A Look Back
2002 was a difficult year for the Bank.

Capital markets continued to struggle and for the third straight year North America’s major stock market indices reported losses, representing the longest continuous down stretch since the end of the Second World War. In addition, several high profile cases of corporate malfeasance were uncovered.

Figuratively speaking, investor confidence was brought to its knees.

The after-effects of the telecom bubble bursting resonated well into 2002 and the utilities sector in the U.S. and U.K. domestic markets suffered a rapid and unprecedented deterioration in the latter part of the year.

All of these events had a severe impact on our wholesale banking business.

Consequently, our financial results for the year were mixed and unsatisfactory overall.

Swift and Decisive Action
We had no choice but to move swiftly and aggressively to change the risk profile of the Bank, and overhaul our corporate lending strategy.

Our corporate loan book was divided into core and non-core relationships. Loans in the non-core book are being exited, a process that we expect to substantially complete over the next three-year period. Core client relationships will be strengthened.

Changes were made to our lending standards, and our procedures and practices. We intend to reduce the total amount of capital available for corporate lending and have implemented an enhanced credit framework with stricter industry, portfolio and name concentration limits. A new organizational structure has been put in place to lead and support these initiatives, and lines of responsibility and accountability have been made clearer.

Looking ahead, we are confident that these changes have dramatically and fundamentally reduced our risk profile, and positioned our wholesale banking business for renewed growth and performance in the years ahead.

Additionally, these moves have accelerated our transition towards focusing more of our financial and intellectual capital on our retail businesses, which are less volatile and where we have a leading Canadian position and key competitive advantages with our service model.

In the near term, we expect to derive 70% of our earnings from this area of our business, ultimately growing to reach our goal of 80% of our total earnings mix over the longer-term.

Personal and Commercial Banking
The integration of the Canada Trust franchise with our TD Bank Financial Group retail network, the largest merger in Canadian banking history, is now essentially complete.

TD Canada Trust revenue grew during 2002 and we generated good increases in a number of key product segments. Our Customer Satisfaction Index reached a record high at year end, which we believe is a testament to the hard work and dedication of our employees.

At year end, TD Canada Trust's overall share of its market was 21.46 percent, compared to 21.86 percent a year ago. Notwithstanding this slight overall decline and the challenges presented by branch integration, our share of the market is stable, close to pre-merger levels and well within our expectations.

This year, we will direct much of our attention to streamlining our processes and investing in our infrastructure to support our service model. In doing so, we expect to realize improved operational and cost efficiencies.

We are also working to capitalize on the many growth opportunities in our existing product lines and markets, and are improving our capacity to cross-sell our services to both existing and prospective customers, across all of our businesses.

Given our leading TD Canada Trust position in the Canadian market, we expect to augment the inherent growth in our retail business by continuing to benefit from growth in those areas where we are below our market share. For instance, we see potential in small business and commercial banking, and in life, property and casualty insurance through TD Insurance and TD Meloche Monnex.

Overall, our commitment is to ensure our customers continue to have the most comfortable banking experience possible, and we believe we are in the best position to provide just that – we did not undertake the TD-CT integration to build a bigger bank, but rather to build a better one.

Wholesale Banking
Our wholesale banking operation is positioned to benefit from its recent strategic shift. We have separated our corporate banking operations into two separate units – one for our ongoing operations with core clients and one for businesses that we want to exit over time. This has isolated our core business from the impact of unprofitable relationships.

We are also in the process of providing TD Securities with a more appropriate capital base and affirmative steps are being taken to change its risk profile, to bring it to a level that is more consistent with our overall, retail-focused strategy.

We believe that this strategy will restore our position as a leading Canadian wholesale banking franchise, both in corporate lending and investment banking, with a highly diversified portfolio across industries and companies.

Outside of Canada, we will lend on a much more restricted and limited basis, and expand on our strong capital markets capabilities. Our selective focus on clients with whom we have strong relationships will strengthen our wholesale banking operation in 2003 and beyond.

Wealth Management
Overall, we expect TD Waterhouse to be more profitable in 2003 as we realize the benefits of the steps we have taken in 2002.

Last year, we integrated our Canadian wealth management retail operations – Discount Brokerage, Investment Advice and Financial Planning – under the TD Waterhouse brand, providing our customers with a range of products and superior advice and guidance under one strong and reputable brand.

We were profitable in 2002. We ended the year with more professional advisors and implemented a new Uniform Referral Process that enables smooth handoffs between our businesses. This supports our efforts to increase our cross-selling abilities to our 10 million retail customers – which is a core part of our wealth management strategy.

In the United States, we are also profitable. Last year, we significantly reduced the cost base and breakeven point of our TD Waterhouse USA operation. We also continued to build a strong and differentiated brand, and stepped up our efforts of optimizing each and every customer relationship.

Looking ahead, we will continue to make TD Waterhouse in the U.S. more competitive on costs and technology while developing a long-term growth strategy that integrates with our developing retail vision for the U.S. market.

Globally, we are focused on finding ways to improve and leverage our scale, and on reducing costs, improving efficiency and increasing productivity. Specific initiatives include our recent relationship with The Royal Bank of Scotland Group and its NatWest Personal Finance Management Limited subsidiary, the holding company for NatWest Stockbrokers.

Under the arrangement, we are providing the operational and settlement platform to The Royal Bank of Scotland and NatWest customers for the execution of share transactions. We have extensive experience in this area and expect to benefit from increased order flow.

Across our wealth business, we believe that we have taken the right steps and have the right strategy in place – one that will allow us to be profitable in difficult markets and realize significant upside in improved markets.

Our challenge now is to deliver – we intend to do that through a combination of more aggressive growth in Investment Advisors and Financial Planners, supported by superior service and cross-sell strategies, and by becoming more competitive on costs and technology.

Poised for Growth
Going forward, our banking franchise is on solid ground and has significant earnings power – even when operating in extremely difficult circumstances and when faced with unexpected challenges.

Our personal and commercial business is strong, we have adopted a new strategy for our wholesale banking operation and we have repositioned our wealth management business.

Our commitment to growing and strengthening our Bank has never been stronger. So, too, is our determination to build a better bank – one that provides superior service and is capable of meeting and exceeding customer expectations.

Underpinning all that we do is a rigorous and unrelenting emphasis on operational excellence. For us, this means everyone within our organization knowing their business and their customer. It also means adhering to meaningful processes that support all of our activities.

Our mandate is straightforward:

On behalf of management, we would like to thank the Board of Directors for their continued guidance, our great team of employees – now over 42,000 strong – for their dedication and our shareholders for their ongoing support.

Together, we are building a better bank – a leading Canadian-based North American financial institution that is prepared for the future.

A. Charles Baillie Chairman of the Board Toronto January 23, 2003		W. Edmund Clark President and Chief Executive Officer

In Memoriam
Allen Thomas Lambert, O.C., LL.D. (1911 – 2002) Few have had such a profound influence on the financial services sector in Canada as Allen Lambert. He had an extraordinary career with the Bank, which spanned over 50 years. He joined the Bank in 1927 and rose steadily through the ranks to become President in 1960 – effectively the Chief Executive Officer, although this title was not formally adopted until 1972. In 1961, Allen added the role of Chairman. He became Chairman and Chief Executive Officer in 1972. He served the Bank as its most senior executive for seventeen years, before retiring as CEO in 1977, and a year later as Chairman in 1978.

Under his progressive leadership, he led the Bank through many significant changes, including the merger of The Dominion Bank with the Bank of Toronto in 1955. He also oversaw the Bank in adopting a culture of change and innovation – which included the introduction of its Green Machine automated banking system. Among his most visible legacies was the construction of world-renowned architect Mies van der Rohe’s TD Centre in the early 1960’s, an important contribution to the regeneration of Toronto’s downtown city core.

Allen remained as an advisor to TDBFG’s management following his retirement, and was also extremely active outside of the Bank. He served as President of the International Monetary Conference and as Chairman of the much-lauded Royal Commission on Financial Management and Accountability in the Federal Public Service, which became more fittingly known as the Lambert Commission. Additionally, he continued to serve within the Canadian business community, as a contributing member to the Board of Directors of several significant Canadian companies.

Allen Lambert was an Officer of the Order of Canada, received numerous honourary degrees from several Canadian institutions and made significant contributions to many charitable causes.

He passed away peacefully and unexpectedly at home in Toronto on October 25, 2002 at the age of 90.