Chairman of the Board’s Message

I am pleased and honoured to report on behalf of the Board of Directors for the first time as Chairman of the Board. The shareholders of TD Bank Financial Group deserve and indeed are represented by an engaged, discerning Board who are committed to candid discussions about the business of the Bank. This past year was marked by several such discussions as we worked with Ed Clark and his team on successfully repositioning the Bank after a difficult year in 2002.

On an ongoing basis, your Board advises and supports the management team on strategic issues, financial reporting, management resources, risk management and governance issues. It is an honour to work with such distinguished directors and I look forward to continuing to represent shareholders in 2004.

2003: A year of solid performance

The Board is delighted with Ed’s appointment as President and Chief Executive Officer. Ed has demonstrated tremendous leadership over the past year and is committed to clear and open communication with all of the Bank’s stakeholders.

The Board is confident that the management team is making a positive difference and delivering shareholder value. The market also recognized this performance, with a steady increase in our share price this year.

Based on the Bank’s results, the Board elected to increase the dividend consistent with the change in business mix, lower risk profile and increased earnings certainty. In the third quarter, the Board approved a four cent increase in the quarterly dividend, a sign of confidence in TDBFG’s earnings power.

A commitment to leadership in corporate governance

While the Board is focused on maximizing shareholder value and ensuring the management team has the right strategies to grow the business, we are also committed to good corporate governance. The Board acts as the voice of the shareholder and ensures that management is held accountable.

The continued strenghtening of our strong corporate governance principles is fundamental to my role as Chairman of the Board. As a shareholder myself, I recognize the importance of this subject to TDBFG’s shareholders and would like to reiterate the Board’s commitment to ongoing reviews of our corporate governance principles and practices.

Our approach to corporate governance is founded on several cornerstones:

• Having a large majority of independent Board members;
• Ensuring that all committee members are non-management so that the important functions of the Committees are impartial;
• Frequently conducting meetings of the Board and Committees without management present to facilitate open and candid discussion;
• Having a stock ownership requirement for members of the Board and management so that everyone has a vested interest in the long-term performance of the Bank;
• Seeking and obtaining shareholder approval for option plans to ensure fairness and transparency;
• Maintaining the concept of pay-for-performance;
• Retaining outside advisors to review and assess our compensation practices.

After a review of our practices in 2003, we implemented a number of enhancements to our corporate governance practices and policies including:

• Separating the role of Chairman of the Board and President and Chief Executive Officer;
• Splitting the Audit and Risk Management Committee into two separate committees in recognition of the scope of the Committees’ responsibilities;
• Strengthening governance of risk management processes and reporting;
• Introducing a number of changes to the executive compensation to further align the interests of the executives with overall Bank strategy and the interests of shareholders including:
  • Reducing use of stock options as a component of compensation in favour of performance-based restricted share units;
  • Increasing executive share ownership requirements;
  • Reducing the use of annual cash incentive payments in favour of long-term equity awards to further align executive interests with long-term shareholder value.

The Board will maintain a watchful eye on governance developments as the regulatory and business climates continue to evolve, and adapt measures as appropriate to ensure that we continue to build on our history of leadership in corporate governance.

We are committed to ensuring that investors are represented by a strong independent Board and equally committed to regularly communicating refinements to our corporate governance policies and practices. I invite you to visit the corporate governance section of our web site at www.td.com/governance for the latest information on our corporate governance practices.

A word of thanks

I would like to recognize the service of our directors, some of whom will be retiring this year.

Finally, on behalf of the Board, I would again like to thank Ed, his outstanding management team and dedicated employees for their continued hard work.

John M. Thompson
Chairman of the Board