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SECURITIES AND EXCHANGE COMMISSION
450, 5th Street
Washington, D.C. 20549


FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of August, 2004.

The Toronto-Dominion Bank
(Translation of registrant's name into English)

c/o General Counsel's Office
P.O. Box 1, Toronto Dominion Centre,
Toronto, Ontario, M5K 1A2
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F   o   Form 40-F   ý

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes   o   No   ý

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-                             

This Form 6-K is incorporated by reference into the following Registration Statements of The Toronto-Dominion Bank:






FORM 6-K

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    THE TORONTO-DOMINION BANK

DATE: August 26, 2004

 

 

 

 

 

By

/s/  
CHRISTOPHER A. MONTAGUE      
Name: Christopher A. Montague
Title: Executive Vice President and General Counsel

LOGO

3rd Quarter • 2004 • Report to Shareholders • Nine months ended July 31, 2004

TD Bank Financial Group Delivers
Solid Third Quarter Earnings, Boosts Dividend


THIRD QUARTER FINANCIAL HIGHLIGHTS

The diluted earnings per share figures above includes:

        TORONTO, August 26, 2004 — TD Bank Financial Group (TDBFG) today announced its financial results for the third quarter ended July 31, 2004. Results for the quarter reflect continued earnings growth in Personal and Commercial Banking and solid performance in Wealth Management and Wholesale Banking. The Bank also announced an increase in the quarterly dividend of 2 cents to 36 cents representing an increase of 5.9% per fully paid common share for the quarter ended October 31, 2004, payable on or after October 31, 2004.

        "The Bank delivered solid, broad-based results in the third quarter in line with our goal of generating stable, consistent earnings across all three businesses," said W. Edmund Clark, TD Bank Financial Group President and Chief Executive Officer. "The second dividend increase this year is a reflection of the Board's confidence in earnings sustainability and our commitment to returning value to shareholders." Clark also noted that the Bank's Tier 1 capital position stood at 12.3% for the quarter, up from 10.5% at the end of fiscal 2003.

THIRD QUARTER BUSINESS SEGMENT PERFORMANCE

Personal and Commercial Banking

        Personal and Commercial Banking turned in another strong quarter with earnings growth of 14% over the same quarter last year. This marks the seventh consecutive quarter of double-digit earnings growth at TD Canada Trust.

        "Personal and Commercial Banking has delivered a remarkable run of earnings growth," said Clark. "This consistency is a product of sound business strategies and a deep-rooted commitment to operational excellence."

        The successful integration of 57 Laurentian branches was completed in July. Our insurance businesses, particularly TD Meloche Monnex, continued to produce strong earnings growth in the third quarter. The third quarter marked the first full quarter that the operations acquired from Liberty Mutual have been integrated into the insurance business.

1
Reported results are prepared in accordance with Canadian generally accepted accounting principles (GAAP).

2
Earnings before amortization of intangibles and reported results referenced in this report are explained in detail on page 3 under the "How the Bank Reports" section.

        Good volume growth in real estate secured lending, core banking, credit cards and small business deposits was offset by continued margin compression this quarter. Personal and Commercial loan portfolios continued to perform well with lower than expected loss rates. Lower provision for credit losses (PCL) account for $13 million of the year-over-year improvement in pre-tax earnings for the segment.

Wealth Management

        Despite flat financial markets, the Bank's Wealth Management business delivered another solid quarter. The advice-based businesses continued to see encouraging asset growth this quarter both from new customers and referrals from TD Canada Trust. Market softness impacted the discount brokerage business as trading volumes declined significantly over the previous quarter.

        "We have now seen several quarters of asset growth in our advice-based businesses, affirming the success of our integrated wealth management strategy," said Clark. "But soft markets caused many investors to stay on the sidelines for much of the quarter, impacting our discount brokerage business."

Wholesale Banking

        Wholesale Banking delivered another solid quarter. While net income was down from the first two quarters it was 20% higher than the same quarter last year.

        "Wholesale Banking continues to deliver encouraging results during what is historically a slow period for this business," said Clark. "I think we have done a good job of removing much of the volatility from TD Securities and this quarter's results speak to our success in positioning the business to deliver stable, consistent results even during periods of market weakness."

Corporate

        Continued improvements in credit quality resulted in a release of $65 million after-tax ($100 million pre-tax) in sectoral provisions.

CONCLUSION

        "I am pleased that the Bank's diverse earnings base has allowed us to maintain solid overall performance this quarter despite softer financial markets," said Clark. "All three businesses are having a great year and as a result, our earnings and dividend are up significantly year-over-year."

Forward-looking statements

From time to time, the Bank makes written and oral forward-looking statements, including in this report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission (SEC), and in other communications. All such statements are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements regarding the Bank's objectives and strategies to achieve them, the outlook for the Bank's business lines, and the Bank's anticipated financial performance. Forward-looking statements are typically identified by words such as "believe", "expect", "may" and "could". By their very nature, these statements are subject to inherent risks and uncertainties, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Some of the factors that could cause such differences include: the credit, market, liquidity, interest rate, operational and other risks discussed in the management discussion and analysis section of this report and in other regulatory filings made in Canada and with the SEC, including the Bank's 2003 Annual Report; general business and economic conditions in Canada, the United States and other countries in which the Bank conducts business; the effect of changes in monetary policy; the degree of competition in the markets in which the Bank operates, both from established competitors and new entrants; legislative and regulatory developments; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to complete and integrate acquisitions; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; technological changes; change in tax laws; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and saving habits; the possible impact on the Bank's businesses of international conflicts and terrorism; acts of God, such as earthquakes; and management's ability to anticipate and manage the risks associated with these factors and execute the Bank's strategies within a disciplined risk environment. The preceding list is not exhaustive of all possible factors. Other factors could also adversely affect the Bank's results. For more information, please see the discussion starting on page 32 of the Bank's 2003 Annual Report concerning the effect certain key factors could have on actual results. All such factors should be considered carefully when making decisions with respect to the Bank, and undue reliance should not be placed on the Bank's forward-looking statements. The Bank does not undertake to update any forward-looking statements, written or oral, that may be made from time to time by or on its behalf.

2



MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE

How the Bank Reports

        The Bank prepares its financial statements in accordance with Canadian generally accepted accounting principles (GAAP), which are presented on pages 12 to 23 of this Third Quarter Report to Shareholders. The Bank refers to results prepared in accordance with GAAP as the "reported basis".

        The Bank also utilizes earnings before the amortization of intangibles to assess each of its businesses and to measure overall Bank performance. To arrive at this measure, the Bank removes amortization of intangibles from reported basis earnings. Previously the Bank reported operating cash basis earnings. Since the only distinction between operating cash basis and reported basis earnings in 2003 was the amortization of intangibles (as there were no special items), the Bank now refers to earnings before amortization of intangibles as it is a better description of this measure.

        The majority of the Bank's intangible amortization relates to the Canada Trust acquisition in fiscal 2000. The Bank excludes amortization of intangibles as this approach ensures comparable treatment with goodwill which is not amortized. Consequently, the Bank believes that earnings before amortization of intangibles provides the reader with an understanding of the Bank's results that can be consistently tracked from period to period.

        As explained, earnings before amortization of intangibles is different from reported results determined in accordance with GAAP. Earnings before amortization of intangibles and related terms used in this report are not defined terms under GAAP, and therefore may not be comparable to similar terms used by other issuers. The table below provides a reconciliation between the Bank's earnings before amortization of intangibles and its reported results.

        Reconciliation of earnings before amortization of intangibles to reported results (unaudited)

 
  For the three months ended
  For the nine months ended
 
  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
  (millions of dollars)
Net interest income   $ 1,487   $ 1,402   $ 4,450   $ 4,237
Provision for (reversal of) credit losses     (17 )   59     (313 )   269
Other income     1,188     1,193     3,783     3,330
Non-interest expenses     1,755     1,697     5,619     5,807
   
 
 
 
Income before provision for income taxes and non-controlling interest     937     839     2,927     1,491
Provision for income taxes     231     196     775     468
Non-controlling interest     23     23     69     69
   
 
 
 
Net income before amortization of intangibles and preferred dividends   $ 683   $ 620   $ 2,083   $ 954
Amortization of intangibles, net of income taxes     99     119     385     379
   
 
 
 
Net income   $ 584   $ 501   $ 1,698   $ 575
Preferred dividends     19     21     61     66
   
 
 
 
Net income applicable to common shares — reported basis   $ 565   $ 480   $ 1,637   $ 509
   
 
 
 
Basic net income per common share — reported basis   $ .87   $ .74   $ 2.50   $ .78
Diluted net income per common share — reported basis     .86     .73     2.48     .78
Basic net income per common share — before amortization of intangibles     1.02     .92     3.09     1.37
Diluted net income per common share — before amortization of intangibles     1.01     .91     3.06     1.36

Certain comparative amounts have been reclassified to conform with current period presentation.

3


Net Income

        Reported net income was $584 million for the third quarter, compared with $501 million in the same quarter last year. Reported basic earnings per share were $.87, compared with $.74 in the same quarter last year. Reported diluted earnings per share were $.86 for the quarter, compared with $.73 in the same quarter last year. Reported return on total common equity, on an annualized basis was 18.4% for the quarter compared with 17.1% last year.

        Net income before amortization of intangibles for the third quarter was $683 million, compared with $620 million for the same quarter last year. Basic earnings per share before amortization of intangibles were $1.02, compared with $.92 in the same quarter last year. Diluted earnings per share before amortization of intangibles were $1.01 for the quarter, compared with $.91 in the same quarter last year. Return on total common equity before amortization of intangibles, on an annualized basis was 21.7% for the quarter compared with 21.4% last year.

        For the nine months ended July 31, 2004, reported net income was $1,698 million, compared with $575 million in the same period last year. Reported basic earnings per share were $2.50 for the nine months ended July 31, 2004, compared with $.78 in the same period last year. Reported diluted earnings per share were $2.48 for the nine months ended July 31, 2004, compared with $.78 in the same period last year. Reported return on total common equity, on an annualized basis was 18.3% for the nine months ended July 31, 2004, compared with 6.0% last year.

        Net income before amortization of intangibles for the nine months ended July 31, 2004 was $2,083 million, compared with $954 million for the same period last year. Basic earnings per share before amortization of intangibles were $3.09 for the nine months ended July 31, 2004, compared with $1.37 in the same period last year. Diluted earnings per share before amortization of intangibles were $3.06 for the nine months ended July 31, 2004, compared with $1.36 in the same period last year. Return on total common equity before amortization of intangibles, on an annualized basis was 22.6% for the nine months ended July 31, 2004 compared with 10.4% last year.

Economic Profit and Return on Invested Capital

        The Bank utilizes economic profit as a tool to measure shareholder value creation. Economic profit is net income before amortization of intangibles less preferred dividends and a charge for average invested capital. Average invested capital is equal to average common equity plus the average cumulative after-tax amounts of goodwill and intangible assets amortized as of the reporting date. The rate used in the charge for capital is the equity cost of capital calculated using the Capital Asset Pricing Model. The charge represents an assumed minimum return required by common shareholders on the Bank's invested capital. The Bank's goal is to achieve positive and growing economic profit.

        Return on invested capital (ROIC) is net income before amortization of intangibles less preferred dividends, divided by average invested capital. ROIC is a variation on the economic profit measure that is useful in comparison to the equity cost of capital. Both ROIC and the cost of capital are percentage rates, while economic profit is a dollar measure. When ROIC exceeds the equity cost of capital, economic profit is positive. The Bank's goal is to maximize economic profit by achieving ROIC that exceeds the equity cost of capital.

        Economic profit and ROIC are not defined terms under GAAP, and therefore may not be comparable to similar terms used by other issuers. The table on the following page provides a reconciliation between the Bank's economic profit and net income before amortization of intangibles. Earnings before amortization of intangibles and related terms are discussed in the "How the Bank Reports" section.

4


Reconciliation of economic profit (loss) and net income before amortization of intangibles

 
  For the three months ended
  For the nine months ended
 
 
  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
 
  (millions of dollars)
 
Average common equity   $ 12,195   $ 11,107   $ 11,944   $ 11,397  
Average cumulative amount of goodwill/intangible amortization, net of income taxes     2,894     2,429     2,782     2,363  
   
 
 
 
 
Average invested capital   $ 15,089   $ 13,536   $ 14,726   $ 13,760  
Rate charged for invested capital     10.7%     10.9%     10.7%     10.9%  
   
 
 
 
 
Charge for invested capital1     405     372     1,180     1,148  
Net income before amortization of intangibles less preferred dividends     664     599     2,022     888  
   
 
 
 
 
Economic profit (loss)1   $ 259   $ 227   $ 842   $ (260 )
   
 
 
 
 
Return on invested capital1     17.5%     17.6%     18.3%     8.4%  
   
 
 
 
 
1
Includes a charge of $26 million after-tax for the past amortization of goodwill that became impaired during the second quarter of 2003.

Net Interest Income

        Net interest income on a reported basis was $1,487 million this quarter, an increase of $85 million from the same quarter last year. The increase related primarily to Wholesale Banking, where trading-related net interest income increased and dividend income from the Bank's equity portfolio was higher compared with last year. Net interest income also increased due to growth in margin lending and customer deposits in Wealth Management's Discount Brokerage businesses. Strong volume growth in Personal and Commercial Banking partly offset by lower margins also contributed to the increase in net interest income.

        For the nine months ended July 31, 2004, net interest income on a reported basis was $4,450 million, an increase of $213 million from the same period last year. The increase primarily related to Wholesale Banking and Wealth Management where the change was due to similar reasons noted above for the current quarter. In addition, results from recently acquired Laurentian branches in Personal and Commercial Banking added to growth.

        Beginning in fiscal 2004, the Bank no longer discusses net interest income on a taxable equivalent basis (TEB) at the total Bank level, as it is not useful at that level. However, on a segmented basis, the Bank continues to report net interest income on a TEB. For further details, see the introductory discussion in the Bank's Management's Discussion and Analysis of TD's Businesses on page 10.

Other Income

        Other income on a reported basis was $1,188 million for the quarter, a decrease of $5 million from the same quarter last year.

        Self-directed brokerage revenues decreased $44 million compared with the same quarter a year ago due to lower trading volumes. Average trades per day decreased 21% to 87,000 from 110,000 a year ago. However, mutual fund management fees increased by $20 million as a result of an increase in assets under management relating to higher sales volumes.

5


        The investment securities portfolio realized net gains of $44 million this quarter compared with $18 million in the same quarter last year. The improvement is largely a result of stronger market conditions resulting in improved exit opportunities in the merchant banking portfolio. Gains or losses on derivative and loan sales in the non-core lending portfolio improved from a $13 million loss last year to a $40 million gain this quarter, a result of improved credit conditions which have resulted in higher market valuations of the derivative positions and loans sold during the quarter. However, trading income reported in other income decreased by $56 million compared with the same quarter last year as a result of weaker interest rate related trading. Trading-related income (which is the total of trading income reported in other income and the net interest income on trading positions reported in net interest income) increased by $56 million. This was largely a result of improved results in the equity trading businesses, which suffered losses last year. Capital market fee revenues (which includes revenues from mergers and acquisitions, underwriting and equity sales commissions) decreased $37 million compared with the same quarter a year ago, due to weaker performance for some of the debt capital market businesses. Corporate credit fees also decreased by $18 million due to a reduction in assets in the core and non-core lending portfolios.

        Insurance revenues increased by $52 million compared with the same quarter last year, primarily due to strong volume growth and reduced loss frequency. Income from loan securitizations and card services remained relatively flat as compared with the same period last year.

        For the nine months ended July 31, 2004, other income on a reported basis was $3,783 million, an increase of $453 million from the same period last year.

        Self-directed brokerage revenues increased by $103 million for the nine months ended July 31, 2004 compared with the same period a year ago due to an overall increase in trading volumes. Growth in mutual fund management fees was $56 million from the same period a year ago due to similar reasons previously noted for the quarter. During the nine months ended July 31, 2003, the Bank recorded write downs of $39 million in other income as a result of other than temporary impairments in certain international wealth management joint ventures. There were no such write downs during the nine months ended July 31, 2004.

        The investment securities portfolio realized net gains of $148 million for the nine months ended July 31, 2004 compared with no net gains or losses in the same period last year. Gains or losses on derivative and loan sales improved from a $94 million loss last year to a $52 million gain for the nine months ended July 31, 2004. The fluctuations were mainly a result of the same reasons previously noted for the quarter. However, trading income for the nine months ended July 31, 2004 decreased by $204 million. Trading-related income decreased by $27 million. Revenue from foreign exchange, equity products and interest rate and credit products have all declined marginally. Corporate credit fees decreased by $76 million. The Bank also incurred $40 million of losses, net of accrual costs, related to the adoption of the new hedging relationships guideline for the nine months ended July 31, 2004.

        Insurance revenues for the nine months ended July 31, 2004 increased by $117 million compared with the same period a year ago. The fluctuation was largely a result of the same reasons previously noted for the quarter. Income from loan securitizations increased by $147 million whereas card services decreased by $53 million as compared with the same period last year.

Non-Interest Expenses

        Expenses before amortization of intangibles for the quarter increased by $58 million to $1,755 million or 3% from the same quarter last year. Personal and Commercial Banking expenses increased primarily due to the integration of the Laurentian branches into the TD Canada Trust network and growth in the insurance business while underlying expenses remained well controlled and relatively flat. Expenses increased in Wholesale Banking as a result of higher variable compensation expenses related to improved performance and increased support expenses. On a reported basis, expenses increased by $24 million for the quarter from a year ago to $1,907 million. In the third quarter 2004, the impact of the amortization of intangibles on the Bank's reported before tax expenses was $152 million compared with $186 million in the same quarter a year ago.

6


        The Bank's efficiency ratio before amortization of intangibles weakened to 65.6% in the current quarter from 65.4% in the same quarter a year ago. The Bank's consolidated efficiency ratio is impacted by shifts in its business mix. The efficiency ratio is viewed as a more relevant measure for Personal and Commercial Banking, which had an efficiency ratio before amortization of intangibles of 57.8% this quarter, compared with 58.3% a year ago. On a reported basis, the Bank's overall efficiency ratio improved to 71.3% from 72.6% in the same quarter a year ago.

        For the nine months ended July 31, 2004, expenses before amortization of intangibles decreased by $188 million to $5,619 million from the same period last year. The decline in expenses is primarily a result of $624 million of goodwill write downs and $92 million of restructuring costs included in prior period figures that related to the international unit of the Bank's wealth management business and the Bank's U.S. equity options business in Wholesale Banking. The decrease was partially offset by an increase in expenses in Corporate due to the recognition of $300 million of losses relating to contingent litigation reserves in the second quarter 2004. Also, expenses in Wealth Management increased as a result of higher business volumes in Discount Brokerage, Investment Advice and Financial Planning. Expenses in Personal and Commercial Banking and Wholesale Banking increased mostly due to the same reasons noted above for the quarter. On a reported basis, expenses for the nine months ended July 31, 2004 decreased by $301 million from the same period a year ago to $6,103 million. For the nine months ended July 31, 2004, the impact of the amortization of intangibles on the Bank's reported before tax expenses was $484 million, compared with $597 million in the same period last year.

        The Bank's efficiency ratio before amortization of intangibles for the nine months ended July 31, 2004 improved to 68.2% from 76.7% in the same period a year ago. On a reported basis, the Bank's overall efficiency ratio for the nine months ended July 31, 2004 improved to 74.1% from 84.6% in the same period a year ago.

Taxes

        On a reported basis, the Bank's effective tax rate was 22.7% for the third quarter, compared with 19.8% in the same quarter a year ago. The Bank's effective tax rate based on earnings before amortization of intangibles was 24.7% for the quarter compared with 23.4% a year ago. The change in the effective tax rates is due to a change in the Bank's business mix and tax adjustments this quarter.

        The Bank's effective tax rate, on a reported basis, was 27.7% for the nine months ended July 31, 2004, compared with 28.0% in the same period a year ago. Based on earnings before amortization of intangibles, the effective tax rate was 26.5% for the nine months ended July 31, 2004, compared with 31.4% in the same period a year ago. The tax rate before amortization of intangibles for the nine months ended July 31, 2004 is lower this year because amortization of intangibles is a lower portion of net income.

Balance Sheet

        Total assets were $309 billion at the end of the third quarter 2004, $36 billion higher than October 31, 2003. Increased positions in securities and securities purchased under resale agreements represented $22 billion and $8 billion of the increase, respectively. Consumer instalment and other personal loans increased by $7 billion from year end to reach $50 billion. At the end of the third quarter, residential mortgages remained relatively unchanged at $52 billion. Bank-originated securitized assets not included on the balance sheet amounted to $19 billion, unchanged from year end.

        Wholesale deposits increased by $19 billion and securities sold short or under repurchase agreements increased by $7 billion as compared with October 31, 2003. Personal non-term deposits increased by $7 billion while personal term deposits decreased by $1 billion.

        The Bank also enters into structured transactions on behalf of clients which results in assets being recorded on the Bank's Consolidated Interim Balance Sheet for which market risk has been transferred to third parties via total return swaps. As at July 31, 2004, assets under such arrangements amounted to $13 billion, unchanged from year end. The Bank also acquires market risk on certain assets via total return swaps, without acquiring the cash instruments directly. Assets under such arrangements amounted to $5 billion as at July 31, 2004, compared with $6 billion as at October 31, 2003. Market risk for all such positions is tracked and monitored, and regulatory market risk capital is maintained.

7


Managing Risk

Credit Risk and Provision for (Reversal of) Credit Losses

        During the third quarter 2004, the Bank recorded a $17 million reversal of credit losses, compared with a provision of $59 million in the same quarter last year. Conditions in the lending area have continued to improve from those at the time that the Bank took sectoral provisions, and as a result of these conditions and reduced exposures the Bank has released $100 million from the sectoral provisions. This decrease was somewhat offset by provisions for credit losses recorded in Personal and Commercial Banking during the quarter of $92 million.

        For the nine months ended July 31, 2004, the Bank recorded a $313 million reversal of credit losses, compared with a provision of $269 million in the same period last year. The decrease in the provision for credit losses for the nine months ended July 31, 2004 primarily related to the release of $500 million in sectoral allowances previously established for the non-core lending portfolio and a general allowance reversal of $67 million.

Interest Rate Risk

        The objective of interest rate risk management for the non-trading portfolio is to ensure stable and predictable earnings are realized over time. In this context, the Bank has adopted a disciplined hedging approach to profitability management for its asset and liability positions including a modeled maturity profile for non-rate sensitive assets, liabilities and equity. Key aspects of this approach are:

        The Bank uses derivative financial instruments, wholesale instruments and other capital market alternatives and, less frequently, product pricing strategies to manage interest rate risk. As at July 31, 2004, an immediate and sustained 100 basis point increase in rates would have decreased the economic value of shareholders' equity by $120 million after-tax.

Liquidity Risk

        The Bank holds a sufficient amount of liquidity to fund its obligations as they come due under normal operating conditions as well as under various stress scenarios with a base case that defines the minimum amount of liquidity that must be held at all times. The surplus liquid asset position is total liquid assets less the Bank's maturing wholesale funding, potential non-wholesale deposit run-off and contingent liabilities coming due in 90 days. As at July 31, 2004, the Bank's consolidated surplus liquid asset position up to 90 days was $17.6 billion, compared with a surplus liquid asset position of $8.7 billion on October 31, 2003. The Bank ensures that it meets the requirements by managing its cash flows and holding highly liquid assets that can be readily converted into cash. The Bank manages liquidity on a global basis, ensuring the prudent management of liquidity risk in all its operations. In addition to a large base of stable retail and commercial deposits, the Bank has an active wholesale funding program including asset securitization. This funding is highly diversified as to source, type, currency and geographical location.

8


Market Risk

        The Bank manages market risk in its trading books by using several key controls. The Bank's market risk policy sets out detailed limits for each trading business, including Value at Risk (VaR), stress test, stop loss, and limits on profit and loss sensitivity to various market factors. Policy controls are augmented through active oversight by independent market risk staff and frequent management reporting. VaR is a statistical loss threshold which should not be exceeded on average more than once in 100 days. It is also the basis for regulatory capital for market risk. The table below presents average and end-of-quarter general market risk VaR usage for the three and nine months ended July 31, 2004, as well as for the fiscal 2003 average. The Bank backtests its VaR by comparing it to daily net trading revenue. For the three and nine months ended July 31, 2004, daily net trading revenues were positive for 89.2% and 93.8% of the trading days, respectively. Losses never exceeded the Bank's statistically predicted VaR for the total of the Bank's trading-related businesses.

Value at Risk Usage — Wholesale Banking

 
  For the three
months ended

  For the three
months ended

  For the nine
months ended

  For the twelve
months ended

 
 
  July 31, 2004
As at

  July 31, 2004
Average

  July 31, 2004
Average

  Oct. 31, 2003
Average

 
 
  (millions of dollars)
 
Interest rate risk   $ (9.0 ) $ (7.6 ) $ (9.2 ) $ (17.0 )
Equity risk     (4.1 )   (5.0 )   (5.8 )   (6.8 )
Foreign exchange risk     (3.7 )   (4.0 )   (2.7 )   (2.9 )
Commodity risk     (.8 )   (.9 )   (.9 )   (.9 )
Diversification effect     6.5     7.5     6.8     10.2  
   
 
 
 
 
General Market Value at Risk   $ (11.1 ) $ (10.0 ) $ (11.8 ) $ (17.4 )
   
 
 
 
 

Capital

        As at July 31, 2004, the Bank's Tier 1 capital ratio was 12.3%, compared with 10.5% at October 31, 2003. Risk-weighted assets decreased by $9 billion compared with October 31, 2003, principally from reductions in risk-weighted assets from market risk. Effective February 1, 2004, the Office of the Superintendent of Financial Institutions has approved phased implementation of the Bank's Interest Rate Specific VaR model for the calculation of regulatory capital. This replaces the Bank for International Settlements standardized model approach. Interest Rate Specific VaR is a measure of the potential loss associated with trading positions due to a credit rating change or credit default. Tier 1 capital increased by $1 billion compared with October 31, 2003. Tier 1 capital increases were achieved notwithstanding repurchasing common shares during the nine month period at a cost of $350 million, and the redemption and cancellation of $225 million in outstanding Class A First Preferred Shares, Series H (see Note 5 of the Consolidated Interim Financial Statements).

9



MANAGEMENT'S DISCUSSION AND ANALYSIS OF TD'S BUSINESSES

        The Bank's operations and activities are organized around the following operating business segments: Personal and Commercial Banking, Wholesale Banking, and Wealth Management. Results of each business segment reflect revenues, expenses, assets and liabilities generated by the businesses in that segment. The Bank measures and evaluates the performance of each segment based on earnings before amortization of intangibles and, where applicable, the Bank notes that the measure is before amortization of intangibles. For example, revenue is not affected by the amortization of intangibles, but expenses are affected by the amortization of intangibles. This measure is only relevant in the Personal and Commercial Banking, and Wealth Management segments as there are no intangibles allocated to the Wholesale Banking and Corporate segments. For further details see the "How the Bank Reports" section in the Bank's Management's Discussion and Analysis of Operating Performance on page 3. For information concerning the Bank's measures of economic profit and return on invested capital, see page 4 in Management's Discussion and Analysis of Operating Performance. Segmented information also appears in Note 9 of the Bank's Consolidated Interim Financial Statements.

        Net interest income, primarily within Wholesale Banking is calculated on a taxable equivalent basis (TEB), which means that the value of non-taxable or tax-exempt income such as dividends is adjusted to its equivalent before tax value. Using TEB allows the Bank to measure income from all securities and loans consistently and makes for a more meaningful comparison of net interest income with similar institutions.

Personal and Commercial Banking

        Personal and Commercial Banking had record earnings this quarter as solid revenue growth and improved credit loss performance offset higher expenses related to acquisitions. Net income before amortization of intangibles of $381 million for the third quarter increased by $46 million or 14% from the prior year. Return on invested capital increased from 19% last year to 21% this quarter. Personal and Commercial Banking continued to create additional shareholder value by generating economic profit of $210 million during the quarter, an increase of $36 million or 21% over last year.

        Revenue grew by $82 million or 5% over last year. The home and auto insurance business of TD Meloche Monnex continued to be a significant factor in revenue growth through strong volume growth, improved loss rates and the impact of the acquisition of operations from Liberty Mutual Group. The other main contributors to revenue growth were the acquisition of branches from Laurentian Bank, improved mutual fund sales through the branches as well as strong volume growth in real estate secured lending, credit cards, core banking and small business deposits. These areas of growth were partly offset by lower margins, a loss on disposal of Automated Banking Machine equipment (see Note 11 of the Consolidated Interim Financial Statements), and adjustments for credit card customer reward programs.

        As compared with the same quarter last year (before the impact of the Laurentian branch acquisition), personal lending volume (including securitizations) grew by $10 billion or 9%, primarily from real estate secured lending, while personal deposit volume grew $3 billion or 4%. Business deposits grew by $3 billion or 11% and originated gross insurance premiums grew by $69 million or 18% (before the impact of the acquisition of Liberty Mutual). Business loans and acceptances contracted by $1 billion or 7%. The acquisition of Laurentian Bank branches added $2 billion of lending volume and $2 billion of deposit volume. As of May 2004, personal market share (loans, deposits and mutual funds) was 21.0% down .04% from the third quarter of fiscal 2003. Absent the branch acquisition, market share would have declined by .35%. Customer satisfaction as measured by the retail branch Customer Satisfaction Index was 86.7%, an improvement of .5% compared with the prior quarter and .8% compared with the prior year.

        Margin on average earning assets decreased from 3.26% last year to 3.03% with margins narrowing on deposits from a combination of competitive pricing, customers moving balances to lower margin accounts and the low interest rate environment. Each of these factors contributed to the margin decline in approximately equal amounts.

        Provision for credit losses (PCL) for the quarter decreased by $13 million or 12% compared with last year as personal and small business delinquency rates improved and credit quality remained strong in the commercial portfolio. PCL as a percent of annualized lending volume continued at a cyclically low rate of .26% down from .33% last year.

        Expenses before amortization of intangibles increased by $40 million or 5% compared with last year. Underlying expenses continued to be well managed as the branch and insurance acquisitions contributed $45 million to expense growth. The integration of the 57 Laurentian Bank branches into the TD Canada Trust network, involving approximately 140,000 customer accounts, was successfully completed in July. Business volumes in TD Meloche Monnex, real estate secured lending origination and systems development projects also contributed to expense growth. Offsetting these factors were higher severance and Wal-Mart in-store branch closure costs in the prior year. Base staffing levels were down 500 full time equivalent from last year and the efficiency ratio improved from 58.3% last year to 57.8% this quarter.

        The outlook for revenue growth from both TD Meloche Monnex (including the impact of the acquisition) and personal and small business volumes, particularly in real estate secured lending, core banking and small business deposits, remains positive. However, margin compression is also expected to continue to be a negative factor. Expense management, including achieving synergies from the Laurentian branch integration, continues to be a priority as does implementing process improvements to increase sales capacity and improve customer experience.

10


Wholesale Banking

        Net income was $133 million in the third quarter, an increase of $23 million from $110 million in the third quarter of last year. The return on invested capital for the quarter was 22% compared with 16% in the same quarter of last year. Economic profit for the quarter was $53 million compared with $20 million in the same quarter last year.

        Wholesale Banking's revenues are derived primarily from capital markets, investing and corporate lending activities. Revenue for the quarter was $540 million, compared with revenue of $482 million in the same quarter of last year. Revenue from the equity investment portfolios improved significantly relative to last year because of higher dividends received and higher net security gains on improved market conditions. Capital markets revenues, which include advisory, underwriting, trading, facilitation and execution services were marginally higher, largely due to higher trading-related revenue, particularly in the equity structured products businesses due to weak results last year. This was partially offset by weaker equity markets, which resulted in lower underwriting fees.

        Provisions for credit losses were $12 million in the quarter, an increase of $9 million from $3 million in the third quarter of 2003. Provisions for credit losses in the Wholesale Banking segment were modified in the first quarter 2004 and reclassified on a retroactive basis to include the cost of credit protection incurred in hedging the lending portfolio. The provision for credit losses of $12 million is attributed solely to costs of credit protection. The credit quality of the portfolio remains strong as there have been no credit losses in the core lending portfolio in Wholesale Banking since the fourth quarter of 2002.

        Wholesale Banking currently holds $5.0 billion in notional credit default swap protection, a decrease of $.5 billion from the end of last quarter due to maturities. Wholesale Banking continues to proactively manage its credit risk and has achieved a significantly improved risk profile. The cost of credit protection included in this segment represents the accrual cost of this protection. The change in market value of this protection, in excess of the accrual cost, is reported in the Corporate segment.

        Risk-weighted assets (RWA) of the Wholesale Banking segment were $32 billion this quarter, a decrease of $3 billion compared with last quarter and a decrease of $14 billion compared with last year. The reduction compared with last year is a result of a decrease in both market and credit risk. The market risk RWA reduction reflects the impact of implementing the new Interest Rate Specific VaR model for the trading businesses, while the reduction in credit risk RWA is largely a result of a decline in the size of the lending portfolio.

        Expenses were $340 million, an increase of $33 million from $307 million last year. This is largely a result of higher variable compensation related to stronger performance in the capital markets businesses.

        This was another solid quarter for Wholesale Banking, building on the excellent results of the first half of this year. Wholesale Banking continues to make excellent progress on its long term strategies of increasing domestic market share, growing the global products business, strategically allocating capital within the segment, and strengthening credit and market risk management.

Wealth Management

        Wealth Management's net income before amortization of intangibles for the third quarter 2004 was $80 million, a decline of $2 million from the same quarter last year. The return on invested capital for the quarter was 11%, a small decrease from the same quarter last year. The economic loss for the quarter was $7 million, an increase of $1 million over the third quarter of 2003.

        Total revenue increased $6 million from the prior year to $620 million due to growth in net interest income and Mutual Fund management fees, offset by a decline in trading volumes. The growth in net interest income resulted from higher margin loans and customer deposits in Discount Brokerage while 14% growth in Mutual Fund assets under management resulted in an increase in management fees. Discount Brokerage trades per day for the quarter were 87,000, a decrease of 21% from 110,000 a year ago.

        Expenses before the amortization of intangibles were $502 million in the third quarter, an increase of $7 million from the same quarter in 2003. The increase resulted from higher trailer payments to sellers of TD Mutual Funds with the growth in assets under management offset by cost reductions in Discount Brokerage associated with the decline in trading volumes.

        Assets under management of $126 billion at July 31, 2004 increased $13 billion from October 31, 2003 due to strong sales of mutual funds. Assets under administration totaled $283 billion at the end of the third quarter, increasing $24 billion from October 31, 2003 due to the addition of new assets in Discount Brokerage, Investment Advice and Financial Planning.

Corporate

        During the current quarter, the Corporate segment reported net income of $89 million. The results include income relating to a $100 million ($65 million after-tax) sectoral allowance release and $47 million ($30 million after-tax) of additional income in the non-core lending portfolio. In addition, the Corporate segment reported interest on income tax refunds of $19 million ($12 million after-tax). This was partially offset by the costs associated with treasury activities and net unallocated revenues, expenses and taxes.

11



CONSOLIDATED INTERIM BALANCE SHEET

(unaudited)

 
  As at
 
 
  July 31
2004

  Oct. 31
2003

 
 
  (millions of dollars)

 
Assets              
Cash and non-interest-bearing deposits with other banks   $ 1,836   $ 1,468  
Interest-bearing deposits with other banks     8,400     6,251  
   
 
 
      10,236     7,719  
   
 
 
Securities purchased under resale agreements     25,401     17,475  
   
 
 
Securities              
Investment     33,653     24,775  
Trading     67,702     54,890  
   
 
 
      101,355     79,665  
   
 
 
Loans              
Residential mortgages     51,528     52,566  
Consumer instalment and other personal     49,812     43,185  
Business and government     23,251     24,319  
   
 
 
      124,591     120,070  
Allowance for credit losses (Note 2)     (1,369 )   (2,012 )
   
 
 
Loans (net of allowance for credit losses)     123,222     118,058  
   
 
 
Other              
Customers' liability under acceptances     5,701     6,645  
Trading derivatives' market revaluation     26,163     28,451  
Intangible assets     2,286     2,737  
Goodwill     2,308     2,263  
Land, buildings and equipment     1,221     1,417  
Other assets     11,300     9,102  
   
 
 
      48,979     50,615  
   
 
 
Total assets   $ 309,193   $ 273,532  
   
 
 

Liabilities

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 
Personal   $ 111,564   $ 105,996  
Banks     16,501     11,958  
Business and government     83,439     64,926  
   
 
 
      211,504     182,880  
   
 
 
Other              
Acceptances     5,701     6,645  
Obligations related to securities sold short     19,413     15,346  
Obligations related to securities sold under repurchase agreements     10,934     7,845  
Trading derivatives' market revaluation     26,556     28,000  
Other liabilities     14,490     12,568  
   
 
 
      77,094     70,404  
   
 
 
Subordinated notes and debentures (Note 4)     5,671     5,887  
   
 
 
Non-controlling interest in subsidiaries     1,250     1,250  
   
 
 
Contingent liabilities and commitments (Note 11)              

Shareholders' equity

 

 

 

 

 

 

 
Capital stock (Note 5)              
  Preferred     1,309     1,535  
  Common (millions of shares issued and outstanding 653.0 in Q3, 2004 and 656.3 in Q4, 2003)     3,245     3,179  
Contributed surplus (Note 6)     17     9  
Foreign currency translation adjustments     (73 )   (130 )
Retained earnings     9,176     8,518  
   
 
 
      13,674     13,111  
   
 
 
Total liabilities and shareholders' equity   $ 309,193   $ 273,532  
   
 
 

Certain comparative amounts have been reclassified to conform with current period presentation.

12



CONSOLIDATED INTERIM STATEMENT OF OPERATIONS

(unaudited)

 
  For the three months ended
  For the nine months ended
 
  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
  (millions of dollars)

Interest income                        
Loans   $ 1,734   $ 1,962   $ 5,191   $ 5,793
Securities                        
  Dividends     219     181     629     539
  Interest     691     638     2,149     2,070
Deposits with banks     100     59     343     141
   
 
 
 
      2,744     2,840     8,312     8,543
   
 
 
 
Interest expense                        
Deposits     934     1,052     2,844     3,240
Subordinated notes and debentures     76     59     234     165
Other obligations     247     327     784     901
   
 
 
 
      1,257     1,438     3,862     4,306
   
 
 
 
Net interest income     1,487     1,402     4,450     4,237
Provision for (reversal of) credit losses (Note 2)     (17 )   59     (313 )   269
   
 
 
 
Net interest income after provision for (reversal of) credit losses     1,504     1,343     4,763     3,968
   
 
 
 
Other income                        
Investment and securities services     520     579     1,785     1,565
Credit fees     96     113     263     331
Net investment securities gains     44     18     148    
Trading income (loss)     (75 )   (19 )   (78 )   126
Service charges     170     168     503     476
Loan securitizations (Note 3)     90     60     308     161
Card services     51     74     152     205
Insurance, net of claims     164     112     418     301
Trust fees     20     19     60     55
Other     108     69     224     110
   
 
 
 
      1,188     1,193     3,783     3,330
   
 
 
 
Net interest and other income     2,692     2,536     8,546     7,298
   
 
 
 
Non-interest expenses                        
Salaries and employee benefits (Note 7)     957     959     2,871     2,817
Occupancy including depreciation     158     178     455     483
Equipment including depreciation     144     150     401     473
Amortization of intangible assets     152     186     484     597
Restructuring costs (reversal)         5     (7 )   92
Goodwill impairment                 624
Other (Note 11)     496     405     1,899     1,318
   
 
 
 
      1,907     1,883     6,103     6,404
   
 
 
 
Income before provision for income taxes     785     653     2,443     894
Provision for income taxes     178     129     676     250
   
 
 
 
Income before non-controlling interest in subsidiaries     607     524     1,767     644
Non-controlling interest in net income of subsidiaries     23     23     69     69
   
 
 
 
Net income     584     501     1,698     575
Preferred dividends     19     21     61     66
   
 
 
 
Net income applicable to common shares   $ 565   $ 480   $ 1,637   $ 509
   
 
 
 
Average number of common shares outstanding (millions)                        
  Basic     653.1     651.3     654.9     648.5
  Diluted     657.4     655.3     659.7     652.4
Earnings per common share                        
  Basic   $ .87   $ .74   $ 2.50   $ .78
  Diluted     .86     .73     2.48     .78
   
 
 
 

Certain comparative amounts have been reclassified to conform with current period presentation.

13



CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)

 
  For the nine months ended
 
 
  July 31
2004

  July 31
2003

 
 
  (millions of dollars)

 
Preferred shares              
Balance at beginning of period   $ 1,535   $ 1,485  
Translation adjustment on shares issued in a foreign currency         (23 )
Proceeds from share issues         550  
Share redemptions (Note 5)     (225 )   (477 )
Impact of shares (acquired) sold in Wholesale Banking (Note 1 (c))     (1 )    
   
 
 
Balance at end of period     1,309     1,535  
   
 
 
Common shares              
Balance at beginning of period     3,179     2,846  
Proceeds from shares issued on exercise of options     82     28  
Proceeds from shares issued as a result of dividend reinvestment plan     96     204  
Impact of shares (acquired) sold in Wholesale Banking (Note 1 (c))     (74 )    
Repurchase of common shares (Note 5)     (38 )    
   
 
 
Balance at end of period     3,245     3,078  
   
 
 
Contributed surplus              
Balance at beginning of period     9      
Stock option expense (Note 6)     8     7  
   
 
 
Balance at end of period     17     7  
   
 
 
Foreign currency translation adjustments              
Balance at beginning of period     (130 )   418  
Foreign exchange gains (losses) from investments in subsidiaries and other items     171     (1,044 )
Foreign exchange gains (losses) from hedging activities     (88 )   1,012  
(Provision for) benefit of income taxes     (26 )   (306 )
   
 
 
Balance at end of period     (73 )   80  
   
 
 
Retained earnings              
Balance at beginning of period     8,518     8,292  
Net income     1,698     575  
Preferred dividends     (61 )   (66 )
Common dividends     (655 )   (545 )
Termination of equity based compensation plan     (24 )    
Premium paid on repurchase of common shares (Note 5)     (312 )    
Other     12     (9 )
   
 
 
Balance at end of period     9,176     8,247  
   
 
 
Total common equity     12,365     11,412  
   
 
 
Total shareholders' equity   $ 13,674   $ 12,947  
   
 
 

14



CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

(unaudited)

 
  For the three months ended
  For the nine months ended
 
 
  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
 
  (millions of dollars)

 
Cash flows from (used in) operating activities                          
Net income   $ 584   $ 501   $ 1,698   $ 575  
Adjustments to determine net cash flows                          
  Provision for (reversal of) credit losses     (17 )   59     (313 )   269  
  Restructuring costs (reversal)         5     (7 )   98  
  Depreciation     70     79     211     227  
  Amortization of intangible assets     152     186     484     597  
  Goodwill impairment                 624  
  Write down of investment in joint ventures                 39  
  Stock option expense     3     2     8     7  
  Net investment securities gains     (44 )   (18 )   (148 )    
Changes in operating assets and liabilities                          
  Future income taxes     (75 )   (2 )   (149 )   (155 )
  Current income taxes payable     118     189     (671 )   603  
  Interest receivable and payable     (161 )   5     (152 )   127  
  Trading securities     (1,505 )   (1,484 )   (12,812 )   (11,605 )
  Unrealized gains and amounts receivable on derivatives contracts     3,264     1,131     2,288     (2,028 )
  Unrealized losses and amounts payable on derivatives contracts     (2,629 )   (1,887 )   (1,444 )   1,455  
  Other     (155 )   2,365     667     3,713  
   
 
 
 
 
Net cash from (used in) operating activities     (395 )   1,131     (10,340 )   (5,454 )
   
 
 
 
 
Cash flows from (used in) financing activities                          
Deposits     (36 )   (13,205 )   28,624     9,438  
Securities sold under repurchase agreements     (1,982 )   (8,293 )   3,089     5,165  
Securities sold short     2,845     358     4,067     2,625  
Issuance of subordinated notes and debentures         903         905  
Repayment of subordinated notes and debentures     (4 )   (3 )   (156 )   (10 )
Subordinated notes and debentures (acquired) sold in Wholesale Banking     (32 )       (67 )    
Translation adjustment on subordinated notes and debentures issued in a foreign currency     (23 )   (18 )   7     (95 )
Common shares issued on exercise of options     11     7     82     28  
Common shares issued as a result of dividend reinvestment plan     9     71     96     204  
Common shares (acquired) sold in Wholesale Banking     (46 )       (74 )    
Repurchase of common shares     (87 )       (350 )    
Preferred shares (acquired) sold in Wholesale Banking     8         (1 )    
Issuance of preferred shares                 550  
Redemption of preferred shares     (225 )   (251 )   (225 )   (477 )
Dividends paid on — preferred shares     (19 )   (21 )   (61 )   (66 )
                                 — common shares     (222 )   (183 )   (655 )   (545 )
   
 
 
 
 
Net cash from (used in) financing activities     197     (20,635 )   34,376     17,722  
   
 
 
 
 
Cash flows from (used in) investing activities                          
Interest-bearing deposits     (481 )   (677 )   (2,149 )   (1,629 )
Activity in investment securities                          
  Purchases     (11,415 )   (2,161 )   (26,914 )   (18,586 )
  Proceeds from maturities     991     2,101     2,920     5,318  
  Proceeds from sales     9,263     2,507     15,264     13,711  
Activity from lending activities                          
  Origination and acquisitions     (20,460 )   (58,103 )   (64,072 )   (118,251 )
  Proceeds from maturities     16,648     56,214     52,716     113,356  
  Proceeds from sales     913     402     3,046     799  
  Proceeds from loan securitizations     1,426     3,721     3,459     6,376  
Land, buildings and equipment     61     (43 )   (15 )   (36 )
Securities purchased under resale agreements     3,581     15,754     (7,926 )   (13,583 )
   
 
 
 
 
Net cash from (used in) investing activities     527     19,715     (23,671 )   (12,525 )
   
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents     (8 )   (21 )   3     (97 )
   
 
 
 
 
Net changes in cash and cash equivalents     321     190     368     (354 )
Cash and cash equivalents at beginning of period     1,515     1,358     1,468     1,902  
   
 
 
 
 
Cash and cash equivalents at end of period represented by cash and non-interest-bearing deposits with other banks   $ 1,836   $ 1,548   $ 1,836   $ 1,548  
   
 
 
 
 
Supplementary disclosure of cash flow information                          
Amount of interest paid during the period   $ 1,351   $ 1,529   $ 4,035   $ 4,469  
Amount of income taxes paid during the period     329     77     1,484     205  
Dividends per common share   $ .34   $ .28   $ 1.00   $ .84  

Certain comparative amounts have been reclassified to conform with current period presentation.

15



NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

        These Consolidated Interim Financial Statements should be read in conjunction with the Bank's Consolidated Financial Statements for the year ended October 31, 2003. The Consolidated Interim Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles and follow the same accounting policies and methods of application as the Bank's Consolidated Financial Statements for the year ended October 31, 2003 except as discussed in Note 1. The Consolidated Interim Financial Statements include all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the periods presented.

Note 1:    Changes in accounting policy

(a)   Hedging relationships

        As of November 1, 2003, the Bank prospectively adopted the Canadian Institute of Chartered Accountants (CICA) accounting guideline on hedging relationships. This guideline sets out the criteria that must be met in order to apply hedge accounting for derivatives. The guideline provides detailed guidance on the identification, designation, documentation and effectiveness of hedging relationships, for purposes of applying hedge accounting, and the discontinuance of hedge accounting.

        The Bank's non-trading derivatives that have been designated in a hedging relationship have been considered effective under the guideline. However, ineffective hedging relationships and hedges not designated in a hedging relationship have been carried at fair value and will result in earnings volatility. The earnings impact of derivatives not qualifying for hedge accounting was a $26 million after-tax loss for the nine months ended July 31, 2004.

        As a result of implementing the guideline, the Bank's credit default swap portfolio with a November 1, 2003 notional value of $4 billion no longer qualifies for hedge accounting and has been carried at fair value. The resulting transitional loss of $32 million has been deferred and will be recognized in income in the same period as the corresponding gains, losses, revenues or expenses associated with the original hedged item.

        Also, as of November 1, 2003, the Bank changed its accounting policy for interest rate commitments to account for them at fair value. The corresponding hedges of the interest rate commitments are also carried at fair value. The upfront commitment cost, net of pay offs, is deferred and amortized over the life of the underlying mortgage. The Bank does not expect any earnings volatility to result from this change in accounting policy.

(b)   Equity-linked deposit contracts

        As of November 1, 2003, the Bank prospectively adopted a new CICA accounting guideline on equity-linked deposit contracts. The guideline pertains to certain of the Bank's deposit obligations that vary according to the performance of certain equity levels or indices, may be subject to a guaranteed minimum redemption amount and have an embedded derivative. As a result, the Bank accounts for the embedded derivative of such variable obligations at fair value with changes in fair value reflected in income as they arise. A transition adjustment of $103 million was completely offset by the recognition of the fair value of derivatives used to hedge the derivative embedded in the equity-linked deposit contract. The Bank does not expect any future earnings volatility to result from this change in accounting policy, as the embedded derivatives are effectively hedged.

(c)   Generally accepted accounting principles

        As of November 1, 2003, the Bank prospectively adopted a new CICA accounting standard on generally accepted accounting principles. The new accounting standard establishes standards for financial reporting and describes what constitutes Canadian generally accepted accounting principles and its sources. The standard also provides guidance on sources to consult when selecting accounting policies and determining appropriate disclosures, when a matter is not dealt with explicitly in the primary sources of generally accepted accounting principles. The new accounting standard resulted in shares of the Bank held as economic hedges in the Bank's trading portfolio being reclassified from trading assets to a deduction from common and preferred equity. For the nine months ended July 31, 2004, the Bank deducted $75 million from equity related to shares of the Bank held in Wholesale Banking. The effect of this change is not material to the Consolidated Interim Statement of Operations.

(d)   Impairment of long-lived assets

        As of November 1, 2003, the Bank prospectively adopted the CICA accounting standard on impairment of long-lived assets. The new standard requires that impairment of long-lived assets be measured as the amount by which the asset's carrying value exceeds fair value. There was no impairment of the Bank's long-lived assets under the new standard.

16


Note 2:    Allowance for credit losses

        The Bank's allowance for credit losses at July 31, 2004 and July 31, 2003 is shown in the table below.

 
  July 31, 2004
  July 31, 2003
 
 
  Specific allowance
  General allowance
  Sectoral allowance
  Total
  Specific allowance
  General allowance
  Sectoral allowance
  Total
 
 
  (millions of dollars)
 
Balance at beginning of year   $ 487   $ 984   $ 541   $ 2,012   $ 1,074   $ 1,141   $ 1,285   $ 3,500  
Provision for (reversal of) credit losses     254     (67 )   (500 )   (313 )   309         (40 )   269  
Transfer from sectoral to specific     5         (5 )       501         (501 )    
Write-offs1     (555 )           (555 )   (1,175 )           (1,175 )
Recoveries     93         138     231     91         37     128  
Other, including foreign exchange rate changes     8         (14 )   (6 )   (91 )       (83 )   (174 )
   
 
 
 
 
 
 
 
 
Allowance for credit losses at end of period   $ 292   $ 917   $ 160   $ 1,369   $ 709   $ 1,141   $ 698   $ 2,548  
   
 
 
 
 
 
 
 
 

1
For the nine months ended July 31, 2004, there were no write-offs related to restructured loans (nine months ended July 31, 2003 — $24 million).

Note 3: Loan securitizations

        The following table summarizes the Bank's securitization activity for the three months ended July 31, 2004 and July 31, 2003. In most cases the Bank retained the responsibility for servicing the assets securitized.

 
  July 31, 2004
  July 31, 2003
 
  Residential mortgage loans
  Credit card loans
  Commercial mortgage loans
  Residential mortgage loans
  Credit card loans
  Commercial mortgage loans1
 
  (millions of dollars)
Proceeds from new securitizations   $ 1,663   $ 1,300   $   $ 2,339   $ 1,500   $ 294
Retained rights to future excess interest     36     24         75     27    
Gain on sale, net of transaction fees and expenses2         22         47     18     14
Cash flows received on interests retained     40         2     21        

1
The Bank retained the rights to future excess interest, subordinated tranches and a cash reserve account on $9 million of the securitized commercial mortgage loans.

2
For term loans (residential mortgage and commercial mortgage loans), the gain on sale is before the effects of hedges on assets sold.

        The key assumptions used to value the sold and retained interests are shown in the table below.

 
  July 31, 2004
  July 31, 2003
 
 
  Residential mortgage loans
  Credit card loans
  Commercial mortgage loans
  Residential mortgage loans
  Credit card loans
  Commercial mortgage loans
 
Prepayment rate1   20.0 % 39.4 % % 20.0 % 36.5 % 5.0 %
Excess spread2   .7   12.2     1.1   11.6    
Discount rate   5.4   4.4     6.4   3.9   4.8  
Expected credit losses3     3.2       3.3   .1  

1
Represents monthly payment rate for credit card loans.

2
The excess spread for credit card loans reflects the net portfolio yield, which is interest earned less funding costs and losses.

3
There are no expected credit losses for residential mortgage loans as these mortgages are government guaranteed.

        During the third quarter 2004, there were maturities of previously securitized loans and receivables of $1,537 million (Q3, 2003 — $412 million). As a result, the net proceeds from loan securitizations were $1,426 million (Q3, 2003 — $3,721 million).

17


Note 4: Subordinated notes and debentures

        On December 15, 2003, the Bank repaid $150 million of 8.0% subordinated debentures that matured.

        In addition, from January 2004 to July 2004, the Bank repaid upon maturity $6 million of debentures, with various interest rates.

Note 5: Capital stock

 
  July 31 2004
  Oct. 31 2003
 
  (thousands of shares)
Preferred shares1 issued by the Bank:        
Class A — Series H     9,000
Class A — Series I   16   16
Class A — Series J   16,375   16,384
Class A — Series M   14,000   14,000
Class A — Series N   8,000   8,000
   
 
Preferred shares issued by TD Mortgage Investment Corporation:        
Series A   350   350
   
 
Common shares2 — outstanding   652,960   656,261
Options to purchase common shares — outstanding   22,696   24,380
   
 

1
9 preferred shares held by Bank subsidiaries have been deducted from equity and 341 preferred shares have been sold during the quarter.


2
1,735 common shares held by Bank subsidiaries have been deducted from equity and 1,005 common shares have been acquired during the quarter.

        On March 2, 2004, the Bank commenced a normal course issuer bid, effective for up to one year, to repurchase for cancellation up to 10 million common shares, representing approximately 1.5% of the Bank's outstanding common shares. A copy of the notice of the bid may be obtained, without charge, by contacting the Shareholder Relations department as set out on page 24 of this report. During the nine months ended July 31, 2004, 7.6 million shares were repurchased at a cost of $350 million.

        On May 3, 2004, the Bank redeemed and cancelled all the outstanding Class A First Preferred Shares, Series H at the price of $25.00 per share together with declared and unpaid dividends of $.014589 per share for the three day period ended May 3, 2004.

Note 6: Stock-based compensation

        For the nine months ended July 31, 2004, the Bank recognized a compensation expense of $8 million for stock option awards in the Consolidated Interim Statement of Operations. The fair value of options granted was estimated at the date of grant using the Black-Scholes valuation model with the following assumptions: risk-free rate of 4.10%, expected option life of 5 years, expected volatility of 27.6% and expected dividend yield of 2.93%. During the nine months ended July 31, 2004, 2.4 million of options were granted with a weighted average fair value of $9.26 per option.

18


Note 7: Employee future benefits

        The Bank's principal pension plan and non-pension post-retirement benefit plan expenses are as follows:

Pension expense for principal pension plan

 
  For the three months ended
  For the nine months ended
 
 
  July 31 2004
  July 31 2003
  July 31 2004
  July 31 2003
 
 
  (millions of dollars)
 
Service cost — benefits earned   $ 8   $ 8   $ 29   $ 23  
Interest cost on projected benefit obligation     23     23     70     68  
Expected return on plan assets     (25 )   (21 )   (76 )   (64 )
Amortization of net actuarial losses     4     3     12     9  
Amortization of prior service costs     (1 )       1     1  
   
 
 
 
 
Total   $ 9   $ 13   $ 36   $ 37  
   
 
 
 
 

Non-pension post-retirement benefit expense

 
  For the three months ended
  For the nine months ended
 
  July 31 2004
  July 31 2003
  July 31 2004
  July 31 2003
 
  (millions of dollars)
Service cost — benefits earned   $ 2   $ 2   $ 7   $ 6
Interest cost on projected benefit obligation     5     4     14     12
   
 
 
 
Total   $ 7   $ 6   $ 21   $ 18
   
 
 
 

        For the three and nine months ended July 31, 2004, the Bank has contributed $12 million and $33 million, respectively to its principal pension plan (2003 — $112 million and $139 million, respectively). As at July 31, 2004, the Bank expects to contribute an additional $11 million to its principal pension plan by the end of the fiscal year. However, future contribution amounts may change upon the Bank's review of the current contribution levels during the fourth quarter. For the three and nine months ended July 31, 2004, the Bank has contributed $2 million and $6 million, respectively to its post-retirement benefit plans (2003 — $2 million and $5 million, respectively). As at July 31, 2004, the Bank expects to contribute an additional $2 million to its post-retirement benefits plan by the end of the fiscal year.

Note 8:    Earnings per common share

 
  For the three months ended
  For the nine months ended
 
  July 31 2004
  July 31 2003
  July 31 2004
  July 31 2003
 
  (millions of dollars)
Basic earnings per common share                        
Net income   $ 584   $ 501   $ 1,698   $ 575
Preferred dividends     19     21     61     66
   
 
 
 
Net income applicable to common shares     565     480     1,637     509
Average number of common shares outstanding (millions)     653.1     651.3     654.9     648.5
Basic earnings per common share   $ .87   $ .74   $ 2.50   $ .78
   
 
 
 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 
Net income applicable to common shares   $ 565   $ 480   $ 1,637   $ 509
Average number of common shares outstanding (millions)     653.1     651.3     654.9     648.5
Stock options potentially exercisable as determined under the treasury stock method1     4.3     4.0     4.8     3.9
   
 
 
 
Average number of common shares outstanding — diluted     657.4     655.3     659.7     652.4
Diluted earnings per common share   $ .86   $ .73   $ 2.48   $ .78
   
 
 
 

1
For Q3, 2004, all options outstanding were included in the computation of diluted earnings per common share as the options' exercise prices were less than the average market prices of the Bank's common shares. For Q3, 2003, the computation of diluted earnings per common share excluded weighted average options outstanding of 12,096,010 with a weighted exercise price of $38.99 as the options' exercise price was greater than the average market price of the Bank's common shares.

19


Note 9:    Segmented information

        The Bank's operations and activities are organized around the following businesses: Personal and Commercial Banking, Wholesale Banking and Wealth Management. Results for these segments for the three and nine months ended July 31, 2004 and July 31, 2003 are presented in the following tables.

Results by business segment

 
  Personal and Commercial Banking
  Wholesale Banking1,2
  Wealth Management
  Corporate1,2
  Total
For the three months ended

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
  (millions of dollars)

Net interest income   $ 1,042   $ 1,031   $ 422   $ 343   $ 131   $ 113   $ (108 ) $ (85 ) $ 1,487   $ 1,402
Provision for (reversal of) credit losses     92     105     12     3             (121 )   (49 )   (17 )   59
Other income     537     466     118     139     489     501     44     87     1,188     1,193
Non-interest expenses before amortization of intangibles     913     873     340     307     502     495         22     1,755     1,697
   
 
 
 
 
 
 
 
 
 
Income before provision for (benefit of) income taxes and non-controlling interest     574     519     188     172     118     119     57     29     937     839
Provision for (benefit of) income taxes     193     184     55     62     38     37     (55 )   (87 )   231     196
Non-controlling interest in net income of subsidiaries                             23     23     23     23
   
 
 
 
 
 
 
 
 
 

Net income — before amortization of intangibles

 

$

381

 

$

335

 

$

133

 

$

110

 

$

80

 

$

82

 

$

89

 

$

93

 

$

683

 

$

620
   
 
 
 
 
 
 
 
 
 
Amortization of intangibles, net of income taxes                                                     99     119
                                                   
 
Net income — reported basis                                                   $ 584   $ 501
                                                   
 
Total assets (billions of dollars)                                                            
— balance sheet   $ 121.0   $ 113.3   $ 148.3   $ 149.8   $ 25.1   $ 20.4   $ 14.8   $ 18.7   $ 309.2   $ 302.2
— securitized     29.4     24.3         .1             (10.4 )   (5.9 )   19.0     18.5
   
 
 
 
 
 
 
 
 
 

 


 

Personal and Commercial Banking


 

Wholesale Banking1,2


 

Wealth Management


 

Corporate1,2


 

Total

For the nine months ended

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

  July 31
2004

  July 31
2003

 
  (millions of dollars)

Net interest income   $ 3,091   $ 3,062   $ 1,247   $ 1,004   $ 374   $ 314   $ (262 ) $ (143 ) $ 4,450   $ 4,237
Provision for (reversal of) credit losses     285     332     29     7             (627 )   (70 )   (313 )   269
Other income     1,543     1,328     500     551     1,629     1,357     111     94     3,783     3,330
Non-interest expenses before amortization of intangibles     2,706     2,590     1,028     1,366     1,545     1,761     340     90     5,619     5,807
   
 
 
 
 
 
 
 
 
 
Income (loss) before provision for (benefit of) income taxes and non-controlling interest     1,643     1,468     690     182     458     (90 )   136     (69 )   2,927     1,491
Provision for (benefit of) income taxes     546     518     209     48     157     89     (137 )   (187 )   775     468
Non-controlling interest in net income of subsidiaries                             69     69     69     69
   
 
 
 
 
 
 
 
 
 

Net income (loss) — before amortization of intangibles

 

$

1,097

 

$

950

 

$

481

 

$

134

 

$

301

 

$

(179

)

$

204

 

$

49

 

$

2,083

 

$

954
   
 
 
 
 
 
 
 
 
 
Amortization of intangibles, net of income taxes                                                     385     379
                                                   
 
Net income — reported basis                                                   $ 1,698   $ 575
                                                   
 

1
The Wholesale Banking and Corporate segment results have been restated to reflect the transfer of the non-core lending portfolio to the Corporate segment.

2
The taxable equivalent basis adjustment is reflected in the Wholesale Banking segment's results and eliminated in the Corporate segment.

20


Note 10:    Reconciliation of Canadian and United States generally accepted accounting principles

        The accounting principles followed by the Bank including the accounting requirements of the Superintendent of Financial Institutions Canada conform with Canadian generally accepted accounting principles (Canadian GAAP).

        Significant differences between Canadian GAAP and United States generally accepted accounting principles (U.S. GAAP) are described in the Bank's 2003 Annual Report with their impact detailed below.

Net Income

 
  For the nine months ended July 31
 
 
  2004
  2003
 
 
  (millions of dollars)

 
Net income based on Canadian GAAP   $ 1,698   $ 575  
Employee future benefits     (2 )   (5 )
Restructuring costs         (10 )
Variable interest entities     (9 )   (8 )
Non-controlling interest in TD Mortgage Investment Corporation     (19 )   (17 )
Available for sale securities     1     88  
Derivative instruments and hedging activities     (81 )   (19 )
Guarantees     (11 )   (8 )
Asset retirement obligations     (3 )    
Other     (5 )    
   
 
 
Net income based on U.S. GAAP     1,569     596  
Preferred dividends     42     49  
   
 
 
Net income applicable to common shares based on U.S. GAAP   $ 1,527   $ 547  
   
 
 
Average number of common shares outstanding (millions)              
  Basic — U.S. GAAP     648.9     648.5  
            — Canadian GAAP     654.9     648.5  
   
 
 
  Diluted — U.S. GAAP     653.7     652.4  
                — Canadian GAAP     659.7     652.4  
   
 
 
Basic earnings per common share — U.S. GAAP   $ 2.35   $ .84  
                                                             — Canadian GAAP     2.50     .78  
   
 
 
Diluted earnings per common share — U.S. GAAP   $ 2.34   $ .84  
                                                                 — Canadian GAAP     2.48     .78  
   
 
 

Consolidated Interim Statement of Comprehensive Income

 
  For the nine months ended July 31
 
 
  2004
  2003
 
 
  (millions of dollars)

 
Net income based on U.S. GAAP   $ 1,569   $ 596  
Other comprehensive income, net of income taxes              
  Net change in unrealized gains and losses on available for sale securities     (119 )   117  
  Reclassification to earnings in respect of available for sale securities     5     (84 )
  Change in unrealized foreign currency translation gains and losses     57     (338 )
  Change in gains and losses on derivative instruments designated as cash flow hedges     (178 )   96  
  Reclassification to earnings of gains and losses on cash flow hedges     22     50  
   
 
 
Comprehensive income   $ 1,356   $ 437  
   
 
 

21


Condensed Consolidated Interim Balance Sheet

 
  As at July 31
 
  2004
  2003
 
  Canadian
GAAP

  Adjustments
  U.S.
GAAP

  Canadian
GAAP

  Adjustments
  U.S.
GAAP

 
  (millions of dollars)

Assets                                    
Cash resources and other   $ 10,236   $   $ 10,236   $ 7,813   $   $ 7,813
Securities purchased under resale     25,401         25,401     26,643         26,643
Securities     101,355     1,814     103,169     93,359     1,769     95,128
Loans (net)     123,222     5,881     129,103     120,078     4,895     124,973
Derivatives' market revaluation     26,163     1,469     27,632     27,767     3,437     31,204
Other assets     22,816     160     22,976     26,555     113     26,668
   
 
 
 
 
 
Total assets   $ 309,193   $ 9,324   $ 318,517   $ 302,215   $ 10,214   $ 312,429
   
 
 
 
 
 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Deposits   $ 211,504   $ 350   $ 211,854   $ 198,628   $   $ 198,628
Derivatives' market revaluation     26,556     1,113     27,669     27,409     4,212     31,621
Other liabilities     50,538     2,227     52,765     56,838     696     57,534
Subordinated notes and other     5,671     5,921     11,592     5,143     4,749     9,892
Non-controlling interest     1,250     10     1,260     1,250     350     1,600
   
 
 
 
 
 
Total liabilities     295,519     9,621     305,140     289,268     10,007     299,275
   
 
 
 
 
 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Preferred shares     1,309     (350 )   959     1,535     (350 )   1,185
Common shares     3,245     (204 )   3,041     3,078     13     3,091
Contributed surplus     17     3     20     7     26     33
Foreign currency translation     (73 )   117     44     80     (36 )   44
Retained earnings     9,176     138     9,314     8,247     177     8,424
Accumulated other comprehensive income         (1 )   (1 )       377     377
   
 
 
 
 
 
Total shareholders' equity     13,674     (297 )   13,377     12,947     207     13,154
   
 
 
 
 
 
Total liabilities and shareholders' equity   $ 309,193   $ 9,324   $ 318,517   $ 302,215   $ 10,214   $ 312,429
   
 
 
 
 
 

Consolidation of variable interest entities

        As of January 31, 2004, the Bank prospectively adopted the U.S. interpretation on the consolidation of variable interest entities (VIEs). The interpretation required the Bank to identify VIEs in which it has an interest, determine whether it is the primary beneficiary of such entities and if so, consolidate them.

        As a result of this interpretation, the Bank consolidated $6 billion in assets as at July 31, 2004. This adjustment consisted of multi-seller conduits where the Bank assists clients in securitizing their financial assets through VIEs administered through the Bank. The Bank consolidated these VIEs given that it absorbs the majority of their expected losses through its provision of liquidity, credit enhancement and swap facilities as well as through the variability of certain fees received. The creditors have recourse to all the assets in the VIEs but not the general credit of the Bank. The net income impact of this adjustment was not significant.

        The Bank also holds significant variable interests in certain VIEs where it is not considered the primary beneficiary. The first of these is a multi-seller conduit which the Bank created in fiscal 1999 with $3 billion of assets. While probability of loss is negligible, the Bank's maximum potential exposure to loss for this conduit is $3 billion as of July 31, 2004 (through sole provision of liquidity facilities only available in the event of a general market disruption).

        The second is a single-seller conduit which the Bank created in fiscal 2000 with $3 billion of assets. The Bank's maximum potential exposure to loss for this conduit is $3 billion as of July 31, 2004 (through sole provision of liquidity facilities only available in the event of a general market disruption), however, the probability of loss is negligible.

        The Bank also enters into structured transactions on behalf of clients. Beginning in fiscal 2001, the Bank sold trading assets to certain third party managed multi-seller conduits as a source of cost effective funding as well as to manage regulatory capital. As part of the transactions, the Bank maintained its exposure to the assets through derivative contracts executed with the conduits. The Bank's maximum exposure to the entity is limited to the $3 billion notional value of the specified assets sold.

22


Note 11:    Contingent liabilities and commitments

Note 12:    Future accounting changes

Consolidation of variable interest entities

        The Canadian Accounting Standards Board has issued proposed amendments to its guideline on the consolidation of variable interest entities (VIEs) in order to harmonize with a recently revised U.S. Financial Accounting Standards Board interpretation. The revised guideline is effective for the Bank in fiscal 2005. The following summarizes the Bank's assessment of the primary impact of adopting the revised guideline. Note 10, the Reconciliation of Canadian and U.S. generally accepted accounting principles provides details of the adoption of the U.S. interpretation.

Single-seller conduits

        The Bank will consolidate securitized bank-originated assets of $300 million.

Multi-seller conduits

        The Bank will consolidate third party originated assets of approximately $6 billion. The Bank continues to investigate restructuring alternatives for these third party originated assets.

Innovative Capital Structures

        The Bank will no longer consolidate one of its innovative capital structures — TD Capital Trust Securities — Series 2012, which accounts for $350 million of Tier 1 capital. Although the Bank has voting control it is not deemed the primary beneficiary under the VIEs rules. For regulatory capital purposes, the Bank's innovative capital structures have been grandfathered by the Superintendent of Financial Institutions Canada, and the Bank's capital ratios are unaffected.

Other financial transactions

        The Bank is also involved with other entities and/or structures such as investment vehicles and continues to assess the impact of the new guideline on these transactions.

Liabilities and equity

        The CICA issued amendments to its accounting standard on financial instruments — disclosure and presentation which are effective for the Bank in fiscal 2005. As a result of these amendments, the Bank will be required to classify its existing preferred shares and innovative Tier 1 capital as liabilities. The Bank's preferred dividends will therefore be reported as interest expense and earnings attributable to common shares will be unaffected. For regulatory capital purposes, the existing capital instruments of the Bank have been grandfathered by the Superintendent of Financial Institutions Canada, and the Bank's capital ratios are unaffected.

Asset retirement obligations

        In fiscal 2003, the CICA issued an accounting standard on asset retirement obligations that is applicable to the Bank in fiscal 2005. The standard harmonizes Canadian GAAP with current U.S. GAAP and requires that a liability for an asset retirement obligation related to a long-lived asset be recognized in the period in which it is incurred and recorded at fair value.

Merchant banking accounting

        During 2003, the Canadian Accounting Standards Board amended its accounting standard on subsidiaries to disallow an enterprise acquired with the clearly demonstrated intention that it would be disposed of in the foreseeable future to be considered a temporary investment. As a result, beginning in fiscal 2005, the Bank will commence equity accounting for investments held within the merchant banking portfolio where it has significant influence. The Bank currently does not expect this change in accounting to result in a significant net income impact.

Note 13:    Subsequent event

        On August 26, 2004, the Bank announced a definitive agreement to acquire a 51% interest in Banknorth Group Inc. for total consideration of approximately $5 billion. Consideration is expected to be 60% cash and 40% common shares of the Bank. Banknorth is a public company with approximately $38 billion in assets. The acquisition is subject to approval by regulators and Banknorth shareholders, and if approved, is expected to close February 2005.

23


SHAREHOLDER AND INVESTOR INFORMATION

Shareholder Services
Call the Shareholders Relations department at (416) 944-6367 or toll free at 1-866-756-8936 or e-mail tdshinfo@td.com.
Shareholder information is also available by calling toll free in Canada or the United States:
1-800-4NEWS-TD (1-800-463-9783).
In Toronto, call:
(416) 982-NEWS [(416) 982-6397].

Internet website: www.td.com
Internet e-mail: customer.service@td.com

General Information
Contact Corporate & Public Affairs
(416) 982-8578

Products and services: Contact 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

Annual Meeting
Wednesday, March 23, 2005

Online Investor Presentation: Full financial statements and a presentation to investors and analysts (available on August 26) are accessible from the home page of the TD Bank Financial Group website, www.td.com/investor/calendar.jsp.

Webcast of Call: A live audio and video internet webcast of TD Bank Financial Group's quarterly earnings conference call with investors and analysts is scheduled on August 26, 2004 at 10:30 a.m. EDT. The call is webcast via the TD Bank Financial Group website at www.td.com. In addition, recordings of the presentations are archived on TD's website and will be available for replay for a period of at least one month.

Quarterly Earnings Conference Call: Instant replay of the teleconference is available from August 27, 2004 to September 23, 2004. Please call 1-877-289-8525 toll free, in (416) 640-1971, passcode 21091683 (pound key).

Software Required for Webcast: A Netscape Navigator 4.5 or Microsoft Internet Explorer 4.0 browser or better is required to access the webcast via the internet. Real Player is also required to access the webcast. To download Real Player, go to www.real.com.



THE TORONTO-DOMINION BANK
EARNINGS COVERAGE ON SUBORDINATED NOTES AND DEBENTURES
FOR THE TWELVE MONTHS ENDED JULY 31, 2004

        The Bank's interest requirements on all subordinated notes and debentures and innovative Tier 1 capital, after adjustment for new issues and retirement of subordinated debt, amounted to $444 million for the 12 months ended July 31, 2004. The Bank reported a net income, before interest on subordinated debt and innovative Tier 1 capital and income tax, of $3,459 million for the 12 months ended July 31, 2004, which was 7.8 times the Bank's interest requirements. On an earnings before amortization of intangibles basis1, the Bank's interest requirements on all subordinated notes and debentures and innovative Tier 1 capital, after adjustment for new issues and retirement of subordinated debt, amounted to $444 million for the 12 months ended July 31, 2004 and the Bank's net income before interest on subordinated debt and innovative Tier 1 capital and income tax was $4,118 million, which was 9.3 times its interest requirements.


1
The Bank utilizes "earnings before the amortization of intangibles basis" to assess each of its businesses and to measure overall Bank performance. To arrive at this measure, the Bank removes special items and the amortization of intangibles from the reported basis earnings. The Bank views special items as transactions that are not part of the normal daily business operations and are therefore not indicative of underlying trends. Previously, the Bank reported operating cash basis earnings. Since the only distinction between operating cash basis and reported basis earnings in 2003 and 2004 was the amortization of intangibles (as there were no special items), the Bank now refers to earnings before amortization of intangibles as it is a better description of this measure. The majority of the Bank's intangible amortization relates to the Canada Trust acquisition in fiscal 2000. The Bank excludes the amortization of intangibles as this approach ensures comparable treatment with goodwill, which is not amortized. Consequently, the Bank believes that earnings before amortization of intangibles provides the reader with an understanding of the Bank's results that can be consistently tracked from period to period. As explained, earnings before amortization of intangibles is different from reported results determined in accordance with GAAP. Earnings before amortization of intangibles and related terms are not defined terms under GAAP and therefore may not be comparable to similar terms used by other issuers.



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FORM 6-K SIGNATURES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF TD'S BUSINESSES
CONSOLIDATED INTERIM BALANCE SHEET
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
THE TORONTO-DOMINION BANK EARNINGS COVERAGE ON SUBORDINATED NOTES AND DEBENTURES FOR THE TWELVE MONTHS ENDED JULY 31, 2004