Edgar Filing: TORONTO DOMINION BANK

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U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 40-F

o Registration statement pursuant to section 12 of the
Securities Exchange Act of 1934

ý Annual report pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934


For the fiscal year ended		Commission File Number
October 31, 2004		1-14446

The Toronto-Dominion Bank
(Exact name of Registrant as specified in its charter)

Canada
(Province or other jurisdiction of incorporation or organization)

6029
(Primary Standard Industrial Classification Code Number (if applicable))

13-5640479
(I.R.S. Employer Identification Number (if applicable))

c/o General Counsel's Office
P.O Box 1
Toronto Dominion Centre
Toronto, Ontario M5K 1A2
(416) 308-6963
(Address and telephone number of Registrant's principal executive offices)

Brendan O'Halloran, The Toronto-Dominion Bank
31 West 52^nd Street
New York, NY
10019-6101
(212) 827-7000
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class		Name of each exchange on which registered
Common Shares		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not Applicable
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable
(Title of Class)

For annual reports, indicate by check mark the information filed with this Form:

ý Annual information form

ý Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

	Common Shares		656,954,072
	Class A First Preferred Shares, Series I		16,065
	Class A First Preferred Shares, Series J		16,383,935
	Class A First Preferred Shares, Series M		14,000,000
	Class A First Preferred Shares, Series N		8,000,000

Indicate by check mark whether the Registrant by filing 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 (the "Exchange Act"). If "Yes" is marked, indicate the filing number assigned to the Registrant in connection with such Rule.

Yes o

82-

No ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ý

No o

Disclosure Controls and Procedures and
Changes in Internal Control Over Financial Reporting.

The disclosure provided on page 21 of Exhibit 2: Management's Discussion and Analysis is incorporated by reference herein.

Audit Committee Financial Expert.

The disclosure provided under the heading Corporate Governance — The Audit Committee and the Shareholders' Auditors in Exhibit 4: Corporate Governance Disclosure is incorporated by reference herein.

Code of Ethics.

The Registrant has adopted the TD Bank Financial Group Guidelines of Conduct as its code of ethics applicable to the Registrant's President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and Senior Vice President and Chief Accountant. The Registrant undertakes to provide a copy of its code of ethics to any person without charge upon request. Such request may be made by mail, fax or email to:

The Toronto-Dominion Bank
Shareholder Relations
P.O. Box 1, TD Centre
12^th Floor, TD Tower
Toronto, Ontario, Canada
M5K 1A2
fax: 416-982-6166
email: tdshinfo@td.com

Principal Accountant Fees and Services.

The disclosure provided in Table 10 on page 54 of Exhibit 2: Management's Discussion and Analysis is incorporated by reference herein.

Pre-Approval Policy for Audit and Non-Audit Services

The disclosure provided in Table 10 on page 54 of Exhibit 2: Management's Discussion and Analysis is incorporated by reference herein.

Hours Expended on Audit Attributed to Persons Other than the Principal Accountant's Employees

N/A

Off-balance Sheet Arrangements.

The disclosure provided on page 17 of Exhibit 2: Management's Discussion and Analysis is incorporated by reference herein.

Tabular Disclosure of Contractual Obligations.

The disclosure provided in Table 17 on page 59 of Exhibit 2: Management's Discussion and Analysis is incorporated by reference herein.

Undertaking

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises or transactions in said securities.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

		THE TORONTO-DOMINION BANK
DATE: December 13, 2004		By:	/s/ CHRISTOPHER A. MONTAGUE Name: Christopher A. Montague Title: Executive Vice President and General Counsel

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 40-F

ANNUAL REPORT PURSUANT TO
SECTION 13(a) or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

THE TORONTO-DOMINION BANK

EXHIBITS

INDEX TO EXHIBITS

No.		Exhibits
1.		Annual Information Form
2.		Management's Discussion and Analysis
3.		2004 Annual Statement
4.		Corporate Governance Disclosure
5.		Senior Officers
6.		Independent auditors' report to the directors of Ernst & Young LLP and PricewaterhouseCoopers LLP dated November 24, 2004 and Comments by auditors for U.S. readers on Canada-U.S. reporting difference
7.		Consent of the Independent Auditors dated December 13, 2004
8.		Certification Pursuant to Section 302 of the U.S. Sarbanes-Oxley Act of 2002
9.		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002

Exhibit 1

ANNUAL INFORMATION FORM

The Toronto-Dominion Bank

Toronto-Dominion Centre

Toronto, Ontario, Canada

M5K 1A2

December 9, 2004

Documents Incorporated by Reference

Portions of the Annual Information Form ("AIF") are disclosed in the Annual Report to Shareholders for the year ended October 31, 2004 ("Annual Report") and are incorporated by reference into the AIF.

		Page Reference
		Annual Information Form	Incorporated by Reference from the Annual Report
CORPORATE STRUCTURE
	Name, Address and Incorporation	1
	Intercorporate Relationships		101-102
GENERAL DEVELOPMENT OF THE BUSINESS
	Three Year History	1	23-35
DESCRIPTION OF THE BUSINESS
	Review of Business		13-35
	Competition	2
	Economic Dependence		47
	Average Number of Employees	2
	Lending		39-41, 43-45
	Reorganizations	2
	Risk Factors	2	38-47
DIVIDENDS
	Dividends per Share	3
	Dividend Policy and Restrictions		49, 77-78
CAPITAL STRUCTURE
	Common Shares	3	77-78
	Preferred Shares	3	77-78
	Constraints	4
	Ratings	4
MARKET FOR SECURITIES OF THE BANK
	Market Listings	5
	Trading Price and Volume	5
	Prior Sales	7
DIRECTORS AND OFFICERS
	Directors and Board Committees of the Bank	7	7-10
	Audit Committee	9	9-10
	Executive Officers of the Bank	10	110-111
	Shareholdings of Directors and Executive Officers	10
	Additional Disclosure for Directors and Executive Officers	10
LEGAL PROCEEDINGS		11
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS		11
TRANSFER AGENTS AND REGISTRARS
	Transfer Agent	11
	Co-transfer Agent and Registrar	11
	Shareholder Service Agent in Japan	12
MATERIAL CONTRACTS		12
INTERESTS OF EXPERTS
	Names of Experts	12
	Interests of Experts	12
ADDITIONAL INFORMATION		13

Unless otherwise specified, this AIF presents information as at October 31, 2004.

Caution regarding Forwarding-Looking Statements

From time to time, The Toronto-Dominion Bank (the "Bank") makes written and oral forward-looking statements, including in this Annual Information Form, 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 targets 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 in other regulatory filings made in Canada and with the SEC, including the Bank's 2004 Annual Report; general business and economic conditions in Canada, the United States and other countries in which the Bank conducts business, as well as the effect of changes in monetary policy in those jurisdictions and changes in the foreign exchange rates for the currencies of those jurisdictions; 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, including the acquisition of a 51% interest in Banknorth Group, Inc. ("Banknorth"); 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; continued negative impact of the United States litigation environment; 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. The preceding list is not exhaustive of all possible factors. Other factors could also adversely affect the Bank's 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.

CORPORATE STRUCTURE

Name, Address and Incorporation

The Toronto-Dominion Bank (the "Bank") and its subsidiaries are collectively known as "TD Bank Financial Group". The Bank, a Schedule 1 chartered bank subject to the provisions of the Bank Act of Canada (the "Bank Act"), was formed on February 1, 1955 through the amalgamation of The Bank of Toronto (chartered in 1855) and The Dominion Bank (chartered in 1869). The Bank's head office is located at Toronto-Dominion Centre, King Street West and Bay Street, Toronto, Ontario, M5K 1A2.

GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History

As at October 31, 2004, the Bank was the third largest Canadian bank in terms of market capitalization. From 2001 to 2004, the Bank's assets have grown on average 2.9% annually to a total of $311.0 billion at the end of fiscal 2004. In Canada and around the world, TD Bank Financial Group serves more than 13 million customers in three key businesses: personal and commercial banking including TD Canada Trust; wealth management including the global operations of TD Waterhouse; and wholesale banking, including TD Securities, operating in a number of locations in key financial centres around the globe. TD Bank Financial Group also ranks among the world's leading on-line financial services firms, with more than 4.5 million on-line customers. For additional information on the Bank's businesses, see pages 23-35 of the Annual Report.

On November 4, 2002, the Bank announced that it would split its corporate lending business into "core" business, which the Bank intended to continue, and "non-core" business, which the Bank intended to run off in a manner that maximized shareholder value. At the end of 2004, this run off has been largely completed.

In the first half of fiscal 2003, the Bank restructured the international wealth management business of TD Waterhouse. Restructuring plans included: streamlining of TD Waterhouse International's United Kingdom operations; steps taken regarding strategic initiatives such as joint ventures in India, Singapore, Hong Kong and Luxembourg; and the sale of TD Waterhouse discount brokerage operations in Australia. The Bank also announced the restructuring of its U.S. equity options business. The Bank exited the options trading business in Philadelphia and San Francisco but continues to have a strong presence on the Chicago and American stock exchanges.

On October 31, 2003, the Bank acquired 57 Laurentian Bank branches in Ontario and Western Canada and their related regional and administrative support areas. The acquisition included a loan portfolio of approximately $2.0 billion and a deposit portfolio of approximately $1.9 billion. Laurentian Bank Visa card accounts were excluded. The Laurentian Bank customers, branches and related support areas have been largely merged into TD Canada Trust.

On January 20, 2004, Meloche Monnex Inc., an affiliate of the Bank, announced the signing of an agreement to acquire the Canadian personal lines property and casualty operations (automobile and homeowners insurance) of Boston-based Liberty Mutual Group. At October 31, 2004, Meloche Monnex was Canada's largest direct-response property and casualty insurer and one of the country's top four property and casualty insurers in personal lines, serving more than 1.5 million policyholders with a total of $1.4 billion in written premiums. The transaction closed in April 2004.

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 $35 billion in assets. The acquisition is subject to approval by regulators and Banknorth shareholders, and if approved, is expected to close in February 2005.

DESCRIPTION OF THE BUSINESS

Competition

The Bank is subject to intense competition in all aspects and areas of its business from banks and other domestic and foreign financial institutions and from non-financial institutions, including retail stores that maintain their own personal credit programs and governmental agencies that make available loans to certain borrowers. Competition has increased in recent years in many areas in which the Bank operates, in substantial part because other types of financial institutions and other entities have begun to engage in activities traditionally engaged in only by banks. Many of these competitors are not subject to regulation as extensive as that under the Bank Act and, thus, may have competitive advantages over the Bank in certain respects.

Average Number of Employees

In fiscal 2004, the Bank had an average number of employees of 42,843.

Reorganizations (within the last three years)

In November, 2001, the Bank announced the successful completion of its tender offer, through its wholly owned subsidiary, TD Waterhouse Holdings, Inc., for all of the approximately 12% of the outstanding shares of TD Waterhouse Group, Inc.'s common stock that the Bank and TD Waterhouse Holdings, Inc. did not already own.

Risk Factors

Banking and financial services involve risk. The Bank's goal is to earn stable and sustainable returns from its various businesses and operations while managing risks within acceptable limits. The Bank manages the static and changing risks involved in its businesses by establishing policies, procedures and internal checks and balances to keep the potential impacts and likelihood of each risk to an acceptable level. The Bank is exposed to six major categories of risk: credit, market, operational, liquidity, investment and regulatory risks. In addition, since all risks have the potential to impact upon the Bank's reputation, how it manages the various risks determines the extent to which the Bank's overall reputation and capital are at risk.

Industry and Bank-specific risks and uncertainties may impact materially on the Bank's future results. Industry risks include general economic and business conditions in the regions in which the Bank conducts business, monetary policies of the Bank of Canada and Federal Reserve System in the United States, competition, changes in laws and regulations, and accuracy and completeness of information on customers and counterparties. Bank-specific risks include the Bank's ability to adapt products and services to evolving industry standards, its ability to successfully complete and integrate acquisitions, its ability to attract and retain key executives and the disruption of key components of the Bank's business infrastructure.

Further explanation of the types of risks cited above and the ways in which the Bank manages them can be found in the Management Discussion and Analysis in pages 38 to 47 of the Annual Report, which are incorporated by reference. The Bank cautions that the preceding discussion of risk is not exhaustive. When considering whether to purchase securities of the Bank, investors and others should carefully consider these factors as well as other uncertainties, potential events and industry- and Bank-specific factors that may adversely impact the Bank's future results.

DIVIDENDS

Dividends per Share

		2004		2003		2002
Common shares		$	1.36	$	1.16	$	1.12
Preferred Shares
	Series G		—	U.S.$	0.68	U.S.$	1.35
	Series H	$	0.90	$	1.78	$	1.78
	Series I	$	0.04	$	0.04	$	0.04
	Series J	$	1.28	$	1.28	$	1.28
	Series K		—	$	0.47	$	1.84
	Series L		—	U.S.$	0.41	U.S.$	1.60
	Series M	$	1.18	$	0.86		—
	Series N	$	1.15	$	0.58		—

On February 3, 2003, the Bank redeemed all its 6,000,000 outstanding Class A First Preferred Shares, Series K and L.

On February 3, 2003, the Bank issued 14,000,000 Class A First Preferred Shares, Series M.

On April 30, 2003, the Bank issued 8,000,000 Class A First Preferred Shares, Series N.

On May 1, 2003, the Bank redeemed all its 7,000,000 outstanding Class A First Preferred Shares, Series G.

On May 3, 2004, the Bank redeemed all its 9,000,000 outstanding Class A First Preferred Shares, Series H.

CAPITAL STRUCTURE

Common Shares

The authorized common share capital of the Bank consists of an unlimited number of common shares without nominal or par value. The holders of common shares are entitled to vote at all meetings of the shareholders of the Bank except meetings at which only holders of a specified class or series of shares are entitled to vote. The holders of common shares are entitled to receive dividends as and when declared by the Board of Directors of the Bank, subject to the preference of the holders of the preferred shares of the Bank. After payment to the holders of the preferred shares of the Bank of the amount or amounts to which they may be entitled, and after payment of all outstanding debts, the holders of common shares shall be entitled to receive the remaining property of the Bank upon the liquidation, dissolution or winding-up thereof.

Preferred Shares

The Class A First Preferred Shares (the "Preferred Shares") of the Bank may be issued from time to time, in one or more series, with such rights, privileges, restrictions and conditions as the Board of Directors of the Bank may determine.

The Preferred Shares rank prior to the common shares and to any other shares of the Bank ranking junior to the Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Bank. Each series of Preferred Shares ranks on a parity with every other series of Preferred Shares.

In the event of the liquidation, dissolution or winding-up of the Bank, before any amounts shall be paid to or any assets distributed among the holders of the common shares or shares of any other class of the Bank ranking junior to the Preferred Shares, the holder of a Preferred Share of a series shall be entitled to receive to the extent provided for with respect to such Preferred Shares by the conditions attaching to such series: (i) an amount equal to the amount paid up thereon; (ii) such premium, if any, as has been provided for with respect to the Preferred Shares of such series; and (iii) all unpaid cumulative dividends, if any, on such Preferred Shares and, in the case of non-cumulative Preferred Shares, all declared and unpaid non-cumulative dividends. After payment to the holders of the Preferred Shares of the amounts so payable to them, they shall not be entitled to share in any further distribution of the property or assets of the Bank. Each series of Preferred Shares ranks equally with every other series of Preferred Shares.

There are no voting rights attaching to the Preferred Shares except to the extent provided for by any series or by the Bank Act.

Constraints

There are no constraints imposed on the ownership of securities of the Bank to ensure that the Bank has a required level of Canadian ownership. However, under the Bank Act, the ownership by one person or entity of more than 10% of the common shares of the Bank is prohibited without approval in accordance with the provisions of the Bank Act.

Ratings

	Dominion Bond Rating Service	Moody's Investor Services	Standard & Poor's	Fitch
Long Term Debt (deposits)	AA (low)	Aa3	A+	AA -
Subordinated Debt	A (high)	A1	A	A +
Short Term Debt (deposits)	R-1 (mid)	P-1	A-1	F-1+
Preferred Shares	Pfd-1 (low)		P-1 (low)

The AA (low) rating assigned by Dominion Bond Rating Service Limited ("DBRS") to the Bank's long term debt and the A (high) rating assigned to the Bank's subordinated debt are the second and third highest ratings, respectively, of DBRS's ten rating categories for long term debt obligations, which range from AAA to D. DBRS uses "high" and "low" designations on ratings from AA to C to indicate the relative standing of the securities being rated within a particular rating category. The R-1 (mid) rating assigned to short tem debt is the highest rating of DBRS's four rating categories for short term debt obligations, which range from R-1 to D. A Pfd-1 (low) rating by DBRS is the highest of five categories granted by DBRS for preferred shares.

The A+ rating assigned by Standard & Poor's, a division of McGraw-Hill Companies ("S&P") to the Bank's long term debt and the A rating assigned to the Bank's subordinated debt are both the third highest ratings, of S&P's ten rating categories for long term debt obligations, which range from AAA to D. Ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. The A-1 rating assigned to short tem debt is the highest rating of S&P's six rating categories for short term debt obligations, which range from A-1 to D. A P-1 (low) rating by S&P is the highest of five categories used by S&P in its Canadian preferred share rating scale. "Plus" and "minus" signs may be used to indicate the relative standing of a credit within a particular rating category.

The Aa3 rating assigned by Moody's Investor Services Inc. ("Moody's") to the Bank's long term debt and the A1 rating assigned to the Bank's subordinated debt are the second and third highest, respectively, of its nine rating categories for long term debt obligations, which range from Aaa to C. Moody's appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking and the modifier 3 indicates a ranking in the lower end of that generic rating category. The P-1 rating assigned to short tem debt is the highest rating of Moody's four rating categories for short term debt obligations, which range from P-1 to NP.

The AA- rating assigned by Fitch Ratings ("Fitch") to the Bank's long term debt and the A+ rating assigned to the Bank's subordinated debt are the second and third highest ratings, respectively, of Fitch's twelve rating categories for long term debt obligations, which range from AAA to D. A plus or minus sign may be appended to ratings from AA to CCC to denote relative status within major rating categories. The F-1+ rating assigned to short term debt is the highest rating of Fitch's six rating categories for short term debt obligations, which range from F1 to D. A plus sign may be appended to an F1 rating class to denote relative status within the category.

Credit ratings are intended to provide investors with an independent assessment of the credit quality of an issue or issuer of securities and do not speak to the suitability of particular securities for any particular investor. The credit ratings assigned to securities may not reflect the potential impact of all risks on the value of the securities. A rating is therefore not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating agency.

MARKET FOR SECURITIES OF THE BANK

Market Listings

        The Bank's common shares are listed on:
                the Toronto Stock Exchange
                the New York Stock Exchange
                the Tokyo Stock Exchange

The Bank's preferred shares, except the Class A First Preferred Shares, Series I, are listed on the Toronto Stock Exchange.

Trading Price and Volume

Trading price and volume of the Bank's securities:

TORONTO STOCK EXCHANGE

			Preferred Shares
		Common Shares	Preferred Shares
		Common Shares	Series H	Series J	Series M	Series N
November 2003
	High Price ($)	44.78	26.75	27.15	26.64	26.59
	Low Price ($)	40.68	25.91	26.63	26.30	26.27
	Volume ('00)	326,310	490	348	1,736	2,087
December
	High Price ($)	43.65	26.39	27.23	27.12	27.03
	Low Price ($)	40.60	25.50	26.66	26.43	26.40
	Volume ('00)	400,093	584	477	1,481	1,886

			Preferred Shares
		Common Shares	Preferred Shares
		Common Shares	Series H	Series J	Series M	Series N
January 2004
	High Price ($)	46.05	26.12	27.38	27.20	27.17
	Low Price ($)	42.88	25.50	26.75	26.63	26.67
	Volume ('00)	436,732	21,071	6,063	6,471	9,384
February
	High Price ($)	45.33	25.75	27.85	27.50	27.40
	Low Price ($)	43.40	25.27	27.25	26.94	26.94
	Volume ('00)	288,812	513	4,310	1,285	1,295
March
	High Price ($)	47.49	25.89	27.80	27.88	27.84
	Low Price ($)	44.60	25.25	27.61	27.30	27.23
	Volume ('00)	506,263	18,627	28,478	1,446	2,555
April
	High Price ($)	48.25	25.45	27.69	27.84	27.75
	Low Price ($)	43.50	24.95	26.02	25.75	24.50
	Volume ('00)	285,422	26,244	12,956	3,524	6,436
May
	High Price ($)	45.75	25.03	26.51	26.47	26.15
	Low Price ($)	43.30	24.94	26.15	25.90	25.60
	Volume ('00)	267,105	22*	846	1,208	2,078
June
	High Price ($)	46.59		26.85	26.98	26.39
	Low Price ($)	42.67		26.45	26.20	25.90
	Volume ('00)	305,521		943	3,518	1,683
July
	High Price ($)	44.40		27.10	26.79	26.58
	Low Price ($)	42.54		26.15	26.00	25.71
	Volume ('00)	206,066		12,994	2,624	5,354
August
	High Price ($)	46.07		26.80	27.00	27.00
	Low Price ($)	42.71		26.48	26.50	26.40
	Volume ('00)	369,755		562	1,325	3,708
September
	High Price ($)	47.07		26.79	27.16	27.00
	Low Price ($)	45.00		25.60	26.76	26.75
	Volume ('00)	301,567		939	973	1,199
October
	High Price ($)	50.00		26.75	27.09	27.04
	Low Price ($)	46.04		25.81	26.25	26.31
	Volume ('00)	378,611		12,669	4,306	8,841

*: On May 3, 2004, the Bank redeemed all of its Class A First Preferred Shares, Series H.

Prior Sales

In the most recently completed financial year, the Bank did not issue (a) any shares that are not listed or quoted on a marketplace, or (b) any subordinated debt securities. In the ordinary course of business, the Bank issues deposit notes under its Euro Medium Term and Deposit Note Programme, as well as on a stand-alone basis in various jurisdictions, including Canada. In 2004, the Bank issued approximately $690 million of such deposit notes at par.

DIRECTORS AND OFFICERS

Directors and Board Committees of the Bank

The following table sets forth the directors of the Bank as at December 9, 2004, their present principal occupation and business and the date each became a director of the Bank.

Director Name Principal Occupation		Director Since
William E. Bennett Corporate Director and retired President and Chief Executive Officer, Draper & Kramer, Inc.		May 2004
Hugh J. Bolton Chair of the Board, EPCOR Utilities Inc. (integrated energy company)		April 2003
John L. Bragg President and Co-Chief Executive Officer, Oxford Frozen Foods Limited (distributor of frozen food products)		October 2004
W. Edmund Clark President and Chief Executive Officer of the Bank		August 2000
Marshall A. Cohen Counsel, Cassels Brock & Blackwell LLP (law firm)		February 1992
Wendy K. Dobson Professor and Director, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto		October 1990
Darren Entwistle President and Chief Executive Officer, TELUS Corporation (telecommunications company)		November 2001
Donna M. Hayes Publisher and Chief Executive Officer, Harlequin Enterprises Limited (global publishing company)		January 2004

Director Name Principal Occupation		Director Since
Henry H. Ketcham Chairman of the Board, President and Chief Executive Officer, West Fraser Timber Co. Ltd. (integrated forest products company)		January 1999
Pierre H. Lessard President and Chief Executive Officer, METRO INC. (food retailer and distributor)		October 1997
Harold H. MacKay Senior Partner, MacPherson Leslie & Tyerman LLP (law firm)		November 2004
Brian F. MacNeill Chairman of the Board, Petro-Canada (integrated oil and gas company)		August 1994
Roger Phillips Corporate Director and retired President and Chief Executive Officer, IPSCO Inc.		February 1994
Wilbur J. Prezzano Corporate Director and retired Vice Chairman, Eastman Kodak Company		April 2003
Helen K. Sinclair Chief Executive Officer, BankWorks Trading Inc. (software and educational products company)		June 1996
Donald R. Sobey Chairman Emeritus, Empire Company Limited (investment holding company)		October 1992
Michael D. Sopko Corporate Director and retired Chairman and Chief Executive Officer, Inco Limited		August 1992
John M. Thompson Chairman of the Board of the Bank		August 1988

Except as hereinafter disclosed, all directors have held their positions or other executive positions with the same, predecessor or associated firms or organizations for the past five years. Prior to his appointment as Chair of EPCOR Utilities Inc. on January 1, 2000, Mr. Hugh J. Bolton was a financial consultant and corporate director. Prior to joining the Bank on February 1, 2000, Mr. W. Edmund Clark was President and Chief Executive Officer of CT Financial Services Inc., Canada Trustco Mortgage Company and The Canada Trust Company. Until December 20, 2002 when Mr. Clark became the President and Chief Executive Officer of the Bank, he was the President and Chief Operating Officer of the Bank. Prior to joining TELUS Corporation in July 2000, Mr. Darren Entwistle held various senior executive positions in the telecommunications industry, including Cable & Wireless Communications plc in the United Kingdom. Mr. Brian F. MacNeill was President and Chief Executive Officer of Enbridge Inc. (formerly IPL Energy Inc.) from April 1991 and stepped down as President in September 2000 and as Chief Executive Officer in January 2001. Mr. Roger Phillips retired as President and Chief Executive Officer of IPSCO Inc. in January 2002. Dr. Michael D. Sopko retired as Chief Executive Officer of Inco Limited on April 25, 2001 and as its Chairman on April 17, 2002. Mr. John M. Thompson was the Vice Chairman of the Board of IBM Corporation from August 2000 until his retirement in September 2002, and prior to that held various senior executive positions with IBM. Mr. Donald R. Sobey was also a director of the Bank from May 1978 to January 1992. As announced on August 26, 2004, William J. Ryan, Chairman, President and Chief Executive Officer of Banknorth Group, Inc. will join the Board of Directors of the Bank upon the conclusion of the Bank's acquisition of 51% of the outstanding shares of Banknorth. Subject to shareholder and regulatory approval, the acquisition is expected to close in February 2005. Each director will hold office until the next annual meeting of shareholders of the Bank, which is scheduled for March 23, 2005. Information concerning the nominees proposed by management for election as directors at the meeting will be contained in the proxy circular of the Bank in respect of the meeting.

Audit Committee

The Audit Committee of the Board of Directors of the Bank operates under a written charter that sets out its responsibilities and composition requirements. A copy of the charter is attached to this AIF. As at December 9, 2004, the members of the Committee were: Hugh J. Bolton (chair), John L. Bragg, Darren Entwistle, Donna M. Hayes, Henry H. Ketcham and Helen K. Sinclair. The following sets out the education and experience of each director relevant to the performance of his or her duties as a member of the Committee:

Hugh J. Bolton is Chair of the Bank's Audit Committee. Mr. Bolton holds an undergraduate degree in economics from the University of Alberta. Mr. Bolton has over 40 years of experience in the accounting industry, including as a former partner, Chairman and Chief Executive Officer of Coopers & Lybrand Canada, Chartered Accountants. He remains a Chartered Accountant and Fellow of the Alberta Institute of Chartered Accountants and has significant experience with accounting and auditing issues relating to financial service corporations such as the Bank. Mr. Bolton is the Bank's Audit Committee Financial Expert for the purposes of U.S. securities legislation.

John L. Bragg is President and Founder of Oxford Frozen Foods Limited and the owner and founder of Bragg Communications Inc. Mr. Bragg holds a Bachelor of Commerce degree and a Bachelor of Education degree from Mount Allison University.

Darren Entwistle is the President and Chief Executive Officer of TELUS Corporation and is a member of its Board of Directors. Mr. Entwistle holds an undergraduate degree in economics from Concordia University and a master's degree in business administration from McGill University.

Donna M. Hayes is the Publisher and Chief Executive Officer of Harlequin Enterprises Limited and is a member of its Board of Directors and the boards of a number of associated companies. Ms. Hayes holds an undergraduate degree from McGill University and has completed the professional publishing course at Stanford University and the executive management program at the Richard Ivey School at The University of Western Ontario.

Henry H. Ketcham is the Chairman of the Board, President and Chief Executive Officer of West Fraser Timber Co. Ltd. Mr. Ketcham holds an undergraduate degree from Brown University.

Helen K. Sinclair is the founder and Chief Executive Officer of BankWorks Trading Inc. and is a member of its Board of Directors. Ms. Sinclair holds an undergraduate degree from York University and a master's degree from the University of Toronto, both in economics. She is a graduate of the Advanced Management Program of the Harvard Business School.

The Committee charter requires all members to be financially literate or be willing and able to acquire the necessary knowledge quickly. Financially literate means the ability to read and understand financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Bank's financial statements. The Bank believes all of the current members of the Committee are financially literate.

In addition, the Committee charter contains independence requirements applicable to each member and, as at December 9, 2004, each member meets those requirements. Specifically, the charter provides that no member of the Committee may be an officer or retired officer of the Bank and every member shall be independent of the Bank within the meaning of all applicable laws, rules and regulations and any other relevant consideration, including laws, rules and regulations particularly applicable to audit committee members.

The Committee has in place a policy to restrict the provision of non-audit services by the shareholders' auditors. Any such services must be permitted services and must be pre-approved by the Committee pursuant to the policy. The Committee also pre-approves the audit services and the fees to be paid. Additional information regarding audit and non-audit services, together with the fees paid to the shareholders' auditors in the last three fiscal years, can be found in Table 10 on page 54 of the Annual Report.

Executive Officers of the Bank

As at December 9, 2004, executive officers of the Bank are Mr. W. Edmund Clark, Ms. Andrea S. Rosen, and Messrs. Robert E. Dorrance, Fredric J. Tomczyk, Bernard T. Dorval, William H. Hatanaka, Robert F. MacLellan and Daniel A. Marinangeli.

Shareholdings of Directors and Executive Officers

As at December 9, 2004, the directors and executive officers of the Bank as a group beneficially owned, directly or indirectly, or exercised control or direction over, less than one percent of the outstanding common shares of the Bank.

Additional Disclosure for Directors and Executive Officers

To the best of our knowledge, having made due inquiry, the Bank confirms that, as at December 9, 2004:

(i)

in the last ten years, no director or executive officer of the Bank is or has been a director or officer of a company (including the Bank) that, while that person was acting in that capacity:

(a): was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days, except Mr. Pierre Lessard who was a director of CINAR Corporation at the time its shares were suspended from trading on the Toronto Stock Exchange for more than 30 consecutive days and were delisted from the Toronto Stock Exchange and the NASDAQ due to the inability of CINAR Corporation to meet continued listing requirements;
(b): was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or
(c): within a year of the person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, except Mr. Marshall Cohen who ceased to be a director of Haynes International Inc. within twelve months prior to Haynes International Inc. filing for relief under Chapter 11 of the United States Bankruptcy Code in March 2004;

(ii)

in the last ten years, no director or executive officer of the Bank has become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer; and

(iii): no director or executive officer of the Bank has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

LEGAL PROCEEDINGS

The Bank and its subsidiaries are engaged in legal actions arising in the ordinary course of business, many of which are loan-related. None of this litigation individually or in the aggregate, however, is expected to have a material adverse effect on the consolidated financial position or results of operations of the Bank.

During fiscal 2004, the Bank added $354 million to its contingent litigation reserves. This includes reserves with respect to certain Enron-related actions to which the Bank is a party. Several of these matters are in the early stages of litigation and given the size of the claims there is exposure to additional loss. The Bank will regularly assess its position as events progress.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

To the best of our knowledge, the Bank confirms that, as at December 9, 2004 there were no directors or executive officers of the Bank or any associate or affiliate of a director or executive officer of the Bank with a material interest in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or will materially affect the Bank.

TRANSFER AGENTS AND REGISTRARS

Transfer Agent

CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario
M5C 2W9

(800) 387-0825
(416) 643-5500
www.cibcmellon.com or inquiries@cibcmellon.com

Co-transfer Agent and Registrar

Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, New Jersey
07606

85 Challenger Road
Ridgefield Park, New Jersey
07660

(800) 370-1163
(201) 329-8660
www.melloninvestor.com

Shareholder Service Agent in Japan

Mizuho Trust & Banking Co., Ltd.
1-17-7, Saga, Koto-ku
Tokyo, Japan
135-8722

MATERIAL CONTRACTS

On August 25, 2004, the Bank and Banknorth signed a definitive agreement for the Bank to acquire 51% of the outstanding shares of Banknorth for consideration valued at the time of approximately $5 billion. The agreement between the Bank and Banknorth provides for the merger of Banknorth with a Bank subsidiary in which each Banknorth shareholder will receive a package of US$12.24 in cash, 0.2351 of a common share of the Bank and 0.49 shares of the new Banknorth stock, which will continue to be listed on the New York Stock Exchange. Subject to shareholder and regulatory approval, the acquisition is expected to close in February, 2005.

INTERESTS OF EXPERTS

Names of Experts

The consolidated financial statements of the Bank for the year ended October 31, 2004 included in the Bank's 2004 Annual Report filed under National Instrument 51-102 Continuous Disclosure (NI 51-102), portions of which are incorporated by reference in this AIF, have been audited by Ernst & Young LLP and PricewaterhouseCoopers LLP.

Further, the proxy statement/prospectus relating to the Bank's acquisition of 51% of the outstanding shares of Banknorth, filed under NI 51-102, describes or includes: fairness opinions of Keefe, Bruyette & Woods, Inc. and Lehman Brothers Inc.; the audit report of Ernst & Young LLP and PricewaterhouseCoopers LLP covering the consolidated financial statements of the Bank for the year ended October 31, 2003; and legal opinions of Elias, Matz, Tiernan & Herrick L.L.P., Simpson Thacher & Bartlett LLP and Osler, Hoskin & Harcourt LLP.

Interests of Experts

Keefe, Bruyette & Woods, Inc., Lehman Brothers Inc., and the respective partners, counsel and associates of each of Elias, Matz, Tiernan & Herrick L.L.P., Simpson Thacher & Bartlett LLP and Osler, Hoskin & Harcourt LLP beneficially own, directly or indirectly, less than 1% of any class of security issued by the Bank or any of its affiliates.

As of December 9, 2004, no executive officer or director of the Bank is an officer, director or employee of Keefe, Bruyette & Woods, Inc. or Lehman Brothers Inc., or is a partner, counsel or associate of Elias, Matz, Tiernan & Herrick L.L.P., Simpson Thacher & Bartlett LLP or Osler, Hoskin & Harcourt LLP. Nor, as of December 9, 2004, to the best of our knowledge, does the Bank expect to elect, appoint or employ as a director or executive officer of the Bank any director, officer or employee of Keefe, Bruyette & Woods, Inc. or Lehman Brothers Inc., or partner, counsel or associate of Elias, Matz, Tiernan & Herrick L.L.P., Simpson Thacher & Bartlett LLP or Osler, Hoskin & Harcourt LLP.

The Bank has implemented a policy governing the hiring of current or former partners, employees or consultants of the shareholders' auditors. The objectives of this policy are to ensure that the Bank's hiring practices comply with all applicable securities laws, rules and regulations and to establish procedures to be followed by the Bank's Human Resources department when considering a candidate for a position at the Bank who is currently or has previously been employed by one or more of the shareholders' auditors. From time to time, at the Bank's request, law firms provide lawyers and law students for secondment to groups in the Bank's head office and business units.

ADDITIONAL INFORMATION

Additional information concerning the Bank may be found on SEDAR at www.sedar.com. The Bank will provide to any person or company upon request to the Secretary of the Bank at the head office of the Bank: (a) when the securities of the Bank are in the course of distribution pursuant to a short form prospectus or a preliminary short form prospectus which has been filed in respect of a proposed distribution of its securities, (i) one copy of this Annual Information Form, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in this Annual Information Form, (ii) one copy of the comparative financial statements of the Bank for its most recently completed financial year for which financial statements have been filed, together with the accompanying report of the auditors, and one copy of the most recent interim financial statements of the Bank, if any, filed for any period after the end of its most recently completed financial year, (iii) one copy of the proxy circular of the Bank in respect of its most recent annual meeting of shareholders that involved the election of directors, and (iv) one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or the short form prospectus and are not required to be provided under (i) to (iii) above; or (b) at any other time, one copy of any documents referred to in (a)(i), (ii) and (iii) above, provided the Bank may require the payment of a reasonable charge if the request is made by a person or company who is not a security holder of the Bank.

Additional information, including directors' and officers' remuneration and indebtedness, principal holders of the Bank's securities, options to purchase securities and interests of insiders in material transactions, if applicable, is contained in the Bank's proxy circular for its most recent annual meeting of shareholders that involved the election of directors. Additional financial information is provided in the Bank's comparative financial statements and management's discussion and analysis for its most recently completed financial year, which at the date hereof, was the year ended October 31, 2004. The Bank's comparative financial statements and management's discussion and analysis for the year ended October 31, 2004 are contained in the Annual Report.

ATTACHMENT

AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF THE TORONTO-DOMINION BANK
CHARTER

~ ~ Supervising the Quality and Integrity of the Bank's Financial Reporting ~ ~

Our Main Responsibilities:

•: overseeing of reliable, accurate and clear financial reporting to shareholders
•: monitoring internal controls – the necessary checks and balances must be in place
•: directly responsible for the selection, compensation, retention and oversight of the work of the external auditors – the external auditors report directly to the Committee
•: listening to the shareholders' auditors and internal auditor and evaluating the effectiveness and independence of each
•: overseeing the establishment and maintenance of processes that ensure the Bank is in compliance with the laws and regulations that apply to it as well as its own policies
•: acting as the audit committee and conduct review committee for certain subsidiaries of the Bank that are federally-regulated financial institutions
•: receiving reports on and approve, if appropriate, transactions with related parties

Independence is Key:

•: our Committee is composed entirely of non-management directors
•: we meet regularly without management present
•: we have the power to hire – and fire – independent advisors, paid for by the Bank, to help us make the best possible decisions on the financial reporting, accounting policies and practices, disclosure practices, and internal controls of the Bank

Composition and Independence, Financial Literacy and Authority

The Committee shall be composed of members of the Board of Directors in such number as is determined by the Board with regard to the by-laws of the Bank, applicable laws, rules and regulations and any other relevant consideration, subject to a minimum requirement of three directors. In this charter, "Bank" means The Toronto-Dominion Bank on a consolidated basis.

To facilitate open communication between the Audit Committee and the Risk Committee, the Chair of the Audit Committee shall either be a member of the Risk Committee or be entitled to receive notice of and attend as an observer each meeting of the Risk Committee and to receive the materials for each meeting of the Risk Committee. The Chair of the Risk Committee shall either be a member of the Audit Committee or be entitled to receive notice of and attend as an observer each meeting of the Audit Committee and to receive the materials for each meeting of the Audit Committee.

No member of the Committee may be an officer or retired officer of the Bank. Every member of the Committee shall be independent of the Bank within the meaning of all applicable laws, rules and regulations and any other relevant consideration, including laws, rules and regulations particularly applicable to audit committee members.

The members of the Committee shall be appointed by the Board and shall serve until their successors are duly appointed. A Chair will be appointed by the Board, failing which the members of the Committee may designate a Chair by majority vote. The Committee may from time to time delegate to its Chair certain powers or responsibilities that the Committee itself may have hereunder.

In addition to the qualities set out in the Position Description for Directors, all members of the Committee should be financially literate or be willing and able to acquire the necessary knowledge quickly. "Financial Literacy" means the ability to read and understand financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Bank's financial statements. At least one member of the Committee shall have a background in accounting or related financial management experience which would include any experience or background which results in the individual's financial sophistication, including being or having been an auditor, a Chief Executive Officer or other senior officer with financial oversight responsibilities.

In fulfilling the responsibilities set out in this Charter, the Committee has the authority to conduct any investigation and access any officer, employee or agent of the Bank appropriate to fulfilling its responsibilities, including the shareholders' auditors of the Bank. The Audit Committee may obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and may retain and determine the compensation to be paid by the Bank for such independent counsel or outside advisor in its sole discretion without seeking Board approval.

Committee members will enhance their familiarity with financial, accounting and other areas relevant to their responsibilities by participating in educational sessions or other opportunities for development.

Meetings

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Committee should meet with the shareholders' auditors and management quarterly to review the Bank's financial statements consistent with the section entitled "Financial Reporting" below. The Committee should dedicate a portion of each of its regularly scheduled quarterly meetings to meeting separately with each of the Chief Financial Officer, the Chief Auditor and the shareholders' auditors and to meeting on its own without members of management or the shareholders' auditors. Annually, the Committee shall meet jointly with the Risk Committee and The Office of the Superintendent of Financial Institutions.

Specific Duties and Responsibilities

Financial Reporting

The Committee shall be responsible for the oversight of reliable, accurate and clear financial reporting to shareholders, including reviewing the Bank's annual and interim financial statements and management's discussion and analysis, prior to approval by the Board and release to the public, and reviewing, as appropriate, releases to the public of significant material non-public financial information of the Bank. Such review of the financial reports of the Bank shall include, where appropriate but at least annually discussion with management and the shareholders' auditors of significant issues regarding accounting principles, practices, and significant management estimates and judgments.

The Committee shall review earnings press releases and satisfy itself that adequate procedures are in place for the review of the Bank's public disclosure of financial information extracted or derived from the Bank's financial statements, other than the public disclosure in the Bank's annual and interim financial statements and MD&A, and must periodically assess the adequacy of those procedures.

Financial Reporting Process

The Committee shall support the Board in its oversight of the financial reporting process of the Bank including:

•: working with management, the shareholders' auditors and the internal audit department to review the integrity of the Bank's financial reporting processes;
•: reviewing the process relating to and the certifications of the Chief Executive Officer and the Chief Financial Officers on the integrity of the Bank's quarterly and annual consolidated financial statements;

•: considering the key accounting policies of the Bank and key estimates and judgments of management and discussing such matters with management and/or the shareholders' auditors;
•: keeping abreast of trends and best practices in financial reporting including considering, as they arise, topical issues such as the use of variable interest entities and off-balance sheet reporting, and their application to the Bank;
•: reviewing with the shareholders' auditors and management significant accounting principles and policies and all critical accounting policies and practices used and any significant audit adjustments made;
•: considering and approving, if appropriate, major changes to the Bank's accounting and financial reporting and policies as suggested by the shareholders' auditors, management, or the internal audit department; and
•: establishing regular systems of reporting to the Committee by each of management, the shareholders' auditors and the internal audit department regarding any significant judgments made in management's preparation of the financial statements and any significant difficulties encountered during the course of the review or audit, including any restrictions on the scope of work or access to required information.

The Audit Committee's Role in the Financial Reporting Process

The shareholders' auditors are responsible for planning and carrying out, in accordance with professional standards, an audit of the Bank's annual financial statements and reviews of the Bank's quarterly financial information. Management of the Bank is responsible for the preparation, presentation and integrity of the Bank's financial statements and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulators. The Audit Committee oversees the financial reporting process at the Bank and receives quarterly reporting regarding the process undertaken by management and the results of the shareholders' auditors' review. It is not the duty of the Audit Committee to plan or conduct audits, or to determine that the Bank's financial statements are complete, accurate and in accordance with GAAP.

Internal Controls

The Committee shall monitor the internal controls of the Bank to ensure the necessary checks and balances are in place, including:

•: requiring management to implement and maintain appropriate systems of internal controls in accordance with applicable laws, regulations and guidance, including section 404 of the U.S. Sarbanes-Oxley Act;

•: meeting with management and the Chief Auditor to assess the adequacy and effectiveness of the Bank's internal control systems;
•: receiving reports from the Risk Committee as considered necessary or desirable with respect to any issues relating to internal control procedures considered by that Committee in the course of undertaking its responsibilities; and
•: reviewing reporting by the Bank to its shareholders regarding internal controls.

Internal Audit Division

The Committee shall monitor the internal audit division of the Bank, including reviewing and approving its annual plan and satisfying itself that the internal audit division has adequate resources and independence to perform its responsibilities. In addition, the Committee shall:

•: confirm the appointment and dismissal of the Chief Auditor of the Bank;
•: periodically assess the effectiveness of the internal audit division;
•: regularly review significant reports prepared by the Chief Auditor or the internal audit department together with management's response and follow-up on these reports as appropriate;
•: provide a forum for the Chief Auditor to raise any issues regarding the relationship and interaction among the internal audit division, management and the shareholders' auditors; and
•: review reports from the Chief Auditor or the internal audit department regarding the relationships between the Bank and OSFI.

Oversight of Shareholders' Auditors

The Committee shall review and evaluate the performance, qualifications and independence of the shareholders' auditors including the lead partners and annually make recommendations to the Board and shareholders regarding the nomination of the shareholders' auditors for appointment by the shareholders. The Committee shall also make recommendations regarding remuneration and, if appropriate, termination of the shareholders' auditors. The shareholders' auditors shall be accountable to the Committee and the entire Board, as representatives of the shareholders, for such shareholders' auditors' review of the financial statements and controls of the Bank. In addition, the Committee shall:

•: review the shareholders' auditors' annual audit plans and engagement letters;

•: review the shareholders' auditors' processes for assuring the quality of their audit services including any matters that may affect the audit firms' ability to serve the Bank as shareholders' auditors;
•: discuss those matters that are required to be communicated by shareholders' auditors to the Committee in accordance with the standards established by the Canadian Institute of Chartered Accountants, as such matters are applicable to the Bank from time to time;
•: review with the shareholders' auditors any issues that may be brought forward by them, including any audit problems or difficulties, such as restrictions on their audit activities or access to requested information, and management's responses;
•: review with the shareholders' auditors the auditors' concerns, if any, about the quality, not just acceptability, of the Bank's accounting principles as applied in its financial reporting; and
•: provide a forum for management and the internal and/or shareholders' auditors to raise issues regarding their relationship and interaction. To the extent disagreements regarding financial reporting are not resolved, be responsible for the resolution of such disagreements between management and the internal and/or shareholders' auditors.

Independence of Shareholders' Auditors

The Committee shall oversee and assess the independence of the shareholders' auditors through various mechanisms, including:

•: reviewing and approving (or recommending to the Board for approval) the audit fees and other significant compensation to be paid to the shareholders' auditors and reviewing and monitoring the policy for the provision of non-audit services to be performed by the shareholders' auditors, including the pre-approval of such non-audit services in accordance with an approved policy;
•: receiving from the shareholders' auditors, on a periodic basis, a formal written statement delineating all relationships between the shareholders' auditors and the Bank consistent with the rules of professional conduct of the Canadian provincial chartered accountants institutes or other regulatory bodies, as applicable;
•: reviewing and discussing with the Board, annually and otherwise as necessary, and the shareholders' auditors, any relationships or services between the shareholders' auditors and the Bank or any factors that may impact the objectivity and independence of the shareholders' auditors;
•: reviewing and approving policies and procedures regarding the employment of partners, employees and former partners and employees of the present or former shareholders' auditors of the Bank as required by applicable laws; and

•: reviewing and monitoring other policies put in place to facilitate auditor independence, such as the rotation of members of the audit engagement team, as applicable.

Conduct Review and Related Party Transactions

The Committee shall be responsible for conduct review and oversight of related party transactions (except the approval of Bank officer related party credit facilities which are reviewed by the Management Resources Committee and the approval of Bank director related party credit facilities which are reviewed by the Risk Committee, as required), including:

•: ensuring procedures and practices are established by management as required by the Bank Act relating to conduct review and related party transactions and monitoring compliance with those procedures and their effectiveness from time to time; and
•: monitoring compliance with policies in respect of ethical personal and business conduct, including the Conflicts of Interest Procedures, Disclosure of Information and Compliant Procedures and the Guidelines of Conduct of the Bank.

Compliance

The Committee shall oversee the establishment and maintenance of processes that ensure the Bank is in compliance with the laws and regulations that apply to it as well as its own policies, including:

•: reviewing with management the Bank's compliance with applicable regulatory requirements, the legislative compliance management system and applicable securities legislation;
•: establishing procedures in accordance with regulatory requirements for the receipt, retention and treatment of complaints received by the Bank on accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters;
•: reviewing professional pronouncements and changes to key regulatory requirements relating to accounting rules to the extent it applies to the financial reporting process of the Bank; and
•: reviewing with the Bank's general counsel any legal matter arising from litigation, asserted claims or regulatory noncompliance that could have a material impact on the Bank's financial condition.

General

The Committee shall have the following additional general duties and responsibilities:

•: acting as the audit committee and conduct review committee for certain subsidiaries of the Bank that are federally-regulated financial institutions;
•: performing such other functions and tasks as may be mandated by regulatory requirements applicable to audit committees and conduct review committees or delegated by the Board;
•: conducting an annual evaluation of the Committee in which the Committee (and/or its individual members) reviews the performance of the Committee for the preceding year for the purpose, among other things, of assessing whether the Committee fulfilled the purposes and responsibilities stated in this charter;
•: reviewing reports from the Risk Committee for purposes of monitoring policies and processes with respect to risk assessment and risk management and discuss the Bank's major financial risk exposures, including operational risk issues, and the steps management has taken to monitor and control such exposures;
•: reviewing and assessing the adequacy of this Charter at least annually and submitting this Charter to the Corporate Governance Committee and the Board for approval upon amendment;
•: maintaining minutes or other records of meetings and activities of the Committee; and
•: reporting to the Board following each meeting of the Committee and reporting as required to the Risk Committee on issues of relevance to it.

Exhibit 2

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis (MD&A) gives you management's perspective on performance of the Bank's businesses, the economy and how the Bank manages risk and capital. The MD&A is as of December 9, 2004.


page 13		How we performed
page 18		Off-balance sheet arrangements
page 19		Critical accounting policies and estimates
page 22		Accounting and reporting changes
page 23		How our businesses performed
page 25		Personal and Commercial Banking
page 29		Wholesale Banking
page 32		Wealth Management
page 35		Corporate
page 37		Factors that may affect future results
page 38		Managing risk
page 39		Strategic Risk
page 39		Credit Risk
page 41		Market Risk
page 43		Asset Liability Management
page 45		Liquidity Risk
page 46		Operational Risk
page 47		Regulatory Risk
page 47		Reputational Risk
page 48		Managing capital
page 50		Controls and procedures
page 51		Supplementary information

Additional information relating to the Bank, including the Bank's Annual Information Form for the year ended October 31, 2004, is on SEDAR at www.sedar.com.

Caution regarding 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 targets, 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; general business and economic conditions in Canada, the United States and other countries in which the Bank conducts business, as well as the effect of changes in monetary policy in those jurisdictions and changes in the foreign exchange rates for the currencies of those jurisdictions; 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, including the acquisition of a 51% interest in Banknorth Group, Inc.; 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; continued negative impact of the United States securities litigation environment; 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. 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 37 of this 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.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 11

12 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

HOW WE PERFORMED

AT A GLANCE OVERVIEW

•: REPORTED NET INCOME WAS $2,310 MILLION IN 2004, COMPARED WITH REPORTED NET INCOME OF $1,076 MILLION IN 2003 AND REPORTED NET LOSS OF $67 MILLION IN 2002
•: IN 2004, NET INCOME BEFORE AMORTIZATION OF INTANGIBLES WAS $2,787 MILLION, COMPARED WITH $1,567 MILLION IN 2003 AND $567 MILLION IN 2002
•: REPORTED DILUTED EARNINGS PER SHARE WERE $3.39 IN 2004 COMPARED WITH REPORTED DILUTED EARNINGS PER SHARE OF $1.51 IN 2003 AND LOSS PER SHARE OF $.25 IN 2002
•: DILUTED EARNINGS PER SHARE BEFORE AMORTIZATION OF INTANGIBLES WERE $4.11 IN 2004 COMPARED WITH $2.26 IN 2003 AND $.73 IN 2002

How the Bank Reports

The Bank prepares its financial statements in accordance with Canadian generally accepted accounting principles (GAAP), relevant aspects of which are presented on pages 60 to 102 of this Annual Report. The Bank refers to results prepared in accordance with GAAP as the "reported basis".

The Bank also utilizes earnings before 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 beginning 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. Fiscal 2002 operating cash basis earnings have been restated to reflect this new basis.

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 is how the Bank manages the businesses internally. 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 Annual 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

(millions of Canadian dollars)	2004			2003		2002
Net interest income	$	5,943		$	5,616	$	5,300
Provision for (reversal of) credit losses		(386	)		186		2,925
Other income		4,883			4,424		4,929
Non-interest expenses		7,381			7,592		6,754

Income before provision for income taxes and non-controlling interest		3,831			2,262		550
Provision for (benefit of) income taxes		952			603		(81	)
Non-controlling interest		92			92		64

Net income before amortization of intangibles and preferred dividends	$	2,787		$	1,567	$	567
Amortization of intangibles, net of income taxes		477			491		634

Net income (loss)	$	2,310		$	1,076	$	(67	)
Preferred dividends		78			87		93

Net income (loss) applicable to common shares — reported basis	$	2,232		$	989	$	(160	)

(Canadian dollars)
Basic net income (loss) per common share — reported basis	$	3.41		$	1.52	$	(.25	)
Diluted net income (loss) per common share — reported basis		3.39			1.51		(.25	)
Basic net income per common share — before amortization of intangibles		4.14			2.28		.74
Diluted net income per common share — before amortization of intangibles		4.11			2.26		.73

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

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 13

Net Income (Loss)

Net income is revenues (net interest income plus other income) less loan losses, expenses, income taxes and non-controlling interest.

Reported net income was $2,310 million in 2004, compared with reported net income of $1,076 million in 2003 and a reported net loss of $67 million in 2002. Reported basic earnings per share were $3.41 in 2004 compared with reported basic earnings per share of $1.52 in 2003 and a loss per share of $.25 in 2002. Reported diluted earnings per share were $3.39 in 2004 compared with reported diluted earnings per share of $1.51 in 2003 and a loss per share of $.25 in 2002. Reported return on total common equity was 18.5% in 2004 compared with 8.7% in 2003 and (1.3)% in 2002.

In 2004, net income before amortization of intangibles was $2,787 million, compared with $1,567 million in 2003 and $567 million in 2002. Basic earnings per share before amortization of intangibles were $4.14 in 2004 compared with $2.28 in 2003 and $.74 in 2002. Diluted earnings per share before amortization of intangibles were $4.11 in 2004 compared with $2.26 in 2003 and $.73 in 2002.

Economic Profit (Loss) 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 below provides a reconciliation between the Bank's economic profit (loss), return on invested capital and net income before amortization of intangibles. Earnings before amortization of intangibles and related terms are discussed in the "How the Bank Reports" section.

Net Interest Income

The Bank calculates net interest income by adding the interest and dividends it earns from loans and securities, and subtracting the interest it pays on deposits and other liabilities.

See supplementary information pages 51 and 52, tables 2, 3 and 4

Net interest income was $5,943 million in 2004, a year-over-year increase of $327 million. The increase in net interest income primarily related to Wholesale Banking, where numerous factors contributed to the increase, including the mix of interest earning securities and derivatives within the trading businesses of Wholesale Banking. Personal and Commercial Banking also contributed to this increase due to continued growth in lending volumes. Wealth Management net interest income increased due to higher margin lending and higher spreads on loans and deposits in Wealth Management's Discount Brokerage business. Partially offsetting this increase was a decline in interest income earned on reduced assets in the non-core lending portfolio in the Corporate segment.

Reconciliation of Economic Profit (Loss), Return on Invested Capital and Net Income Before Amortization of Intangibles

(millions of Canadian dollars)	2004			2003			2002
Average common equity	$	12,050		$	11,396		$	12,144
Average cumulative amount of goodwill/intangible amortization, net of income taxes		2,834			2,396			1,881

Average invested capital	$	14,884		$	13,792		$	14,025
Rate charged for invested capital		10.7	%		10.9	%		11.2	%

Charge for invested capital¹		(1,593	)		(1,530	)		(1,574	)
Net income before amortization of intangibles less preferred dividends		2,709			1,480			474

Economic profit (loss)¹	$	1,116		$	(50	)	$	(1,100	)
Return on invested capital¹		18.2	%		10.5	%		3.4	%
Return on total common equity — reported basis		18.5	%		8.7	%		(1.3	)%

¹: Includes a charge of $26 million after-tax for the past amortization of goodwill that became impaired during the second quarter of 2003.

14 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Net interest income was $5,616 million in 2003, an increase of $316 million compared with 2002. The increase in net interest income was related to Personal and Commercial Banking where average personal loan volumes — excluding securitizations — increased $7 billion from the previous year; however this growth was partially offset by a 14 basis point reduction in the net interest margin to 3.28%. The increase was also related to higher invested balances in Wealth Management combined with higher yields on these investments. In addition, the increase in net interest income related to interest income from income tax refunds and securitization adjustments in 2003.

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 "How Our Businesses Performed" section on page 23.

Other Income

Other income represents all of the Bank's income other than net interest income. Sources of other income include revenues from trading activities, brokerage fees, mutual fund management fees, service fees, income from loan securitizations and other revenue.

See supplementary information page 52, tables 5 and 6

Other income on a reported basis was $4,883 million in 2004, an increase of $459 million from 2003.

Insurance revenues, net of claims increased by $173 million compared with last year, primarily due to the acquisition of business from Liberty Mutual Group, organic volume growth and lower claims. Income from loan securitizations increased by $140 million whereas card services decreased by $80 million as compared with fiscal 2003.

Mutual fund management fees increased by $65 million due to higher assets under management relating to higher sales volumes. Full service brokerage and certain other securities services revenues increased by $48 million due to increased business volumes. Self-directed brokerage revenues increased $28 million compared with a year ago due to an overall increase in trading volumes. During fiscal 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 in fiscal 2004.

The investment securities portfolio realized net gains of $192 million this year compared with net gains of $23 million last year. The improvement is largely a result of stronger market conditions resulting in improved exit opportunities in the Bank's private and public equity portfolios. Gains or losses on derivatives and loan sales in the non-core lending portfolio improved from a loss of $113 million last year to a gain of $71 million as a result of improved credit conditions which have resulted in higher market valuations of the derivative positions and loans sold during the year. However, trading income reported in other income decreased by $257 million compared with the same period last year as a result of weaker results in both the Bank's interest and credit portfolios and equities. 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) decreased by $109 million. This was primarily a result of weaker results in the equity trading businesses. Corporate credit fees decreased by $80 million due to a reduction in assets as well as outstanding commitments in the core and non-core lending portfolios. The Bank also recognized $77 million of losses, net of accrual costs, related to derivatives not afforded hedge accounting subsequent to the adoption of the new hedging relationships accounting guideline in fiscal 2004.

Also, non-trading foreign exchange income improved from $48 million in fiscal 2003 to $129 million in fiscal 2004 as a result of the Bank resolving a previously unhedged non-trading U.S. dollar exposure arising from its U.S. dollar Visa business.

Other income was $4,424 million in 2003, a decrease of $505 million from 2002.

Trading income reported in other income decreased by $425 million as compared with 2002, while trading-related income generated by Wholesale Banking was $993 million for 2003, a decrease of $208 million compared with 2002. The decrease reflected a decline in market activity levels across equity and interest rate structured products compared with fiscal 2002. The investment securities portfolio realized net gains of $23 million in 2003 compared with net gains of $26 million in 2002. The decrease was primarily attributable to market conditions. The decline in other income was also due to losses on derivative and loan sales in Wholesale Banking of $113 million in 2003.

In addition, the decline in other income related to write downs of $39 million in 2003, resulting from other than temporary impairments in certain international wealth management joint ventures. Somewhat offsetting the decline in other income were increases in self-directed brokerage revenues of $35 million due to an overall increase in trading volumes.

Non-trading foreign exchange income decreased by $61 million in 2003 after the resolution of a previously unhedged non-trading U.S. dollar exposure in the Bank's U.S. dollar Visa business. During fiscal 2002, the Bank sold its mutual fund record keeping and custody business and recorded pre-tax gains of $40 million. No such gains were recorded in fiscal 2003. Somewhat offsetting the decline was a year-over-year increase in fees from card services and service charges of $48 million, an increase in insurance revenues of $45 million and an increase in income from loan securitizations of $32 million as compared with 2002.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 15

Expenses

Expenses include non-interest expenses, such as salaries, occupancy and equipment costs, amortization of intangibles and other operating expenses.

See supplementary information page 53, table 7

On a reported basis, expenses for fiscal 2004 were $8,007 million compared with $8,364 million in fiscal 2003. The decline in expenses is primarily a result of $624 million in 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 its U.S. equity options business in Wholesale Banking. During the second quarter of 2003, the Bank reviewed the value of goodwill assigned to these businesses and determined that an impairment had occurred. This decrease was partially offset by litigation loss accruals of $354 million recorded in fiscal 2004. Several actions are pending and given the litigious environment the Bank has accrued for the most likely amounts that may be expended. Also, Personal and Commercial Banking expenses increased primarily due to the Liberty Mutual and Laurentian branch acquisitions and higher insurance business volumes. Also, underlying expenses in Wealth Management increased as a result of increases in mutual fund trailer payments due to higher assets under management, growth in business volumes in Private Investment Advice, Financial Planning and Private Client Services and increased levels of investment in upgrading technology, product training and marketing platforms. The impact of the amortization of intangibles on the Bank's reported before tax expenses was $626 million, compared with $772 million in fiscal 2003. Expenses before amortization of intangibles in fiscal 2004 decreased $211 million from $7,592 million in 2003 to $7,381 million.

On a reported basis, expenses increased by $612 million from 2002 to $8,364 million in 2003. The increase in expenses is primarily a result of $624 million in goodwill write downs and $92 million of restructuring costs recognized in fiscal 2003, as discussed above. The fiscal 2003 increase in expenses is also related to increased variable compensation expenses and charges related to systems write-offs, real estate downsizing, legal provisions in the non-core portfolio and costs of streamlining core operations in Wholesale Banking. The impact of the amortization of intangibles on the Bank's reported before tax expenses was $772 million in fiscal 2003, compared with $998 million in fiscal 2002. Expenses before amortization of intangibles in fiscal 2003 increased $838 million to $7,592 million compared with 2002. Beginning in fiscal 2003, the Bank applied the fair value method of accounting for stock options and recorded an expense of $9 million.

Efficiency Ratio

The efficiency ratio measures the efficiency of operations. It's calculated by taking expenses as a percentage of total revenue. The lower the percentage, the greater the efficiency.

See supplementary information page 53, table 7

On a reported basis, the Bank's overall efficiency ratio improved to 74.0% from 83.3% in 2003 and 75.8% in 2002. 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 of 58.3% this year compared with 58.8% in 2003 and 60.7% in 2002. The Bank's efficiency ratio before amortization of intangibles improved to 68.2% from 75.6% in 2003 and 66.0% in 2002.

Taxes

The Bank's effective tax rate, on a reported basis, was 25.1% for fiscal 2004, compared with 21.6% in fiscal 2003. Based on earnings before amortization of intangibles, the effective tax rate was 24.8% for fiscal 2004, compared with 26.7% in fiscal 2003. The 2004 effective tax rates were affected by an additional $52 million future tax liability that arose from a change in the scheduled Ontario statutory rates in the first quarter 2004, while the 2003 rates were affected by goodwill and other than temporary impairments with a tax effect of $114 million.

On a reported basis, the Bank's effective tax rate was 21.6% for fiscal 2003 as compared with 99.3% in fiscal 2002. The Bank's effective tax rate based on earnings before amortization of intangibles was 26.7% in fiscal 2003 compared with nil in fiscal 2002. The Bank earned net income in fiscal 2003 compared with a net loss in fiscal 2002. This resulted in a reduction in the effective tax rate. In addition, the reduction was a result of a change in the Bank's business mix and a decrease in statutory tax rates in fiscal 2003.

Balance Sheet

See Consolidated Balance Sheet page 62

Total assets were $311 billion at the end of fiscal 2004, $37 billion higher than October 31, 2003. Increased positions in securities and securities purchased under resale agreements represented $19 billion and $4 billion of the increase, respectively. Also, as compared with last year, personal loans, including securitizations, increased by $7 billion to reach $56 billion, primarily attributable to a solid performance in the personal loan portfolio at TD Canada Trust. At the end of the year, residential mortgages, including securitizations, increased by $1 billion to reach $64 billion as compared with last year. Bank-originated securitized assets not included on the balance sheet amounted to $20 billion, compared with $19 billion last year.

16 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Wholesale deposits increased by $14 billion and securities sold short or under repurchase agreements increased by $4 billion as compared with October 31, 2003. Personal non-term deposits increased by $6 billion while personal term deposits remained relatively unchanged.

Total assets were $274 billion as at October 31, 2003, $4 billion lower than as at October 31, 2002. A decline in investment securities activity resulted in a $4 billion decrease and business and government loans decreased by $12 billion as compared with October 31, 2002. However, securities purchased under resale agreements increased by $4 billion to $17 billion due to increased securities volumes. Also, compared with last year, personal loans, including securitizations, increased by $6 billion to reach $49 billion. At the end of the year, residential mortgages, including securitizations, decreased by $3 billion to reach $64 billion at the end of 2003. Bank-originated securitized assets not included on the balance sheet amounted to $19 billion, compared with $15 billion at October 31, 2002.

Wholesale deposits decreased by $14 billion as compared with October 31, 2002. However, personal non-term deposits increased by $3 billion to $53 billion and personal term deposits increased by $2 billion to $53 billion compared with October 31, 2002.

The Bank also enters into structured transactions on behalf of clients which results in assets recorded on the Bank's Consolidated Balance Sheet for which market risk has been transferred to third parties via total return swaps. As at October 31, 2004, assets under such arrangements amounted to $14 billion compared with $13 billion in 2003 and $11 billion in 2002. 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 October 31, 2004 compared with $6 billion in 2003 and $6 billion in 2002. Market risk for all such positions is tracked and monitored, and regulatory market risk capital is required. The assets sold under these arrangements (excluding equity derivatives) discussed in the Other Financial Transactions section on page 19 are included in this amount. See Note 17 of the Bank's Consolidated Financial Statements for more details of derivative contracts.

Fourth Quarter Analysis

Net Income

Reported net income was $612 million for the fourth quarter, compared with $501 million in the same quarter last year. Reported basic earnings per share were $.91, compared with $.74 in the same quarter last year. Reported diluted earnings per share were $.90 for the quarter, compared with $.73 in the same quarter last year. Reported return on total common equity, on an annualized basis was 19.1% for the quarter compared with 16.7% last year.

Net income before amortization of intangibles for the fourth quarter was $704 million, compared with $613 million for the same quarter last year. Basic earnings per share before amortization of intangibles were $1.05, compared with $.91 in the same quarter last year. Diluted earnings per share before amortization of intangibles were $1.04 for the quarter, compared with $.90 in the same quarter last year. Return on total common equity before amortization of intangibles, on an annualized basis was 22.1% for the quarter compared with 20.6% last year.

Net Interest Income

Net interest income on a reported basis was $1,475 million for the fourth quarter, an increase of $96 million from the same quarter last year. The increase related primarily to Personal and Commercial Banking, due to volume growth in real estate secured lending along with small business and core deposits, partially offset by lower margins. Net interest income in Wealth Management also increased due to higher margin lending and higher spreads on loans and deposits in Wealth Management's Discount Brokerage business.

Other Income

Other income on a reported basis was $1,118 million for the fourth quarter, an increase of $24 million from the same quarter last year.

Insurance revenues, net of claims increased by $56 million compared with the same quarter last year, due to the acquisition of business from Liberty Mutual, organic volume growth and lower claims. However, income from card services decreased by $27 million due to adjustments relating to credit card customer reward programs.

Mutual fund management fees increased by $9 million due to higher assets under management relating to higher sales volumes. Full service brokerage and certain other securities services revenues increased by $15 million from the same period in the prior year due to increased business volumes. However, self-directed brokerage revenues decreased $75 million compared with the same quarter a year ago due to lower trading volumes. Average trades per day decreased 25% to 83,000 from 111,000 in the same period a year ago.

The investment securities portfolio realized net gains of $44 million for the fourth quarter compared with $23 million in the same quarter last year. The improvement is largely a result of stronger market conditions resulting in improved exit opportunities for the Bank's private and public equity portfolios. Gains or losses on derivative and loan sales in the non-core lending portfolio improved from a $19 million loss last year to a $19 million gain this quarter, a result of improved credit conditions which have resulted in higher market valuations of the derivatives and loans sold during the fourth quarter. However, trading income reported in other income decreased by $53 million compared with the same quarter last year, largely as a result of reduced trading revenue in the equity businesses. Trading-related income also decreased by $82 million. This was primarily a result of weaker results in the equity, and interest rate and credit portfolios. The Bank also recognized $17 million of losses, net of accrual costs, in the fourth quarter related to derivatives not afforded hedge accounting subsequent to the adoption of the new hedging relationships guideline at the beginning of fiscal 2004.

Also, non-trading foreign exchange income improved from a loss of $31 million in the fourth quarter of 2003 to a gain of $45 million this quarter. The loss in the prior year was the result of the Bank resolving a previously unhedged non-trading U.S. dollar exposure arising from its U.S. dollar Visa business.

Expenses

Expenses before amortization of intangibles for the fourth quarter decreased by $23 million to $1,762 million from the same quarter last year. The decrease in expenses this quarter is primarily attributable to lower severance costs, lower variable compensation expenses in Wholesale Banking and higher expenses in the same quarter last year due to charges related to systems write-offs, real estate downsizing and legal provisions in the non-core portfolio. The decrease was partially offset by litigation loss accruals of $54 million and increases in expenses in Personal and Commercial Banking and Wealth Management. Personal and Commercial Banking expenses increased due to the Liberty Mutual and Laurentian branch acquisitions, higher insurance business volumes and the upgrading of the Bank's automated banking machines through an outsourcing arrangement. Expenses in Wealth Management increased mainly due to increased mutual fund trailer payments due to higher assets under management, increases in sales commissions reflecting business growth, and increased investment in technology, hiring of sales staff and marketing costs.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 17

The Bank's efficiency ratio before amortization of intangibles improved to 67.9% in the fourth quarter from 72.2% in the same quarter a year ago. Personal and Commercial Banking had an efficiency ratio before amortization of intangibles of 58.2% for the fourth quarter, unchanged from a year ago. On a reported basis, the Bank's overall efficiency ratio improved to 73.4% from 79.3% in the same quarter a year ago.

Taxes

On a reported basis, the Bank's effective tax rate was 16.7% for the fourth quarter, compared with 12.1% in the same quarter a year ago. The Bank's effective tax rate based on earnings before amortization of intangibles was 19.6% for the quarter compared with 17.5% a year ago. The change in the effective tax rates is due to a change in the Bank's business mix.

For summary information related to the Bank's eight most recently completed quarters, please see supplementary table 19 on page 59 of this Annual Report.

Acquisition of Banknorth Group, Inc.

On August 26, 2004, the Bank announced a definitive agreement to acquire a 51% interest in Banknorth Group, Inc. (Banknorth) for total consideration of approximately $5 billion. Consideration will be 60% cash and 40% common shares of the Bank. Banknorth is a public company with approximately $35 billion in assets. The acquisition is subject to approval by regulators and Banknorth shareholders, and if approved, is expected to close in February 2005. Banknorth and the Bank filed a proxy statement/prospectus with the U.S. Securities and Exchange Commission containing additional information about this transaction. A copy may be obtained by contacting the Shareholder Relations department as set out on page 109 of this Annual Report. In addition, the Bank has hedged the cash portion of the purchase price for the proposed Banknorth acquisition using foreign exchange forward contracts. The fair value of this hedge was a loss of $226 million as at October 31, 2004. If the Banknorth transaction does not proceed, the Bank will record an after-tax loss of $217 million in connection with these forward contracts, based on October 31, 2004 foreign exchange rates.

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of operations, the Bank engages in a variety of financial transactions that, under Canadian generally accepted accounting principles, are either not recorded on the Consolidated Balance Sheet or are recorded in amounts that differ from the full contract or notional amounts. These off-balance sheet arrangements involve, among other risks, varying elements of market, credit and liquidity risk which are discussed in the Managing Risk section on pages 38 to 47 of this Annual Report. Off-balance sheet arrangements are generally undertaken for risk management, capital management and/or funding management purposes and include securitizations, commitments, guarantees, and contractual obligations.

Securitizations

Securitizations are an important part of the financial markets, providing liquidity by facilitating investor access to specific portfolios of assets and risks. In a typical securitization structure, the Bank sells assets to a variable interest entity (VIE) and the VIE funds the purchase of those assets by issuing securities to investors. VIEs are typically set up for a single, discrete purpose, are not operating entities and usually have no employees. The legal documents that govern the transaction describe how the cash earned on the assets held in the VIE must be allocated to the investors and other parties that have rights to these cash flows. The Bank is involved in VIEs through the securitization of its own assets, securitization of third party assets and other financial transactions. Certain of the Bank's securitizations of its own assets and of third party assets are structured through qualifying special purpose entities (QSPEs). QSPEs are trusts or other legal vehicles that are demonstrably distinct from the Bank, have specified permitted activities, defined asset holdings and may only sell or dispose of selected assets in automatic response to limited conditions. QSPEs are not consolidated by the Bank.

Securitization of Bank-originated Assets

The Bank securitizes residential mortgages, personal loans, credit card loans and commercial mortgages to enhance its liquidity position, diversify its sources of funding and to optimize the management of its balance sheet. Details of these securitizations are as follows.

The Bank securitizes residential mortgages through the creation of mortgage-backed securities and transfers to VIEs. The Bank continues to service the securitized mortgages and may be exposed to the risks of the transferred loans through retained interests. There are no expected credit losses on the retained interests of the securitized residential mortgages that are government guaranteed (99.9% of all securitized residential mortgages). As at October 31, 2004, the Bank had outstanding securitized residential mortgages of $13.1 billion as compared with $11.3 billion in fiscal 2003.

The Bank securitizes real estate secured personal loans through sales to VIEs. These securitizations are revolving securitizations. The Bank provides credit enhancement through its retained interest in the excess spread of the VIEs and by funding cash collateral accounts. The Bank's interest in the excess spread of the VIEs and the cash collateral account is subordinate to the VIE's obligations to the holders of its asset-backed securities and absorbs losses with respect to the personal loans before payments to noteholders are affected. As at October 31, 2004, the Bank had outstanding securitized personal loans of $4.0 billion as compared with $4.6 billion in fiscal 2003.

The Bank securitizes credit card loans through sales to VIEs. These securitizations are revolving securitizations. The Bank provides credit enhancement to the VIEs through its retained interest in the excess spread. The Bank's interest in the excess spread of the VIEs is subordinate to the VIE's obligations to the holders of its asset-backed securities and absorbs losses with respect to the credit card receivables before payments to the noteholders are affected. As at October 31, 2004, the Bank had outstanding securitized credit card receivables of $1.3 billion as compared with $1.5 billion in fiscal 2003.

The Bank also securitizes commercial mortgages, which in addition to providing a source of liquidity and capital efficient funding, may reduce the Bank's credit exposure, i.e. exposure to credit, liquidity and operational risks associated with these loans. As at October 31, 2004, the Bank had outstanding securitized commerical mortgages of $1.8 billion as compared with $1.4 billion in fiscal 2003.

Total bank-originated securitized assets not included on the Consolidated Balance Sheet amounted to $20.2 billion compared with $18.8 billion a year ago. Further details are provided in Note 4 of the Bank's Consolidated Financial Statements. If these securitizations were to be terminated, the Bank would experience capital implications of maintaining the assets on the Consolidated Balance Sheet and be exposed to the assets' full operational, financial and market risks.

18 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Securitization of Third Party Originated Assets

The Bank assists its clients in securitizing their financial assets through VIEs administered by the Bank. The Bank may provide credit enhancement, swap facilities or liquidity facilities to the resulting VIEs as well as securities distribution services. Liquidity facilities are only available in the event of a general market disruption and the probability of loss is negligible. The Bank does not provide employees to the VIEs, nor does it have ownership interests in these VIEs and all fees earned in respect of these activities are on a market basis. If these securitizations were to be terminated, the Bank would experience a reduction in securitization income.

Other Financial Transactions

The Bank sells trading securities to VIEs in conjunction with its balance sheet management strategies. The Bank holds a significant variable interest in these VIEs, but is not considered to be the primary beneficiary, and as a result does not consolidate these VIEs. Also, the Bank does not retain effective control over the assets sold. Assets sold under such arrangements at October 31, 2004 amounted to $3.0 billion as compared with $5.0 billion in fiscal 2003. The Bank enters into total return swaps with the sale counterparties in respect of the assets sold. Market risk for all such transactions is tracked and monitored.

The Bank is also involved in Collateralized Debt Obligation vehicles (CDOs). In relation to these CDOs, the Bank may serve in the capacity of an underwriter, a third party investor or a derivative counterparty. CDOs raise capital by issuing debt securities and use their capital to invest in portfolios of securities and derivatives. Any net income or loss is shared by the CDOs' variable interest holders.

In addition, the Bank offers equity-linked notes and credit-linked notes to various VIEs and third party clients. The Bank's exposure to risk from these transactions is not significant.

The Bank through The Canada Trust Company acts as a trustee for personal and corporate trusts. In the capacity as a trustee, fees are earned.

The Bank also sponsors numerous mutual funds. The Bank acts as the administrator of these funds and does not guarantee the principal or return to investors on these funds.

The Bank also offers other financial products to clients. These financial products are, on occasion, created using a VIE as issuer or obligor of the financial products. The Bank may provide certain administrative services and other financial products to the VIEs in exchange for market rate compensation.

Commitments

The Bank enters into various commitments to meet the financing needs of the Bank's clients and to earn fee income. Significant commitments of the Bank include financial and performance standby letters of credit, documentary and commercial letters of credit and commitments to extend credit. These products may expose the Bank to liquidity, credit and reputational risks. There are adequate risk management and control processes in place to mitigate these risks. Note 18 of the Bank's Consolidated Financial Statements provides detailed information about the maximum amount of additional credit the Bank could be obligated to commit.

Guarantees

The Bank enters into various guarantee contracts which include financial and performance standby letters of credit, assets sold with recourse, credit enhancements, written options and indemnification agreements. Note 18 of the Bank's Consolidated Financial Statements provides detailed information about the Bank's guarantees.

Contractual Obligations

The Bank has contractual obligations to make future payments on subordinated notes and debentures, operating and capital lease commitments, capital trust securities and certain purchase obligations. Subordinated notes and debentures, capital lease commitments and capital trust securities are reflected on the Bank's Consolidated Balance Sheet, while operating lease commitments and purchase obligations are not. Details of these contractual obligations as at October 31, 2004 are disclosed by remaining maturity in supplementary table 17 on page 59 of this Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Bank's accounting policies are essential to understanding its results of operations and financial condition. A summary of the Bank's significant accounting policies is presented in Note 1 of the Bank's Consolidated Financial Statements beginning on page 60 of this Annual Report. Some of the Bank's policies require subjective, complex judgements and estimates as they relate to matters that are inherently uncertain. Changes in these judgements or estimates could have a significant impact on the Bank's financial statements. The Bank has established procedures to ensure that accounting policies are applied consistently and that the processes for changing methodologies are well controlled and occur in an appropriate and systematic manner. In addition, the Bank's critical accounting policies are reviewed with the Audit Committee on a periodic basis. Critical accounting policies that require management's judgement and estimates include accounting for loan losses, accounting for the fair value of financial instruments held in trading portfolios, accounting for income taxes, the valuation of investment securities, accounting for securitizations, the valuation of goodwill and intangible assets, the accounting for pensions and post-retirement benefits and contingent liabilities.

Accounting for Loan Losses

Accounting for loan losses is an area of importance given the size of the Bank's loan portfolio. From 2002 through to 2004, the Bank had three types of allowances against loan losses — specific, general and sectoral. Loan impairment is recognized when the Bank determines, based on its identification and evaluation of problem loans and accounts that the timely collection of all contractually due interest and principal payments is no longer assured. Judgement is required as to the timing of designating a loan as impaired and the amount of the required specific allowance. Management's judgement is based on its assessment of probability of default, loss given default and exposure at default. Changes in these estimates due to a number of circumstances can have a direct impact on the provision for loan losses and may result in a change in the allowance. Reviews by regulators in Canada and the U.S. bring a measure of uniformity to specific allowances recorded by banks.

Sectoral allowances were established in 2002 for losses not specifically identified in the communications and utilities sectors. Sectoral allowances require ongoing judgement as to draw downs from sectorals to specific loss and the amount of periodic sectoral allowances required. When individual loans in these sectors become impaired, a specific allowance is established by drawing from the sectoral allowance. The judgement on impairment is based on the Bank's credit policy. During fiscal 2004, the Bank released $655 million from the sectoral provisions, resulting in a nil ending balance. The release is a result of a turnaround in credit markets and the emergence of risk mitigation instruments. General allowances also require judgement given that the level of general allowances depends upon an assessment of business and economic conditions, historical and expected loss experience, loan portfolio composition and other relevant indicators. In establishing the appropriateness of general allowances, in addition to management judgement, the Bank refers to an internally developed model that utilizes parameters for probability of default, loss given default and usage given default. If these parameters were independently increased or decreased by 10%, then the model would indicate an increase or decrease to the aggregate corporate and commercial allowance of $48 million for probability of default, $48 million for loss given default and $13 million for usage given default, respectively. The Managing Risk section on page 38 of this Annual Report provides a more detailed discussion regarding credit risk. Also, see Note 1(i) and Note 3 of the Bank's Consolidated Financial Statements for additional disclosures on the Bank's allowance for credit losses.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 19

Accounting for The Fair Value of Financial Instruments Held in Trading Portfolios

The Bank's trading securities, obligations related to securities sold short and trading derivatives are carried at fair value on the Consolidated Balance Sheet with the resulting realized and unrealized gains or losses recognized immediately in other income. See Note 1 of the Bank's Consolidated Financial Statements on Securities and Derivative Financial Instruments for more details.

The fair value of exchange traded financial instruments is based on quoted market prices, adjusted for daily margin settlements, where applicable. Note 15 of the Bank's Consolidated Financial Statements provides disclosures of the estimated fair value of all financial instruments at October 31, 2004.

The fair value for a substantial majority of financial instruments held in trading portfolios is based on quoted market price or valuation models that use independently observable market parameters. Independently observable market parameters include interest rate yield curves, foreign exchange rates and option volatilities. The valuation models incorporate prevailing market rates and prices on underlying instruments with similar maturities and characteristics, and take into account factors such as counterparty credit quality, liquidity and concentration concerns. Certain derivatives are valued using models with unobservable market parameters, where the parameters estimated are subject to management judgement. These derivatives are normally not actively traded and are complex. For example, certain credit products are valued using models with parameters such as correlation and recovery rates that are unobservable. Uncertainty in estimating the parameters can impact the amount of revenue or loss recorded for a particular position.

Management judgement is also used in recording fair value adjustments to model valuations to account for measurement uncertainty when valuing complex and less actively traded derivatives.

The Bank has controls in place to ensure that the valuations derived from the models are appropriate. These include independent review and approval of valuation models and independent review of the valuations by qualified personnel. As the market for complex derivative products develops, the pricing for these products becomes more transparent, resulting in refinement of valuation models.

The Bank believes that its estimates of fair value are reasonable given the process for obtaining multiple quotes of external market prices, consistent application of models over a period of time and the controls and processes discussed above. The valuations are also validated by past experience, and through the actual cash settlement of contracts. For a discussion of Market Risk, refer to page 41 of this Annual Report.

Accounting for Income Taxes

Accounting for current income taxes requires the Bank to exercise judgement for issues relating to certain complex transactions, known issues under discussion with tax authorities or matters yet to be settled in court. As a result, the Bank maintains a tax provision for contingencies and regularly assesses the adequacy of this tax provision.

Future income taxes are recorded to account for the effects of future taxes on transactions occurring in the current period. The accounting for future income taxes also requires judgement in the following key situations:

•: Future tax assets are assessed for recoverability. The Bank records a valuation allowance when it believes based on all available evidence, that it is not more likely than not that all of the future tax assets recognized will be realized prior to their expiration. The amount of the future income tax asset recognized and considered realizable could, however, be reduced if projected income is not achieved due to various factors such as unfavourable business conditions. If projected income is not expected to be achieved, the Bank would record an additional valuation allowance to reduce its future tax assets to the amount that it believes can be realized in its future tax returns. The magnitude of the valuation allowance is significantly influenced by the Bank's forecast of future profit generation, which drives the extent to which it will be able to utilize the future tax assets.
•: Future tax assets are calculated based on tax rates expected to be in effect in future periods. Previously recorded tax assets and liabilities need to be adjusted when the expected date of the future event is revised based on current information.
•: The Bank has not recognized a future income tax liability for undistributed earnings of certain operations as it does not plan to repatriate them. Estimated taxes payable on such earnings in the event of repatriation would be $186 million at October 31, 2004.

Valuation of Investment Securities

The Bank's investment securities comprise both publicly traded securities and investments in private equity securities that are not publicly traded. Under Canadian generally accepted accounting principles (GAAP), investment securities are carried at cost or amortized cost and are adjusted to net realizable value to recognize other than temporary impairment.

The Bank discloses the estimated fair value of investment securities in Note 2 of the Bank's Consolidated Financial Statements. Valuation of publicly traded securities is determined by using quoted market prices, which fluctuate from reporting period to reporting period. Valuation of private equity investments held by the Bank requires management judgement due to the absence of quoted market prices, inherent lack of liquidity and the longer term nature of such investments. Private equity investments are initially valued at cost. Fair value is determined using valuation techniques, including discounted cash flows and a multiple of earnings before taxes, depreciation and amortization. Management applies judgement in the selection of the valuation methodology and the various inputs to the calculation, which may vary from reporting period to reporting period. These estimates are monitored and reviewed on a regular basis by the Portfolio Risk Management Group for consistency and reasonableness. Any imprecision in these estimates can affect the resulting fair value. The inherent nature of private equity investing is that management's valuation will change over time as the underlying investment matures and an exit strategy is developed and realized. Estimates of fair value may also fluctuate between reporting periods due to developments in the business underlying the investment. Such fluctuations may be significant depending on the nature of the factors going into the valuation methodology and the extent of change in those factors.

Investment securities are written down to their net realizable value when there is an impairment in value that is considered to be other than temporary in nature. The determination of whether or not other than temporary impairment exists is a matter of judgement. The Bank's management reviews these investment securities regularly for possible impairment that is other than temporary and this review typically includes an analysis of the facts and circumstances of each investment and the expectations for that investment's performance. Specifically, impairment of the value of an investment may be indicated by conditions such as a prolonged period during which the quoted market value of the investment is less than its carrying value, severe losses by the investee in the current year or current and prior years, continued losses by the investee for a period of years, suspension of trading in the securities, liquidity or going concern problems of the investee or a current fair value of the investment that is less than its carrying value.

20 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Accounting for Securitizations

There are two key determinations relating to the accounting for securitizations. For bank-originated securitized assets, a decision must be made as to whether the securitization should be considered a sale under Canadian GAAP. GAAP requires that specific criteria be met for the Bank to have surrendered control of the assets and thus recognize a gain or loss on sale. For instance, the securitized assets must be isolated from the Bank and put beyond the reach of the Bank and its creditors, even in bankruptcy or other receivership. In determining the gain or loss, management estimates future cash flows by relying on estimates of the amount of interest that will be collected on the securitized assets, the yield to be paid to investors, the portion of the securitized assets that will be prepaid before their scheduled maturity, expected credit losses, the cost of servicing the assets and the rate at which to discount these expected future cash flows. Actual cash flows may differ significantly from those estimated by management. If actual cash flows are different from management's estimate of future cash flows then the gains or losses on the securitization recognized in income will be adjusted. Retained interests are taken into income over the life of the securitized asset. Note 4 of the Bank's Consolidated Financial Statements provides additional disclosures regarding securitizations, including a sensitivity analysis for key assumptions. For fiscal 2004, there were no significant changes to the key assumptions used in estimating the future cash flows. These assumptions are subject to periodic review and may change due to significant changes in the economic environment.

The second key determination is whether the variable interest entity (VIE) should be consolidated into the Bank's financial statements. All of the Bank's securitization trusts are considered VIEs. Current GAAP requires consolidation of VIEs only when the Bank retains substantially all the residual risks and rewards of the VIE. In addition, if the VIE is a QSPE then the Bank should not consolidate the VIE. Under current Canadian GAAP, all of the bank-originated assets transferred to VIEs meet the criteria for sale treatment and non-consolidation.

Valuation of Goodwill and Intangible Assets

Under Canadian GAAP, goodwill is not amortized, but is instead assessed for impairment at the reporting unit level on at least an annual basis. Goodwill is assessed for impairment using a two step approach with the first step being to assess whether the fair value of the reporting unit to which the goodwill is associated is less than its carrying value. When the fair value of the reporting unit is less than the carrying value, a second impairment test is performed. The second test requires a comparison of the fair value of goodwill to its carrying amount. If the fair value of goodwill is less than its carrying value, goodwill is considered impaired and a charge for impairment must be recognized immediately. The fair value of the Bank's reporting units are determined from internally developed valuation models that consider various factors such as normalized and projected earnings, price earnings multiples and discount rates. The Bank's management uses judgement in estimating the fair value of reporting units and imprecision in any assumptions and estimates used in the fair value calculations could influence the determination of goodwill impairment and affect the valuation of goodwill. The Bank's management believes that the assumptions and estimates used are reasonable and supportable in the existing environment. Where possible, fair values generated internally are compared to market information and are found to be reasonable. The carrying values of the Bank's reporting units are determined by management using economic capital models to adjust net assets and liabilities by reporting unit. These models consider various factors such as market risk, credit risk, operational risk, and are designed to produce the equity capital a reporting unit would have if it was a standalone entity. The Bank's allocation of economic capital to the reporting unit is reviewed by the Capital Management Committee.

Intangible assets that derive their value from contractual customer relationships or that can be separated and sold, and have a finite useful life are amortized over their estimated useful life. Determining the estimated useful life of these finite life intangible assets requires an analysis of the circumstances and judgement by the Bank's management. Finite life intangible assets are tested for impairment whenever circumstances indicate that the carrying value may not be recoverable. Such circumstances would indicate potential intangible impairment and would require a cash flow analysis at that time. As a result, the finite life intangible assets would be written down to net recoverable value based on expected future cash flows similar to other capital assets. See Note 5 of the Bank's Consolidated Financial Statements for additional disclosures regarding goodwill and intangible assets.

Accounting for Pensions and Post-retirement Benefits

The Bank's pension and post-retirement benefits obligation and expense is determined in accordance with GAAP, and is dependent on the assumptions used in calculating these amounts. The actuarial assumptions are determined by management and are reviewed annually by management and the Bank's actuaries. These assumptions include the discount rate, the rate of compensation increase, the overall health care cost trend rate and the expected long term rate of return on plan assets. The discount rate used to value liabilities is based on long term corporate AA bond yields as of the valuation date. The other assumptions are also long term estimates. The expected long term rate of return on plan assets assumption is based on historical returns and future expectations for returns for each asset class, as well as the target asset allocation of the fund. As these assumptions relate to factors that are long term in nature, they are subject to a degree of uncertainty. Differences between actual experience and the assumptions, as well as changes in the assumptions resulting from changes in future expectations, result in increases or decreases in the Bank's pension and post-retirement benefits expense in future years.

The table on the following page provides the sensitivity of the accrued pension benefit obligation, and the pension expense for the Bank's principal pension plan, to changes in the discount rate, expected long term return on plan assets assumption and rate of compensation increase as at October 31, 2004. The sensitivity analysis provided in the table is hypothetical and should be used with caution. For a further discussion of the key assumptions used in determining the Bank's annual pension expense and accrued benefit obligation, see Note 13 of the Consolidated Financial Statements.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 21

(millions of Canadian dollars)			Obligation			Expense
Impact of a change of 1.0% in key assumptions
	Discount rate
		Decrease in assumption	$	240		$	32
		Increase in assumption		(190	)		(25	)
	Expected long term return on assets
		Decrease in assumption					15
		Increase in assumption					(15	)
	Rate of compensation increase
		Decrease in assumption		(50	)		(8	)
		Increase in assumption		57			7

Contingent Liabilities

The Bank and its subsidiaries are involved in various legal actions in the ordinary course of business, many of which are loan-related. In management's opinion, the ultimate disposition of these actions, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Bank.

Contingent litigation loss accruals are established when it becomes probable that the Bank will incur an expense and the amount can be reasonably estimated. In addition to the Bank's management, internal and external experts are involved in assessing probability and in estimating any amounts involved. Throughout the existence of a contingency, the Bank's management or its experts may learn of additional information that may impact its assessments about probability or about the estimates of amounts involved. Changes in these assessments may lead to changes in recorded loss accruals. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts accrued for those claims.

During fiscal 2004, the Bank added $354 million to its contingent litigation loss accruals. This includes accruals with respect to certain Enron related actions to which the Bank is a party. Several of these matters are in the early stages of litigation and given the size of the claims there is exposure to additional loss. The Bank will regularly assess its position as events progress.

ACCOUNTING AND REPORTING CHANGES

The following is a summary of accounting and reporting changes the Bank expects to adopt in future periods. See Note 26 of the Bank's Consolidated Financial Statements for more details of future accounting and reporting changes.

Consolidation of Variable Interest Entities

The Canadian Accounting Standards Board issued a revised guideline on the consolidation of variable interest entities which is effective for the Bank in fiscal 2005. As a result of this guideline, 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 guideline. 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.

Liabilities and Equity

As a result of amendments to the Canadian Institute of Chartered Accountants (CICA) accounting standard on financial instruments — disclosure and presentation, the Bank will be required to classify its existing preferred shares and innovative Tier 1 capital as liabilities, effective fiscal 2005. The Bank's preferred dividends will therefore be reported as interest expense but earnings attributable to common shares will be unaffected.

Asset Retirement Obligations

The Bank will be required to adopt the CICA accounting standard on asset retirement obligations in fiscal 2005. The standard requires that a liability for an asset retirement obligation related to a long-lived asset to be recognized in the period in which it is incurred and recorded at fair value. The impact of this accounting standard is not significant for the Bank.

Merchant Banking Accounting

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.

Financial Instruments, Hedges and Comprehensive Income

The CICA has issued two proposed accounting standards — Financial Instruments — Recognition and Measurement and Hedges and one new accounting standard — Comprehensive Income. These standards are substantially harmonized with U.S. GAAP and are effective for the Bank beginning with the first quarter of fiscal 2007. The principal impact of the standards are detailed below.

•: Comprehensive income will be a new component of shareholders' equity and a new statement entitled Statement of Comprehensive Income will be added to the Bank's primary Consolidated Financial Statements.
•: Financial assets will be required to be classified as available for sale, held to maturity or trading.
•: For fair value hedges, where the Bank is hedging changes in the fair value of assets, liabilities or firm commitments, the change in the value of derivatives and hedged items will be recorded through income.
•: For cash flow hedges where the Bank is hedging the variability in cash flows related to variable rate assets, liabilities or forecasted transactions, the effective portion of the changes in the fair values of the derivative instruments will be recorded through comprehensive income until the hedged items are recognized in income.

Investment Companies

In fiscal 2005, the Bank will adopt the CICA accounting guideline on investment companies which requires the Bank's investment companies to account for all its investments at fair value. The impact of this accounting guideline is not significant for the Bank.

22 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank's operations and activities are organized around the following operating business segments: Personal and Commercial Banking, Wholesale Banking and Wealth Management.

Personal and Commercial Banking comprises the Bank's retail, commercial banking and insurance operations. Under the TD Canada Trust brand, the retail operations provide a full range of financial products and services to approximately 10 million personal and small business customers. Products and services are provided — anywhere, anytime — through telephone and internet banking, more than 2,400 automated banking machines and a network of 1,000 branches located across Canada. Under the TD Insurance and TD Meloche Monnex brands, the Bank offers a broad range of insurance products including home and automobile coverage, life and health insurance, as well as credit protection coverage on TD Canada Trust lending products. TD Commercial Banking serves the needs of Canadian businesses, customizing a broad range of products and services to meet their financing, investment, cash management, international trade and day-to-day banking needs.

Wholesale Banking serves a diverse base of corporate, government and institutional clients in key financial markets around the world. Under the TD Securities brand, Wholesale Banking provides a full range of capital markets and investment banking products and services that include:

•: Advice on corporate strategy and mergers and acquisitions;
•: Underwriting and distributing loan, debt and equity products;
•: Structuring tailored risk management solutions; and
•: Executing financial transactions.

Wealth Management provides a wide array of investment products and services through different brands to a large and diverse retail and institutional client base around the world. Wealth Management is comprised of a number of advisory, distribution and asset management businesses including TD Waterhouse and TD Mutual Funds and is one of Canada's largest asset managers. Through Wealth Management's discount brokerage channels, it serves customers in Canada, the United States and the United Kingdom. In Canada, Discount Brokerage, Financial Planning, Private Investment Advice and Private Client Services service the needs of different retail customer segments through all stages of their investing life cycle. Wealth Management has assets under administration of $279 billion and assets under management of $124 billion.

The Bank's other business activities are not considered reportable segments and are therefore grouped in the Corporate segment. The Corporate segment includes activities from the non-core lending portfolio, effects of asset securitization programs, treasury management, general provisions for credit losses, elimination of taxable equivalent adjustments, corporate level tax benefits, and residual unallocated revenues, expenses, and taxes. The non-core portfolio represents lending accounts on which the risk-return relationship was unsatisfactory.

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 on page 13. For information concerning the Bank's measures of economic profit and return on invested capital, see page 14 of this Annual Report. Segmented information also appears in Note 20 of the Bank's Consolidated 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 increased 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. The TEB adjustment reflected in the Wholesale Banking segment's results is eliminated in the Corporate segment.

The "Economic Outlook" and "Business Outlook and Focus for 2005" sections provided for each of the Bank's segments on the next few pages are based on the Bank's views and the actual outcome is uncertain. For more information, see the Caution regarding forward-looking statements on page 11 and "Factors that May Affect Future Results".

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 23

PERSONAL AND COMMERCIAL BANKING

AT A GLANCE OVERVIEW

•: EARNINGS GROWTH OF 16% FOR THE YEAR
•: EIGHT CONSECUTIVE QUARTERS OF DOUBLE-DIGIT EARNINGS GROWTH
•: INTEGRATED 57 BRANCHES ACQUIRED FROM LAURENTIAN BANK
•: EFFICIENCY RATIO IMPROVED BY .5% TO 58.3% DESPITE IMPACT OF ACQUISITIONS
•: ACHIEVED A NEW HIGH IN CUSTOMER SATISFACTION

Overall Business Strategy

•: Deliver superior service through a powerful, distinctive customer experience based brand.
•: Leverage superior service into above average growth through better customer retention, better attraction and increased business with each customer.
•: Grow under-penetrated businesses at above average growth rates:

— Small business banking;

— Commercial banking;

— Insurance.

•: Maintain a core competency in managing expenses.
•: Manage to a straightforward financial paradigm: deliver consistent double-digit earnings growth over time by maintaining a spread between the revenue growth rate and expense growth rate.

Review of Financial Performance 2004

Personal and Commercial Banking reported record earnings in 2004 as strong revenue growth and a sharp decline in the provision for credit losses offset higher expenses. Net income of $1,487 million before amortization of intangibles for the year increased by $210 million or 16% from the prior year. Return on invested capital increased from 19% last year to 20% in 2004 as earnings growth exceeded the 6% growth in average invested capital. Personal and Commercial Banking contributed strongly to shareholder value by generating economic profit of $810 million during the year, an improvement of $171 million over last year.

Revenue grew by $368 million or 6% over last year. The acquisition of insurance business from Liberty Mutual Group and branches from Laurentian Bank contributed $130 million to revenue growth. The main contributors to organic revenue growth were strong volumes in insurance, core deposits, real estate secured lending, small business deposits and branch mutual fund sales, as well as improved insurance claims experience and higher transaction-based fees. These areas of growth were partly offset by a contraction in commercial lending, lower net interest margins and adjustments for credit card customer reward programs.

As compared with last year (before the impact of the Laurentian branch acquisition), real estate secured lending average volume (including securitizations) grew by $9 billion or 10%, credit card lending volume grew by $240 million or 7% and personal deposit volume (core and term) grew $3 billion or 3%. Business deposits grew by $2 billion or 9% and originated gross insurance premiums grew by $290 million or 21% (before the impact of the acquisition from Liberty Mutual). Personal loans declined by $240 million or 2% and business loans and acceptances declined by $1 billion or 7%. The Laurentian branch acquisition added $2 billion of lending volume and $2 billion of deposit volume.

Margin on average earning assets decreased from 3.28% last year to 3.07% as margins narrowed on deposits from a combination of competitive pricing, customers moving balances to higher rate savings accounts and the low interest rate environment. The increased volume of lower margin real estate secured lending as a proportion of earning assets also reduced the overall margin.

Provision for credit losses (PCL) decreased by $87 million or 19% compared with last year. Commercial and small business PCL was low at $19 million for the year down $68 million from last year. Personal PCL of $354 million was $19 million lower than last year on improved delinquency rates. PCL as a percent of lending volume was at a cyclically low rate of .27% down from .36% last year.

Expenses before amortization of intangibles increased by $187 million or 5% compared with last year. The insurance and branch acquisitions accounted for $115 million or 3% of the expense growth. Higher volumes in the insurance business, systems development projects and the upgrading of the Bank's automated banking machines through an outsourcing arrangement also contributed to the increase in expenses.

Offsetting these factors were higher severance and Wal-Mart in-store branch closure costs in the prior year. Growth in the insurance business, including the Liberty acquisition, added 695 full-time equivalent (FTE) to average staffing levels compared to last year. Base average staffing levels were down 380 FTE from last year as a result of the in-store branch closures and a series of productivity improvements in operations centres. The efficiency ratio for the year was 58.3% an improvement of .5% over last year.

Review of Financial Performance 2003

Personal and Commercial Banking reported strong earnings growth in 2003 following modest growth in 2002. Net income before amortization of intangibles of $1,277 million for 2003 increased by $163 million or 15% from 2002. A three-percentage point spread between revenue and expense growth, lower credit losses and a lower tax rate combined to improve earnings significantly year-over-year. Return on invested capital increased from 17% to 19% in fiscal 2003. Personal and Commercial Banking continued to drive growth in shareholder value by generating economic profit of $639 million during 2003, an improvement of $201 million over 2002.

Total revenue grew 2% in 2003 compared with 2002. Solid real estate secured lending and deposit volume growth, higher transaction-based fees and strong growth in insurance income were the main contributors to revenue growth. Revenue growth was reduced by lower net interest margins, lower branch sales of Wealth Management products and a contraction in commercial lending volume.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 25

CHALLENGES IN 2004

•: MARGIN COMPRESSION IN DEPOSITS DRIVEN BY THE LOW INTEREST RATE ENVIRONMENT, COMPETITIVE PRICING AND CUSTOMER PRODUCT PREFERENCE
•: CONTRACTION IN BOTH COMMERCIAL LENDING AND UNSECURED PERSONAL LENDING VOLUMES
•: AS OF AUGUST 2004, PERSONAL MARKET SHARE (LOANS, DEPOSITS AND MUTUAL FUNDS) WAS 21.0%, DOWN .06% FROM LAST YEAR

2004 HIGHLIGHTS

•: REVENUE GROWTH OF 6% DESPITE INTEREST RATE MARGIN COMPRESSION
•: SHARPLY REDUCED CREDIT LOSSES
•: THE INTEGRATION OF 57 BRANCHES ACQUIRED FROM LAURENTIAN BANK ON OCTOBER 31, 2003 INTO THE TD CANADA TRUST NETWORK, INVOLVING 140,000 CUSTOMER ACCOUNTS, WAS SUCCESSFULLY COMPLETED IN JULY OF THIS YEAR
•: ACQUIRED THE CANADIAN PERSONAL LINES PROPERTY AND CASUALTY INSURANCE OPERATIONS OF LIBERTY MUTUAL GROUP EFFECTIVE APRIL 1, 2004 AND COMMENCED THE INTEGRATION OF THE LIBERTY OPERATIONS WITH TD MELOCHE MONNEX
•: ACHIEVED A NEW HIGH IN CONSUMER SATISFACTION, AS MEASURED BY THE RETAIL CUSTOMER SATISFACTION INDEX¹ WHICH REACHED 86.4% IN FISCAL 2004, AN IMPROVEMENT OF .8% COMPARED WITH LAST YEAR

¹: The Retail Customer Service Index (CSI) program measures customer perceptions of the quality of service received during their most recent interaction with a TD Canada Trust representative. The CSI score reflects the proportion of customers rating the service quality a 6 or 7 based on a 7-point scale where 1 is poor and 7 is excellent. CSI surveys are conducted with a 24-hour window after the customer transaction. On an annual basis, about 400,000 customers are surveyed to provide feedback on TD Canada Trust's service performance.
²: Other revenue includes internal commissions on sales of mutual funds and other Wealth Management products, fees for foreign exchange, safety deposit box rentals and other branch services.

26 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Provision for credit losses decreased by $45 million or 9% reflecting an improved credit environment and continued improvement in retail lending processes. Provision for credit losses as a percent of lending volume improved to .36% from .41% in 2002.

Expenses before amortization of intangibles decreased by $38 million or 1% compared with 2002. Expense synergies from branch mergers and process improvements contributed to a 1,420 or 5% decrease in average full-time equivalent personnel over 2002. The branch merger program consisted of 32 mergers carried out during 2003 following 238 mergers over the previous two years. These savings in personnel costs were offset in part by increases in salaries and employee benefits, severance costs and variable expenses associated with volume growth in real estate secured lending and insurance products. In addition, up-front costs were incurred on the closure of 118 Wal-Mart in-store branches towards the end of the year. As a result of the actions taken to improve operational efficiency, the efficiency ratio before amortization of intangibles for the year improved to 58.8%, two percentage points better than 2002.

Key Product Groups within Personal and Commercial Banking

Real estate secured lending

•: Offers mortgages and home equity secured lines of credit through branches, direct sales force, multi unit residential, and broker channels.
•: During 2004, the industry experienced above average portfolio growth on continued increases in house prices, house sales and refinancing activity.
•: The strong market drove average real estate lending volume of $9 billion, a 10% increase over 2003 average volumes. Home equity lines of credit grew more rapidly than did mortgages. Volume growth was slightly below estimated industry growth in an extremely competitive environment. The Laurentian branch acquisition added $2 billion of volume.
•: Margins stabilized in the last three quarters of 2004, after declining in 2003 and early 2004 due to competitive pricing pressure.
•: A number of improvements were made to the mortgage application and funding process in 2004.
•: Market growth may moderate in 2005 as housing demand and price growth may revert closer to historical norms, particularly if interest rates rise.
•: Business objectives for 2005 are to improve market share trends while also improving customer cross sell and maintaining margins.

Personal deposits

•: Offers a complete range of Canadian and U.S. dollar chequing, savings and term investment products designed to promote primary banking relationships, retirement savings and retirement income options.
•: Margin compression was experienced during 2004 due to the low interest rate environment, high competition for deposits, and customer preference towards lower margin short term and liquid investments.
•: Volume growth of $5 billion was fueled by chequing accounts and the Guaranteed Investment Account, while term deposits received a boost from the acquisition of Laurentian branches. A "simple, fast and easy" account opening process and EasySwitch generated strong growth in new accounts. The Bank maintained its number one position in personal deposit market share.
•: Solid growth is expected in non-term deposits in 2005 as growing core relationships will continue to be a focus. Margin compression on savings products experienced in 2004 will carry forward, although this is expected to ease should the upward trend in short term interest rates continue. Modest volume growth is expected in term deposit volumes if rates rise from historic lows creating opportunity for margin improvement.

Consumer lending

•: Offers lines of credit, loans, overdraft protection products and a wide selection of Visa credit cards including classic, premium, commercial cards and compelling reward programs such as the TD Gold Travel Visa card and The GM Card.
•: Consumer Lending revenue grew by 4% during the year based on improved margins and growth in card and other fee income.
•: Lending volumes (excluding credit cards) declined slightly over the year based on actions to improve credit quality. Provision for credit losses decreased .12% to 1.55% contributing to a strong increase in economic profit contribution from this portfolio.
•: Credit card purchase volumes and average outstanding balances increased 11% and 7% respectively. During the year the Bank renewed its contract with General Motors to issue The GM Card. The TD Gold Travel Visa card continues to realize strong growth based on the appeal of the flexible, easy to redeem travel rewards positioning.
•: Continuing to strengthen credit relationships with the Bank's customers, realizing above market growth in credit cards, and capitalizing on credit management infrastructure investments to re-establish growth momentum in Consumer Lending products, are key objectives for 2005.

Small business banking and merchant services

•: Provides quick and efficient delivery of deposit, lending and cash management services across the breadth of the entire TD Canada Trust branch network.
•: Merchant services is a debit and credit payment solution provider with point-of-sale technology and continuous support service to over 90,000 merchant locations across Canada.
•: Volume growth from small business deposits was strong on 6% account growth, driven by new small business formations, customers attracted by our brand and service proposition as well as an improved account opening process and more sales focus within retail branches.
•: Credit volumes were adversely affected by weakness in the agricultural sector. However, improved overall credit quality resulted in a lower provision for credit losses compared with last year.
•: In 2005 the focus will be to continue to make its processes simple, fast and easy to improve the customer and employee experience.

Commercial banking

•: Offers lending, deposit, and cash management services to medium-sized businesses, plus a full range of investment, trade finance and treasury services.
•: Commercial deposits continued their strong growth rate, though slowing from preceding years. Volume growth was partially offset by lower margins due to the impact of the low interest rate environment and customers shifting to lower margin products to achieve higher returns.
•: Average lending volumes decreased by 10% due mainly to reductions by several large accounts many of which refinanced using non-debt vehicles. The declines occurred in the first two quarters with marginal growth recorded in subsequent quarters.
•: The overall risk profile of the portfolio has remained steady from one year ago, still well within risk guidelines.
•: After exceptional performance in 2004, loan losses are expected to increase in 2005, but still remain below historical averages.
•: Focus in 2005 will be on growing customer relationships and revenue.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 27

Personal and Commercial Banking

(millions of Canadian dollars)	2004		2003		2002
Net interest income	$	4,191	$	4,086	$	4,058
Provision for credit losses		373		460		505
Other income		2,066		1,803		1,710
Non-interest expenses before amortization of intangibles		3,650		3,463		3,501

Income before provision for income taxes		2,234		1,966		1,762
Provision for income taxes		747		689		648

Net income — before amortization of intangibles	$	1,487	$	1,277	$	1,114

Selected volumes and ratios
Average loans and acceptances (billions of Canadian dollars)	$	110	$	104	$	98

Average deposits (billions of Canadian dollars)		116		107		103

Economic profit (millions of Canadian dollars)	$	810	$	639	$	438

Return on invested capital — before amortization of intangibles		20%		19%		17%

Efficiency ratio — before amortization of intangibles		58.3		58.8		60.7

Margin on average earning assets including securitized assets		3.07		3.28		3.42

Insurance

Offers a broad range of insurance products through the TD Insurance and TD Meloche Monnex brands, including credit protection coverage on TD Canada Trust lending products.

TD Life Group

•: Provides life and health insurance protection to 1.7 million customers.
•: A leader in critical illness insurance in Canada. This coverage was successfully launched on lines of credit in August 2004, and with an initial sales rate of over 3,000 customers insured per week is well exceeding expectations.
•: Premiums collected grew by over 10% year-over-year, consistent with a 10 year track record of double-digit growth.
•: The focus for 2005 will be on continued growth in sales and further investments in systems to continue to make processes simple, fast and easy benefiting both employees and customers.

TD Meloche Monnex

•: With the acquisition of insurance operations from Liberty Mutual effective April 1, Meloche Monnex became the largest direct response property and casualty insurer of homes and automobiles in Canada and the number three personal insurer in Canada with a market share estimated at 7.7%. The company now serves more than 870,000 individual clients.
•: Reached a premium volume of $1.5 billion, representing a growth of 44% year-over-year, half of which was attributable to the Liberty acquisition. Meloche Monnex's organic growth rate of 22% was significantly higher than the industry.
•: Strong growth in revenue resulted from the increase in premium volume along with a reduction in claims rates.
•: Completed the development of significant information technology tools and operating systems which will further improve overall efficiency in the coming years from an already best-in-class efficiency ratio, while benefiting employees and customers.
•: An improved underwriting approach, along with the most efficient direct insurance marketing business model in Canada, positions Meloche Monnex well for continued client growth.
•: Although the outlook is for the market to return to a more stable pricing environment and possibly increased competition between insurers, Meloche Monnex's goal is to continue to deliver double-digit revenue growth.

Economic Outlook

•: A respectable but not thriving performance by the Canadian economy should be supportive to personal and commercial banking activities in 2005.
•: Continued growth in personal income and corporate profits is expected, but the rate of increase is expected to slow in 2005. Nevertheless, the economic backdrop should support increased day-to-day banking, cash management, trade and treasury services.
•: Bank of Canada may raise interest rates modestly in the second half of next year. This would help cool housing markets and act to reduce the pace of consumer spending on big-ticket items, thus tempering demand for mortgages and personal loans.
•: However, the level of activity in housing markets is expected to remain strong by historical standards and the national employment rate should remain close to a record high, encouraging consumers to keep spending.
•: On the commercial front, the high absolute level of the Canadian dollar against the U.S. dollar could lead to an increase in commercial loan losses.
•: Nevertheless, small and medium-size businesses should generally fare well in the coming year, as they benefit from the continued economic expansion and they tend to be less exposed to foreign exchange movements than large corporations.

See page 37 for discussion of factors that may affect future results.

Business Outlook and Focus for 2005

The outlook is for revenue growth to be at a rate similar to 2004. Net interest margins are expected to stabilize in the near term should the upward trend in short term interest rates continue. Expense growth is also expected to moderate from 2004's growth rate. Credit and insurance loss rates are at cyclical lows and are not expected to improve further. While the 16% earnings growth achieved this year is likely not sustainable at this level going forward, Personal and Commercial Banking's goal is to continue to deliver consistent double-digit earnings growth over time. Key priorities for 2005 are as follows:

•: Maintain focus on net customer growth in each of personal, small business and commercial;
•: Enhance service quality;
•: Create sales capacity by simplifiying processes and reducing administration;
•: Improve business volume growth in Commercial Lending;
•: Integrate Liberty insurance operations with TD Meloche Monnex; and
•: Continue to manage expense growth below revenue growth.

28 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

WHOLESALE BANKING

AT A GLANCE OVERVIEW

•: ACHIEVED AN OUTSTANDING RETURN ON INVESTED CAPITAL OF 25% — A RECORD FOR THE SEGMENT
•: RESTRUCTURED THE SEGMENT OVER THE PAST TWO YEARS TO REDUCE RISK AND OPTIMIZE THE USE OF CREDIT
•: LED $2 BILLION FINANCING FOR OPTI CANADA INC. — INCLUDING THE LARGEST IPO BY A CANADIAN OIL AND GAS COMPANY IN OVER 10 YEARS
•: ACHIEVED A SIGNIFICANT RISK WEIGHTED ASSET (RWA) REDUCTION, FREEING UP CAPITAL TO SUPPORT GROWTH

Overall Business Strategy

•: Invest in businesses that support the needs of clients and that provide opportunities for increasing economic profit.
•: Deliver full suite of capital market services for Wholesale Banking's established client base in Canada.
•: Operate as a niche investment bank outside of Canada by leveraging product capabilities or sector expertise.
•: Selectively use credit to support high return relationships.

Review of Financial Performance 2004

Net income was $607 million in 2004, an increase of $347 million from $260 million last year. In 2003 net income included an after-tax impact of $289 million related to the restructuring costs and goodwill impairment charges for the U.S. equity options business. The return on invested capital for 2004 was 25%, compared with 9% last year. Economic profit for the year was $278 million compared with an economic loss of $125 million in 2003.

Wholesale Banking revenue is derived primarily from capital markets and investment banking, investing and corporate banking activities. Revenue for the year was $2,215 million, compared with revenue of $2,056 million last year. Capital markets and investment banking revenues, which include advisory, underwriting, trading, facilitation and execution services were slightly higher than last year as overall trading revenue was relatively flat year-over-year but Wholesale Banking's equity underwriting and institutional equity facilitation revenues improved. Revenue from the equity investment portfolios also improved significantly relative to last year because of higher dividends received and higher net security gains on improved market conditions. These increases were partially offset by lower revenues in corporate banking due to lower lending fees on a reduced loan portfolio.

Provisions for credit losses were $41 million in 2004, an increase of $26 million from $15 million in 2003. Provisions for credit losses in the Wholesale Banking segment were modified in the first quarter of 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 $41 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 holds $4.5 billion in credit protection against the lending portfolio, an increase of $1.6 billion from the end of last year, as significant hedging activities were undertaken this year. 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 $30 billion this year, a decrease of $10 billion compared with 2003. 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 a model, approved by the Bank's regulators, to measure market risk RWA, while the reduction in credit risk RWA is largely a result of a decline in the size of the lending portfolio.

Expenses were $1,289 million compared with $1,689 million last year, which included $416 million relating to the restructuring costs and goodwill impairment charges for the U.S. equity options business. The underlying increase in expenses was $16 million (before the impact of restructuring costs and goodwill). This is a result of higher variable compensation related to stronger performance in the capital markets businesses and increased investment in infrastructure improvements.

Review of Financial Performance 2003

Wholesale Banking net income was $260 million in 2003 compared with a net loss of $657 million in 2002. The improved performance in 2003 is primarily a result of the significant reduction in credit losses as compared with 2002, but includes a $289 million after-tax charge for the restructuring and goodwill impairment of the equity options business.

Wholesale Banking revenues are derived primarily from corporate banking, investment banking and capital markets and investing activities. Revenues declined 23% from 2002 to $2,056 million. Capital markets revenues, which include advisory, underwriting, trading, facilitation and execution services businesses decreased compared with 2002 largely as a result of reduced trading revenue from structured products businesses.

Provisions for credit losses decreased from a $2,490 million charge in 2002 to a $15 million charge in 2003. The 2002 allowance included $1,450 million of sectoral provisions. The provision for credit losses of $15 million is attributed solely to costs of credit protection, as no losses were incurred.

Expenses increased 37% to $1,689 million in 2003. The equity options business restructuring charge and goodwill write-off in 2003 had a combined impact of $416 million. The remaining increase includes costs of streamlining the core operations in Wholesale Banking, charges for systems write-offs, real estate downsizing, and higher variable compensation expenses compared with 2002.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 29

CHALLENGES IN 2004

•: LOW CORPORATE FINANCING AND STRUCTURING ACTIVITY CONTINUED IN 2004
•: CONTINUING TO IMPROVE INFRASTRUCTURE TO MEET STRONGER GOVERNANCE REQUIREMENTS FROM INVESTORS AND REGULATORS
•: MAINTAINING CONTROL OVER COSTS WHILE MEETING GOALS OF OPERATIONAL EXCELLENCE

2004 HIGHLIGHTS

•: ACHIEVED RETURN ON INVESTED CAPITAL OF 25%, RESULTS THAT DEMONSTRATE THE SUCCESSFUL TRANSFORMATION OF THE SEGMENT
•: STRENGTHENED GLOBAL PRODUCT DISTRIBUTION CAPABILITIES
•: USED CREDIT MORE EFFECTIVELY BY FOCUSING ON CLIENT PROFITABILITY WHILE STRENGTHENING THE FRANCHISE
•: REDUCED RISK IN THE LOAN PORTFOLIO BY PURCHASING PROTECTION
•: ACHIEVED SIGNIFICANT RWA REDUCTION
•: IMPROVED MARKET AND CREDIT RISK INFRASTRUCTURE

30 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Wholesale Banking

(millions of Canadian dollars)	2004			2003			2002
Net interest income (TEB)	$	1,600		$	1,355		$	1,505
Provision for credit losses		41			15			2,490
Other income		615			701			1,163
Non-interest expenses before amortization of intangibles		1,289			1,689			1,235

Income (loss) before provision for (benefit of) income taxes		885			352			(1,057	)
Provision for (benefit of) income taxes (TEB)		278			92			(400	)

Net income (loss) — before amortization of intangibles	$	607		$	260		$	(657	)

Selected volumes and ratios
Average loans and customers' liabilities under acceptances (billions of Canadian dollars)	$	7		$	9		$	25

Risk-weighted assets (billions of Canadian dollars)		30			40			62

Economic profit (loss) (millions of Canadian dollars)	$	278		$	(125	)	$	(1,192	)

Return on invested capital — before amortization of intangibles		25	%		9	%		(16	)%

Efficiency ratio — before amortization of intangibles		58.2			82.1			46.3

Key Product Groups within Wholesale Banking

Corporate Banking

•: Corporate banking revenues declined 11% from $340 million in 2003 to $301 million in 2004. This decrease is largely a result of reduced revenue from lending activities. Lending revenue decreased because of reduced assets and the impact of the strengthening Canadian dollar on U.S. denominated loans. Asset reductions were a result of continued efforts to reduce credit risk and a low level of corporate loan market activity.

Investment Banking and Capital Markets

•: Investment banking and capital markets revenues increased 3% from $1,562 million in 2003 to $1,614 million in 2004. Investment banking and underwriting revenues increased over last year reflecting better market conditions. These gains were partially offset by weaker performance from structuring revenue in Wholesale Banking's derivative businesses reflecting reduced corporate activity levels in structured transactions.

Equity Investments

•: The equity investment portfolios, comprised of public and private equity, had significantly improved revenue in 2004 as revenue increased by 95% from $154 million to $300 million on increased net securities gains. This was a result of improved market conditions for both Wholesale Banking's private and public equity portfolios. In addition to the improved security gains, the unrealized gains in the portfolios increased by $49 million, from $369 million to $418 million at the end of 2004.

Economic Outlook

•: Moderate growth in client demand for wholesale banking services is expected in 2005.
•: Business investment is likely to grow at a solid pace, promoting increased activity in investment banking, debt capital markets, institutional equities and private equity.
•: Further volatility and weakness in the U.S. dollar is expected. The U.S. dollar is likely to lose ground in response to the massive U.S. current account deficit and the currency is expected to be buffeted by changing financial market expectations with regards to economic growth, inflation and the rate of increase in interest rates.
•: This outlook for the U.S. dollar implies further volatility in the Canadian dollar and suggests that the Canadian dollar could climb higher. Consequently, Canadian companies should continue to adjust to the dramatic appreciation in the Canadian currency.

See page 37 for discussion of factors that may affect future results.

Business Outlook and Focus for 2005

Credit and equity markets improved substantially in 2004 and Wholesale Banking is optimistic that corporate activity levels will improve in 2005. Key priorities for 2005:

•: Continue to increase market share in its Canadian franchise and expand its niche product and sector based strategy globally.
•: Continue to enhance its risk and control infrastructure.
•: Improve performance of its capital markets businesses, while equity investments will likely not repeat the outstanding results of 2004.
•: Improve cost control.
•: Achieve return on invested capital target of 15% to 22%.

In 2005, Wholesale Banking will continue to focus on growing and deepening client relationships, expanding its product and service suite and operating with excellence. The segment is expected to deliver a strong return on invested capital in 2005 and is expected to continue to provide a strong contribution to the Bank's economic profit.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 31

WEALTH MANAGEMENT

AT A GLANCE OVERVIEW

•: REVENUE GROWTH OF 13% DRIVEN BY STRONG EQUITY MARKETS, NEW ACCOUNT AND ASSET GROWTH
•: RECORD EARNINGS IN THE MUTUAL FUND BUSINESS ATTRIBUTABLE TO SIGNIFICANT INCREASES IN ASSET BASE
•: TD MUTUAL FUNDS RANKED 2^ND IN THE INDUSTRY IN LONG TERM NET SALES, AT $2.7 BILLION
•: 8% GROWTH IN CLIENT ASSETS UNDER ADMINISTRATION AND MANAGEMENT
•: EARNINGS TURNAROUND IN THE ADVICE-BASED BUSINESSES FOLLOWING A LOSS IN 2003
•: 10% INCREASE IN DISCOUNT BROKERAGE TRADES PER DAY

Overall Business Strategy

•

Develop an integrated asset gathering client focused organization.

•

Grow under penetrated businesses at above average growth rates

•: Focus on the Financial Planning and Private Investment Advice businesses.

•

Leverage the wealth brands of TD Waterhouse and TD Mutual Funds as a premier, trusted advisor in investing for clients.

•

Develop a world class continuum of products, services and solutions designed to meet the needs of each client segment.

•

Leverage technology to enhance the systems architecture supporting the customer experience and to increase operational efficiency.

•

Leverage the strong client referral relationship with Personal and Commercial Banking to ensure clients are serviced in the most appropriate distribution channel within Wealth Management.

Review of Financial Performance 2004

Wealth Management's net income before amortization of intangibles for 2004 was $368 million compared with a loss of $75 million in 2003. Results for 2003 included a $328 million after-tax impact relating to write downs and restructuring costs within TD Waterhouse International. The remaining Wealth Management income was higher as a result of higher volumes across the Wealth businesses. The return on invested capital for the year was 13% compared with a negative return of 4% in 2003. The economic profit for 2004 was $25 million, an improvement of $501 million over 2003.

Total revenue increased by a healthy $302 million from 2003 to $2,606 million due to improvements in both equity markets and client asset growth. Trades per day in Discount Brokerage grew 10% while interest revenue increased due to 20% growth in margin balances. Mutual Fund management fees increased as a result of 12% growth in Mutual Fund assets under management while growth in assets under administration generated improved results in Private Investment Advice and Financial Planning.

Expenses before the amortization of intangibles were $2,047 million in 2004, a decrease of $187 million from 2003. Included in 2003 expenses were $300 million of restructuring and goodwill impairment charges for TD Waterhouse International. The remaining increase in expenses resulted from volume-related trade execution costs, higher trailer payments to sellers of TD Mutual Funds and higher sales force compensation in Private Investment Advice and Financial Planning resulting from the growth in revenue in those businesses. Expenses also reflect a higher level of investment in technology, hiring of sales staff and marketing costs in order to better position the business for future growth.

Assets under management of $124 billion at October 31, 2004 increased $11 billion or 10% from October 31, 2003 due to strong sales of mutual funds and growth in institutional assets. Assets under administration totaled $279 billion at the end of the year, increasing $20 billion or 8% from October 31, 2003 due to the addition of new assets in Discount Brokerage, Private Investment Advice and Financial Planning.

Review of Financial Performance 2003

Wealth Management lost $75 million in 2003. Included in these results was $328 million after-tax relating to write downs and restructuring costs within TD Waterhouse International. The remaining Wealth Management income was higher as a result of the higher business volumes in the second half of the year and the focus on cost containment.

Total revenue decreased $17 million. The decrease in revenue resulted from a $39 million write down related to the TD Waterhouse International joint ventures and the impact of the higher Canadian dollar on U.S. results, partially offset by higher business volumes across the Wealth Management businesses. Expenses before amortization of intangibles increased $154 million from 2002. Included in these expenses were $300 million of restructuring and goodwill impairment charges for TD Waterhouse International. The remaining expenses decreased due to the focus on cost containment. The strong Canadian dollar also contributed to the decline in U.S. expenses. The benefits of the TD Waterhouse International restructuring were already evident as it broke even in the fourth quarter 2003.

Total assets under management of $113 billion, increased $1 billion from October 31, 2002. Assets under administration of $259 billion increased $33 billion from October 31, 2002 due to higher market levels, the growth in Private Investment Advice and Financial Planning channels and significant referrals from the retail bank.

Key Product Groups within Wealth Management

TD Waterhouse Discount Brokerage

•: A leader in self-directed investing, serving customers in Canada, the United States and the United Kingdom.
•: Volumes peaked at an average of 164,000 trades per day for the month of January, but declined to an average of 85,000 per day for the second half of the year as external economic forces dampened investor confidence.
•: Revenue increased by $161 million or 11%. Revenue for 2003 included $39 million related to the joint venture write downs. The remainder of the increase occurred due to a 10% increase in trading volumes and higher net interest income resulting from growth in margin lending, partially offset by the impact on U.S. results of the higher Canadian dollar.
•: Expenses declined by $310 million primarily due to $300 million of restructuring and goodwill impairment charges for TD Waterhouse International in 2003. Increases in marketing and trade related expenses in the U.S. were more than offset by the impact of the higher Canadian dollar on U.S. results.

32 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Wealth Management

(millions of Canadian dollars)	2004			2003			2002
Net interest income	$	508		$	431		$	426
Other income		2,098			1,873			1,895
Non-interest expenses before amortization of intangibles		2,047			2,234			2,080

Income before provision for income taxes		559			70			241
Provision for income taxes		191			145			116

Net income (loss) — before amortization of intangibles	$	368		$	(75	)	$	125

Selected volumes and ratios
Assets under administration (billions of Canadian dollars)	$	279		$	259		$	226

Assets under management (billions of Canadian dollars)		124			113			112

Economic profit (loss) (millions of Canadian dollars)	$	25		$	(476	)	$	(298	)

Return on invested capital — before amortization of intangibles		13	%		(4	)%		4	%

Efficiency ratio — before amortization of intangibles		78.5			97.0			89.6

Average trades per day (thousands)		108			98			99

TD Asset Management

•: TD Mutual Funds is the sixth largest mutual fund family in Canada with $35 billion in assets under management at October 31, 2004, an increase of 12% over prior year generating revenue growth of 17%. The increase in assets under management, combined with a change in compensation methodology to the retail bank, resulted in a $61 million increase in expenses over 2003. Record earnings were delivered by this business. For the second successive year, TD Mutual Funds was second in the industry in long term sales at $2.7 billion.
•: TD Investment Management is recognized as one of the largest quantitative managers in the country. Services provided include investment management to pension funds, corporations, institutions, endowments and foundations. Assets under management increased by 10% compared with 2003.

Advice-Based Businesses

•: TD Waterhouse Private Client Group includes trust services, private banking and Private Investment Counsel. Increases in customer assets were responsible for a 10% or $15 million increase in revenue year-over-year. Expenses grew at 10% due to costs associated with higher business volumes and additional marketing and technology costs related to the rebranding of Private Client Services under the TD Waterhouse banner.
•: TD Waterhouse Private Investment Advice provides full-service brokerage services to its retail customers throughout Canada. In 2004, assets under administration continued to grow resulting in a 20% or $48 million increase in revenue. Expenses grew at 9% reflecting increases in investment advisor compensation with the growth in commissionable revenue. This business was profitable in 2004 after recording a loss in 2003.
•: TD Waterhouse Financial Planning continues to aggressively grow its client facing advisors with a 33% increase in the number of planners and a 64% increase in assets under administration in 2004. As a result, revenues increased $19 million in 2004 while expenses grew $21 million as the investment in growing the number of financial planners continues.

Economic Outlook

•: Favourable economic conditions are expected in 2005, driven by an increase in personal disposable income, job creation and high levels of consumer confidence which should encourage investment activity.
•: The economy is expected to deliver moderate growth, low inflation and further gains in corporate profits which should result in low-to-mid single digit returns for the major financial asset classes.
•: Bank of Canada may raise interest rates in the second half of the year causing returns on money market instruments to increase modestly.
•: Corporate profits are expected to rise by approximately 5% (when commodity sectors are excluded). Commodity prices are expected to trend lower, but remain profitable for most industries.
•: Foreign exchange volatility will continue, particularly with respect to the U.S. dollar which may impact investment strategies.

See page 37 for discussion of factors that may affect future results.

Business Outlook and Focus for 2005

•

The outlook is strong for revenue growth in 2005:

•: While Discount Brokerage trading volumes have shown improvement over the last three months of 2004 external economic factors may impact the trend.
•: Key focus will be on growing client assets by a minimum of 10%.

•

Key priorities for 2005:

•: Improve Wealth Management's new client asset growth by increasing the number of client facing advisors, both through competitive hiring and training programs for new and experienced advisors.
•: Increase share of business with current customers by enhancing and delivering new products, services and solutions.
•: Introduce an active-trader platform in the U.S. and Canada to target the frequent trading customers in Wealth Management's discount brokerage businesses.
•: Maintain a positive spread between revenue and expense growth by aggressively managing costs through technology investment and elimination of overlapping functions and processes.
•: Target specific under penetrated market niches in each Wealth business as unique growth opportunities.
•: Introduce selective new funds in TD Mutual Funds to meet customer needs.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 33

CHALLENGES IN 2004

•: VOLATILITY IN THE DISCOUNT BROKERAGE BUSINESS WAS EVIDENT AS TRADES AVERAGED 135,000 PER DAY IN THE FIRST QUARTER AND DECLINED TO 83,000 PER DAY BY THE FOURTH QUARTER
•: PRICE COMPETITION, PARTICULARLY IN THE U.S., IMPACTED COMMISSION REVENUE

2004 HIGHLIGHTS

•: WEALTH MANAGEMENT ASSETS UNDER ADMINISTRATION INCREASED $20 BILLION OR 8% FROM 2003 AS A RESULT OF BUSINESS AND MARKET GROWTH WHILE ASSETS UNDER MANAGEMENT GREW $11 BILLION OR 10% OVER THE PRIOR YEAR
•: SIGNIFICANT INVESTMENT IN UNDER-PENETRATED BUSINESSES TOOK PLACE IN 2004 IN ORDER TO POSITION THEM FOR SUPERIOR GROWTH IN FUTURE YEARS
•: DISCOUNT BROKERAGE TRADES PER DAY AVERAGED 108,000, AN INCREASE OF 10% OVER LAST YEAR
•: TD WATERHOUSE FINANCIAL PLANNING INCREASED ITS SALES FORCE BY 33% AND ASSETS UNDER ADMINISTRATION BY 64%
•: LAUNCHED DONOR ADVISED FUNDS, PROVIDING CLIENTS WITH THE ABILITY TO SET UP ENDOWMENTS FOR CHARITABLE GIVING; THE FIRST OF ITS KIND IN CANADA
•: WEALTH MANAGEMENT'S SUCCESSFUL JOINT VENTURE WITH ROYAL BANK OF SCOTLAND IN THE U.K. CONTRIBUTED 38,000 NEW ACCOUNTS FOR ITS BROKERAGE OPERATION
•: THE CANADIAN INVESTMENT INDUSTRY HAS CHOSEN TD MUTUAL FUNDS AS THE ANALYSTS' CHOICE FOR "FUND COMPANY OF THE YEAR" AT THE 10TH ANNUAL CANADIAN INVESTMENT AWARDS. THIS PRESTIGIOUS AWARD IS GRANTED TO THE FUND COMPANY WHO DEMONSTRATES EXCELLENCE IN A RANGE OF CATEGORIES, INCLUDING PERFORMANCE, MANAGEMENT AND BREADTH OF CORE OFFERINGS

¹: Assets under management: Assets owned by customers, managed by the Bank, where the Bank makes investment selections on behalf of the client (in accordance with an investment policy). In addition to the TD family of mutual funds, the Bank manages assets on behalf of individuals, pension funds, corporations, institutions, endowments and foundations. These assets are not reported on the Bank's Consolidated Balance Sheet.
²: Assets under administration: Assets owned by customers where the Bank provides services of an administrative nature, such as the collection of investment income and the placing of trades on behalf of the clients (where the client has made their own investment selection). These assets are not reported on the Bank's Consolidated Balance Sheet.
³: Certain revenues are presented net of internal transfers.

34 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

CORPORATE

Review of Financial Performance 2004

During fiscal 2004, the Corporate segment reported net income of $325 million. The most significant factors contributing to this result were pre-tax income from $655 million in sectoral allowance releases during the year, a $67 million general allowances release in the second quarter 2004, and interest income earned on income tax refunds of $77 million before tax. This income was partially offset by litigation loss accruals of $354 million. Several actions are pending and given the litigious environment the Bank has accrued for the most likely amounts that may be expended. Corporate also recorded $77 million in losses relating to the impact of hedging relationship guideline and costs associated with net treasury activities and net unallocated revenues, expenses and taxes.

Review of Financial Performance 2003

During fiscal 2003, the Corporate segment reported net income of $105 million. The most significant factors contributing to this result were pre-tax income from the $157 million general allowances release in the fourth quarter 2003, interest income earned on income tax refunds of $55 million before tax in the third quarter 2003, securitization gain of $12 million after-tax in the third quarter 2003, and tax recoveries of $13 million in 2003. This income was offset by a $39 million after-tax loss to resolve a previously unhedged non-trading U.S. dollar exposure arising from the Bank's U.S. dollar Visa business, a $30 million tax adjustment in the second quarter 2003 relating to lease write downs, as well as costs associated with net treasury activities and net unallocated revenues, expenses and taxes.

Corporate

(millions of Canadian dollars)	2004			2003			2002
Net interest income	$	(356	)	$	(256	)	$	(689	)
Provision for (reversal of) credit losses		(800	)		(289	)		(70	)
Other income		104			47			161
Non-interest expenses before amortization of intangibles		395			206			(62	)

Income (loss) before provision for (benefit of) income taxes		153			(126	)		(396	)
Provision for (benefit of) income taxes		(264	)		(323	)		(445	)
Non-controlling interest in net income of subsidiaries		92			92			64

Net income (loss) — before amortization of intangibles	$	325		$	105		$	(15	)

Corporate Management

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

Banking is an increasingly complex and challenging business. The demands and expectations of our stakeholders — customers, shareholders, employees, regulators, governments and the community at large — are constantly changing. Ensuring the Bank stays abreast of emerging trends and developments is vital to maintaining stakeholders' confidence in TDBFG.

At the same time, the modern bank is a complex organization. Those who serve our 13 million global customers most directly in our three key businesses need strong and effective support from a wide range of functional groups, so that they can remain focused on the key priority of exceeding customer expectations. Corporate Management's mandate is to provide centralized advice and counsel and to design, establish and implement processes, systems and technologies to ensure that the Bank's key businesses operate efficiently, reliably and in compliance with all applicable regulations. To accomplish this, Corporate Management endeavors to have the best people, processes and tools to support our businesses, customers, employees and shareholders.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 35

Factors that may affect future results

As noted in the Caution regarding forward-looking statements on page 11 of this Annual Report, all forward-looking statements, by their very nature, are subject to inherent risks and uncertainties, general and specific, which may cause the Bank's actual results to differ materially from the expectations expressed in the forward-looking statements. Some of these factors are discussed below.

Industry Factors

General Business and Economic Conditions in the Regions in Which We Conduct Business

The Bank operates in Canada, the United States, and other countries. As a result, the Bank's earnings are significantly affected by the general business and economic conditions in the geographic regions in which it operates. These conditions include short-term and long-term interest rates, inflation, fluctuations in the debt and capital markets, exchange rates, the strength of the economy, threats of terrorism and the level of business the Bank conducts in a specific region.

Monetary Policy

The Bank's earnings are affected by the monetary policies of the Bank of Canada and the Federal Reserve System in the United States and other financial market developments. Changes in the supply of money and the general level of interest rates can impact the Bank's profitability. A change in the level of interest rates affects the interest spread between the Bank's deposits and loans and as a result impacts the Bank's net interest income. Changes in monetary policy and in the financial markets are beyond the Bank's control and difficult to predict or anticipate.

Level of Competition

The Bank's performance is impacted by the level of competition in the markets in which it operates. The Bank currently operates in a highly competitive industry. Customer retention can be influenced by many factors such as the pricing of products or services, changes in customer service levels and changes in products or services offered.

Changes in Laws and Regulations

Changes to laws and regulations, including changes in their interpretation or implementation, could affect the Bank by limiting the products or services it can provide and increasing the ability of competitors to compete with its products and services. Also, the Bank's failure to comply with applicable laws and regulations could result in sanctions and financial penalties that could adversely impact its earnings and damage the Bank's reputation.

Accuracy and Completeness of Information on Customers and Counterparties

The Bank depends on the accuracy and completeness of information about customers and counterparties. In deciding whether to extend credit or enter into other transactions with customers and counterparties, the Bank may rely on information furnished by them, including financial statements and other financial information. The Bank may also rely on the representations of customers and counterparties as to the accuracy and completeness of that information and with respect to financial statements, on the reports of auditors. The Bank's financial condition and earnings could be negatively impacted to the extent it relies on financial statements that do not comply with generally accepted accounting principles, that are materially misleading, or that do not fairly present, in all material respects, the financial condition and results of operations of the customers and counterparties.

Bank Specific Factors

New Products and Services to Maintain or Increase Market Share

The Bank's ability to maintain or increase its market share depends, in part, on its ability to adapt products and services to evolving industry standards. There is increasing pressure on financial services companies to provide products and services at lower prices. This can reduce the Bank's net interest income and revenues from fee-based products and services. In addition, the widespread adoption of new technologies, including Internet-based services, could require the Bank to make substantial expenditures to modify or adapt existing products and services. The Bank might not be successful in introducing new products and services, achieving market acceptance of its products and services, and/or developing and maintaining loyal customers.

Acquisitions

The Bank regularly explores opportunities to acquire other financial services companies. On August 26, 2004, the Bank announced it had entered into an agreement to acquire a 51% interest in Banknorth Group, Inc. The Bank's ability to successfully complete an acquisition is often subject to regulatory and shareholder approvals, as is the case in the Banknorth acquisition, and the Bank cannot be certain when or if, or on what terms and conditions, any required approvals will be granted. Acquisitions can affect future results depending on management's success in integrating the acquired business. If the Bank encounters difficulty in integrating the acquired business, this can prevent the Bank from realizing expected revenue increases, cost savings, increases in market share and other projected benefits from the acquisition.

Ability to Attract and Retain Key Executives

The Bank's future performance depends to a large extent on its ability to attract and retain key executives. There is intense competition for the best people in the financial services sector and executives employed by a company the Bank acquires may chose not to remain following the acquisition. There is no assurance that the Bank will be able to continue to attract and retain key executives, although this is the goal of the Bank's management resources policies and practices.

Business Infrastructure

Third parties provide key components of the Bank's business infrastructure such as Internet connections and network access. Disruptions in Internet, network access or other voice or data communication services provided by these third parties could adversely affect the Bank's ability to deliver products and services to customers and otherwise conduct business.

Currency Rates

Currency rate movements in Canada, the United States and other jurisdictions in which the Bank does business may have an adverse impact on the Bank's financial position as a result of foreign currency translation adjustments and on the Bank's future earnings. For example, the rising value of the Canadian dollar may negatively affect the unhedged portion of our investments in U.S. subsidiaries, including, subject to regulatory and shareholder approval and completion of the transaction, the Bank's investment in Banknorth Group, Inc. The rising Canadian dollar may also adversely affect the earnings of the Bank's small business, commercial and corporate clients in Canada.

Other Factors

Other factors beyond the Bank's control that may affect the Bank's future results include changes in foreign exchange rates for the currencies of Canada, the United States and other countries in which the Bank does business, in tax laws, continued negative impact of the United States securities litigation environment, unexpected changes in consumer spending and saving habits, technological changes, the possible impact on the Bank's businesses of international conflicts and terrorism, natural disasters, such as earthquakes, and the Bank's anticipation of and success in managing the risks implied by the factors discussed.

The Bank cautions that the preceding discussion of factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Bank, investors and others should carefully consider these factors as well as other uncertainties, potential events and industry and Bank specific factors that may adversely impact the Bank's future results. 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.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 37

MANAGING RISK — EXECUTIVE SUMMARY

Banking and financial services involve risk. From a shareholder's perspective, what matters is how we manage our exposure to risks. At TD Bank Financial Group, our goal is to earn stable and sustainable returns from our various businesses and operations while managing risks within acceptable limits. Managing risk means understanding the static and changing risks involved in our businesses and assessing the potential impacts and likelihood of each risk. We do this by establishing policies, procedures and internal checks and balances to keep risk at an acceptable level.

What are the Risks Involved in Our Businesses?

The Enterprise Risk Framework

As a way of managing the different kinds of risk to which we are exposed we have created an Enterprise Risk Framework. This is a dynamic model that identifies key risks that could have an impact on the achievement of our business objectives and strategies.

As illustrated, the Enterprise Risk Framework sets out the major categories of risk to which we are exposed, and how they are interrelated. We develop strategies for our various business units taking into consideration the business environment in which we operate. Those strategies expose us to six major categories of risk — credit, market, operational, liquidity, investment and regulatory risks, as shown.

In addition, since all risks have the potential to impact the Bank's reputation, how we manage the various risks determines the extent to which the Bank's overall reputation and capital are at risk.

Who Manages Risk

We have put in place a risk governance framework that assigns ownership of risk and outlines the responsibilities of each group involved in risk management. This framework helps us set priorities, allocate resources and make effective decisions regarding the risks we assume and manage. A formal risk management governance structure aligned with the Enterprise Risk Framework ensures that information about significant risks flows up from the business units and oversight functions to the Senior Executive Team and the Board.

38 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

The risk governance framework establishes that:

•: The Board and the Risk Committee of the Board are responsible for ensuring that management forms and nurtures an effective risk management culture throughout the organization. The Bank's risk appetite and supporting risk management objectives are clearly communicated to all employees through the various business units and corporate oversight functions.
•: The Senior Executive Team of the Bank, chaired by the President and CEO is responsible for monitoring, evaluating and managing risk across the Bank as a whole. The President and Chief Executive Officer and the Executive Vice President and Chief Risk Officer, with the support of other members of the Senior Executive Team, are accountable for identifying significant risks and communicating them to the Board.
•: Executive Management Committees provide enterprise-level oversight over key risks and exposures through the review and approval of risk management policies, strategies and applicable transactions. Major risk management policies are then approved by the Risk Committee of the Board. The Executive Management Committees ensure there are sufficient and appropriate risk management resources across the Bank to meet our risk management objectives.
•: The corporate Risk Management function is responsible for setting enterprise-level standards and policies that reflect the risk appetite of the Bank. Risk Management also monitors and reports on enterprise-level risks where a combination of risks across different businesses could have a significant impact on the Bank's well-being.
•: The Audit and Compliance functions independently monitor and report to management and the Board on the effectiveness of risk management policies, procedures and internal controls.
•: Each business unit owns and is accountable for managing risk within the business unit. Business management and risk management professionals in each business unit ensure that policies, processes and internal controls are in place to manage not only the business but also the risks inherent in that business.

How We Manage Risk

The Bank has a comprehensive and proactive risk management approach that combines the experience and specialized knowledge of individual business units and the corporate oversight functions. Our approach is designed to promote a strong risk management culture and ensure alignment to the Bank's strategic objectives. It includes:

•: Maintaining appropriate enterprise-wide risk management policies and procedures including guidelines and limits to ensure risks are managed to acceptable levels.
•: Subjecting significant risk management policies to regular review and evaluation by the Executive Management Committees and then by the Risk Committee of the Board.
•: An integrated enterprise-wide risk reporting framework that communicates key elements of the Bank's risk profile, both quantitatively and qualitatively, to senior management, the executive and the Board.
•: Maintaining risk measurement methodologies that support risk quantification, including Value-at-Risk analysis and stress-testing.
•: Annual self-assessments by significant business units and corporate oversight functions of the Bank of their key risks and internal controls.
•: Supporting appropriate performance measurement that allocates risk-based economic capital to businesses and charges a cost against that capital.
•: Actively monitoring internal and external risk events to assess whether internal controls are effective.
•: Independent and comprehensive reviews conducted by the Internal Audit department of the quality of the internal control environment and compliance with established risk management policies and procedures.

The following pages describe the main risks the Bank faces and how we manage them.

STRATEGIC RISK

Strategic risk is the potential for loss arising from ineffective business strategies, the absence of integrated business strategies, the inability to implement those strategies, and the inability to adapt the strategies to changes in the business environment.

The most significant strategic risks faced by the Bank are assessed, managed and mitigated by senior management, with oversight by the Board.

Who Manages Strategic Risk

The Senior Executive Team manages the Bank's strategic risk. The Senior Executive Team is comprised of the most senior executives of the Bank, representing every significant business or corporate oversight function.

The Bank's overall strategy is established by the President and CEO and the Senior Executive Team, in consultation with and subject to approval by the Board. Each executive who manages a significant business or function is responsible for managing strategies within that area, and for ensuring that they are aligned with the Bank's overall strategy. They are also accountable to the President and CEO and the Senior Executive Team for monitoring, managing and reporting on business risks inherent in their respective strategies.

The President and CEO reports to the Board on the implementation of Bank strategies, identifying business risks within those strategies and how they are managed.

How We Manage Strategic Risk

The strategies and operating performance of the Bank's significant business units and corporate oversight functions are reviewed by the Senior Executive Team in business performance review sessions. The frequency with which strategies are reviewed in these sessions depends on the risk profile and the magnitude of the business or function concerned.

CREDIT RISK

Credit risk is the potential for financial loss if a borrower or counterparty in a transaction fails to meet its obligations.

Credit risk is obviously one of the most significant and pervasive risks in banking. Every traditional loan, extension of credit or transaction that involves settlements between the Bank and other parties or financial institutions — such as derivative transactions and securities inventories — exposes us to some degree of credit risk. For this reason, as a strategy we make it clear that we lend exclusively on a relationship basis, and we manage all of our businesses in an extremely disciplined and conservative manner, with a strict focus on economic returns for all client relationships.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 39

Who Manages Credit Risk

Bank policies and procedures for managing credit risk on a global basis are set by the business unit in conjunction with Risk Management. This includes:

•: Setting guidelines to limit portfolio concentrations of credit exposure by country, industry and affiliated group.
•: Approving the discretionary limits for officers throughout the Bank for extending lines of credit.
•: Setting standards for measuring credit exposure.
•: Approving the "scoring" techniques used in extending personal credit.
•: Approving all policies relating to all Bank products that entail credit risk.
•: Setting criteria for rating risk on business accounts, based on a 21-category rating system.

A credit group within each business unit is primarily responsible for adjudication, in accordance with the policies and strict authorization and exposure limits established by Risk Management.

The Risk Committee of the Board periodically reviews and approves major credit risk policies. In addition, the Credit and Market Risk Committee, chaired by the President and CEO, reviews and approves all major credit policies, industry concentrations and resolves any major policy issues related to credit or market risk.

How We Manage Credit Risk

As noted above, the Bank establishes credit risk exposure limits by country, industry and affiliated group. The various risk categories are managed as follows:

Country Risk

Economic or political changes in a foreign country could affect cross-border payments — for goods and services, loans, dividends, trade-related finance, as well as repatriation of the Bank's capital in that country. The Bank currently has counterparty exposure in 58 countries with a concentration in North America. We use an internal risk rating system to establish country exposure guidelines covering all aspects of credit exposure, across all businesses.

Business and Government Loans

As part of our strategy, we establish industry and group limits for credit exposure to business and governments. A systematic approach is used to limit industry concentrations and ensure diversification of the Bank's loan portfolio. Exposure guidelines are a key element of this process as they limit exposure based on an internal risk rating score. The rating is determined by using our Industry Risk Rating Model and through detailed industry analysis.

We have identified 26 major business industry groups and divided them into 108 segments and assigned a risk rating for each segment. If we believe that several industry segments are affected by common risk factors, we assign a single exposure guideline to them. In addition, for each industry, Risk Management assigns a concentration limit, which is a percentage of the Bank's total corporate and commercial exposure. We regularly review industry risk ratings to ensure that they properly reflect the risk of the industry.

We assign each business or government borrower a risk rating using a 21-category rating system, and set limits on credit exposure to related business or government accounts accordingly. In addition, we use a Risk Adjusted Return on Capital model to assess the return on credit relationships according to the structure and maturity of the loans and the internal ratings of the borrowers involved. We review the rating and return on capital for each borrower at least once every year.

For accounts where exposures include derivatives, we use master netting agreements or collateral whenever possible to reduce our exposures.

Financial Institutions

Our financial institutions portfolio is divided into 15 major groups, comprised of individual companies that have similar attributes and common risk factors. Within these groups we have established specific exposure risk guidelines for 29 different segments. Risk Management conducts ongoing reviews of the segment and exposure guidelines for each group.

We use our 21-category rating system to assign each group a risk rating based on their financial strength. We assign each borrower a credit rating based on each firm's net worth, the quality of its assets, the consistency and level of its profits, as well as the rating of the major credit rating agencies. For certain types of financial institutions we may use additional criteria.

Personal Credit

Requests for personal credit are evaluated using automated credit scoring systems, or are directed to regional credit centres which operate within clear authority limits. Once retail credits are funded they are continually monitored with quantitative customer management programs to identify changes in risk and provide opportunities that increase risk-adjusted performance. The centralized quantitative review of retail credits has resulted in well-balanced portfolios with predictable performance characteristics. By creating more predictable estimates of loss, management can more effectively attain optimal targets for customer profitability and capital allocation.

The Bank is making a large investment in the platform for retail applications and loan fulfillment, including automated decision technology and credit scoring techniques. This investment will not only improve the Bank's ability to manage retail credit losses within predictable ranges, it also strengthens the control environment that reduces the potential for operational errors. Moreover, the new platform provides more complete, timely and accurate management information permitting measurable improvement in the management of credit risk. Thus, the overall retail credit process is being augmented with state-of-the-art systems, methods and processes.

Classified Risk/Impaired Loans

Classified risk refers to loans and other credit exposures that pose a higher than normal credit risk. A loan is considered impaired when, in management's opinion, we can no longer be reasonably assured that we will be able to collect the full amount of principal and interest when due.

We establish specific allowances for impaired loans when a loss is likely or when the estimated value of the loan is less than its recorded value, based on discounting expected future cash flows. Allowances for personal credit portfolios are based on delinquency and type of security.

See supplementary information page 56, table 12

See Notes to Consolidated Financial Statements page 66,

Note 1, (h) and (i)

See Notes to Consolidated Financial Statements page 71, Note 3

Specific Allowances

Specific allowances for credit losses are established to reduce the book value of loans to estimated realizable amounts in the normal course of business. Specific allowances for the corporate and commercial portfolios are established by borrower and reviewed quarterly. For the retail or personal portfolio, provisions are calculated on an aggregated facility basis, using a formula that takes recent loss experience into account.

40 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

General Allowances

To recognize losses that management estimates to have occurred in the portfolio at the balance sheet date for loans or credits not yet specifically identified as impaired, we establish general allowances for credit risk. The level of general allowances reflects exposures across all portfolios and categories. It fluctuates according to the nature and composition of our portfolio, shifts in the economic and credit cycles, our historical and expected loss experience and other relevant factors.

General allowances are reviewed quarterly using credit risk models developed by the Bank. The level of allowances is based on the probability of a borrower defaulting on a loan obligation (loss frequency), the loss if default occurs (loss severity) and the expected exposure at the time of default. For the corporate and commercial portfolios, allowances are computed at the borrower level. The loss if default occurs is based on the security of the facility. Exposure at default is a function of current usage, the borrower's risk rating and the committed amount. For the retail portfolio, the general allowance is calculated on a portfolio-level and is based on a statistical estimate of loss using historical loss and recovery data models and forecast balances. Ultimately, the general allowance is established on the basis of expected losses and is directly related to the variance of losses and the inherent product characteristics in each portfolio. Models are validated against historical experience and are updated at least annually. The general allowance methodology is periodically approved by the Board.

At October 31, 2004 our general allowance for loan losses was $917 million, compared with $984 million last year. The reduction in general allowances resulted from a strategic reduction in corporate loan exposure during the past year to reduce the overall risk of the wholesale credit portfolio.

Sectoral Allowances

Where losses are not adequately covered by the general allowances noted above, sectoral allowances for credit losses are established for industry sectors and geographical regions that have experienced adverse events or changes in economic conditions, even though the loans comprising each group are not classified as impaired.

Sectoral allowances are reviewed quarterly on a portfolio basis, taking into account the expected loss of the portfolio of borrowers in the sector under review. The analysis includes a review of probabilities of default, and if default occurs, the expected loss on the sale. The sectoral methodology and model inputs are reviewed quarterly.

When accounts that were included in a group of loans for which a sectoral allowance has been established become impaired, any sectoral allowances on those loans are transferred to specific allowances.

The Corporate segment released the remaining $101 million after-tax ($155 million pre-tax) of sectoral provisions in the fourth quarter following a review of the adequacy of the overall reserves. The Bank has identified specific allowances and no longer requires sectoral allowances.

See Notes to Consolidated Financial Statements page 71 Note 3

Provision for Credit Losses

The provision for credit losses is the amount added to the specific, general and sectoral allowances for credit loss during the year to bring them up to a level that management considers adequate to absorb all probable credit-related losses in the Bank's loan portfolio. The net provision for the year is reduced by any recoveries from loans that were previously assumed to be in default.

The Bank recorded a reversal of credit losses of $386 million in 2004, compared with provisions for credit losses of $186 million in 2003.

See Notes to Consolidated Financial Statements page 71 Note 3

See Supplementary information page 57 table 14

Net Impaired Loans

The Bank monitors the level of net impaired loans in its portfolio, which is defined as the gross amount of impaired loans less the total of all specific, general and sectoral allowances for credit losses. For the year ended October 31, 2004, net impaired loans totaled $646 million, compared with a total of $641 million for the same period in 2003.

See Supplementary information page 56, table 12

MARKET RISK

Market risk is the potential for loss from changes in the value of financial instruments. The value of a financial instrument can be affected by changes in:

•: Interest rates;
•: Foreign exchange rates;
•: Equity and commodity prices;
•: Credit spreads.

We are exposed to market risk in our trading and investment portfolios, as well as through our non-trading activities. In our trading and investment portfolios we are active participants in the market, seeking to realize returns for the Bank through careful management of our positions and inventories. In our non-trading activities we are exposed to market risk through the transactions that our customers execute with us.

Market Risk in Trading Activities

The four main trading activities that expose us to market risk are:

•: Market making. We provide markets for a large number of securities and other traded products. We keep an inventory of these securities to buy from and sell to investors, profiting from the spread between bid and ask prices. Profitability is driven by trading volumes.
•: Sales. We provide a wide variety of financial products to meet the needs of our clients, earning money on these products from markups and commissions. Profitability is driven by sales volumes.
•: Arbitrage. We take positions in certain markets or products and offset the risk in other markets or products. Our knowledge of various markets and products and how they relate to one another allows us to identify and benefit from pricing anomalies.
•: Positioning. We aim to make profits by taking positions in certain financial markets in anticipation of changes in those markets. This is the riskiest of our trading activities and we use it selectively.

Who Manages Market Risk in Trading Activities

Primary responsibility for managing market risk lies with Wholesale Banking, with oversight from the Trade Risk Group within Risk Management. Operational support for market risk monitoring and regulatory capital calculations is provided by the Finance and Operations department within Wholesale Banking.

Though not responsible for trading revenues, the Trade Risk Group is responsible for:

•: Designing methods for measuring and reporting market risk.
•: Determining market risk policy, which includes designing and setting all trading limits for Wholesale Banking's businesses.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 41

•: Enforcing approved market risk limits.
•: Approving all new trading products from a market risk perspective.
•: Independent testing of all pricing models, risk models and trading systems.
•: Approving all market rates and prices used in valuing the Bank's trading positions and estimating the market risk.
•: Stress testing the portfolio to determine the effect of large, unusual market movement.
•: Designing and validating the models used to calculate regulatory capital required for market risk.

The Trade Risk and Capital Committee is chaired by the Senior Vice President, Trade Risk and includes members of senior management from Wholesale Banking and Audit. It meets every two weeks to conduct a peer review of the market risk profile of our trading businesses, approve changes to risk policies, review underwriting inventories, and review the usage of capital and assets in Wholesale Banking.

Significant market risk issues are escalated to the Credit and Market Risk Committee, which is chaired by the Bank's President and CEO and includes senior management of Wholesale Banking and the Executive Vice President and Chief Risk Officer. The Risk Committee of the Board oversees the management of market risk and periodically approves all major market risk policies.

How We Manage Market Risk in Trading Activities

Managing market risk is a key part of our business planning process. We begin new trading operations or expand existing ones only if the risk has been thoroughly assessed and is judged to be within our risk capacity and business expertise, and if we have the infrastructure in place to monitor, control and manage the risk.

We manage market risk primarily by enforcing trading limits and by "stress testing" our trading activities.

Trading limits

We set trading limits that are consistent with the approved business plan for each business and our tolerance for the market risk of that business. In setting limits we take into account market volatility, market liquidity, trader experience and business strategy.

Our primary measure for setting trading limits is Value at Risk (VaR). VaR measures the adverse impact that potential changes in market rates and prices could have on the value of a portfolio over a specified period of time. We use VaR to monitor and control overall risk levels and to calculate the regulatory capital required for market risk.

We may also apply specialized limits, such as notional limits, credit spread limits, yield curve shift limits, loss exposure limits, stop-loss limits and others, if and when appropriate. These additional limits reduce the likelihood that trading losses will exceed VaR limits.

At the end of each day, Market Risk Analysis and Reporting compares risk positions with limits and reports all instances when trading limits have been exceeded. Traders must apply for approval for any excesses via an automated escalation process to approvers as designated by the Market Risk Policy. If an excess is declined, then the business must close the position. The trader is accountable to ensure that positions do not exceed the capacity of the market to immediately close out the risk position in the event an excess is declined. For selected high-impact excesses, there is an immediate escalation process to the Executive Vice President and Chief Risk Officer.

Calculating VaR

We estimate VaR by creating a distribution of potential changes in the market value of the current portfolio. We value the current portfolio using the most recent 259 trading days of market price and rate changes. Then we calculate the VaR as the threshold level that portfolio losses are not expected to exceed more than one out of every 100 trading days.

The graph below discloses daily VAR usage.

The graph below shows the distribution of daily market risk related revenue for fiscal 2004.

Stress Testing

We use stress testing to quantify the largest quarterly loss that we are prepared to take in our trading activities. Our trading business is subject to an overall global stress test limit, and each global business has a stress test limit. Also, each broad risk class has an overall stress test limit. Stress scenarios are designed to model extreme economic events, replicate worst-case historical experiences or introduce large but plausible moves in key market risk factors.

Stress tests are produced and reviewed each week with the Executive Vice President and Chief Risk Officer, and every two weeks with the Market Risk and Capital Committee. They are also reviewed throughout the year with the Risk Committee of the Board.

The following graph is a history of our weekly stress test results, which shows the instantaneous impact of large market disturbances.

42 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Market Risk in Investment Activities

We are also exposed to market risk in the Bank's own investment portfolio and in the Merchant Banking business. Risks are managed by identifying our specific risks, determining their potential impact, and establishing policies and procedures to monitor, measure and mitigate those risks.

Who Manages Risk in Investment Activities

The Risk Committee of the Board reviews and approves the investment policies for the Bank's own portfolio and for the Merchant Banking business. The Investment Committee regularly reviews the performance of the Bank's investments and assesses the performance of the portfolio managers.

How We Manage Risk in Investment Activities

We use advanced systems and measurement tools to manage portfolio risk. Risk intelligence is embedded in the investment decision-making process by integrating performance targets, risk/return tradeoffs and quantified risk tolerances. Performance attribution identifies performance drivers such as sector and security exposures, as well as the impact of certain processes such as the execution of trades.

Market Risk in Non-trading Banking Transactions

We are exposed to market risk when we enter into non-trading banking transactions with our customers. These transactions primarily include deposit taking and lending, which are also referred to as "asset and liability" positions.

ASSET LIABILITY MANAGEMENT

Asset liability management deals with managing the market risks of our traditional banking activities. Market risks primarily include interest rate risk and foreign exchange risk.

Who is Responsible for Asset Liability Management

The Treasury and Balance Sheet Management department within Finance measures and manages the market risks of our non-trading banking activities, with oversight from the Asset/Liability Committee, which is chaired by the Executive Vice President and Chief Financial Officer and includes other senior executives. The Risk Committee of the Board periodically reviews and approves all asset liability management market risk policies.

How We Manage Our Asset and Liability Positions

When Bank products are issued, risks are measured using a fully-hedged option-adjusted transfer pricing framework that allows Treasury and Balance Sheet Management to measure and manage product risk within a target risk profile. The framework also ensures that business units engage in risk-taking activities only if they are productive.

Managing interest rate risk

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

The objective of interest rate risk management is to ensure that earnings are stable and predictable over time. To this end, the Bank has adopted a disciplined hedging approach to managing the net income contribution from its asset and liability positions including a modeled maturity profile for non-rate sensitive assets, liabilities and equity. Key aspects of this approach are:

•: Negating the impact from rising or falling interest rates on net interest income and economic value.
•: Measuring the contribution of each Bank product on a risk-adjusted, fully-hedged basis, including the impact of financial options, such as mortgage commitments, that are granted to customers.
•: Developing and implementing strategies to stabilize net income from all personal and commercial banking products.

We are exposed to interest rate risk when asset and liability principal and interest cash flows have different interest payment or maturity dates. These are called "mismatched positions." An interest sensitive asset or liability is repriced when interest rates change or when there is cash flow from final maturity, normal amortization, or when customers exercise prepayment, conversion or redemption options offered for the specific product.

Our exposure to interest rate risk depends on the size and direction of interest rate changes, and on the size and maturity of the mismatched positions. It is also affected by new business volumes, renewals of loans or deposits, and how actively customers exercise options such as prepaying a loan before its maturity date.

Interest rate risk is measured using various interest rate "shock" scenarios to estimate the impact of changes in interest rates on both the Bank's annual Earnings at Risk (EaR) and Economic Value at Risk (EVaR). EaR is defined as the change in the Bank's annual net interest income from a 100-basis-point unfavourable interest-rate shock due to mismatched cash flows. EVaR is defined as the combined difference in the present value of the Bank's asset portfolio and the change in the present value of the Bank's liability portfolio, including off-balance-sheet instruments, resulting from a 100-basis-point unfavourable interest-rate shock.

Valuations of all asset and liability positions, as well as off-balance-sheet exposures, are performed every week, and certain option positions are valued daily. Our objectives are to protect the present value of the margin booked at the time of inception for fixed rate assets and liabilities, and to reduce the volatility of net interest income over time. We value the assets and liabilities by discounting future cash flows at a yield curve indicative of the blended cost or credit of funds for each asset or liability portfolio. The resulting net present value incorporates the present value of margins booked. We then hedge the resulting financial position to the target risk profile of minimal residual economic exposure. Hedging to manage interest rate risk involves the use of derivatives, wholesale instruments and other capital market alternatives and, less frequently, product pricing strategies.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 43

The interest rate risk exposures from instruments with closed (non-optioned) fixed rate cash flows are measured and managed separately from product options. Instruments in the "closed book" exhibit the traditional, almost linear or symmetrical payoff profile to parallel changes in interest rates (i.e. asset values increase as rates fall and decrease as rates rise). Future cash flows include the impact of modeled exposures for:

•: An assumed maturity profile for the Bank's core deposit portfolio.
•: The Bank's targeted investment profile on its net equity position.

Non-rate-sensitive assets, liabilities and shareholders' equity are modeled on a consistent basis, assuming an intermediate term using a rolling 60-month maturity profile resulting in a two and a half year average duration. Significant assumptions included in the valuation of fixed cash flows include the liquidation assumptions on mortgages other than from embedded prepayment options. The objective of portfolio management within the closed book is to eliminate cash flow mismatches, thereby preserving the present value of product margins.

The graph below shows our interest rate exposure on October 31, 2004 on the closed (non-optioned) instruments within the financial position. If this portfolio had experienced an immediate and sustained 100 basis point increase in rates on October 31, 2004, the economic value of shareholders' equity would have deceased by $110 million after tax, compared with $13 million for a 100 basis point decrease in rates on October 31, 2003. A 100 basis point decrease in rates would reduce net income by $11 million over the next 12 months, compared with $14 million for a 100 basis point decrease in rates in 2003.

Product options — whether they are freestanding options such as mortgage rate commitments or embedded in loans and deposits — expose the Bank to a significant financial risk.

Our exposure from freestanding mortgage rate commitment options is modelled based on an expected funding ratio derived from historical experience. Exposure from written options embedded in other products, such as to prepay or redeem, is modelled based on an assumed percentage rational exercise derived from analyses of customer behaviour. We also model an exposure to declining interest rates resulting in margin compression on certain interest rate-sensitive demand deposit accounts. Product option exposures are managed by purchasing options or through a dynamic hedging process designed to replicate the payoff on a purchased option. To the extent that options can be purchased with characteristics that will result in a payoff profile that is expected to offset the payoff profile of the written option position, the Bank will purchase these options. However, in many instances, the depth of the Canadian option market limits the overall amount of options that can be purchased on economic terms to less than 100% of the underlying short option positions. In such cases, we use dynamic hedging. This involves replicating the payoff of using a combination of swaps and bonds, and rebalancing the portfolio for small changes in rates as indicated by the delta (implied change in value for a change in rates) of the underlying option being hedged. Dynamic hedging involves rebalancing the hedging instruments we hold for small changes in interest rates.

The following graph shows our interest rate risk exposure on October 31, 2004 on all instruments within the financial position (i.e., the closed (non-optioned) instruments plus product options). An immediate and sustained 100 basis points increase in rates would have decreased the economic value of shareholders' equity by $124 million after tax or .98% of common equity, compared with $30 million in 2003 for a 100 basis point decrease in rates. Our EVaR for the total portfolio ranged from $19 million to $133 million during the year ended October 31, 2004. The Bank's policy sets overall limits on EVaR and EaR based on a 100 basis point interest rate shock. EVaR arising from mismatched asset liability positions cannot exceed 1.5% of the Bank's common equity or $191 million. EaR exposure may not exceed 1% of the Bank's annualized net interest income, or $59 million.

Managing Non-trading Foreign Exchange Risk

Foreign exchange risk refers to losses that could result from changes in foreign currency exchange rates. Assets and liabilities that are denominated in foreign currencies have foreign exchange risk.

We are exposed to non-trading foreign exchange risk from our investments in foreign operations, and when our foreign currency assets are greater or less than our liabilities in that currency, creating a foreign currency open position. An adverse change in foreign exchange rates can impact the Bank's reported net income and equity, and also the Bank's capital ratios. Our objective is to minimize these impacts.

44 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Minimizing the impact of an adverse foreign exchange rate change on reported equity will cause some variability in capital ratios, due to the amount of risk-weighted assets that are denominated in a foreign currency. If the Canadian dollar weakens, the Canadian-dollar equivalent of the Bank's risk-weighted assets in a foreign currency increases, thereby increasing the Bank's capital requirement. For this reason, the foreign exchange risk arising from the Bank's net investment in foreign operations is hedged to the point where capital ratios change by no more than a tolerable amount for a given change in foreign exchange rates. The tolerable amount increases as the Bank's capital ratio increases.

The Bank's policy on open currency exposure is to limit exposure to no more than $100 million in aggregate. Our policy on foreign exchange capital exposure is to minimize an adverse foreign exchange rate change on reported equity subject to the constraint that the Bank's capital ratios can change by no more than 10 basis points for an 8% change in foreign exchange rates.

Why Product Margins Fluctuate Over Time

As explained above, a fully-hedged approach to asset liability management locks in margins on fixed rate loans and deposits as they are booked. It also mitigates the impact of an instantaneous interest-rate shock on the level of net interest income to be earned over time as a result of cash flow mismatches and the exercise of embedded options. Despite a fully-hedged position, however, the margin on average earning assets can change over time for the following reasons:

•: Margins earned on new and renewing fixed-rate products relative to the margin previously earned on matured products will impact on the existing portfolio margin.
•: The weighted average margin on average earning assets will shift due to changes in the mix of business.
•: The risk of changes in the prime-Bankers' Acceptances basis and the lag in changing product pricing may have an impact on margins earned.
•: The general level of interest rates will impact the return the Bank generates on its modeled maturity profile for core deposits and the investment profile for its net equity position as it evolves over time. The general level of interest rates is also a key driver of some modeled option exposures, and will affect the cost of hedging such exposures.

A fully-hedged approach tends to moderate the impact of these factors over time, resulting in a more stable and predictable earnings stream.

LIQUIDITY RISK

Liquidity risk is the risk that we cannot meet a demand for cash or fund our obligations as they come due. Demand for cash can arise from withdrawals of deposits, debt maturities and commitments to provide credit. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price.

A bank must always ensure that it has access to enough readily available funds to cover its financial obligations as they come due and to sustain and grow its assets and operations both under normal and stress conditions. In the unlikely event of a funding disruption, the Bank needs to be able to continue to function without being forced to sell too many of its assets. The process that ensures adequate access to funds is known as the management of liquidity risk.

Who Manages Liquidity Risk

The Asset/Liability Committee (described on page 38) oversees the Bank's liquidity risk management program. It ensures that an effective management structure is in place to properly measure and manage liquidity risk. In addition, a Global Liquidity Forum, comprising of senior management from Finance, Treasury and Balance Sheet Management, Risk Management and Wholesale Banking, identifies and monitors our liquidity risks. When necessary, the Forum recommends to the Asset/Liability Committee action to maintain our liquidity position within limits in both normal and stress conditions.

The Bank has one global liquidity risk policy, but the major operating areas measure and manage liquidity risks as follows:

•: The Treasury and Balance Sheet Management department within Finance is responsible for consolidating and reporting the Bank's global liquidity risk position and for managing the Personal and Commercial Banking liquidity position.
•: Wholesale Banking is responsible for managing the liquidity risks inherent in the wholesale and corporate banking portfolios.
•: TD Waterhouse Bank is responsible for managing its liquidity position.

Each area must comply with the Global Liquidity Risk Management policy that is periodically reviewed and approved by the Risk Committee of the Board.

How We Manage Liquidity Risk

The Bank's overall liquidity requirement is defined as the amount of liquidity required to fund expected cash outflows as well as a prudent liquidity reserve to fund potential cash outflows in the event of a disruption in the capital markets or other event that could affect our access to liquidity. We do not rely on short-term wholesale funding for purposes other than funding marketable securities or short-term assets.

We measure liquidity requirements using different stress scenarios, and use a base-case scenario to define the minimum amount of liquidity that must be held at all times. This scenario provides coverage for 100% of our unsecured wholesale debt coming due, as well as other potential deposit run-off and related liabilities for a period of 90 days. Other scenarios may require greater coverage. We also use an extended liquidity coverage test to ensure that we can fund our operations on a fully collateralized basis, in the event that we are unable to replace our short-term unsecured debt beyond the 90 days for a period up to one year.

We meet liquidity requirements by holding sufficient assets that can be readily converted into cash, and by managing our cash flows. To qualify for liquidity purposes, assets must be currently marketable, of sufficient credit quality and available for sale. Liquid assets are represented in a cumulative liquidity gap framework based on settlement timing and market depth. Assets needed for collateral purposes or those that are similarly unavailable are not included for liquidity purposes.

While each of our major operations has responsibility for the measurement and management of its own liquidity risks, we also manage liquidity on a global basis to ensure consistent and efficient management of liquidity risk across all of our operations. On October 31, 2004 our consolidated surplus liquid asset position up to 90 days was $18.8 billion, compared with a surplus liquid asset position of $8.7 billion on October 31, 2003. Our surplus liquid asset position is the Bank's total liquid assets less the Bank's unsecured wholesale funding requirements, potential non-wholesale deposit run-off and contingent liabilities coming due in 90 days.

If a liquidity crisis were to occur, we have contingency plans in place to ensure that we can meet all our obligations as they come due.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 45

Funding

The Bank has a large base of stable retail and commercial deposits, making up over 63% of our total funding. In addition, we have an active wholesale funding program to provide access to widely diversified funding sources, including asset securitization. The Bank's wholesale funding is diversified geographically, by currency and by distribution network. We maintain limits on the amounts of deposits that we can hold from any one depositor so that we do not overly rely on one or a small group of customers as a source of funding.

In fiscal 2004, the Bank securitized and sold $2.9 billion of mortgages and issued $3.7 billion of other medium and long-term funding.

At the time of preparing these financial statements, the Bank had entered into an agreement to acquire control of Banknorth Group, Inc. in early 2005. While this transaction will impact the Bank's surplus liquidity, we have ensured that sufficient liquid assets will be available to both fund the cash portion of this transaction (estimated at approximately $3.0 billion) and maintain our standard prudent liquidity reserve coverage.

OPERATIONAL RISK

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

Operational risk is present in all our business activities; deposit taking, lending, trading, trust and advisory services, transaction processing and insurance. Operational risk encompasses a broad range of risks, which include failed transaction processing and documentation errors, fiduciary breaches, technology failures, business disruption, theft and fraud, workplace safety and damage to physical assets originating from internal or outsourced business activities. Its impact can result in financial loss, reputational harm or regulatory penalties.

While operational risks cannot be fully eliminated, managing operational risk is essential to creating and sustaining shareholder value, operating efficiently and providing a safe environment for employees and customers.

Who Manages Operational Risk

Risk Management is responsible for the design and implementation of the Bank's operational risk management framework that sets out the enterprise-level policies and processes to identify, assess, measure, mitigate and control operational risk. Risk Management facilitates appropriate monitoring and reporting to senior management, the Operational Risk Oversight Committee and the Risk Committee of the Board, on operational risk exposures across the Bank.

The senior management of individual business units have primary responsibility for the ongoing management of operational risk. Each business unit and corporate area has an independent risk management function that implements the operational risk management framework consistent with the nature and scope of the operational risks the area is exposed to. Each business unit has a Risk Management Committee comprised of the senior executives in the unit, responsible for ensuring that the business complies with the Bank's operational risk management framework.

How We Manage Operational Risk

Through the operational risk management framework, the Bank maintains a system of comprehensive policies, processes and methodologies to manage operational risk to appropriate levels and emphasize proactive management practices. Key operational risk management activities include:

Reporting

Risk Management, in partnership with business management, facilitates the transparent escalation of key operational risk issues and information through the Risk Management Committees of the business units and ensures that accountability for resolution is appropriately identified.

Risk and Control Self-Assessment

The Risk and Control Self-Assessment is a process adopted by each of our businesses to proactively manage our operational risks. The goal of the Risk and Control Self-Assessment is to identify key operational risks that exist in each business environment and assess whether there are appropriate controls in place to mitigate these risks. The likelihood and potential impact of these risks occurring are measured against the controls we have in place and action plans may result where we can find additional ways to reduce our exposure.

Operational Risk Event Monitoring

Operational risk event monitoring is important to increase our awareness of risks we encounter and to assist management in taking action to reduce our exposure to losses. The Bank uses a centralized reporting system to monitor and report operational risk events. This event data is analyzed to determine trends for benchmarking, and to gain an understanding of the types of risks our businesses and the Bank as a whole face day to day. Operational risk events that occur outside the Bank are also reviewed and analyzed. Through continuous monitoring and improving our understanding of these events, we can reduce our costs and improve our operational efficiency.

Insurance

Risk Management actively manages a broad portfolio of insurance and other risk financing instruments. Risk Management assesses the type and level of corporate insurance coverage that is required to ensure it is appropriate to meet our tolerance for risk and also to meet statutory requirements. This includes conducting risk analysis and identifying opportunities to transfer our risk where appropriate.

Risk Management also reviews the insurances of counterparties involved in outsourcing and other supplier arrangements to ensure they adequately protect the Bank's risks from the outsourcing arrangement.

The insurance business units manage underwriting risk including catastrophic event risk. Underwriting risk is the exposure to financial loss resulting from the inappropriate selection and pricing of the risks to be insured. The Bank mitigates these risks through target segmentation and product design, individual and portfolio risk exposure monitoring, diversification and reinsurance.

Information Technology

Managing the operational risk exposures related to our technology and systems infrastructure is of significant importance to the Bank. Technology exposures associated with the operational integrity and security of our data, systems and infrastructure are actively managed through the implementation of a Technology Controls Framework, which includes industry best practices.

Business Continuity Management

Business Continuity Management is a vital and integral part of our normal business operations. It includes the establishment of enterprise-wide business continuity management processes that provide safeguards to minimize the likelihood, cost and duration of disruptions to business processes and services.

The Business Continuity Management Group sets appropriate business continuity practices, policies and procedures to assist business units in the management of their business continuity strategies. Each business unit maintains its own business continuity plans to address the loss or failure of any component on which critical functions depend.

46 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Outsourcing Governance

Outsourcing is an arrangement whereby a service provider performs a business activity, function or process on behalf of the Bank. Outsourcing business activities can be beneficial to the Bank by providing access to leading technology, specialized expertise, economies of scale and operational efficiencies. These arrangements typically involve increased dependency on the service provider to provide the expected services.

To help us reduce the risk involved in outsourcing, the Bank has established an Outsourcing Governance Office that is responsible for the formulation, communication and monitoring of the effectiveness of outsourcing policies, standards, guidelines and methodologies. The Outsourcing Governance Office provides guidance on outsourcing best practices and ensures enterprise-level oversight and reporting of the Bank's outsourcing activities.

REGULATORY RISK

Regulatory risk is the risk of non-compliance with applicable legislation, regulation and regulatory directives.

Financial services is one of the most closely regulated industries, and the management of a financial services business such as ours is expected to meet high standards in all business dealings and transactions. As a result, we are exposed to regulatory risk in virtually all of our activities. Failure to meet regulatory requirements not only poses a risk of regulatory censure or penalty but also puts the reputation of the Bank as a whole at risk.

Regulatory risk differs from other banking risks, such as credit risk or market risk, in that it is typically not a risk actively or deliberately assumed by management in expectation of a return. It occurs as part of the normal course of operating our businesses.

Who Manages Regulatory Risk

Proactive management of regulatory risk is a key objective of the Bank. It is carried out primarily through an enterprise-wide regulatory risk management framework called the "Legislative Compliance Management Framework." The Compliance department in Legal is responsible for the Legislative Compliance Management Framework.

The Legislative Compliance Management Framework establishes two levels of controls through which regulatory risk is managed. These are controls to meet day-to-day regulatory requirements, and independent oversight controls.

Business unit management is responsible for managing day-to-day regulatory risk. They are required to demonstrate compliance with all regulatory requirements. In meeting this responsibility they receive advice and assistance from the corporate oversight functions — Legal, Compliance and Audit. The oversight functions also provide an independent review of controls in the business unit and bring significant issues to the attention of senior management and the Board. The Compliance and Audit functions monitor and test the extent to which business units meet regulatory requirements, as well as the effectiveness of internal controls, and report their findings to business unit management, senior management and the Audit Committee of the Board.

How We Manage Regulatory Risk

Business units manage day-to-day regulatory risk primarily by educating and training employees about regulatory requirements, establishing and maintaining appropriate policies and procedures, and monitoring for compliance. The corporate oversight functions promote a compliance culture within the Bank by:

•: Ensuring that accountability for regulatory compliance has been assigned and that a methodology exists for holding individuals accountable.
•: Communicating regulatory requirements to each business unit. Ensuring that business units have appropriate policies and procedures in place and that staff are trained to meet regulatory requirements.
•: Independently monitoring the business units for adherence to the policies, procedures and requirements.
•: Tracking, escalating and reporting significant issues and findings to senior management and the Board.

Compliance with regulatory requirements is also documented through a formal business unit management certification process. In addition to ongoing monitoring and review processes, Canadian business units annually review regulatory requirements relating to the Bank's governing legislation and update their risk assessments and the controls that they have in place to mitigate those risks. The higher the risk, the more rigorous the control process must be to minimize the risk of non-compliance. Their assessments are also reviewed by the Compliance department to evaluate the effectiveness of the business unit controls.

Once the annual review process is completed, senior management of the business unit certify in writing whether they are in compliance with applicable regulatory requirements, or whether any gaps or weaknesses exist — in which case an action plan must be established and implemented to remedy the gap or weakness.

REPUTATIONAL RISK

Reputational risk is the risk to earnings, capital or brand arising from negative public or employee opinion.

A company's reputation is a valuable business asset in its own right, essential to optimizing shareholder value, and as such is constantly at risk. Reputational risk cannot be managed in isolation from other forms of risks, since all risks can have an impact on reputation, which in turn can impact the brand, earnings and capital. Credit, market, operational, liquidity, investment and regulatory risks must all be managed effectively in order to safeguard the Bank's reputation.

As business practices evolve to address new operating environments with respect to reputational risk, we, like others in our industry, have strengthened our focus in this area. We have defined and documented the Structured Transactions Approval Process. The process involves committees with representation from the businesses and control functions, and includes consideration of all aspects of a new Structured Product, including reputational risk.

Who Manages Reputational Risk

Ultimate responsibility for the Bank's reputation lies with the Senior Executive Team and the executive committees that examine reputational risk as part of their ongoing mandate. However, every employee and representative of the Bank has a responsibility to contribute in a positive way to the Bank's reputation. This means ensuring that ethical practices are followed at all times, that interactions with our stakeholders are positive and that the Bank complies with applicable policies, legislation and regulations. Reputational risk is most effectively managed when every individual works continuously to protect and enhance the Bank's reputation.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 47

MANAGING CAPITAL

Regulatory Capital Structure and Ratios

(millions of Canadian dollars)	2004			2003			2002
Tier 1 capital
Retained earnings	$	9,540		$	8,518		$	8,292
Foreign currency translation adjustments		(265	)		(130	)		418
Common shares		3,252			3,179			2,846
Qualifying preferred shares		1,310			1,535			1,328
Contributed surplus		20			9			—
Non-controlling interest in subsidiaries		1,250			1,250			1,119
Less: goodwill and intangibles in excess of 5% limit		(2,467	)		(3,035	)		(4,213	)

Total Tier 1 capital		12,640			11,326			9,790

Tier 2 capital
Subordinated notes and debentures		5,644			5,887			4,343
Qualifying preferred shares and non-controlling interest in subsidiaries		—			—			157
General allowance for credit losses included in capital		878			947			1,056
Less: amortization of subordinated notes and debentures		(212	)		(241	)		(357	)

Total Tier 2 capital		6,310			6,593			5,199

Investment in unconsolidated subsidiaries/substantial investments		1,855			919			870
First loss protection		189			145			159

Total regulatory capital	$	16,906		$	16,855		$	13,960

Capital ratios
To risk-weighted assets
Tier 1 capital		12.6	%		10.5	%		8.1	%
Total regulatory capital		16.9			15.6			11.6

Assets to capital multiple¹		17.1			15.2			18.9

¹: Total assets plus off-balance sheet credit instruments such as letters of credit and guarantees less investments in associated corporations and goodwill and net intangibles divided by total regulatory capital.

The Bank's Goals are to:

•: Provide enough capital to maintain the confidence of investors and depositors, while providing the Bank's common shareholders with a satisfactory return.
•: Be an appropriately capitalized institution, as measured internally, defined by regulatory authorities and compared with the Bank's peers.
•: Maintain strong ratings.
•: Make sure that the Bank has enough capital and the right type of capital on hand or readily available at a reasonable cost.
•: Achieve the lowest overall cost of capital consistent with preserving the appropriate mix of capital elements.

Where Capital Comes From

Most of the Bank's capital comes from common shareholders and retained earnings. Other sources of capital come from the Bank's preferred shareholders and holders of the Bank's subordinated debt.

Who Manages the Bank's Capital

Finance manages capital for the Bank and is responsible for acquiring, maintaining and retiring capital. The Board of Directors oversees capital management.

Economic Capital

The Bank uses in-house models to determine how much capital is required to cover unexpected losses from credit, market and operational risks. The Bank refers to this measure as economic capital and notes that it differs from regulatory capital because it applies to deposit products as well as asset products, and it applies to operational as well as credit and market risk. Regulatory capital is set by regulations established by the Superintendent of Financial Institutions Canada (refer to next section).

Within the Bank's measurement framework, economic capital covers unexpected loss. Expected loss is considered a cost of doing business and is included in product pricing.

Economic capital is sufficient to absorb worst case loss at levels consistent with a AA ratings standard. Unlike rating agency and regulatory capital measures, economic capital refers solely to common equity capital. Since losses flow through the Consolidated Statement of Operations, the Bank ensures it has sufficient common equity to absorb worst case loss.

The Bank makes business decisions based on return on economic capital, while also ensuring that, in aggregate, regulatory and rating agency requirements and capital available are kept in balance.

Regulatory Capital

Tier 1 Capital

Retained earnings, when adjusted for foreign currency translation, increased by $887 million during the year. Foreign exchange adjustments unfavourably affected retained earnings by $135 million. The Bank raised $273 million of common stock including $174 million from the dividend reinvestment plan. However, the Bank repurchased $350 million of common shares under the normal course issuer bid which the Bank launched in March. The Bank also redeemed $225 million of First Preferred Shares, Series H, during the year and issued no new preferred shares.

48 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

Tier 2 Capital

The Bank had $157 million of subordinated debt mature during the year. See Note 9 to 11 to the Bank's Consolidated Financial Statements for more details.

Dividends

The Bank's dividend policy is approved by the Board of Directors. During the year, the Bank increased its quarterly dividend twice. In April, the dividend was increased by 2 cents to 34 cents per share and in October dividends were increased by another 2 cents to 36 cents per share, consistent with the Bank's target payout range of 35-45% of earnings before amortization of intangibles. The Bank's ability to pay dividends is subject to the Bank Act and the regulations of the Superintendent of Financial Institutions Canada. Note 11 of the Bank's Consolidated Financial Statements provides further details.

Ratings

Fitch Ratings revised the Bank's outlook on the Bank's AA long term ratings to stable from negative, citing the progress made in reducing the Bank's credit risk profile and bolstering capital. The Bank's long term ratings were reaffirmed by Fitch (AA-), Moody's (Aa3), DBRS (AA(low)), and S&P (A+), following the Bank's announcement of its intention to purchase 51% of Banknorth.

Capital Ratios

About Capital Ratios

Capital ratios are measures of financial strength and flexibility.

The Office of the Superintendent of Financial Institutions Canada (OSFI) defines two primary ratios to measure capital adequacy, the Tier 1 capital ratio and the total capital ratio. OSFI sets target levels for Canadian banks:

•: The Tier 1 capital ratio is defined as Tier 1 capital divided by risk-weighted assets. OSFI has established a target Tier 1 capital requirement of 7%.
•: The total capital ratio is defined as total regulatory capital divided by risk-weighted assets. OSFI has established a target total capital requirement of 10%.

The Bank's Tier 1 and total capital ratios were 12.6% and 16.9%, respectively, on October 31, 2004 compared with 10.5% and 15.6% on October 31, 2003. The principal factors for the year-over-year increases were the stronger earnings in 2004 combined with successful management of growth in the Bank's risk-weighted assets. The Bank exceeded its medium term target for Tier 1 of 9-9.5%.

OSFI measures the capital adequacy of Canadian banks according to its instructions for determining risk-adjusted capital, risk-weighted assets and off-balance sheet exposures. This approach is based on the Bank for International Settlements' (BIS) agreed framework for achieving a more consistent way to measure the capital adequacy and standards of banks engaged in international business.

Acquisition of Banknorth

The acquisition of Banknorth will cause a reduction in the Bank's capital ratios, caused by the increase in risk-weighted assets, together with higher goodwill and intangibles, partially offset by the issuance of additional Bank common shares. Nevertheless, the Bank expects to meet its medium term targets for Tier 1 capital. For more information about the assumptions and risk factors relating to this transaction, refer to the proxy statement/prospectus that Banknorth and the Bank filed with the SEC. A copy may be obtained by contacting the Shareholder Relations department as set out on page 109 of this Annual Report.

Risk-weighted Assets

Risk-weighted assets are determined by applying OSFI prescribed risk-weights to balance sheet assets and off-balance sheet financial instruments according to credit risk of the counterparty. Risk-weighted assets also include an amount for the market risk exposure associated with the Bank's trading portfolio.

The Bank's total risk-weighted assets (RWA) decreased by $8 billion or 7% in 2004, principally from reductions in risk-weighted assets from market risk. Much of this market risk RWA decline was a result of implementing the first two of three phases of the Bank's Interest Rate Specific VaR model for the calculation of regulatory capital requirements as authorized by OSFI in 2004. This model replaces the standardized 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.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 49

Risk-weighted Assets

		2004				2003				2002
(millions of Canadian dollars)		Balance		Risk- weighted balance		Balance		Risk- weighted balance		Balance		Risk- weighted balance
Balance sheet assets
Cash resources and other		$	9,038	$	1,582	$	7,719	$	1,344	$	6,538	$	1,108
Securities			98,280		4,155		79,665		3,686		82,197		6,247
Securities purchased under resale agreements			21,888		589		17,475		235		13,060		282
Loans (net)			123,924		61,251		118,058		59,273		122,627		63,965
Customers' liability under acceptances			5,507		5,414		6,645		6,400		7,719		7,066
Other assets			52,390		6,208		43,970		5,885		45,899		6,288

Total balance sheet assets		$	311,027	$	79,199	$	273,532	$	76,823	$	278,040	$	84,956

Off-balance sheet assets
Credit instruments					9,031				10,937				14,559
Derivative financial instruments					6,268				5,987				6,259

Total off-balance sheet assets					15,299				16,924				20,818

Total risk-weighted asset equivalent
	— credit risk				94,498				93,747				105,774
	— market risk				5,808				14,470				14,859

Total risk-weighted assets				$	100,306			$	108,217			$	120,633

Revised Capital Accord

In 2004, the Basel Committee on Banking Supervision finalized the New Basel Capital Framework to replace the accord originally introduced in 1988 and supplemented in 1996. The underlying principles of the new Framework are intended to be suitable for application to banks of varying levels of complexity and sophistication. The Framework will allow qualifying banks to determine capital levels consistent with the manner in which they measure, manage and mitigate risk. The new Framework provides a spectrum of methodologies, from simple to advanced, for the measurement of both credit and operational risk. More advanced measurement of risks should result in regulatory and economic capital being more closely aligned.

The objective of the Framework is to provide rewards for more rigorous and accurate risk management by reducing regulatory capital required under weaker or less sophisticated approaches. While the overall objective of the new Framework is to neither increase nor decrease the level of overall capital in the system, some financial institutions will see an increase in regulatory capital, while others will see a decrease. The impact will depend upon the particular institution's asset mix, risk and loss experience.

The Bank has prepared project plans to collect, analyze and report the necessary data and is on track to meet the requirements of the new Framework as applied to the Canadian context by OSFI. For Canadian banks formal implementation will be in fiscal 2008.

CONTROLS AND PROCEDURES

During fiscal 2004, there have been no significant changes in the Bank's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect the Bank's internal controls over financial reporting. However, the Bank is continually improving its infrastructure and controls.

An evaluation was performed under the supervision and with participation of the Bank's management, including the President and Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Bank's disclosure controls and procedures, as defined in the rules of the U.S. Securities and Exchange Commission (SEC), as of the end of the period covered by this Annual Report. Based on that evaluation, the Bank's management, including the CEO and CFO, concluded that the Bank's disclosure controls and procedures were effective as of October 31, 2004.

50 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

SUPPLEMENTARY INFORMATION

51	Table 1	Earnings (Loss) Before Amortization of Intangibles
51	Table 2	Analysis of Change in Net Interest Income
51	Table 3	Net Interest Rate Margin
52	Table 4	Average Earning Balances and Interest Rates
52	Table 5	Other Income
52	Table 6	Trading Related Income
53	Table 7	Non-interest Expenses and Efficiency Ratio
53	Table 8	Taxes
54	Table 9	Loans to Small and Mid-sized Business Customers
54	Table 10	Fees Paid to the Bank's Auditors
55	Table 11	Loans and Customers' Liability under Acceptances, Net of Allowance for Credit Losses
56	Table 12	Impaired Loans less Allowance for Credit Losses
56	Table 13	Impact on Net Interest Income due to Impaired Loans
57	Table 14	Provision for Credit Losses
58	Table 15	Current Replacement Cost of Derivatives
58	Table 16	Assets under Administration and Assets under Management
59	Table 17	Contractual Obligations by Remaining Maturity
59	Table 18	Capital Stock and Dividends Per Share
59	Table 19	Quarterly Results

TABLE 1 Earnings (Loss) Before Amortization of Intangibles¹

	2004			2003			2002
Diluted earnings per common share — reported basis	$	3.39		$	1.51		$	(.25	)
Amortization of intangible assets, net of income taxes²		.72			.75			.98

Diluted earnings (loss) per common share — before amortization of intangibles	$	4.11		$	2.26		$	.73

Return on total common equity — reported basis
Net income applicable to common shares (millions of Canadian dollars)	$	2,232		$	989		$	(160	)
Average common shareholders' equity (millions of Canadian dollars)		12,050			11,396			12,144
Return on total common equity		18.5	%		8.7	%		(1.3	)%

¹: Earnings before amortization of intangibles is defined in the "How the Bank reports" section on page 13 of this Annual Report.
²: The Bank's non-cash identified intangible amortization charges relate to the Canada Trust acquisition in fiscal 2000.

TABLE 2 Analysis of Change in Net Interest Income

	2004 vs. 2003									2003 vs. 2002
	Favourable (unfavourable) due to change in									Favourable (unfavourable) due to change in
(millions of Canadian dollars)	Average volume			Average rate			Net change			Average volume			Average rate			Net change
Total earning assets	$	335		$	(405	)	$	(70	)	$	(182	)	$	(222	)	$	(404	)
Total interest-bearing liabilities		(37	)		434			397			223			497			720

Net interest income	$	298		$	29		$	327		$	41		$	275		$	316

TABLE 3 Net Interest Rate Margin

	2004					2003					2002
(millions of Canadian dollars)	Average earning assets		Net interest income		Margin	Average earning assets		Net interest income		Margin	Average earning assets		Net interest income		Margin
Canada	$	166,647	$	4,019	2.41%	$	156,193	$	3,758	2.41%	$	150,738	$	3,773	2.50	%
United States		43,067		747	1.73		48,582		681	1.40		53,784		543	1.01
Other international		45,655		1,177	2.58		47,032		1,177	2.50		52,038		984	1.89

Total Bank	$	255,369	$	5,943	2.33%	$	251,807	$	5,616	2.23%	$	256,560	$	5,300	2.07	%

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 51

TABLE 4 Average Earning Balances and Interest Rates

	2004						2003						2002
(millions of Canadian dollars)	Average balance		Interest		Average rate		Average balance		Interest		Average rate		Average balance		Interest		Average rate
Earning assets
Deposits with banks	$	7,760	$	517	6.7	%	$	7,323	$	212	2.9	%	$	6,108	$	132	2.2	%

Securities
Investment		27,678		1,219	4.4			29,183		1,017	3.5			28,663		1,193	4.2
Trading		71,188		2,438	3.4			62,161		2,431	3.9			67,633		2,485	3.7

Total securities		98,866		3,657	3.7			91,344		3,448	3.8			96,296		3,678	3.8

Securities purchased under resale agreements		28,306		734	2.6			33,311		902	2.7			31,758		850	2.7

Loans
Residential mortgages		52,155		2,625	5.0			53,168		2,881	5.4			53,035		3,101	5.8
Consumer instalment and other personal		45,215		2,373	5.2			36,909		2,195	5.9			32,849		1,918	5.8
Credit card		2,289		271	11.8			2,181		271	12.4			1,307		172	13.2
Business and government		20,778		955	4.6			27,571		1,293	4.7			35,207		1,755	5.0

Total loans		120,437		6,224	5.2			119,829		6,640	5.5			122,398		6,946	5.7

Total earning assets	$	255,369	$	11,132	4.4	%	$	251,807	$	11,202	4.4	%	$	256,560	$	11,606	4.5	%

Interest-bearing liabilities
Deposits
Personal	$	108,586	$	2,077	1.9	%	$	102,485	$	2,130	2.1	%	$	98,163	$	2,300	2.3	%
Banks		16,166		309	1.9			22,170		412	1.9			24,821		720	2.9
Business and government		81,139		1,467	1.8			77,750		1,660	2.1			81,131		1,734	2.1

Total deposits		205,891		3,853	1.9			202,405		4,202	2.1			204,115		4,754	2.3
Subordinated notes and debentures		5,731		312	5.4			4,710		259	5.5			4,250		201	4.7
Obligations related to securities sold short and under repurchase agreements		34,730		1,024	2.9			38,378		1,125	2.9			44,931		1,351	3.0

Total interest-bearing liabilities	$	246,352	$	5,189	2.1	%	$	245,493	$	5,586	2.3	%	$	253,296	$	6,306	2.5	%

Total net interest income			$	5,943					$	5,616					$	5,300

TABLE 5 Other Income

(millions of Canadian dollars)	2004			2003			2002			2001			2000
TD Waterhouse fees and commissions	$	985		$	957		$	922		$	1,002		$	1,521
Full service brokerage and other securities services		738			667			641			701			667
Mutual fund management		573			508			522			502			452
Credit fees		343			415			415			425			545
Net investment securities gains		192			23			26			216			382
Trading income (loss)		(153	)		104			529			1,318			1,225
Service charges		673			641			596			561			441
Loan securitizations		390			250			218			272			236
Card services		172			252			249			249			233
Insurance, net of claims		593			420			375			326			198
Trust fees		78			70			76			86			75
Gains on sale of investment real estate		—			—			—			350			—
Gain on sale of mutual fund record keeping and custody business		—			—			40			—			—
Write down of investment in joint ventures		—			(39	)		—			—			—
Other		299			156			320			439			425

Total	$	4,883		$	4,424		$	4,929		$	6,447		$	6,400

Percentage increase (decrease) over previous year		10.4	%		(10.2	)%		(23.5	)%		.7	%		7.9	%

TABLE 6 Trading Related Income¹

(millions of Canadian dollars)	2004			2003		2002
Net interest income	$	1,037		$	889	$	672
Other income		(153	)		104		529

Total trading related income	$	884		$	993	$	1,201

By business
Interest rate and credit portfolios	$	559		$	581	$	741
Foreign exchange portfolios		230			248		217
Equity and other portfolios		95			164		243

Total trading related income	$	884		$	993	$	1,201

¹: Trading related income includes both trading income reported in other income and net interest income derived from trading instruments.

52 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

TABLE 7 Non-interest Expenses and Efficiency Ratio

(millions of Canadian dollars)	2004			2003			2002			2001			2000
Salaries and employee benefits
Salaries	$	2,254		$	2,304		$	2,273		$	2,225		$	2,032
Incentive compensation		1,084			986			875			1,150			1,048
Pension and other employee benefits		442			468			418			333			319

Salaries and employee benefits total		3,780			3,758			3,566			3,708			3,399

Occupancy
Rent		353			361			330			323			266
Depreciation		134			143			148			149			104
Other		125			152			127			120			128

Occupancy total		612			656			605			592			498

Equipment
Rent		165			185			170			159			118
Depreciation		160			175			164			169			156
Other		237			290			327			328			287

Equipment total		562			650			661			656			561

General
Goodwill impairment		—			624			—			—			—
Amortization of goodwill		—			—			—			198			142
Amortization of intangible assets		626			772			998			1,292			1,203
Restructuring costs		(7	)		92			—			239			475
Marketing and business development		384			348			388			410			434
Brokerage related fees		228			229			224			229			260
Professional and advisory services		446			372			366			322			284
Communications		207			208			225			205			202
Capital and business taxes		141			133			107			106			82
Postage		100			91			96			115			110
Travel and relocation		62			58			68			67			65
Other		866			373			448			515			412

General total		3,053			3,300			2,920			3,698			3,669

Total expenses	$	8,007		$	8,364		$	7,752		$	8,654		$	8,127

Percentage increase (decrease)		(4.3	)%		7.9	%		(10.4	)%		6.5	%		78.2	%

Efficiency ratio
Net interest income	$	5,943		$	5,616		$	5,300		$	4,391		$	3,605
Other income		4,883			4,424			4,929			6,447			6,400

Total revenue	$	10,826		$	10,040		$	10,229		$	10,838		$	10,005
Efficiency ratio — reported basis		74.0	%		83.3	%		75.8	%		79.8	%		81.2	%
Efficiency ratio — before amortization of intangibles		68.2			75.6			66.0			67.9			69.2

TABLE 8 Taxes

(millions of Canadian dollars)	2004			2003			2002			2001			2000
Income taxes
Income taxes	$	952		$	603		$	(81	)	$	646		$	880
Other taxes
Payroll taxes		178			193			187			174			160
Capital taxes		133			125			97			98			76
GST and provincial sales taxes		146			150			162			149			92
Municipal and business taxes		85			86			93			91			93

Total other taxes		542			554			539			512			421

Total taxes	$	1,494		$	1,157		$	458		$	1,158		$	1,301

Effective income tax rate — before amortization of intangibles¹		24.8	%		26.7	%		—	%		25.3	%		33.8	%
Effective total tax rate — before amortization of intangibles¹		34.2			41.1			42.1			37.7			43.1

¹: Earnings before amortization of intangibles is defined in the "How the Bank reports" section on page 13 of this Annual Report.

The effective income tax rate on the reported basis is set out in Note 14 of the Bank's Consolidated Financial Statements.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 53

TABLE 9 Loans to Small and Mid-sized Business Customers

(millions of Canadian dollars)
	Loans authorized						Amount outstanding
Loan amount	Loans authorized						Amount outstanding
Loan amount	2004		2003		2002		2004		2003		2002
(thousands of Canadian dollars)
0 – 24	$	1,054	$	1,056	$	1,081	$	522	$	530	$	555
25 – 49		768		745		738		445		434		431
50 – 99		1,308		1,298		1,280		727		745		735
100 – 249		2,701		2,682		2,660		1,608		1,626		1,623
250 – 499		2,484		2,409		2,440		1,452		1,421		1,414
500 – 999		2,537		2,478		2,571		1,286		1,271		1,342
1,000 – 4,999		6,969		6,769		6,898		3,185		3,112		3,167

Total¹	$	17,821	$	17,437	$	17,668	$	9,225	$	9,139	$	9,267

¹: Personal loans used for business purposes are not included in these totals.

TABLE 10 Fees Paid to the Bank's Auditors

(thousands of Canadian dollars)	2004		2003		2002
Audit fees¹	$	10,464	$	7,773	$	6,178
Audit related fees²		5,023		605		942
Tax fees³		2,866		3,457		3,205
All other fees⁴		3,867		6,368		6,062

Total	$	22,220	$	18,203	$	16,387

¹: Audit fees are fees for the professional services in connection with the audit of the Bank's financial statements or other services that are normally provided by the Bank's auditors in connection with statutory and regulatory filings or engagements. In addition to including fees for services necessary to perform an audit or review in accordance with generally accepted auditing standards, the Bank's audit fees include fees paid to the Bank's auditors for comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with regulators.
²: Audit related fees are fees for assurance and related services that are performed by the Bank's auditors. These services include employee benefit plan audits, accounting consultations in connection with acquisitions and divestitures, application and general control reviews (including Sarbanes-Oxley pilot audit), attest services not required by statute or regulation and interpretation of financial accounting and reporting standards.
³: Tax fees are fees for services performed by the Bank's auditors for tax compliance, tax advice and tax planning except those tax services related to the audit. Tax compliance generally involves preparation of original and amended tax returns and claims for refund. Tax advice includes assistance with tax audits, appeals and rulings plus tax advice related to mergers and acquisitions. Tax planning includes expatriate and domestic tax services and transfer pricing matters.
⁴: All other fees primarily include fees for insolvency and viability matters either paid by the Bank or by third parties. In these instances, the Bank's auditors are retained to provide assistance on operational business reviews, lender negotiations, business plan assessments, debt restructuring and asset recovery. The amount of insolvency and viability fees paid by third parties is $1,574 thousand (2003 — $3,540 thousand; 2002 — $3,013 thousand). Also included in this category are fees for mutual funds audits (including tax and prospectus renewals) and the purchase of software for compliance and regulatory filings.

The Bank's Audit Committee has implemented a policy restricting the services that may be provided by the Bank's auditors and the fees paid to the Bank's auditors. Prior to the engagement of the Bank's auditors, the Audit Committee must pre-approve the provision of the service. In making its determination regarding non-audit services, the Audit Committee considers the compliance with the policy and the provision of non-audit services in the context of avoiding impact on auditor independence. This includes considering applicable regulatory requirements and guidance and whether the provision of the services would place the auditors in a position to audit their own work, result in the auditors acting in the role of the Bank's management or place the auditors in an advocacy role on behalf of the Bank. Each quarter, the Bank's CFO makes a presentation to the Audit Committee detailing the non-audit services performed by the Bank's auditors on a year-to-date basis, and details of any proposed assignments for consideration by the Audit Committee and pre-approval, if appropriate.

54 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

TABLE 11 Loans and Customers' Liability under Acceptances, Net of Allowance for Credit Losses

(millions of Canadian dollars)
		Canada¹						United States¹						Other internationa1¹						Total
By sector		Canada¹						United States¹						Other internationa1¹						Total
By sector		2004			2003			2004			2003			2004			2003			2004			2003			2002
Residential mortgages		$	51,374		$	52,525		$	—		$	—		$	—		$	—		$	51,374		$	52,525		$	52,784
Consumer instalment and other personal			46,814			38,623			4,294			4,272			11			13			51,119			42,908			36,332

Total residential and personal			98,188			91,148			4,294			4,272			11			13			102,493			95,433			89,116

Real estate development
	Commercial and industrial		1,343			1,491			—			—			—			—			1,343			1,491			1,846
	Residential		1,395			1,247			16			85			—			—			1,411			1,332			1,228
	Retail		346			352			—			—			—			19			346			371			418
	Real estate services		251			300			—			4			—			—			251			304			309

Total real estate			3,335			3,390			16			89			—			19			3,351			3,498			3,801
Agriculture			2,155			2,428			—			—			—			—			2,155			2,428			2,365
Apparel and textile			270			323			—			—			—			38			270			361			400
Automotive			1,404			1,644			52			91			—			3			1,456			1,738			1,308
Cable			543			417			145			363			77			298			765			1,078			1,654
Chemical			435			415			—			24			60			80			495			519			993
Construction			764			694			5			27			1			21			770			742			785
Financial			1,983			1,960			772			264			1,728			466			4,483			2,690			3,796
Food, beverage and tobacco			1,233			1,319			103			106			102			141			1,438			1,566			1,631
Forestry			427			563			68			209			18			27			513			799			1,470
Government			464			589			328			151			—			—			792			740			496
Health and social services			1,130			1,144			—			57			—			—			1,130			1,201			1,176
Media and entertainment			904			1,111			183			351			252			255			1,339			1,717			2,832
Metals and mining			464			600			10			42			18			10			492			652			1,083
Oil and gas			863			941			152			451			—			278			1,015			1,670			2,908
Retail			1,071			1,072			—			59			—			—			1,071			1,131			1,201
Sundry manufacturing			905			910			74			9			22			2			1,001			921			1,213
Telecommunications			60			92			111			333			140			309			311			734			2,494
Transportation			448			600			31			57			47			50			526			707			1,164
Utilities			613			665			476			1,171			182			652			1,271			2,488			5,165
All other loans			1,935			1,487			207			247			152			156			2,294			1,890			3,295

Total business and government			21,406			22,364			2,733			4,101			2,799			2,805			26,938			29,270			41,230

Total		$	119,594		$	113,512		$	7,027		$	8,373		$	2,810		$	2,818		$	129,431		$	124,703		$	130,346

Percentage change			5.4	%		1.9	%		(16.1	)%		(37.8	)%		(.3	)%		(48.4	)%		3.8	%		(4.3	)%		1.2	%

By location of ultimate risk	2004			2003			2002			2004 % mix	2003 % mix	2002 % mix
Canada
Atlantic	$	3,463		$	3,445		$	3,342		2.7	2.8	2.6
Québec		7,570			6,822			6,663		5.9	5.5	5.1
Ontario		72,334			71,914			70,219		55.9	57.6	53.9
Prairies		18,424			16,667			16,286		14.2	13.4	12.5
British Columbia		17,780			15,054			15,310		13.7	12.1	11.7

Total Canada		119,571			113,902			111,820		92.4	91.4	85.8

United States		6,131			7,731			11,714		4.7	6.2	9.0

Other international
United Kingdom		904			434			1,118		.7	.3	.8
Europe — other		962			854			1,838		.8	.7	1.4
Australia and New Zealand		665			746			1,328		.5	.6	1.0
Japan		—			42			138		—	—	.1
Asia — other		894			488			1,254		.7	.4	1.0
Latin America and Caribbean		303			503			1,123		.2	.4	.9
Middle East and Africa		1			3			13		—	—	—

Total other international		3,729			3,070			6,812		2.9	2.4	5.2

Total	$	129,431		$	124,703		$	130,346		100.0	100.0	100.0

Percentage change over previous year
Canada		5.0	%		1.9	%		5.4	%
United States		(20.7	)		(34.0	)		(25.7	)
Other international		21.5			(54.9	)		(2.4	)

Total		3.8	%		(4.3	)%		1.2	%

¹: Based on geographic location of unit responsible for recording revenue.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 55

TABLE 12 Impaired Loans less Allowance for Credit Losses

(millions of Canadian dollars)
		Canada¹						United States¹					Other internationa1¹				Total
By sector		Canada¹						United States¹					Other internationa1¹				Total
By sector		2004			2003			2004		2003			2004		2003		2004			2003			2002
Residential mortgages		$	15		$	43		$	—	$	—		$	—	$	—	$	15		$	43		$	47
Consumer instalment and
	other personal		41			52			—		—			—		—		41			52			67

Total residential and personal			56			95			—		—			—		—		56			95			114

Real estate development
	Commercial and industrial		4			9			—		—			—		—		4			9			9
	Residential		1			2			—		—			—		—		1			2			4
	Retail		—			—			—		—			—		—		—			—			—
	Real estate services		—			—			—		—			—		—		—			—			—

Total real estate			5			11			—		—			—		—		5			11			13
Agriculture			46			73			—		—			—		—		46			73			63
Apparel and textile			(2	)		(1	)		—		—			—		—		(2	)		(1	)		(4	)
Automotive			13			20			—		1			—		6		13			27			6
Cable			—			—			—		146			17		22		17			168			286
Chemical			1			6			—		9			—		—		1			15			2
Construction			4			2			—		—			—		—		4			2			8
Financial			—			2			15		20			—		—		15			22			29
Food, beverage and tobacco			(8	)		2			—		—			—		—		(8	)		2			(4	)
Forestry			1			11			—		—			—		—		1			11			23
Health and social services			1			2			—		—			—		—		1			2			2
Media and entertainment			3			9			—		—			—		1		3			10			31
Metals and mining			2			23			—		(2	)		—		—		2			21			39
Oil and gas			3			—			—		—			—		—		3			—			16
Retail			1			2			—		—			—		—		1			2			—
Sundry manufacturing			9			1			—		—			—		—		9			1			73
Telecommunications			—			2			—		41			—		20		—			63			222
Transportation			1			6			—		8			—		—		1			14			168
Utilities			—			44			88		259			—		35		88			338			349
All other loans			3			5			12		3			—		—		15			8			15

Total business and government			83			220			115		485			17		84		215			789			1,337

Total net impaired loans before general allowances and sectoral allowances		$	139		$	315		$	115	$	485		$	17	$	84	$	271		$	884		$	1,451

Less: general allowances																		917			984			1,141
Less: sectoral allowances																		—			541			1,285

Total net impaired loans																	$	(646	)	$	(641	)	$	(975	)

Net impaired loans as a %
	of common equity																	(5.1	)%		(5.5	)%		(8.4	)%

By location¹	2004			2003			2002			2004 % mix	2003 % mix	2002 % mix
Canada
Atlantic	$	2		$	4		$	5		.7	.5	.4
Québec		3			9			18		1.1	1.0	1.2
Ontario		91			223			345		33.6	25.2	23.8
Prairies		36			62			60		13.3	7.0	4.1
British Columbia		7			17			21		2.6	1.9	1.5

Total Canada		139			315			449		51.3	35.6	31.0

United States		115			485			929		42.4	54.9	64.0

Other international		17			84			73		6.3	9.5	5.0

Total net impaired loans before general and sectoral allowances	$	271		$	884		$	1,451		100.0	100.0	100.0

Less: general allowances		917			984			1,141
Less: sectoral allowances		—			541			1,285

Total net impaired loans	$	(646	)	$	(641	)	$	(975	)

Net impaired loans as a % of net loans²		(.5	)%		(.5	)%		(.7	)%

¹: Based on geographic location of unit responsible for recording revenue.
²: Includes customers' liability under acceptances.

TABLE 13 Impact on Net Interest Income due to Impaired Loans

(millions of Canadian dollars)	2004			2003			2002
Reduction in net interest income due to impaired loans	$	49		$	111		$	115
Recoveries		(8	)		(11	)		(20	)

Net reduction	$	41		$	100		$	95

56 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis

TABLE 14 Provision for Credit Losses

(millions of Canadian dollars)
		Canada¹						United States¹						Other internationa1¹					Total
By sector		Canada¹						United States¹						Other internationa1¹					Total
By sector		2004			2003			2004			2003			2004			2003		2004			2003			2002
Residential mortgages		$	3		$	2		$	—		$	—		$	—		$	—	$	3		$	2		$	6
Consumer instalment and other personal			311			332			1			1			—			—		312			333			328

Total residential and personal			314			334			1			1			—			—		315			335			334

Real estate development
	Commercial and industrial		—			7			—			—			—			—		—			7			(1	)
	Residential		—			2			—			—			—			—		—			2			(2	)
	Retail		—			—			—			—			—			—		—			—			—
	Real estate services		—			—			—			—			—			—		—			—			(1	)

Total real estate			—			9			—			—			—			—		—			9			(4	)
Agriculture			(5	)		27			—			—			—			—		(5	)		27			40
Apparel and textile			1			1			—			11			—			—		1			12			4
Automotive			7			8			—			—			(4	)		8		3			16			3
Cable			—			—			(30	)		(2	)		2			97		(28	)		95			125
Chemical			(2	)		6			7			4			—			—		5			10			1
Construction			3			(2	)		—			(6	)		—			1		3			(7	)		36
Financial			—			2			—			—			(11	)		—		(11	)		2			48
Food, beverage and tobacco			2			2			—			—			—			—		2			2			3
Forestry			—			4			—			—			—			—		—			4			39
Health and social services			1			2			—			(1	)		—			—		1			1			1
Media and entertainment			2			14			—			23			—			9		2			46			59
Metals and mining			3			19			(2	)		4			—			—		1			23			17
Oil and gas			3			1			—			—			—			—		3			1			16
Retail			2			2			—			—			—			—		2			2			(3	)
Sundry manufacturing			3			11			—			(5	)		—			—		3			6			24
Telecommunications			7			—			(20	)		26			2			11		(11	)		37			608
Transportation			(1	)		48			—			—			—			—		(1	)		48			5
Utilities			—			13			78			221			(25	)		94		53			328			295
All other loans			(1	)		3			5			—			—			—		4			3			9

Total business and government			25			170			38			275			(36	)		220		27			665			1,326

Total before general provision and sectoral provision		$	339		$	504		$	39		$	276		$	(36	)	$	220	$	342		$	1,000		$	1,660

General provision (reversal)																				(67	)		(157	)		—
Sectoral provision (reversal) (including transfer to specifics)																				(661	)		(657	)		1,265

Total																			$	(386	)	$	186		$	2,925

By location¹		2004			2003			2002			2004 % mix		2003 % mix		2002 % mix
Canada
Atlantic		$	11		$	10		$	11		(2.8	)	5.4		.4
Québec			15			16			18		(3.9	)	8.6		.6
Ontario			238			372			348		(61.6	)	200.0		11.9
Prairies			38			73			57		(9.8	)	39.2		2.0
British Columbia			37			33			83		(9.7	)	17.7		2.8

Total Canada			339			504			517		(87.8	)	270.9		17.7

United States			39			276			1,006		(10.1	)	148.4		34.4

Other international
United Kingdom			(43	)		206			132		11.1		110.8		4.5
Australia			9			8			2		(2.3	)	4.3		.1
Asia			(2	)		6			3		.5		3.2		.1

Total other international			(36	)		220			137		9.3		118.3		4.7

General provision			(67	)		(157	)		—		17.4		(84.4	)	—

Sectoral provision (net of transfer to specifics)			(661	)		(657	)		1,265		171.2		(353.2	)	43.2

Total		$	(386	)	$	186		$	2,925		100.0		100.0		100.0

Provision for credit losses as a % of net average loans²
Canada
	Residential mortgages		.01	%		—	%		.01	%
	Personal		.73			.94			1.09
	Business and other		.12			.74			.71
Total Canada			.29			.45			.48
United States			.50			2.43			6.37
Other international			(1.30	)		5.16			2.30
General provision			(.05	)		(.12	)		—
Sectoral provision			(.52	)		.52			.97

Total			(.30	)%		.15	%		2.24	%

¹: Based on geographic location of unit responsible for recording revenue.
²: Includes customers' liability under acceptances.

TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 — Management's Discussion and Analysis 57

TABLE 15 Current Replacement Cost of Derivatives

(millions of Canadian dollars)
	Canada¹				United States¹				Other internationa1¹				Total
By sector	Canada¹				United States¹				Other internationa1¹				Total
By sector	2004		2003		2004		2003		2004		2003		2004		2003		2002
Financial	$	13,693	$	11,976	$	132	$	295	$	14,606	$	13,619	$	28,431	$	25,890	$	23,381
Government		2,094		1,496		—		—		263		192		2,357		1,688		1,050
Other		1,585		1,128		183		188		1,302		807		3,070		2,123		2,374

Current replacement cost	$	17,372	$	14,600	$	315	$	483	$	16,171	$	14,618	$	33,858	$	29,701	$	26,805

Less impact of master netting agreements and collateral														21,849		20,149