SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K




| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | Annual report pursuant to Section 13 or 15(d) of the
	Securities Exchange Act of 1934 for the fiscal year ended
	October 31, 2000

or

Transition report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from
               to

Commission file number 1-15101




TD Waterhouse Group, Inc.


(Exact Name of Registrant as Specified in Its
Charter)


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|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------
|                                                                                                                                            
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|                                                                                                                                            
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|Delaware(State or Other Jurisdiction of
	Incorporation or Organization)100 Wall Street, New York, NY(Address of Principal Executive Offices) |  | 13-4056516(IRS Employer
	Identification No.)10005(Zip Code)

212-806-3500

(Registrants Telephone Number, Including
Area Code)


Securities Registered pursuant to Section 12(b) of the
Act:

|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Title of each class                    |  | Name of exchange on which registered
|                                       |  |                                     
|Common Stock, $.01 par value per share |  | The New York Stock Exchange, Inc.   

Securities Registered pursuant to Section 12(g) of the
Act:

None


(Title of Class)





Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 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   No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment of this Form 10-K.

As of January 19, 2001, the aggregate market value of
voting stock held by non-affiliates of the registrant was
approximately $662,185,000 (based upon the closing price for
shares of the Registrants Common Stock as reported by the
New York Stock Exchange on that date). Shares of Common Stock of
the Registrant held by each officer, director and holder of 5%
or more of the outstanding Common Stock of the Registrant have
been excluded in that such persons may be deemed to be
affiliates of the Registrant. This determination of affiliate
status is not necessarily a conclusive determination for other
purposes.

The number of shares of Common Stock outstanding as of
January 19, 2001 was 379,789,350 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Definitive Proxy Statement relating to the Registrants
2001 Annual Meeting of Stockholders to be filed hereafter
(incorporated into Part III hereof).



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TD WATERHOUSE GROUP, INC.

Annual Report on Form 10-K for the Fiscal Year ended
October 31, 2000


Table of Contents


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|PART I       
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|Item  1.      |  | Business                                                                               |    |      | 3  | 
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|Item  2.      |  | Properties                                                                             |    |      | 31 | 
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|Item  3.      |  | Legal Proceedings                                                                      |    |      | 31 | 
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|Item  4.      |  | Submission of Matters to a Vote of Security Holders                                    |    |      | 31 | 
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|PART II      
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|Item  5.      |  | Market for the Companys Common Equity and Related
	Stockholder Matters                |    |      | 32 | 
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|Item  6.      |  | Selected Financial Data                                                                |    |      | 33 | 
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|Item  7.      |  | Managements Discussion and Analysis of Financial
	Condition and Results of Operations |    |      | 34 | 
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|Item  7A.     |  | Quantitative and Qualitative Disclosures about Market Risk                             |    |      | 45 | 
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|Item  8.      |  | Financial Statements and Supplementary Data                                            |    |      | 46 | 
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|Item  9.      |  | Changes in and Disagreements with Accountants on Accounting
	and Financial Disclosure  |    |      | 69 | 
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|PART III     
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|Item  10.     |  | Directors and Executive Officers of the Company                                        |    |      | 69 | 
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|Item  11.     |  | Executive Compensation                                                                 |    |      | 69 | 
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|Item  12.     |  | Security Ownership of Certain Beneficial Owners and
	Management                        |    |      | 69 | 
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|Item  13.     |  | Certain Relationships and Related Transactions                                         |    |      | 69 | 
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|PART IV      
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|Item  14.     |  | Exhibits, Financial Statement Schedules and Reports on Form
	8-K                       |    |      | 69 | 
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|Exhibit Index |  |                                                                                        | 69 |     
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|Signatures    |  |                                                                                        | 71 |     



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The page numbers in this Table of Contents reflects actual page
numbers, not EDGAR page tag numbers.

UNLESS OTHERWISE INDICATED, REFERENCES TO COMPANY
MEAN TD WATERHOUSE GROUP, INC. AND ITS SUBSIDIARIES, AND
REFERENCES TO TD BANK MEAN THE TORONTO-DOMINION BANK. AS OF
SEPTEMBER 1999, THE ENTITY FORMERLY KNOWN AS WATERHOUSE INVESTOR
SERVICES, INC. IS NOW NAMED TD WATERHOUSE HOLDINGS, INC.
AND THE ENTITY FORMERLY KNOWN AS WATERHOUSE SECURITIES, INC. IS
NOW NAMED TD WATERHOUSE INVESTOR SERVICES, INC. REFERENCES
TO FISCAL MEAN THE COMPANYS YEAR ENDED
OCTOBER 31 (E.G. FISCAL 2000 REPRESENTS THE
PERIOD NOVEMBER 1, 1999 TO OCTOBER 31, 2000).



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Part I

Item 1.  Business

TD Waterhouse is a leading global online financial services
firm. Leveraging our investment in technology, we have become
one of the premier global online brokers and a leading provider
of online investing services and related financial products.

We are one of the worlds largest brokers to the
self-directed investor with approximately 4.4 million customer
accounts. At October 31, 2000, we had approximately 3.1
million active accounts and approximately $159 billion in
customer assets.

We have a significant international presence with operations in
the United States, Canada, Australia, the United Kingdom and
Hong Kong. In addition, we service customers in Japan and India
through joint ventures in those countries. We have the second
largest global branch network of any discount broker with over
230 branches worldwide.

Our primary markets are the U.S. and Canada, which accounted for
66% and 29%, respectively, of our fiscal 2000 consolidated
revenues. Approximately 2.6 million of our total customer
accounts at October 31, 2000 were held by customers in the
U.S. and approximately 1.1 million were held by customers in
Canada.

In addition to securities trading services, we also provide our
customers with a broad range of banking, mutual fund and other
consumer financial products and services on an integrated basis,
including:



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a broad range of investment news, third party research reports
	and personal investment management tools such as portfolio
	tracking and stock and mutual fund screening programs;                                                                    
|
| |  | over 13,000 mutual funds from over 600 fund families (including
	several proprietary mutual funds and a series of money market
	funds that we advise), with over $33 billion in assets held in
	these funds through us at October 31, 2000;           
|
| |  | insured transaction accounts, checking, ATM access, electronic
	funds transfer, insured certificates of deposit, mortgage
	services and other banking products, which are provided through
	our affiliates TD  Waterhouse Bank, N.A. and TD Bank;
	and
|
| |  | clearing and execution services to correspondents and other
	broker-dealers.                                                                                                                                                                          

We use a multi-channel distribution system to provide our
customers with access to our products and services. Customers
may utilize any of the following delivery channels to access our
services:



| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | online channels via the Internet, using our webBroker;                                                                                                                                                                                                                                                     
|
| |  | a network of branch offices, supported by service centers
	accessible by toll-free telephone numbers that are available in
	several of our markets 24 hours a day, seven days a week;                                                                                                                      
|
| |  | wireless channels via web-enabled phones and personal digital
	assistants;                                                                                                                                                                                                                                 
|
| |  | touch-tone telephone to access our automated trading systems; and                                                                                                                                                                                                                                          
|
| |  | TalkBroker, a real time voice recognition market information
	system, which provides customers of our Canadian and Australian
	operations with real time stock and option quotes and mutual
	fund pricing, as well as trading of equities, options and mutual
	funds, through the use of voice recognition.

Business Strategy

Our ongoing business strategy focuses on positioning us to take
advantage of the current industry dynamics by leveraging our
position as a leading global financial services firm. Key
elements of our strategy include:



| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhancing Products and Services  We plan to
	enhance our current products and services as well as develop new
	ones in order to provide our customers with a simple, convenient
	and flexible way to manage their finances.

3



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| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Optimizing Each Customer Relationship  We plan
	on continuing to serve our customers with the highest level of
	commitment to quality in order to broaden and increase the value
	of our customer relationships.
|
| |  | Leveraging Technology  We plan to continue to
	utilize and leverage technology to reach more customers with
	more products and services in more useful, convenient and
	cost-effective ways.                    
|
| |  | Global Expansion  We plan on further expansion
	in both our core North American markets and around the world.                                                                                                   

Fundamental to our strategy is our focus on:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Leveraging our relationship with TD Bank Financial Group
	(consisting of TD  Bank and its affiliates, including
	TD Waterhouse Bank, N.A. and TD Securities Inc.).    
|
| |  | Developing strategic relationships and marketing and cross
	promotion alliances with online providers, equipment and
	software publishers, and joint venture partners.
|
| |  | Building our brand around the world.                                                                                                                                  

Our History

Our U.S. operations commenced in 1979 as Waterhouse Securities,
Inc. located in New York City. After a successful initial public
offering in 1987 by its parent, Waterhouse Investor Services,
Inc. (WISI), Waterhouse Securities, Inc., a member
of the New York Stock Exchange, was able to develop its own
self-clearing capability in 1988 and subsequently launched
Waterhouse National Bank in 1994, Waterhouse Asset Management in
1995 and National Investor Services Corp. in 1997. In 1998,
Waterhouse Securities, Inc. became the third largest discount
brokerage firm in the U.S. measured by number of customer
accounts.

WISI was acquired in 1996 by TD Bank, which had begun building
its own discount brokerage operations as early as 1984 following
the deregulation of brokerage commissions in Canada. In 1987, TD
Banks discount brokerage operations became a fully
registered broker and the first bank-owned firm in Canada to
purchase a seat on the Toronto Stock Exchange. By 1989, through
a series of acquisitions and internal growth, TD Bank operated
the largest discount broker in Canada. In connection with the
initial public offerings of our Common Stock on June 23,
1999, TD Bank reorganized its worldwide discount brokerage
operations so that they would be consolidated into our company
and our subsidiaries. The Company was incorporated in Delaware
in 1999.

We have expanded our discount brokerage businesses through
internal growth, the opening of offices in new domestic and
overseas markets, and the acquisition of other discount
brokerage companies. These acquisitions complemented our
internal growth strategy by providing us with a cost-effective
means of acquiring new accounts, adding scale and providing us
with entry platforms in new markets. The table below sets forth
certain information concerning these acquisitions:

|                     |                  |             |                |                |  |                |             |  |  |  |         |  | 
|-------------------- | ---------------- | ----------- | -------------- | -------------- |  | -------------- | ----------- |  |  |  | ------- |  | 
|                     |                  | Acquisition |                | Approximate    |  | Approximate   
|                     |                  | Date        |                | Purchase Price |  | Total Accounts
|                     |                  |             |                |                |  |               
|Dealwise Limited     |                  |             | May 2000       |                |  | $              | 124 million |  |  |  | 230,000 | 
|                     | (United Kingdom) |             |                |                |  |                |             |  |  |  |         |  | 
|                    
|                    
|                    
|                    
|CT Securities Inc.   |                  |             | April 2000     |                |  | $              | 97 million  |  |  |  | 93,000  | 
|                     | (Canada)         |             |                |                |  |                |             |  |  |  |         |  | 
|                    
|                    
|                    
|                    
|YorkSHARE Limited    |                  |             | November 1999  |                |  | $              | 16 million  |  |  |  | 120,000 | 
|                     | (United Kingdom) |             |                |                |  |                |             |  |  |  |         |  | 
|                    
|                    
|                    
|                    
|Gall & Eke           |                  |             | September 1998 |                |  | $              | 13 million  |  |  |  | 50,000  | 
|                     | (United Kingdom) |             |                |                |  |                |             |  |  |  |         |  | 
|                    
|                    
|                    
|                    
|Jack White & Company |                  |             | May 1998       |                |  | $              | 103 million |  |  |  | 130,000 | 
|                     | (U.S.)           |             |                |                |  |                |             |  |  |  |         |  | 
|                    
|                    
|                    
|                    
|Kennedy Cabot & Co.  |                  |             | November 1997  |                |  | $              | 154 million |  |  |  | 202,000 | 
|                     | (U.S.)           |             |                |                |  |                |             |  |  |  |         |  | 

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|                        |             |             |               |                |  |                |            |  |  |  |        |  | 
|----------------------- | ----------- | ----------- | ------------- | -------------- |  | -------------- | ---------- |  |  |  | ------ |  | 
|                        |             | Acquisition |               | Approximate    |  | Approximate   
|                        |             | Date        |               | Purchase Price |  | Total Accounts
|                        |             |             |               |                |  |               
|Rivkin Croll Smith      |             |             | November 1997 |                |  | $              | 19 million |  |  |  | 44,000 | 
|                        | (Australia) |             |               |                |  |                |            |  |  |  |        |  | 
|                       
|                       
|                       
|                       
|Pont Securities Limited |             |             | May 1997      |                |  | $              | 23 million |  |  |  | 53,000 | 
|                        | (Australia) |             |               |                |  |                |            |  |  |  |        |  | 
|                       
|                       
|                       
|                       
|Marathon Brokerage      |             |             | October 1993  |                |  | $              | 46 million |  |  |  | 92,000 | 
|                        | (Canada)    |             |               |                |  |                |            |  |  |  |        |  | 

We are also expanding into new markets through joint ventures
with strategic partners. During fiscal 2000, we formed joint
ventures in Japan with The Bank of Tokyo-Mitsubishi, Ltd. and in
India with Tata Finance Limited, one of Indias leading
industrial and financial conglomerates, to pursue online
brokerage opportunities. In November 2000, we formed a
joint venture in Luxembourg with Banque Generale du Luxembourg
to create a multi-market, multi-channel, self-directed investing
service for high net worth Europeans.

Multi-Channel Delivery Systems

Our strategy focuses on providing a wide array of high-quality,
low-cost products and services to our customers through a
variety of distribution channels. We differentiate ourselves
from most of our competitors in the brokerage industry by
providing full-service multi-channel delivery systems which
allow customers to choose how they prefer to do business with
us. We provide a variety of electronic channels through which
our customers can access our products and services. Customers
are able to obtain account information, access a broad array of
research information and enter trade orders on an automated
basis through these electronic channels at any time, thereby
providing added convenience for customers and minimizing our
costs of responding to and processing routine customer
transactions. In addition to our electronic distribution
channels, we maintain an extensive and growing branch office
network, supported by 13 regional U.S. and Canadian
telephone service centers.

Over the past three years, our Internet trading services have
become an increasingly important part of our business. Trades
through our online services represented approximately 73% of our
total trading volume for fiscal 2000 and 72% in the fourth
quarter of fiscal 2000.

Internet Access

Customers can access their brokerage accounts online through the
Internet, including utilizing online service providers such as
America Online and the Microsoft Network as well as through
web-enabled phones and personal digital assistants. Our Internet
web site, marketed under the name TD Waterhouse webBroker,
allows customers to engage in a full range of trading activities
while online. In addition, webBroker provides customers with
access to a broad range of free investing information, including:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | real-time stock quotes;                                                                                            
|
| |  | news and charts;                                                                                                   
|
| |  | research reports;                                                                                                  
|
| |  | investment management tools, such as portfolio tracking;                                                           
|
| |  | stock and mutual fund screening tools;                                                                             
|
| |  | market commentary;                                                                                                 
|
| |  | technical analysis and alerts; and                                                                                 
|
| |  | account management tools which allow customers to review account
	balances, transaction histories and order status.

5



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Through webBanking, our customers can access a full range of
banking products and services offered by our affiliated banks
through links to webBroker.

In addition, to assist customers in using online channels, we
maintain Electronic Brokerage Support Centers which operate
24 hours a day, seven days a week in the U.S. and extended
hours in Canada. These services are available through toll-free
numbers to all our online customers.

Other Electronic Channels

In addition to Internet access, we offer our customers access to
our products and services through the following other electronic
channels:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Touch-tone Telephone.Our interactive investing systems,
	TradeDirect in the U.S. and TeleMax in Canada, provide customers
	with a convenient way to obtain quotes, place orders and review
	certain account information using a touch-tone telephone.                                                                                                                                                                                                                           
|
| |  | Voice Recognition.TalkBroker, currently available to the
	customers of our Canadian and Australian operations, is our real
	time voice recognition market information system which provides
	customers with real-time equity and stock option quotes and
	certain mutual fund pricing, as well as trading of equities,
	options and mutual funds, through the use of voice recognition
	over the telephone. We are currently developing a similar system
	for our U.S. business.
|
| |  | Direct Dial-up Access.Customers of our Canadian
	operations can use their personal computers to access their
	brokerage accounts online by using free proprietary software
	provided by us to dial directly into our private computer
	networks for real-time online brokerage services and market
	information.                                                                                                                                                                

Our direct dial-up access and touch-tone telephone services are
available in both French and English to our Canadian customers.

Electronic distribution channels have become an increasingly
important part of our business in the past several years. We
provide discounts from our standard commission rates for trades
executed through electronic brokerage channels, reflecting the
lower cost of providing services through these channels.

Branch Office Network and Service Centers

We believe that having a significant branch network is an
important marketing tool in opening new customer accounts and in
maintaining a high level of customer satisfaction and retention.
Customers can use branch offices to open accounts, deliver and
receive checks and securities, obtain market information, place
orders, and obtain related customer services in person. Our
branches also offer seminars to existing and prospective
customers on a range of topics relating to personal investment
strategies. At October 31, 2000, we operated over 175
branch offices in all 50 states in the U.S. and 40 branch
offices in nine provinces in Canada, as well as eight branch
offices in Australia, one branch office in Hong Kong and three
customer service centers and one business development office in
the United Kingdom.

Included in our branch office network are 13 regional U.S. and
Canadian telephone service centers which provide support during
normal business hours. Three of our service centers provide
after-hour service in the U.S. and Canada, including two that
are open 24 hours a day, seven days a week.

United States.During normal business hours, our
customers can visit an account officer at a local branch to
place an order, obtain account information or transact other
business or call a toll-free number to reach an account officer
or a customer service representative. During business hours the
account officers in our branches are supported by customer
service representatives at our regional customer service centers
in New York City, Jersey City, Chicago and San Diego. Customer
calls are routed to service centers based on call volume at the
branches in order to maximize efficiency and customer service.
In addition, after normal business hours and on weekends and
legal holidays, customers of our U.S. operations are provided
with a toll-free number to reach our after-hours service center.
These service centers enable us to make customer service
representatives available 24 hours a day, seven days a week
to all of our U.S. customers. Customer orders placed during
non-market hours are routed to appropriate markets the following
business day.

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To allow personnel at branch offices to focus on customer
service, we operate four account processing centers in the U.S.
which provide administrative support to the branch offices.
These services include processing customer securities and
checks, account applications and customer correspondence.

The capacity of the service centers and processing centers
allows the branch office network to be maintained at lower
staffing levels and to focus on customer service and business
development. A majority of customer calls are handled through
our service centers. Every one of our registered representatives
at our service centers has immediate access to the customer
account and market-related information necessary to respond to
an individual customers inquiries.

At October 31, 2000, our branch offices and service centers
were staffed by more than 3,600 account officers and customer
service representatives. Our staffing levels are adjusted in
response to changes in trading volume.

We have expanded and upgraded our call processing system in
order to support expected growth while maintaining high levels
of customer satisfaction. Our call processing system
automatically routes calls to an available broker at one of our
networked service centers or in the branches. The system is
designed to use advanced technologies to route calls based on
load and broker availability, prioritize queuing of calls based
on customer profiles, and direct calls requiring specialized
services to the appropriate location.

Canada.Our customers in Canada can reach an investment
representative 24 hours a day, seven days a week by using
toll-free numbers to contact their local branch office or
calling a service center directly. In addition, the local
branches are supported by eight regional customer service
centers located in four provinces. After market hours, customer
calls are routed to our after-hours service center in Canada.
Customer orders placed after market hours are routed to the
appropriate markets the following business day. In addition,
further customer assistance is available through our customer
support group, which is separate from our call centers. These
customer service representatives respond to all customer
correspondence and investigate all statement inquiries and
discrepancies. Our service centers are staffed with trained
specialists providing advice on mutual funds, options and fixed
income investments.

Outside the U.S. and Canada. In Australia, a significant
amount of our business is conducted over the telephone at our
service center in Sydney. We have also established a service
center in Melbourne. Our customers may place orders, obtain
account information and transact other business through this
service center five days a week until 8:00 p.m. In order to
maintain personal contact with our customers and to develop new
business, we operate eight full-service local branch offices.

In the United Kingdom, we operate three customer service centers
as well as a business development office in London. In Hong
Kong, our call center operates 24 hours a day, seven days a
week.

Products and Services

We offer a broad range of products and services to meet
customers varying investment and financial needs, as well
as access to extensive investment news and information. Our
products and services are tailored to meet the needs of
self-directed individual investors and independent fee-based
investment advisors. For fiscal 2000, approximately 89%, 4% and
7% of our customers transactions were in equity
securities, options and mutual funds, respectively.

Brokerage Services For Individual Investors

United States.We offer our customers the ability to buy
and sell all U.S. and major foreign exchange-listed,
Nasdaq-listed and other equity securities, options, mutual
funds, unit investment trusts, variable annuities and fixed
income investments, including U.S. Treasuries, zero-coupon
bonds, listed and over-the-counter (OTC) corporate
bonds, municipal bonds, GNMAs and CDs. We offer both margin
accounts and cash accounts to our customers. We make commodities
transactions available to our customers by acting as an
introducing broker for commodities trading. In addition, our
webBroker customers may participate in an

7



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Customers must have specific approval to trade options. At
October 31, 2000, approximately 214,000 accounts were so
approved. To write uncovered options, customers must go through
an additional approval process and must maintain a significantly
higher level of equity in their brokerage accounts.

Canada.We offer our customers in Canada the ability to
buy and sell all equity securities which are listed on U.S. and
Canadian exchanges, Nasdaq and all major foreign exchanges, as
well as Canadian and U.S. options, mutual funds, Canadian
government and corporate bonds, zero-coupon bonds, strip bonds,
Eurobonds, Yankee bonds, U.S. Treasuries and mortgage-backed
securities. In addition, customers may buy and sell money market
investments, including guaranteed investment certificates,
short-term government bonds, term deposits, bankers acceptances,
bearer deposit notes, commercial paper, finance company paper
and money market strips. Transactions in Canada Savings Bonds
and provincial savings bonds are available. We also offer our
customers the ability to buy and sell gold and silver
certificates.

Customers must have specific approval to trade options. At
October 31, 2000, approximately 149,000 accounts were so
approved. Our options specialists offer information to our
customers to assist them in their investments in Canadian or
U.S. exchange-traded options.

Over the past several years, an increasing percentage of the
trading activity of our Canadian customers has involved U.S.
equity securities. For fiscal years 2000, 1999 and 1998,
approximately 30%, 25% and 16%, respectively, of all trading
volume in our Canadian operations involved U.S. equity
securities.

We offer our customers the ability to choose from a variety of
different types of brokerage accounts and investment plans.
Brokerage accounts include margin accounts and cash accounts.
The only equity securities which may be traded on margin are
stocks which are listed on major Canadian and U.S. exchanges and
certain stocks listed on Nasdaq.

Outside the U.S. and Canada. In Australia, our customers
can buy and sell all Australian exchange-listed equities,
options, derivatives, fixed interest securities and managed
funds. We do not currently provide margin trading services
directly to our Australian customers. We do currently offer
customers the opportunity to trade on margin through third party
margin lending accounts. We currently offer our customers the
ability to trade U.S. securities listed on Nasdaq, the New York
Stock Exchange and the American Stock Exchange.

In the United Kingdom, our customers can buy and sell all London
Stock Exchange and U.S. and Canadian exchange-listed equity
securities. Our U.K. customers may also trade in European
exchange-listed securities by telephone. We do not currently
offer margin trading to our U.K. customers.

Customers of our Hong Kong operations can trade Hong Kong
exchange listed securities, as well as seven Nasdaq listed
securities under the Hong Kong Nasdaq-Amex Pilot Program. In
addition, our Hong Kong customers can also buy and sell local
unit trusts (or mutual funds) and fixed income products. We
offer both margin accounts and cash accounts to our Hong Kong
customers as well as the opportunity to participate in initial
public offerings. Our Hong Kong operations also act as an
introducing broker and marketing affiliate to our Canadian
operations. This business serves as a liaison between our
customers in Hong Kong and Canada, providing Hong Kong residents
with access to all U.S. and Canadian exchange-listed securities.

Mutual Funds

United States.Through the TD Waterhouse Mutual Fund
Network, we currently offer our U.S. customers access to over
10,500 mutual funds from over 525 fund families, including
over 1,475 no-fee, no-load mutual funds in over 230 fund
families which customers can trade with no transaction fees
(NTF), which are part of our NTF program. Under our
NTF program, we receive fees from the funds and fund sponsors
for providing services for the TD Waterhouse Mutual Fund Network
program, including record keeping and shareholder services.
These fees are based upon balances of customer assets invested
in the

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Our proprietary funds include four taxable and two tax exempt
money market funds and eight non-money market funds, all of
which are advised by one of our subsidiaries. The eight
non-money market funds, include six index funds and two actively
managed funds. Customer assets invested in the TD Waterhouse
proprietary funds totaled approximately $9 billion at
October 31, 2000. Fees received by us from these
proprietary funds for providing transfer agent services,
shareholder services, administration and investment management
are based upon daily balances of customer assets invested in
these funds.

Canada.We offer investors over 2,750 different mutual
funds from approximately 80 fund families including 108
funds in the TD Mutual Fund family which are managed by our
affiliate, TD Asset Management Inc. We receive customary trailer
fees from the funds, including the funds managed by our
affiliate, based upon balances of customer assets invested in
the participating funds through us. We do not charge a
commission on no-load funds and most load funds. We do charge a
commission for certain load funds. There is a regular redemption
fee for all load and no-load funds with the exception of the TD
Mutual Fund Family. Customer assets held by us in mutual funds
totaled approximately $7.6 billion at October 31, 2000,
including approximately $4.4 billion of assets invested in the
TD Mutual Fund Family.

In addition, our team of mutual fund specialists provide our
customers with important comparative information about the over
2,750 mutual funds we make available to our Canadian customers.
Our TD Waterhouse FundSelect Internet tool allows our online
customers to compare all the Canadian mutual funds available
through us by key criteria.

Under the TD Managed Assets Program, our mutual fund specialists
assess the investment needs of customers and assist them in
designing a portfolio made up of a selection of the mutual funds
offered by us tailored to their investment objectives. Funds in
the Managed Assets Program include both load funds and no-load
funds, but are sold on a commission-free basis. The cost to our
customers participating in this program is much lower than a
traditional full-commission brokerage program for the benefits
of having a portfolio manager determine the appropriate asset
mix, select the funds in which to invest, monitor and rebalance
the fund mix on a regular basis and provide a detailed
performance report of the customers portfolio.

Outside the U.S. and Canada. Customers of our Hong Kong
operations have access to more than 200 Hong Kong
registered mutual funds from 14 fund families.

Special Services

In addition to the primary services offered to our customers, we
seek to differentiate ourselves from other discount brokers and
build long-term client relationships by providing additional
services to meet specific needs and requirements of our customer
base, including:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Customer Relationship Officers.Our staff of specially
	trained customer relationship officers assists our customers in
	developing asset allocation strategies and evaluating investment
	choices with the goal of enhancing customer awareness of their
	investment options and encouraging customers to consolidate
	their various investment assets at TD Waterhouse.                                                                                                                                                                                                                                                                                          
|
| |  | Services for Active Customers.In December 2000, we
	introduced TD Waterhouse Select in the U.S., our exclusive free
	service for active online investors. TD Waterhouse Select offers
	two levels of membership, Select and Select Plus,
	based on the number of settled trades each calendar quarter in a
	single account. Select members receive discounted
	commissions, real-time streaming quotes and an integrated
	Trading Cockpit(TM) that displays their account information and
	allows them to place orders. Select Plusmembers get all
	the benefits of Selectplus NASDAQ Level II quotes,
	scrolling news headlines, and intra-day advanced charting.



| |  |                                                                                                                                                                                                                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In Canada, a select group of our most active investors may
	participate in our Presidents Account program. Members of
	this program receive savings on commissions, reduced margin loan
	rates, premium rates on investment balances, free online connect
	time, free real-time quotes, free investment

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| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | reports, access to online streaming quote and market depth data,
	priority telephone services, and an annual trading summary.                                                                                                                                                                
|
| |  | IPOs.Through an arrangement with Epoch Partners, we
	provide our qualified U.S. customers with online access through
	webBroker to initial public offerings that Epoch underwrites.                                                                                                          
|
| |  | Multi-Lingual Services.Through selected branch offices
	and service centers in our major markets, we provide brokerage
	services and access to all our products and services to
	customers whose primary language is French, Spanish, Mandarin,
	Cantonese and certain other Asian languages.
|
| |  | Investment Guidance.Through selected branch offices, we
	provide our customers with guidance regarding fixed income
	investing and assistance selecting among a full-range of mutual
	funds and money market investments.                                                                    

Retirement Services and Registered Plans

United States.We offer a variety of no-fee, no-minimum
balance retirement plan products for both individuals and
businesses. We offer various IRAs for individuals as well as
SEP plans, profit sharing plans, 401(k) plans and
other retirement plans for businesses and self-employed
individuals. Customers are provided with investment and savings
assistance through our Retirement Planning Guide to assist in
determining retirement needs, our Retirement Plans Customer
Service Desk or by using our online Retirement Planning Center.

Canada.In addition to brokerage accounts, our Canadian
customers may open registered accounts, which shelter eligible
investments from income taxes while saving for retirement or
education. The registered accounts we offer include
self-directed RSPs, self-directed RIFs, registered education
savings plans and Quebec stock savings plans.

Brokerage Services For Investment Advisors

United States.Through our TD Waterhouse Institutional
Services Division, which operates out of two regional offices,
we offer a full range of brokerage execution and operational
support services to independent fee-based registered investment
advisors and to financial institutions, such as banks and trust
companies, which provide trust and other investment services for
their clients. The clients of such advisors benefit from our
discounted commissions. Clients of advisors generally pay a fee
to their advisor for his or her advice and pay a commission to
us for execution and custodial services.

This division of our business has its own sales force and
marketing strategy. Specialized technology, including
proprietary software and data translation interfaces, is
provided to all advisors. An experienced relationship manager is
assigned to each advisory firm. A range of products and services
which have been individualized to meet the needs of financial
advisors are available, including block trading and trade
allocation, processing management fees payable to advisors, free
investment research, online trading, downloads of client account
information and consolidated monthly statements of client
accounts. In addition, Internet trading and account management
services are available to our investment advisor clients through
our proprietary technology. This division now serves
approximately 3,000 investment advisors who manage total
customer assets through accounts with us of over $14 billion.

Through the TD Waterhouse referral program, AdvisorDirect, we
provide qualified customers with referrals to registered
investment advisors meeting certain minimum requirements,
including registration with the SEC. In order to qualify for
this referral service, our customers must have a portfolio with
a balance of at least $100,000. While benefiting our retail
customers, this program also benefits our investment advisor
clients by providing participating registered investment
advisors access to our U.S. customer base of over
2.1 million active customer accounts. We do not pay to or
receive from the registered investment advisors any fees or
compensation for participation in the TD Waterhouse referral
program.

Our managed assets network is a service we make available to the
financial advisors who conduct business through us and to their
clients. This customized portfolio management program offers
advisors and their clients access to more than 50 equity and
fixed income portfolios managed by a select group of
institutional asset managers. Among the benefits of the managed
assets network are low asset management fees and

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Canada.Since 1987, our Canadian operations have provided
securities trading, clearing, settlement and account
administration services to independent investment counselors
across Canada. Capitalizing on a growing acceptance of
outsourcing in the Canadian investment community, we generate
revenue by providing an administration model for those counselor
firms seeking an alternative to running their own traditional
proprietary back office.

By leveraging our investment in technology, economies of scale
and management expertise, we can offer investment counselors
quality administration services at a competitive price.
Investment counselors manage private client accounts under our
product label. Trade commissions on the accounts are paid to us,
and we assume responsibility for account opening, trading,
credit and regulatory compliance. As of October 31, 2000,
we serviced 125 investment counselor firms and had approximately
16,000 accounts and $1.6 billion of assets under administration.

Outside the U.S. and Canada. Through our Australian
operations, we offer a broad range of brokerage execution and
operation support services to independent fee-based investment
advisors. The clients of the investment advisors pay the advisor
a fee and pay us a commission for trades executed. Our webBroker
permits the independent advisor to link up multiple client
accounts for ease of reference. Our recently launched Premium
webBroker facility provides the investment advisors with a full
range of market and client data on an integrated basis. In Hong
Kong, apart from our call center operations, we have
commissioned investment executives to serve the customers of our
Hong Kong operations during market hours. The services of such
investment executives are at higher commission rates.

Cash Management Services

United States.Our customers in the U.S. can choose to
have cash balances in their accounts automatically swept, on a
daily basis, into any of a selection of money market funds or an
FDIC-insured money market deposit account offered through TD
Waterhouse Bank, N.A., our affiliate. On certain existing
brokerage accounts, we pay interest on cash balances. Our
customers with online accounts are required to establish an
Investors Money Management (IMM) account. Customers
with IMM accounts may access available funds in their accounts
either with a personal check or a VISA® CheckCard. When a
customer with an IMM account is approved for margin trading, the
checks and CheckCard also provide access to margin cash
available. Other services available to our customers to help
them manage their finances and investments include direct
deposits into their brokerage account, automated transfers from
their bank to brokerage account, periodic investing whereby
customers can add to a mutual fund position each month or
quarter, dividend reinvestment and electronic bill payment which
permits customers to pay bills by touch-tone telephone. In
addition, through TransferDirect, investors may electronically
transfer funds from an outside bank checking or savings account
into their TD Waterhouse brokerage account.

Canada.We pay interest at competitive rates on all cash
balances in the brokerage accounts of our Canadian customers,
including all cash dividends and interest earned on investments.
We offer an automatic deposit service to a TD Bank account.
Customers may elect to have interest and dividend income in both
U.S. and Canadian funds automatically deposited to a
TD Waterhouse Income Generation Account. Our customers may
also access funds in their brokerage account through checking,
ATM account access and electronic funds transfer, which are
provided through TD Bank. Other services available to our
customers include monthly investments in mutual funds with
automatic withdrawals from the customers brokerage account
or bank account.

Investor Information Services

We provide a broad spectrum of free investment information and
research tools to our active customer base in order to help the
self-directed investor with his or her investment decisions.
These include printed research materials, such as
Standard & Poorssresearch reports, as
well as quote information, charts of stock

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Retail Banking Products and Services

United States.We offer our customers related financial
products and services provided by our affiliate,
TD Waterhouse Bank, N.A. In addition to the FDIC-insured
money market sweep account offered through our retail brokerage
business, the products and services of TD Waterhouse Bank, N.A.
include interest-bearing checking accounts, fixed term
certificates of deposits, Visa and MasterCard credit cards,
electronic bill payment via touch-tone telephone, and unsecured
lines of credit. In addition, customers can utilize
TD Waterhouse Bank, N.A.s webBanking service to
perform certain banking transactions online. Customers can
access their brokerage account through a TD Waterhouse
Investors Money Management Account. In addition, customers with
a TD Waterhouse brokerage account and a TD Waterhouse Bank,
N.A. checking account may transfer funds online or by telephone
between such accounts through our Funds Transfer Link program.
Customers enrolled in our Funds Transfer Link program also have
access to a consolidated financial summary, which lets them view
their TD Waterhouse bank and brokerage balances on one screen.
The products of TD Waterhouse Bank, N.A. have been designed to
assist our customers in managing their investments and personal
finances. In connection with the reorganization, we have entered
into agreements with TD Waterhouse Bank, N.A. with respect
to marketing, distribution and management support.

Canada.Our MoneyLink service provides our customers with
access to their brokerage account by offering a variety of
banking services including Canadian and U.S. dollar checking, TD
Bank in-branch banking, automated banking machine access,
telephone banking and web banking. These services provide our
customers with access to the funds in their brokerage accounts
24 hours a day, seven days a week. TD Access telephone and
web banking services allows customers to transfer funds from any
personal TD Bank account to their brokerage account using the
bill payment function. Customers may also use
electronic funds transfer to transfer funds from their brokerage
account to any bank account in Canada.

Insurance Products

We provide our Canadian customers with access to insurance
professionals who can offer travel, home, auto and life
insurance. Life insurance is offered by agents of Toronto
Dominion Life Insurance Company. Travel insurance is provided
under a group insurance contract we hold for our customers. Home
and auto insurance products are offered to our clients through
Vector Intermediaries Inc., an unaffiliated insurance broker. In
May 2000, we announced an alliance with HealthAxis.com, in which
we intend to establish a co-branded web site where our U.S.
customers will have access to a full range of health insurance
products online.

Customer Financing

We conduct securities transactions for our customers on either a
cash or margin basis. In an account authorized for margin
trading, we may lend our customers a portion of the market value
of certain securities up to the limit imposed by applicable
authorities, which for all equity securities is initially 50%.
Thereafter, the minimum percentage of collateral values required
decreases to a lower percentage level. As a matter of policy, we
generally require our customers to maintain higher percentages
of collateral values than the minimum percentages required under
these regulations. In specific situations involving stocks that
are exhibiting a high degree of volatility, we may elect to
increase the required collateral value percentage even higher or
prohibit customers from buying shares of those stocks on margin
at all. Margin loans are collateralized by the securities in the
customers account.

Interest on margin loans to customers provides an important
source of our revenue. During fiscal 2000, outstanding margin
loans to customers averaged approximately $7.2 billion to
the customers of our U.S. operations and approximately
$1.3 million to the customers of our Canadian operations
and were approxi-

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We may use cash balances in our customers brokerage
accounts (other than registered client accounts) to finance
margin loans to other clients. With respect to our Canadian
operations, the portion of such cash balances not used to
finance margin loans to our customers may be utilized by us to
finance our day to day operations in Canada, which reduces our
cost of funds.

Marketing and Advertising

Our marketing strategy is focused on three goals: building brand
awareness, attracting new customers and retaining and
cross-selling to our existing customers value-added products and
services. We pursue these goals through a combination of
marketing through our branch office network, media, advertising,
including outdoor billboard and banner advertising, marketing on
our own web sites and other online opportunities, direct mail
marketing, public relations, and co-marketing programs. In
general, our marketing approach is tailored to fit the investing
needs and practices of the local market, the available
technological infrastructure, and other relevant factors.

Our advertising focuses on building awareness of the brand,
products and services and positioning us as the discount broker
with the most value for the self-directed investor offering the
best combination of product offerings, price and customer
service. We regularly place print advertisements in a broad
range of business, technology and financial publications,
including Barrons, Investors Business Daily,
Money, SmartMoney, the Wall Street Journaland
Kiplingersin the United States and The Globe
and Mail, National Post, Macleans, La Presseand
Les Affaires, in Canada. We also advertise regularly on
cable television including CNBC, MSNBC and CNN and broadcast
television in select local markets. In Canada, we advertise via
sponsorship of a daily business report segment on a national
television news broadcast and business reports on news
broadcasts on regional radio networks.

Through our web sites, prospective customers can get detailed
information on our products and services, access account
applications, view an online demonstration and request
additional information. We have alliances linking webBroker with
several internet service providers, portals and online content
providers. We believe these links are a significant factor in
increasing brand awareness and generating leads, as consumers
increasingly look to the Internet as a key source of information
and commercial activity.

We also believe that providing an effective customer service
team to handle customer needs is critical to our success. Our
customer service organization helps customers get online,
handles product and service inquiries and responds to all
brokerage and technical questions. Our U.S. and Canadian
customers have customer service access through a toll-free
number 24 hours a day, seven days a week.

In Canada, our marketing strategy also focuses on leveraging the
over 1,350 TD Bank retail outlets. Personal bankers at
these branches are trained to assist in account acquisition and
to cross-sell our products and services. In Canada, we are also
active in providing investment seminars across the country to
assist customers in learning about our products and services as
well as assisting in their investment decisions. We do community
oriented advertising for our Asian language and French
communities. We also participate in financial trade shows, which
we believe are important in creating branch awareness.

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To establish and build brand awareness of TD Waterhouse in North
America and around the world, we are pursuing a multi-faceted
marketing and advertising campaign. Our advertising and
marketing costs per new account were approximately $109 in
fiscal 2000 and $133 in the fourth quarter of fiscal 2000, which
we believe are significantly lower than a number of our primary
competitors.

Alliances

We have developed alliances with various strategic partners to
increase account development and expand distribution. Such
providers include Microsoft, Yahoo!, Aether Systems, @Home
Canada, Excite@Home, AT&T, Sprint, Verizon, Nextel,
Cable & Wireless HKT Mobile Services, Metamarkets.com,
Money.net and Netzee. These partners attract significant numbers
of users, and our relationships with them give us access to
expanded market opportunities.

Clearing Operations

We perform clearing services for all securities transactions in
our customer accounts. These services involve issuing trade
confirmations, statements, settling and transferring payment for
securities on the settlement date, providing custodial services
for securities and cash held in the customers accounts and
similar functions involved in all securities trading
transactions. In the U.S., our clearing services are performed
by National Investor Services Corp.

We also provide clearing services for over 30 other unaffiliated
broker-dealers (referred to as introducing brokers)
in the U.S. and Canada representing approximately
$4.5 billion in assets at October 31, 2000. As part of
our clearing services for third parties, we maintain certain
books and records for the introducing brokers, hold securities
and free cash balances of the introducing brokers
customers, execute and settle trades for those customers and,
when appropriate, extend margin loans to those customers. These
clearing operations have generated additional revenues as well
as contributed to increased operating margins.

The vast majority of our customer transactions are cleared
through the facilities of the National Securities Clearing
Corporation or the Options Clearing Corporation for our U.S.
clearing operations, and through the facilities of the Canadian
Depository for Securities, the Canadian Derivative Clearing
Corp. and the Mutual Fund Clearing & Settlement Service
for our Canadian clearing transactions. Certain other
transactions, such as mutual fund transactions and transactions
in securities not eligible for settlement through a clearing
entity, are settled directly with the mutual funds or other
financial institutions or through agents in those markets.

Our U.K. and Australia operations also perform similar services
for all securities in their customer accounts. Our Australian
subsidiary clears its customers trades in U.S. securities
through our U.S. clearing operations. Our Australian subsidiary
also provide execution and clearing services to several local
brokerage firms in connection with options trading. Our
Hong Kong subsidiary clears its customers trades in
U.S. and Canadian exchange-listed securities through our
Canadian clearing operations. Our Hong Kong subsidiary clears
its customers trades in Hong Kong exchange-listed
securities through the Hong Kong Securities Clearing Company
Limited.

In connection with our customers activities, we borrow
securities both to cover short sales and to complete customer
transactions in the event a customer fails to deliver securities
by the required settlement date. We collateralize these
borrowings by depositing cash or securities with the lender and
receive a rebate calculated to yield a negotiated rate of
return. When lending securities, we receive cash or securities
and generally pay a rebate to the other party in the transaction
at a rate calculated to yield a negotiated return. Securities
lending and borrowing transactions are executed pursuant to
written agreements with counterparties that require that the
securities borrowed be marked-to-market on a daily
basis and that excess collateral be refunded or that additional
collateral be furnished in the event of changes in the market
value of the securities. The securities usually are
marked-to-market on a daily basis through the
facilities of the various national clearing organizations.

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Competition

United States.All aspects of our business are highly
competitive. We compete directly with a broad range of companies
seeking to attract consumer financial assets, including
full-commission brokers, other discount brokerage firms, mutual
fund companies, investment banking firms, commercial and savings
banks, insurance companies and others. The financial services
industry has become considerably more concentrated as numerous
securities firms have been acquired by or merged into other
firms. Some of these competitors have greater financial
resources than we do and offer certain additional financial
products and services. In addition, we expect competition from
domestic and international commercial banks to increase as a
result of legislative and regulatory initiatives in the U.S.
(including the passage of the Gramm-Leach-Bliley Act) to remove
or relieve certain restrictions on mergers between commercial
banks and other types of financial services providers. We
primarily compete with these firms on the basis of quality of
customer service, breadth of products and services offered,
prices, accessibility through delivery channels, and
technological innovation and expertise.

Discount brokerage firms and online-only financial services
providers compete vigorously with us with respect to commission
charges. Full-commission brokerage firms also offer discounted
commissions to selected retail brokerage customers. In addition,
some of our competitors in both the full-commission and discount
brokerage industries have substantially increased their spending
on advertising and direct solicitation of customers.

Competition in the online-trading business has become similarly
intense as recent expansion and customer acceptance of
conducting financial transactions online has attracted new
brokerage firms to the market. Price competition continues to
intensify in online investing as traditional brokerage firms
have entered the market and existing competitors have
aggressively sought to gain market share. We have experienced
declines in our average commission per trade as the proportion
of our customers using electronic brokerage channels, which
provide discounts from our standard commission rates, has
increased. As the proportion of our customers who utilize
electronic distribution channels continues to grow, we expect
that the average commission per trade will continue to decline.

Canada.In contrast to the U.S. market, market share
in Canada is concentrated amongst a limited number of
institutions. We believe our client base as measured by the
total number of accounts represents approximately 38% of the
total discount brokerage market.

Given the perceived attractiveness of the wealth management
market segment and the enhanced profile of discount brokerage
over the past several years, competition continues to be
intense. In addition to the various bank or trust owned discount
brokers, several dedicated operators have recently entered the
Canadian market. These include E*Trade Canada and Charles Schwab
Canada. We also expect that a number of mutual fund and
insurance companies will enter the discount brokerage market in
the near future. Many of these competitors have adopted
aggressive pricing as their primary strategy to obtain market
share.

Outside the U.S. and Canada.The discount brokerage
market in Australia is still developing. Our competitors in
Australia include Commonwealth Securities Ltd., which is a
bank-owned discount broker, E*Trade and Charles Schwab.
Currently we are one of the largest discount brokers in
Australia, based on trading volume. The discount brokerage
market in the United Kingdom is relatively underdeveloped and
very fragmented. We are currently the largest discount broker in
the United Kingdom based on trading volume and we are continuing
to expand our U.K. operations. In Hong Kong, local securities
brokerage firms are venturing into the internet-based trading
market, which is currently relatively fragmented and highly
competitive. We are the first major discount brokerage to have a
presence in Hong Kong.

Technology and Information Systems

We maintain sophisticated and proprietary technology that
automates traditionally labor-intensive securities transactions
and provides us with a platform to support our operations. We
believe that our ability to effectively leverage technology to
improve our products and services has been a key component in the

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Our technology platform is supported by an internal staff of
programmers, developers and operators. In addition, we have
dedicated quality control analysts, web site developers,
technical writers and design specialists who are responsible for
ensuring that our electronic access channels are easy to use,
dependable and reflect the most current enhancements and
features.

Our standard development model is to build our electronic
commerce systems using a three-tier approach. The first tier is
the client presentation layer, which consists of our
various delivery channels: Internet, PC dialup, touch-tone, and
voice recognition. We typically code these applications
ourselves, or in conjunction with an outside vendor, to ensure
that we retain the associated competitive advantage.

The second layer is our middleware, which validates
and logs transactions, formats them for the appropriate back
office systems, and returns the completed transaction to the
user. By separating the third layer from the client presentation
layer, we allow ourselves the ability to change presentation
easily or to change back office systems without affecting the
client directly.

Finally, the third layer consists of back office systems,
quotation services, and other databases. Specific formats are
required to communicate with each of these systems, but the
presentation and middleware layers are unaffected by these
complexities.

In the U.S., the primary component of our system with respect to
online trading is our middleware component. Our middleware
unifies front-end applications and multiple interfaces, supports
different languages, hardware platforms and protocols, and
establishes the interface between ADP, our back-office service
provider, and our customers who execute transactions via
webBroker or TradeDirect. In Canada, our middleware is currently
used only on our web product.

ADP, in the U.S., and ISM, in Canada, are our providers of back
office services including broker terminal services, order entry
systems and other information necessary to run our business,
including transaction summaries, data feeds for compliance and
risk management, execution reports, and trade confirmations. Our
systems, which are maintained independently of their systems,
accept trading orders and forward them to the back-office
service provider for processing. Our data systems also contain
our customer profile data base functions, perform functions to
enable our customers on webBroker and provide other support to
our clearing divisions.

We continue to make significant investments in systems
technology. To enhance the capacity and reliability of our
systems, we have established two separate data centers in each
of Jersey City, New Jersey for our U.S. business and in Toronto
for our Canadian business. These facilities support network
services, trading and investor services. These are fully
redundant data centers which allow the business to be run from a
single site should the other fail. To provide for system
continuity during potential outages, we also have equipped our
computer facilities in both countries with uninterruptible power
supply units, as well as back-up generators.

The secure transmission of confidential information over public
networks is a critical element of our operations. We use a
combination of proprietary and industry standard security
measures to protect customers accounts. Customers are
assigned unique account numbers, user identifications and
trading passwords that must be used each time they log on to the
system. We rely on industry-standard encryption and
authentication technology, including public key cryptography
technology licensed from RSA Data Security, Inc., to provide the
security and authentication necessary to effect the secure
exchange of information. Touch-Tone telephone transactions are
secured through a personal identification number, the same
technology used in the ATMs. We have an agreement to provide
digital certification and authentication services for electronic
commerce for our web servers through VeriSign, Inc.

Government Regulation; Net Capital Requirements

The businesses in which we operate are subject to extensive
regulation and supervision under federal, state and provincial
law in the U.S. and Canada and under the applicable laws of each
other country in which

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Securities Regulation

United States.The securities industry in the
U.S. is subject to extensive regulation under both federal
and state laws. The Securities and Exchange Commission is the
federal agency responsible for the administration of the federal
securities laws. Our U.S. brokerage and clearing
subsidiaries are registered as broker-dealers, and our
subsidiary which acts as advisor to our proprietary
U.S. mutual funds is registered as an investment advisor,
with the SEC. Much of the regulation of broker-dealers has been
delegated by the SEC to self-regulatory organizations,
principally the Municipal Securities Rulemaking Board, the
National Association of Securities Dealers and the New York
Stock Exchange, which has been designated by the SEC as our
primary regulator. These self-regulatory organizations adopt
rules (subject to approval by the SEC) that govern the industry
and conduct periodic examinations of the operations of our
U.S. brokerage and clearing subsidiaries. Securities firms
are also subject to regulation by state securities
administrators in those states in which they conduct business.
Our U.S. brokerage and clearing subsidiaries are registered
as broker-dealers in all 50 states, the District of Columbia and
Puerto Rico.

Broker-dealers in the U.S. are subject to regulations
covering all aspects of the securities business, including sales
methods, trade practices among broker-dealers, use and
safekeeping of customers funds and securities, capital
structure, record keeping, the conduct of directors, officers
and employees, possession and control of customer funds and
securities, margin lending and execution and settlement of
transactions.

Our U.S. brokerage and clearing subsidiaries are members of
the Securities Investor Protection Corporation
(SIPC), which provides, in the event of the
liquidation of a broker-dealer, protection for customers
accounts of up to $500,000 for each customer, subject to a
limitation of $100,000 for claims for cash balances. In
addition, we have arranged for full supplemental insurance
coverage of customer securities through Asset Guaranty Insurance
Company. Neither SIPC nor this supplemental coverage provides
coverage for losses due to market fluctuations.

Canada.The securities industry in Canada is under the
jurisdiction of the provincial and territorial governments and
is subject to extensive regulation. Each province or territory
has a securities commission (or equivalent) that is responsible
for the administration of the securities legislation of that
jurisdiction. Our Canadian brokerage subsidiary is registered as
an investment dealer or its equivalent in all provinces and
territories in Canada and is a member of The Investment Dealers
Association of Canada (IDA). Much of the regulation
of investment dealers has been delegated to the IDA, a
self-regulatory organization, which is the primary regulator of
our Canadian brokerage subsidiary. The IDA adopts rules in
conjunction with the various securities commissions that govern
the industry and conducts yearly examinations of our Canadian
brokerage subsidiary. Our Canadian brokerage subsidiary may
acquire a seat on one or more of the stock exchanges in Canada.

Broker-dealers in Canada are subject to regulations covering all
aspects of the securities business including sales practices,
possession and control of customer funds and securities, capital
structure, record keeping, the registration and conduct of
directors, officers and employees, margin lending, execution and
settlement of transactions and trade practices among
broker-dealers.

Our Canadian brokerage subsidiary is a member of the Canadian
Investor Protection Fund (CIPF) which provides, in
the event of the bankruptcy or insolvency of a broker-dealer,
protection for customers accounts of up to Cdn.$1,000,000
for each customer. The CIPF is funded through assessments on
registered broker-dealers.

Outside the U.S. and Canada.Our Australian operations
are regulated by the Australian Securities and Investment
Commission which is the regulator of all federal legal
requirements for Australian broker-dealers. The Australian
corporations law delegates the power of specific regulation of
stockbrokers to the Australian

17



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Our United Kingdom operations are primarily regulated by the
Securities and Futures Authority, which imposes minimum capital
requirements. These requirements are based on ongoing
expenditures levels as well as market related risk exposures.

The Securities and Futures Authority also issues and enforces
numerous rules and regulations covering such areas as handling
of client assets, record keeping and other activities.
Compliance with these rules is subject to ongoing verification.
Noncompliance can result in reprimands, fines, suspensions and
authorization reductions or withdrawals. Our United Kingdom
brokerage subsidiary is also obliged to comply with the rules
and regulations of the London Stock Exchange.

Our Hong Kong brokerage subsidiary operates in Hong Kong as an
introducing broker and marketing affiliate of our Canadian
brokerage operations. This subsidiary is regulated by the
Securities and Futures Commission of Hong Kong. Our other Hong
Kong brokerage subsidiaries are registered as securities dealers
with the Securities and Futures Commission of Hong Kong and one
of these subsidiaries is a participant of the Stock Exchange of
Hong Kong Ltd.

Capital Requirements

United States.As registered broker-dealers and members
of the NASD, our U.S. brokerage and clearing subsidiaries
are subject to the SECs net capital rule,
Rule 15c3-1, promulgated under the Securities Exchange Act
of 1934. Net capital is essentially defined as net worth (assets
minus liabilities), plus qualifying subordinated borrowings and
certain discretionary liabilities, less certain mandatory
deductions that result from excluding assets that are not
readily convertible into cash and from valuing conservatively
certain other assets. Among these deductions are adjustments
(called haircuts) which reflect the possibility of a
decline in the market value of an asset prior to its disposition.

The NYSE monitors the application of the net capital rule to our
U.S. brokerage and clearing subsidiaries. The net capital
rule, which specifies a minimum net capital requirement for
registered broker-dealers, is designed to measure the general
financial integrity and liquidity of a broker-dealer and
requires that at least a minimum part of its assets be kept in
relatively liquid form. TD Waterhouse Investor Services, Inc.,
our U.S. brokerage subsidiary, computes net capital under
the basic method, which requires minimum net capital equal to
the greater of $250,000 or 6 2/3% of aggregate
indebtedness. In addition, it may not permit its aggregate
indebtedness to all other persons to exceed 1,500 percent
of its net capital. National Investor Services Corp., our U.S.
clearing subsidiary, computes net capital under the alternative
method, which requires minimum net capital equal to the greater
of $250,000 or 2% of aggregate debit items arising from customer
transactions. A broker-dealer may be required to reduce its
business if its net capital is less than 4% of aggregate debit
balances and may also be prohibited from expanding its business
or paying cash dividends if resulting net capital would be less
than 5% of aggregate debit balances (accounts due from
customers). In addition, the net capital rule does not allow
withdrawal of subordinated capital if net capital would be less
than 5% of such debit balances. At October 31, 2000, our
U.S. brokerage and clearing subsidiaries had net capital of
approximately $10.1 million and $806.3 million, respectively,
which exceeded their minimum net capital requirements by $5.4
million and $672.8 million, respectively.

The net capital rule also limits the ability of broker-dealers
to transfer capital to parent companies and other affiliates.
Under the net capital rule, equity capital cannot be withdrawn
from a broker-dealer without the prior approval of the SEC when
net capital after the withdrawal would be less than 25% of its
securities position. In addition, the net capital rule requires
a broker-dealer to notify the SEC and the appropriate
self-regulatory organization two business days before a
withdrawal of excess net capital if the withdrawal would exceed
30% of the broker-dealers excess net capital, and two
business days after a withdrawal that exceeds 20% of excess net
capital, provided that no such notice need be given if the
withdrawal is less than $500,000.

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Compliance with the net capital rule could limit those
operations of our registered broker-dealer subsidiaries in the
U.S. that require the intensive use of capital, such as our
clearing operations and the financing of customer account
balances, and also could restrict their ability to pay
dividends, repay debt and redeem or purchase shares of their
outstanding stock. Failure to maintain the minimum net capital
required by the net capital rule could subject a firm to
suspension or expulsion by the NYSE and the NASD, certain
sanctions by the SEC and other regulatory bodies, and ultimately
could lead to a firms liquidation. A change in such rules,
or the imposition of new rules, affecting the scope, coverage,
calculation or amount of such net capital requirements, or a
significant operating loss or any unusually large charge against
net capital, could adversely affect the ability of our brokerage
and clearing subsidiaries in the U.S. to expand or maintain
present levels of business or pay dividends or interest.

Canada.As a member of the IDA, our Canadian brokerage
subsidiary must meet rules regarding minimum levels of risk
adjusted capital, which is calculated in accordance with a
prescribed financial questionnaire and report and can generally
be described as qualifying capital (equity, retained earnings
and qualifying subordinated debt) less non-allowable assets,
i.e., items not readily convertible to cash, margin charges
which reflect an assessment of the risk of a decline in market
value of assets and the risk associated with the ultimate
collection of client receivables, and a securities concentration
charge. The IDA monitors the risk adjusted capital by means of a
monthly and annual financial reporting audit and early warning
reporting requirements.

Outside the U.S. and Canada.

Our U.K., Hong Kong and Australia operations are all subject to
regulatory minimum capital requirements. At October 31,
2000, each of these operations was in compliance with their
respective minimum capital requirements.

Employees

At October 31, 2000, on a full-time equivalent basis, we
employed 8,298 persons. A total of 4,719 of these employees are
based in the U.S. and 2,408 are based in Canada. Our
Australia operations employed 166 persons, our U.K. operations
employed 937 persons and our Hong Kong operations employed 68
persons. None of our employees is subject to a collective
bargaining agreement. We believe that our relations with our
employees are good.

19



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Executive Officers of the Registrant

We have set forth below certain information for each person who
serves as an Executive Officer of TD Waterhouse.

|                    |  |     |    |          |  |                                                        
|------------------- |  | --- | -- | -------- |  | -------------------------------------------------------
|Name                |  | Age |    | Position
|                    |  |     |    |         
|Stephen D. McDonald |  |     | 44 |          |  | Chief Executive Officer and Deputy Chairman            
|                   
|                   
|                   
|                   
|Frank J. Petrilli   |  |     | 50 |          |  | President and Chief Operating Officer                  
|                   
|                   
|                   
|                   
|John G. See         |  |     | 43 |          |  | Vice Chairman                                          
|                   
|                   
|                   
|                   
|Bharat B. Masrani   |  |     | 44 |          |  | Vice Chairman                                          
|                   
|                   
|                   
|                   
|Richard J. Rzasa    |  |     | 41 |          |  | Vice Chairman and Chief Information Officer            
|                   
|                   
|                   
|                   
|Joseph N. Barra     |  |     | 41 |          |  | Executive Vice President                               
|                   
|                   
|                   
|                   
|A. Wayne Kyle       |  |     | 52 |          |  | Executive Vice President, Human Resources              
|                   
|                   
|                   
|                   
|Randall M. Miller   |  |     | 41 |          |  | Executive Vice President and Chief Marketing Officer   
|                   
|                   
|                   
|                   
|Richard H. Neiman   |  |     | 50 |          |  | Executive Vice President, General Counsel and Secretary
|                   
|                   
|                   
|                   
|Gerard J. OMahoney |  |     | 46 |          |  | Executive Vice President                               
|                   
|                   
|                   
|                   
|B. Kevin Sterns     |  |     | 54 |          |  | Executive Vice President and Chief Financial Officer   

Stephen D. McDonaldserves as the Deputy Chairman
of the Board of Directors and Chief Executive Officer of TD
Waterhouse and is Vice Chair of TD Bank Financial Group.
Mr. McDonald joined TD Bank in 1983 and since then has
occupied various positions, including Vice Chair, Group
Administration; Executive Vice President, Corporate Banking; and
Senior Vice President, USA Division, Corporate and Investment
Banking Group.

Frank J. Petrilliserves as the President and
Chief Operating Officer and a director of TD Waterhouse.
Mr. Petrilli is also currently an Executive Vice President
of TD Bank Financial Group. Since 1997, Mr. Petrilli has
served as President and Chief Executive Officer,
TD Waterhouse Holdings, Inc. and from 1998 to 1999 as a
Senior Vice President, TD Bank Financial Group.
Mr. Petrilli joined TD Waterhouse Holdings, Inc. in
1995 as President and Chief Operating Officer. Prior to joining
TD Waterhouse Holdings, Inc., Mr. Petrilli served in
senior management positions at American Express, including
President and Chief Operating Officer of American Express
Centurion Bank (a wholly owned subsidiary of American Express),
from 1988 to 1995.

John G. Seeserves as Vice Chairman,
TD Waterhouse. Mr. See is also the President and Chief
Executive Officer of TD Waterhouse Investor Services (Canada),
Inc. From 1995 to 1999, Mr. See served as President and
Chief Operating Officer of TD Waterhouse Investor Services
(Canada), Inc., formerly, Green Line Investor Services, Inc. and
since 1995 as Senior Vice President, TD Bank Financial
Group. Mr. See joined TD Bank in 1981 and since then
has held various positions of increasing responsibility in the
Corporate and Investment Banking Group in Houston, New York and
London.

Bharat B. Masraniserves as Vice Chairman,
TD Waterhouse, with responsibility for all areas of
brokerage operations in the UK and Europe. Prior to becoming a
Vice Chairman, Mr. Masrani served as an Executive Vice
President of TD Waterhouse. Since 1997 until the date of
the reorganization, Mr. Masrani served as Senior Vice
President, Corporate Banking (London, England). Mr. Masrani
joined TD Bank Financial Group in 1987 and since then has held
various positions including Vice President, Corporate Banking
(London, England) and Vice President, Corporate Banking (Bombay,
India).

Richard J. Rzasaserves as Vice Chairman and Chief
Information Officer, TD Waterhouse. Prior to becoming a
Vice Chairman, Mr. Rzasa served as an Executive Vice
President of TD Waterhouse. From 1985 until
September 1999, Mr. Rzasa held various positions at
Lehman Brothers and most recently served as a Senior Vice
President of Technology.

Joseph N. Barraserves as Executive Vice
President, TD Waterhouse, with responsibility for all areas
of our brokerage operations in the U.S. In January 2001,
Mr. Barra became President of TD Waterhouse Investor
Services, Inc. Since January 1997, Mr. Barra has also
served as President of our subsidiary, National

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A. Wayne Kyleserves as Executive Vice President,
Human Resources, TD Waterhouse. Since 1996, Mr. Kyle
has served as Executive Vice President, Human Resources,
TD Waterhouse Holdings, Inc. Mr. Kyle joined
TD Bank in 1971 and since then has held various positions
including Vice President, Human Resources, Investor Services
Division, TD Bank Financial Group.

Randall M. Millerserves as Executive Vice
President and Chief Marketing Officer, TD Waterhouse. Since
February 1994 until the date of the reorganization,
Mr. Miller has served as a Senior Vice President and
Executive Vice President of TD Waterhouse Investor
Services, Inc.

Richard H. Neimanserves as Executive Vice
President, General Counsel and Secretary, TD Waterhouse.
Since July 1994, Mr. Neiman has served as Executive
Vice President and General Counsel, TD Waterhouse Holdings,
Inc. Prior to joining TD Waterhouse Holdings, Inc.,
Mr. Neiman was a Director of Regulatory Advisory Services
at Price Waterhouse LLP in Washington, D.C. from 1990 to
1994 and served in various legal positions at Citicorp in New
York, including General Counsel of its Global Equities Group,
from 1979 to 1989.

Gerard J. OMahoneyserves as Executive Vice
President, TD Waterhouse, with responsibility for Canadian
and overseas clearing and securities services operations. Since
1996, until the date of the reorganization,
Mr. OMahoney served as Senior Vice President,
TD Securities Services, Wealth Management Services.
Mr. OMahoney joined TD Bank Financial Group in 1982
and has since held various positions including Assistant General
Manager, Operations, Corporate Banking (London, England) and
Director, Administration TD Australia Ltd. (Melbourne,
Australia), Investor Services Division and Vice President,
Mutual Funds Operations, Investor and Trust Services Division.

B. Kevin Sternsserves as Executive Vice President
and Chief Financial Officer, TD Waterhouse. Since 1996,
Mr. Sterns has served as Executive Vice President and Chief
Financial Officer, TD Waterhouse Holdings, Inc.
Mr. Sterns joined TD Bank Financial Group in 1970 and
since then has held various positions including Vice President
Finance and Operations, U.S.A. Division, Corporate and
Investment Banking Group (New York).

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The Reorganization

In connection with the initial public offerings of our common
stock on June 23, 1999, TD Bank reorganized its
worldwide discount brokerage operations so that they would be
consolidated into our company and our subsidiaries. This
reorganization included the following steps:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TD Waterhouse Holdings, Inc., formerly Waterhouse Investor
	Services, Inc., which prior to the reorganization served as the
	U.S. holding company for TD Banks
	U.S. discount brokerage operations, converted the shares of
	common stock it held in one of its wholly-owned registered
	broker-dealer subsidiaries into shares of new common stock and
	preferred stock. The preferred stock is redeemable at any time,
	in whole or in part, at the issuers option for an
	aggregate redemption price of $237 million, pays dividends
	semi-annually at a variable rate based on six month London
	interbank offered rates, and has no fixed maturity.
	TD Waterhouse Holdings, Inc. contributed all of the common
	stock of its registered broker-dealer subsidiaries as well as
	all of the common stock of certain of its other
	U.S. subsidiaries to us. A portion of the proceeds from the
	initial public offerings was used to fund the redemption of
	$236.9 million of the preferred stock in July  1999.
	TD Waterhouse Holdings retained the outstanding shares of
	preferred stock of the broker-dealer subsidiary.
|
| |  | TD Bank transferred its Canadian discount brokerage
	business and brokerage clearing business to our newly-formed
	Canadian subsidiary, TD  Waterhouse Investor Services
	(Canada) Inc. (TDW Canada). In exchange, the
	following were issued to TD Bank:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | a series of 36 million exchangeable preference shares of our
	subsidiary, TDW  Canada; and
|
| |  | promissory notes of TDW Canada totaling approximately $45
	million.                       

A portion of the proceeds of the initial public offerings was
used to repay these promissory notes. The exchangeable
preference shares are exchangeable at any time at
TD Banks option for an equivalent number of shares of
our common stock, and have dividend rights equal to the
equivalent number of shares of our common stock. As part of the
transfer, TDW Canada assumed all past liabilities of these
businesses and each of TD Bank and TDW Canada
indemnified the other and its relevant subsidiaries, and its
respective directors, officers, agents and employees, against
all past, present and future liabilities related to the
transferred and retained businesses.



| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TD Waterhouse Holdings, Inc. was issued one special voting
	preferred share of the Company. The special voting preferred
	share has voting rights equal to the number of shares of our
	common stock into which the exchangeable preference shares may
	be exchanged, and will be cancelled when the exchangeable
	preference shares are no longer outstanding.
|
| |  | TD Bank transferred ownership of its United Kingdom, Australia
	and Hong Kong discount broker subsidiaries to us in exchange for
	shares of our common stock and promissory notes totaling
	$27 million. A portion of the proceeds of the initial
	public offerings was used to repay these promissory notes.                                                  
|
| |  | We entered into a master services agreement with TD Bank
	pursuant to which certain services are made available to us and
	we make certain services available to TD Bank.                                                                                                                                                                                      

In order to transfer its Canadian discount brokerage business
and brokerage clearing business to us, TD Bank entered into
transfer and assumption agreements with TDW Canada, which
in general provided for the transfer of assets used exclusively
in the transferred businesses. The assets were transferred to
TDW Canada immediately prior to the completion of the
initial public offerings.

The assets transferred consisted of all tangible assets, such as
computers, equipment and furniture, which exclusively related to
the transferred businesses. Accounts receivable as well as cash
and cash equivalents of the transferred businesses were also
transferred. All intellectual property owned by TD Bank or
its non-transferred subsidiaries and used exclusively by the
transferred businesses was transferred to TDW Canada. The
transferred businesses currently operate in premises leased from
third parties or in space owned or leased by TD Bank.
Pursuant to the master services agreement, TD Bank
continues to make available to TDW Canada shared space used
by the transferred businesses.

22



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All employees involved in the transferred businesses were
employees of TD Bank prior to the reorganization. In most
cases, those employees who were exclusively engaged in
performing the activities of the transferred businesses in
Canada were transferred to TDW Canada. In addition,
employees who performed services for both TD Bank and us
were retained by, or transferred to, the entity for which they
predominantly provide services, with appropriate exceptions
where business needs required. Pursuant to the master services
agreement, TD Bank and TDW Canada made available to
the other employees who immediately prior to the Offerings
provided services to both TD Bank and the transferred
businesses.

As a result of these reorganizations, approximately 1,450
associates were transferred to us. TDW Canadas
associates comprise all employees working in its local branches,
customer service centers and back office activities. With the
exception of certain support services provided by TD Bank
associates, TDW Canadas associates perform all
day-to-day compliance, technology and information systems
management and human resources functions for TDW Canada.

The transfer and assumption agreements provided for TD Bank
to transfer to us all of its title to and rights and interests
in the transferred assets. The transfer and assumption
agreements provided for assumptions and indemnities designed to
place sole legal and financial responsibility on TDW Canada
for all liabilities known or contingent relating to the
transferred businesses, the past and present operations and the
assets transferred or licensed to TDW Canada. As a result,
the liabilities assumed by TDW Canada included all
liabilities and obligations, actual or contingent, relating to
the transferred businesses, such as accounts payable,
contractual obligations and ongoing or presently unknown claims
and suits. The transfer and assumption agreements contained
indemnification provisions in connection with the conduct of
TDW Canadas business after the transfer of the
transferred businesses, misstatements or omissions in the
offering prospectus with respect to the transferred businesses
and the use of trademarks, trade names, logos and other
indemnities. TD Bank similarly indemnified TDW Canada
in respect of its past, present and future businesses, other
than the transferred businesses.

23



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Risk Factors

An investment in our company involves certain risks, including
those described below. There may be additional risks that we do
not currently know of or that we currently deem immaterial based
on the information available to us. Our business, financial
condition or results of operations could be materially adversely
affected by any of these risks, potentially resulting in a
decline in the trading price of our common stock.

From time to time, we may make forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Those forward-looking statements reflect our current
beliefs and are based on information currently available to us.
However, forward-looking statements are by their nature subject
to risks and uncertainties. Our actual results may differ
materially from those contemplated by such forward-looking
statements. Factors and risks that could cause our future
results to differ from those contemplated in such
forward-looking statements include, but are not limited to,
those described below and in other documents we may file with
the SEC.

Any forward-looking statements we may make speak only as of the
date they are made and we do not undertake any obligation to
update them.

Our Business Could Be Harmed by Market Volatility,
Declines in General Economic Conditions and Other Securities
Industry Risks

Our revenues are derived primarily from securities brokerage and
related services, and we expect this business to continue to
account for a significant amount of our revenues. We, like other
securities firms, are directly affected by economic and
political conditions, broad trends in business and finance and
changes in the conditions of the securities markets in which our
customers trade. Over the past several years the securities
markets in the U.S. and Canada (which are the principal trading
markets for most of our customers) have fluctuated considerably
and during the second half of the year 2000, experienced
significant declines in market price levels and trading volume.
The declines in the trading prices of many technology and
Internet related stocks were particularly sharp. These declines
affected our revenues and net income. A further and sustained
downturn in the stock markets could materially adversely affect
investor interest in buying and trading securities and
accordingly, adversely affect our business. A significant
downturn in the markets for technology and Internet-related
stocks would have an even greater effect on us because a
substantial portion of our customers invest in these types of
stocks. In previous major stock market declines, the level of
individual investor trading activity decreased after these
events. When trading volume is low, our profitability would
likely be adversely affected because a significant portion of
our costs do not vary with revenue. For these reasons, severe
market fluctuations could have a material adverse effect on our
business, financial condition and operating results. A
significant decline in general economic conditions could also
cause our customers to reduce their trading activities and the
level of invested assets they maintain with us, and might also
cause an increase in delinquencies and defaults in margin loans
that we extend to our customers. Some of our competitors with
more diversified business lines might withstand such a downturn
in the securities industry better than we would. See
 We Face Substantial Competition Which Could
Reduce Our Market Share and Harm Our Financial Performance.

Our Business Relies Heavily On Computers and Other
Electronic Systems and Capacity Constraints and Failures of
These Systems Could Harm Our Business

We receive and process a majority of our trade orders through
electronic means such as the Internet, dial-up links to our
private computer networks and touch-tone telephones. In
addition, we execute all of our trades through a series of
computerized processing systems and links to third parties.
Thus, we depend heavily on the capacity and reliability of the
electronic systems supporting this type of trading. Heavy use of
our systems during peak trading times or at times of unusual
market volatility could cause our systems to operate slowly or
even to fail for periods of time. Over the last two years, we
have experienced periods of extremely high trading volume and
substantial volatility in the securities markets. On several
occasions during these periods, the volume and volatility of
trading activity caused individual system components or
processes to fail, resulting in the temporary unavailability of
our web site for electronic trading. On some other occasions,
high trading volume has caused significant delays in executing
trading orders, resulting in some customers orders

24



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As our business expands, we also face risks relating to the need
to expand and upgrade our transaction processing systems,
network infrastructure and other aspects of our technology.
While many of our systems are designed to accommodate additional
growth without redesign or replacement, we may nevertheless need
to make significant investments in additional hardware and
software to accommodate growth. In addition, we cannot assure
you that we will be able to predict accurately the timing or
rate of such growth, or expand and upgrade our systems and
infrastructure on a timely basis.

We Operate in a Highly Regulated Industry and Compliance
Failures Could Adversely Affect Our Business

The securities industry in the U.S., Canada and the other
jurisdictions in which we operate is subject to extensive
regulation covering all aspects of the securities business. As a
clearing broker, we have to comply with additional laws and
rules. These include rules relating to possession and control of
customer funds and securities margin lending and execution and
settlement of transactions.

The various governmental authorities and industry
self-regulatory organizations that supervise and regulate us
generally have broad enforcement powers to censure, fine, issue
cease-and-desist orders or suspend or expel us or any of our
officers or employees who violate applicable laws or
regulations. Our ability to comply with all applicable laws and
rules is largely dependent on our establishment and maintenance
of compliance and reporting systems, as well as our ability to
attract and retain qualified compliance and other personnel. We
could be subject to disciplinary or other regulatory or legal
actions in the future due to noncompliance. In addition, it is
possible that any past noncompliance could subject us to future
civil lawsuits, the outcome of which could have a material
adverse effect on our financial condition and operating results.

In addition, we use the Internet as a major distribution channel
to provide products and services to our customers. Due to the
increasing popularity of the Internet, it is possible that new
laws and regulations may be adopted dealing with such issues as
user privacy, content and pricing. Such laws and regulations
might increase our cost of using, or limit our ability to use,
the Internet as a distribution channel. In addition, the growth
of the Internet as a means of conducting international business
has raised many legal issues regarding, among other things, the
circumstances in which countries or other jurisdictions have the
right to regulate Internet services that may be available to
their citizens from service providers located elsewhere. In many
cases, there are no laws, regulations, judicial decisions or
governmental interpretations that clearly resolve these issues.
This uncertainty may adversely affect our ability to use the
Internet to expand our international operations, and creates the
risk that we could be subject to disciplinary sanctions or other
penalties for failure to comply with applicable laws or
regulations.

We Face Substantial Competition Which Could Reduce Our
Market Share and Harm Our Financial Performance

The market for brokerage services is rapidly evolving and
intensely competitive. We expect competition to continue and
intensify in the future. We face direct competition from other
discount brokerage firms, many of which provide touch-tone
telephone and online brokerage services but do not maintain
significant branch networks. This may result in those other
firms having a lower cost structure and an ability to charge
lower commissions.

We also encounter competition from established full commission
brokerage firms whose pricing and Internet strategies are
continuing to evolve and who could elect to market the same
types of services that we offer. Currently, several large U.S.
brokerage firms offer discounted online brokerage services to
their customers and others have announced plans to introduce
similar services. In addition, we compete with financial
institutions, mutual fund sponsors and other organizations, some
of which provide (or may in the future provide) electronic and
other discount brokerage services.

25



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Increased financial profit levels within the securities industry
over the past several years have strengthened existing
competitors. We believe that such success will continue to
attract new competitors to the industry, such as banks, software
development companies, insurance companies, providers of online
financial and information services and others. Commercial banks
and other financial institutions have become more competitive
with us by offering their customers certain corporate and
individual financial services traditionally provided by
securities firms. The current trends toward consolidation and
product line expansion in the commercial banking industry could
further increase competition in all aspects of our business. To
the extent our competitors are able to attract and retain
customers based on the convenience of one-stop shopping, our
business or ability to grow could be adversely affected.

There can be no assurance that we will be able to compete
effectively with current or future competitors. See
 Competition.

Failure to Introduce New Services and Products in a Timely
Manner May Affect Our Ability to Compete Effectively

Our future success will depend in large part on our ability to
develop and enhance our services and products. We operate in a
very competitive industry in which the ability to develop and
deliver advanced services through the Internet and other
channels is a key competitive factor. There are significant
technical risks in the development of new or enhanced services
and products, including the risk that we will be unable to:



| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | effectively use new technologies;                                    
|
| |  | adapt our services and products to emerging industry standards;
	or  
|
| |  | develop, introduce and market enhanced or new services and
	products.

Historically, we have been able to develop and introduce
enhanced or new products and services in response to market and
customer requirements and emerging industry standards. However,
if in the future we are unable to develop and introduce enhanced
or new services and products quickly enough to respond to market
or customer requirements or to comply with emerging industry
standards, or if these services and products do not achieve
market acceptance, our business, financial condition and
operating results could be materially adversely affected.

Expansion of Our Operations Outside North America Involves
Special Challenges That We May Not Be Able to Meet, Which Could
Negatively Impact Our Financial Results

To date, we have established or acquired operations in
Australia, the United Kingdom and Hong Kong and we plan to
expand our operations into other European and Asian countries in
the near future. There are certain risks inherent in doing
business in international markets, particularly in the regulated
brokerage industry, which could include for any particular
market:



| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | less developed technological infrastructures, resulting in lower
	customer acceptance of, or access to, electronic channels;
|
| |  | less developed automation in exchanges, depositories and
	national clearing systems;                                        
|
| |  | unexpected changes in regulatory requirements, tariffs and other
	trade barriers;                                           
|
| |  | difficulties in staffing and managing foreign operations;                                                                   
|
| |  | fluctuations in currency exchange rates;                                                                                    
|
| |  | reduced protection for intellectual property rights;                                                                        
|
| |  | seasonal reductions in business activity during the summer
	months; and                                                     
|
| |  | potentially adverse tax consequences.                                                                                       

Any of the factors described above could have a material adverse
effect on our future international operations and consequently
on our business, financial condition and operating results.

26



---



We Intend to Continue Growing Through Acquisitions of
Other Companies and Joint Ventures with Strategic Partners, and
Our Business and Financial Results Could Be Adversely Affected
If We Do Not Successfully Implement These Acquisitions and Joint
Ventures

A significant portion of our growth to date has been based on
acquisitions, and we may acquire other companies or businesses
in the future. Acquisitions entail numerous risks, including:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | difficulties in the assimilation of acquired operations and
	products;                       
|
| |  | diversion of managements attention from other business
	concerns;                           
|
| |  | assumption of unknown material liabilities of acquired companies;                            
|
| |  | amortization of acquired intangible assets, which would reduce
	future reported earnings; and
|
| |  | potential loss of customers or key employees of acquired
	companies.                         

We cannot assure you that we will be able to integrate
successfully any operations, personnel, services or products
that might be acquired in the future.

We also intend to grow by forming joint ventures with various
strategic partners throughout the world. Such joint ventures
entail numerous risks, including, but not limited to,
difficulties in growing the business of the newly formed joint
ventures and having a minority interest in certain joint venture
entities controlled by others. There can be no assurance that
any of the joint ventures we enter into will be successful.

Our Clearing Operations Expose Us to Potential Liability
for Clearing Errors and Other Risks That Could Adversely Affect
Us

We are a self-clearing broker in the U.S., Canada,
Australia, the United Kingdom and Hong Kong. We also provide
clearing services for unaffiliated broker-dealers (referred to
as introducing brokers) in the U.S. and Canada.
Self-clearing securities firms are subject to substantially more
regulatory control and examination than brokers that rely on
others to perform those functions, such as many of our
competitors. Errors in performing clearing functions, including
clerical and other errors related to the handling of funds and
securities held by us on behalf of customers and introducing
brokers, could lead to civil penalties imposed by applicable
authorities as well as losses and liability in related lawsuits
brought by customers and others. Any liability that arises as a
result of our clearing operations could have a material adverse
effect on our business, financial condition and operating
results.

Securities industry regulators in the U.S. and Canada are
currently reviewing the extent to which clearing firms will be
held accountable for the improper activities of introducing
brokers for which they provide clearing services. We cannot
assure you that our procedures will be sufficient to protect us
from liability for the acts of introducing brokers under current
laws and regulations or that securities industry regulators will
not enact more restrictive laws or regulations or change their
interpretations of current laws and regulations.

Our Clearing Operations Require Us to Have Access to
Significant Sources of Liquidity Which May Not Be
Available

As a clearing firm, we extend credit to customers who purchase
securities through their margin accounts. A significant portion
of our revenues is derived from these margin loans. To the
extent that these margin loans exceed customer free credit
balances (that is, customer cash balances maintained with us),
we generally must obtain financing from third parties.
Currently, we obtain a significant portion of our funds for
customer margin loans and our operating expenses from such
excess customer free credit balances. To the extent customer
cash balances are available for use by us at interest costs
lower than third party financing, our cost of funds is reduced
and our net income is enhanced. Such interest savings contribute
substantially to the profitability of our operations. We cannot
assure you that we will continue to be able to obtain such
financing on favorable terms or in sufficient amounts.

27



---



We Need to Comply with Stringent Capital
Requirements

Many of the regulatory agencies, securities exchanges and other
industry self-regulatory organizations that regulate us have
stringent rules with respect to the maintenance of specific
levels of net capital by securities broker-dealers. Net capital
is the net worth (assets minus liabilities) of a broker or
dealer, less deductions for certain types of assets. If our
brokerage subsidiaries fail to maintain the required net
capital, they may be subject to suspension or revocation of
their licenses, which could ultimately lead to their being
liquidated. If such net capital rules are changed or expanded,
or if there is an unusually large charge against net capital, we
might be required to limit or discontinue those portions of our
business that require the intensive use of capital. Such
operations include our clearing operations and the financing of
customer account balances. Also, our ability to withdraw capital
from our brokerage subsidiaries could be restricted, which in
turn could limit our ability to pay dividends, repay debt and
redeem or purchase shares of our outstanding stock, if
necessary. A large operating loss or charge against net capital
could adversely affect our ability to expand or even maintain
our present levels of business.

The Loss of Our Third Party Suppliers of Key Services
Would Adversely Affect Our Business

We rely on a number of third parties to process transactions.
These include service bureaus for our customer account record
keeping and data processing services and market makers and stock
exchanges to execute customer orders. In the U.S., we depend on
Automatic Data Processing and in Canada on Information Systems
Management Corporation (a wholly-owned subsidiary of IBM Canada)
for back-office services, including broker terminal services and
order entry systems, and other information necessary to run our
business, including transaction summaries, data feeds for
compliance and risk management, execution reports, and trade
confirmations. We cannot assure you that any of these providers
will be able to continue to provide these services in an
efficient, cost-effective manner or that they will be able to
adequately expand their services to meet our needs. An
interruption in or the cessation of service by any third-party
service provider as a result of systems failures or capacity
constraints or for any other reason, and our inability to make
alternative arrangements in a timely manner, if at all, would
have a material adverse effect on our business, financial
condition and operating results. See Business 
Products and Services.

Because We Rely On Encryption Technology Our Business is
Vulnerable to Security Risks Which May Compromise Our Customer
Transaction Data

A significant barrier to Internet commerce is the secure
transmission of confidential information over public networks.
We rely on third-party encryption and authentication technology
to facilitate secure transmission of confidential information.
We cannot assure you that advances in computer and cryptography
capabilities or other developments will not result in a
compromise of the algorithms we use to protect customer
transaction data. See  Technology and
Information Systems.

We May be Unable to Manage Effectively Our Rapid
Growth

Our rapid growth has placed significant demands on our
management and other resources and is likely to continue. To
manage the growth of our business, we will need to attract, hire
and retain highly skilled and motivated officers and employees.
In particular, we may need to hire a significant number of
account representatives and other customer service personnel to
support the expansion of our service centers. In addition, most
of our competitors are facing similar staffing shortages, making
the competition for qualified employees particularly strong. We
will also need to improve existing systems and/or implement new
systems for transaction processing, operational and financial
management and training, integrating and managing our growing
employee base. We cannot assure you that we will be able to
attract the employees or conduct the system improvements
necessary to manage this growth effectively or that we will be
able to achieve the rate of growth we have experienced in the
past.

28



---



Our Exposure to Possible Securities Litigation Could
Adversely Affect Our Business

Many aspects of the securities brokerage business, including
online trading services, involve substantial risks of liability.
In recent years, there has been an increasing incidence of
litigation involving the securities brokerage industry,
including class action and other suits that generally seek
substantial damages, including in some cases punitive damages.
Like other securities brokerage firms, we have been named as a
defendant in class actions and other suits. Any such litigation
brought in the future could have a material adverse effect on
our business, financial condition and operating results. See
 Legal Proceedings.

Losses Due to Customer Defaults and Fraud Could Have an
Adverse Effect on Our Business

Extending credit to our customers involves certain risks. We
allow certain of our customers to purchase securities on margin.
We also allow customers, subject to certain internal approval
requirements, to place trades up to specified limits without
first depositing any money into their accounts. We generally are
obligated to settle trades with the other party even if our
customer fails to meet his or her obligations to us. This risk
is especially great when the market is declining rapidly and the
value of the collateral we hold, if any, could fall below the
amount of our customers obligations to us for that trade.
Under applicable regulations and our internal policies, any time
we extend credit to a customer to purchase securities, we must
require the customer to maintain a minimum cash or securities
deposit level in his or her account. We run the risk of loss if
there are sharp changes in the market values of securities
pledged to us and our customers fail to honor their commitments
to supply additional cash collateral.

In addition to the risks of extending credit to customers, we
are exposed to potential losses resulting from fraud and other
misconduct by customers, including fraudulent Internet trading
(including fraudulent access to legitimate customer accounts, or
the use of a false identity to open an account) or the use of
forged or counterfeit checks for payment. Such types of fraud
may be difficult to prevent or detect, and we may not be able to
recover the losses caused by such activities. It is possible
that as a higher proportion of our trading volume is comprised
of online transactions, it may be more difficult to detect fraud
or misconduct at an early stage. Any such losses could have a
material adverse effect on our business, financial condition and
operating results.



| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | Control By TD Bank Could Prevent a Change of Control of
	Our Company and May Affect the Market Price of Our Common
	Stock

Currently, TD Bank beneficially owns approximately 88.6% of our
common stock, including shares issuable upon exchange of certain
exchangeable preference shares issued to TD Bank. Accordingly,
for as long as TD Bank continues to beneficially own more than
50% of our common stock, TD Bank will be able to elect our
entire board of directors, control all matters that require a
stockholder vote (such as mergers, acquisitions and other
business combinations) and exercise a significant amount of
influence over our management and operations. This concentration
of ownership could have the effect of preventing us from
undergoing a change of control in the future and might affect
the market price of our common stock.

Conflicts of Interest with TD Bank May Arise

Various conflicts of interest between us and TD Bank may arise
in the future in a number of areas relating to our past and
ongoing relationships, including potential acquisitions of
businesses or properties, potential competitive business
activities, the election of new or additional directors, payment
of dividends, incurrence of indebtedness, tax matters, financial
commitments, marketing functions, indemnity arrangements,
service arrangements, issuances of our capital stock, sales or
distributions by TD Bank of its remaining shares of our common
stock and the exercise by TD Bank of control over our management
and affairs. A majority of our directors also serve as officers
or directors of TD Bank or its other subsidiaries. Service as a
director or officer of both us and TD Bank or its other
subsidiaries would create conflicts of interest if such
directors and officers are faced with decisions that could have
materially different implications for us and for TD Bank. Our
charter includes certain provisions relating to the allocation
of business opportunities that may be suitable for both us and
TD Bank. These provisions will expire only after TD Bank no
longer beneficially owns at least ten percent

29



---





As part of the reorganization in 1999, TD Bank contributed all
of its worldwide discount brokerage operations to us. TD Bank
does not currently have any plans to form or acquire any other
discount brokerage operations, other than through us. However,
TD Bank, through its TD Evergreen Investment Services division,
is currently engaged in the full-service brokerage and related
investment service business, and TD Bank, directly and through
its subsidiaries, is engaged in the investment banking business.
TD Bank is not restricted from competing with us and we cannot
assure you that TD Bank will not expand its operations in ways
that would result in direct or indirect competition with us. It
is also possible that changes in the markets in which we operate
may in the future result in us competing directly or indirectly
with TD Bank and its other subsidiaries.

30



---



Item 2.  Properties

Our corporate headquarters are located at 100 Wall Street,
New York, New York. This office consists of approximately
119,500 square feet under a lease which expires as to
approximately 55,000 square feet in 2002 and the remaining
square feet in 2006. We also lease approximately 65,000 square
feet of space at 55 Water Street, New York, New York for
our clearing operations under a lease that expires in 2006. In
addition, we lease approximately 1,643,000 square feet
worldwide for our other branches and offices under various
leases, the majority of which expire on dates through 2006.

Item 3.  Legal Proceedings

Many aspects of our business involve substantial risks of
liability. In recent years, there has been an increasing
incidence of litigation involving the securities brokerage
industry, including class action suits that generally seek
substantial damages, including in some cases punitive damages.
Like other securities brokerage firms, we have been named as a
defendant in law suits and from time to time we have been
threatened with, or named as a defendant in, arbitrations and
administrative proceedings. Compliance and trading problems that
are reported to federal, state and provincial securities
regulators, securities exchanges or other self-regulatory
organizations by dissatisfied customers are investigated by such
regulatory bodies, and, if pursued by such regulatory body or
such customers, may rise to the level of arbitration or
disciplinary action. We are also subject to periodic regulatory
audits and inspections.

We are not, nor are our subsidiaries, currently a party to any
litigation that we believe could have a material adverse effect
on our business, financial condition or operating results.

Item 4.  Submission of Matters to a Vote of
Security Holders

No matters were submitted to a vote of the Companys
security holders during the fourth quarter of fiscal 2000.

31



---



Part II

Item 5.  Market for the Companys Common
Equity and Related Stockholder Matters

The Companys Common Stock has been trading on The New York
Stock Exchange and The Toronto Stock Exchange under the symbol
TWE since June 23, 1999. The following table
shows the high and low closing sales prices for our Common Stock
for the period indicated, as reported on The New York Stock
Exchange Composite Tape.

|                            |  |                       |          |     |  |  |          | 
|--------------------------- |  | --------------------- | -------- | --- |  |  | -------- | 
|                            |  |                      
|                            |  | Price of Common Stock
|                            |  |                      
|                            |  | High                  |          | Low
|                            |  |                       |          |    
|Fourth Quarter Fiscal 2000  |  |                       | $20.75   |     |  |  | $15.125  | 
|                           
|                           
|                           
|                           
|Third Quarter Fiscal 2000   |  |                       | $20.625  |     |  |  | $15.0625 | 
|                           
|                           
|                           
|                           
|Second Quarter Fiscal 2000  |  |                       | $25.6875 |     |  |  | $13.375  | 
|                           
|                           
|                           
|                           
|First Quarter Fiscal 2000   |  |                       | $20.375  |     |  |  | $12.75   | 
|                           
|                           
|                           
|                           
|Fourth Quarter Fiscal 1999  |  |                       | $17.50   |     |  |  | $11.4375 | 
|                           
|                           
|                           
|                           
|June 23, 1999-July 31, 1999 |  |                       | $26.125  |     |  |  | $17.375  | 

The closing sale price of the Companys Common Stock as
reported on the New York Stock Exchange on January 19, 2001
was $15.375 per share. As of January 19, 2001, there were
233 holders of record of the Companys Common Stock based
on information provided by our transfer agent. The number of
stockholders does not reflect the actual number of individual or
institutional stockholders of the Company because certain shares
are held in the name of nominees.

Dividends

We have never declared or paid cash dividends on our capital
stock. We intend to retain all of our earnings for use in our
business and do not anticipate paying any cash dividends in the
foreseeable future. Any decision to declare and pay dividends in
the future will be made at the discretion of our board of
directors, after taking into account such matters as general
business conditions, financial results, capital requirements,
contractual, legal and regulatory restrictions on the payment of
dividends by us to our stockholders or by our subsidiaries to us
and such other factors as the board of directors may deem
relevant.

32



---



Item 6.  Selected Financial Data

TD WATERHOUSE GROUP, INC.

SUMMARY FINANCIAL RESULTS

YEAR ENDED OCTOBER 31


|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |         | 
|------------------------------------------------ | ---------------------------------- | ------------------------------------------------------------- | ----------- | ------------ |  | ---------- | ----------- | ---------- |  | ----------- | ----------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                 |                                    | 2000                                                          |             | 1999         |  |            |             |            |  |            
|                                                 |                                    |                                                               |             |              |  | 1998       |             | 1997       |  | 1996       
|                                                 |                                    |                                                               |             |              |  | Historical |             | Historical |  | Pro Forma  
|                                                 |                                    | Consolidated                                                  |             | Consolidated |  | Combined   |             | Combined   |  | Combined(1)
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |            
|                                                 |                                    |                                                              
|                                                 |                                    | (in thousands of dollars, except share and per share amounts)
|                                                
|                                                
|                                                
|                                                
|Statement of income data                         |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|Revenues:                                        |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Commissions and fees               |                                                               | $           | 1,004,508    |  |            | $           | 633,530    |  |             | $           | 409,432 |  |   | $       | 313,572 |  |   | $       | 270,505 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Mutual fund and related revenue    |                                                               |             | 148,316      |  |            |             | 98,414     |  |             |             | 59,022  |  |   |         | 35,762  |  |   |         | 23,515  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Net interest revenue               |                                                               |             | 351,077      |  |            |             | 186,834    |  |             |             | 117,733 |  |   |         | 68,874  |  |   |         | 53,085  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                              |                                                               |             | 71,514       |  |            |             | 41,339     |  |             |             | 28,274  |  |   |         | 28,424  |  |   |         | 23,681  | 
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Total revenues                                   |                                    |                                                               | 1,575,415   |              |  |            | 960,117     |            |  |             | 614,461     |         |  |   | 446,632 |         |  |   | 370,786 |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Expenses:                                        |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Employee compensation and benefits |                                                               |             | 424,617      |  |            |             | 277,602    |  |             |             | 183,377 |  |   |         | 138,261 |  |   |         | 107,137 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Execution and clearing costs       |                                                               |             | 168,188      |  |            |             | 133,443    |  |             |             | 95,523  |  |   |         | 63,316  |  |   |         | 47,510  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Occupancy and equipment            |                                                               |             | 130,115      |  |            |             | 80,010     |  |             |             | 56,596  |  |   |         | 43,485  |  |   |         | 44,413  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Advertising and marketing          |                                                               |             | 110,761      |  |            |             | 62,761     |  |             |             | 33,184  |  |   |         | 18,511  |  |   |         | 14,439  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Communications                     |                                                               |             | 62,724       |  |            |             | 41,100     |  |             |             | 30,809  |  |   |         | 22,981  |  |   |         | 19,154  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Amortization of goodwill           |                                                               |             | 43,560       |  |            |             | 37,390     |  |             |             | 33,000  |  |   |         | 21,630  |  |   |         | 21,121  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Professional fees                  |                                                               |             | 47,285       |  |            |             | 24,519     |  |             |             | 15,350  |  |   |         | 14,871  |  |   |         | 15,034  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                              |                                                               |             | 206,597      |  |            |             | 120,754    |  |             |             | 63,144  |  |   |         | 44,956  |  |   |         | 34,311  | 
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Total expenses                                   |                                    |                                                               | 1,193,847   |              |  |            | 777,579     |            |  |             | 510,983     |         |  |   | 368,011 |         |  |   | 303,119 |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Income before income taxes                       |                                    |                                                               | 381,568     |              |  |            | 182,538     |            |  |             | 103,478     |         |  |   | 78,621  |         |  |   | 67,667  |        
|                                                
|                                                
|                                                
|                                                
|Income tax provision                             |                                    |                                                               | 171,252     |              |  |            | 85,192      |            |  |             | 54,765      |         |  |   | 42,416  |         |  |   | 41,363  |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Net income                                       |                                    | $                                                             | 210,316     |              |  | $          | 97,346      |            |  | $           | 48,713      |         |  | $ | 36,205  |         |  | $ | 26,304  |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|Basic earnings per share                         |                                    | $                                                             | 0.56        |              |  | $          | 0.28        |            |  | $           | 0.15        |         |  |   |         |         |  |   |         |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Diluted earnings per share                       |                                    | $                                                             | 0.55        |              |  | $          | 0.28        |            |  | $           | 0.15        |         |  |   |         |         |  |   |         |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Shares used to compute basic per share data(2)   |                                    |                                                               | 378,942,208 |              |  |            | 348,509,453 |            |  |             | 333,000,000 |         |  |   |         |         |  |   |         |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        
|Shares used to compute diluted per share data(2) |                                    |                                                               | 379,155,143 |              |  |            | 348,509,453 |            |  |             | 333,000,000 |         |  |   |         |         |  |   |         |        
|                                                 |                                    |                                                               |             |              |  |            |             |            |  |             |             |         |  |   |         |         |  |   |         |        

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |        | 
|------------------------------------------------ | ---------------------------------- | ------------------------------------------------------------- | ------- | ------ |  | ------ | ------- | ------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                 |                                    |                                                               |         |       
|                                                 |                                    | 1995                                                          |         | 1994  
|                                                 |                                    |                                                               |         |       
|                                                 |                                    | Canada                                                        |         | U.S.   |  | Canada |         | U.S.   
|                                                 |                                    |                                                               |         |        |  |        |         |        
|                                                 |                                    |                                                              
|                                                 |                                    | (in thousands of dollars, except share and per share amounts)
|                                                
|                                                
|                                                
|                                                
|Statement of income data                         |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|Revenues:                                        |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Commissions and fees               |                                                               | $       | 64,833 |  |        | $       | 113,881 |  |   | $       | 77,398 |  |   | $       | 83,917 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Mutual fund and related revenue    |                                                               |         | 5,831  |  |        |         | 9,286   |  |   |         |       |  |   |         | 6,018  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Net interest revenue               |                                                               |         | 28,660 |  |        |         | 18,888  |  |   |         | 26,604 |  |   |         | 13,056 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                              |                                                               |         | 14,493 |  |        |         | 1,375   |  |   |         | 9,863  |  |   |         | 1,603  | 
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|Total revenues                                   |                                    |                                                               | 113,817 |        |  |        | 143,430 |         |  |   | 113,865 |        |  |   | 104,594 |       
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|Expenses:                                        |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Employee compensation and benefits |                                                               |         | 31,414 |  |        |         | 43,259  |  |   |         | 35,136 |  |   |         | 32,272 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Execution and clearing costs       |                                                               |         | 17,219 |  |        |         | 14,989  |  |   |         | 18,312 |  |   |         | 11,983 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Occupancy and equipment            |                                                               |         | 10,221 |  |        |         | 12,992  |  |   |         | 8,555  |  |   |         | 10,223 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Advertising and marketing          |                                                               |         | 3,572  |  |        |         | 9,441   |  |   |         | 3,120  |  |   |         | 4,677  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Communications                     |                                                               |         | 6,718  |  |        |         | 6,032   |  |   |         | 7,330  |  |   |         | 4,189  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Amortization of goodwill           |                                                               |         | 1,623  |  |        |         |        |  |   |         | 1,638  |  |   |         |       | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Professional fees                  |                                                               |         | 5,799  |  |        |         | 4,095   |  |   |         | 4,172  |  |   |         | 2,480  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                              |                                                               |         | 11,313 |  |        |         | 13,969  |  |   |         | 15,219 |  |   |         | 9,477  | 
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|Total expenses                                   |                                    |                                                               | 87,879  |        |  |        | 104,777 |         |  |   | 93,482  |        |  |   | 75,301  |       
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|Income before income taxes                       |                                    |                                                               | 25,938  |        |  |        | 38,653  |         |  |   | 20,383  |        |  |   | 29,293  |       
|                                                
|                                                
|                                                
|                                                
|Income tax provision                             |                                    |                                                               | 12,127  |        |  |        | 15,228  |         |  |   | 9,689   |        |  |   | 11,731  |       
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|Net income                                       |                                    | $                                                             | 13,811  |        |  | $      | 23,425  |         |  | $ | 10,694  |        |  | $ | 17,562  |       
|                                                 |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|Basic earnings per share                         |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|Diluted earnings per share                       |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|Shares used to compute basic per share data(2)   |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       
|                                                
|                                                
|                                                
|                                                
|Shares used to compute diluted per share data(2) |                                    |                                                               |         |        |  |        |         |         |  |   |         |        |  |   |         |       

|                                  |  |                |            |              |  |            |           |            |  |             |           |  |  |   |           |  |  |   |           | 
|--------------------------------- |  | -------------- | ---------- | ------------ |  | ---------- | --------- | ---------- |  | ----------- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                  |  | 2000           |            | 1999         |  |            |           |            |  |            
|                                  |  |                |            |              |  | 1998       |           | 1997       |  | 1996       
|                                  |  |                |            |              |  | Historical |           | Historical |  | Pro Forma  
|                                  |  | Consolidated   |            | Consolidated |  | Combined   |           | Combined   |  | Combined(1)
|                                  |  |                |            |              |  |            |           |            |  |            
|                                  |  |               
|                                  |  | (in thousands)
|                                 
|                                 
|                                 
|                                 
|Statement of financial condition  |  |                |            |              |  |            |           |            |  |             |           |  |  |   |           |  |  |   |           | 
|                                 
|                                 
|                                 
|                                 
|Cash and cash equivalents         |  | $              | 859,579    |              |  | $          | 569,181   |            |  | $           | 522,029   |  |  | $ | 291,511   |  |  | $ | 246,097   | 
|                                 
|                                 
|                                 
|                                 
|Securities owned, at market value |  |                | 138,515    |              |  |            | 342,042   |            |  |             | 76,279    |  |  |   | 66,549    |  |  |   | 67,857    | 
|                                 
|                                 
|                                 
|                                 
|Receivables from customers        |  |                | 7,978,551  |              |  |            | 5,868,804 |            |  |             | 2,556,182 |  |  |   | 1,757,019 |  |  |   | 962,551   | 
|                                 
|                                 
|                                 
|                                 
|Total assets                      |  |                | 10,989,317 |              |  |            | 8,591,816 |            |  |             | 4,298,736 |  |  |   | 2,946,594 |  |  |   | 1,969,007 | 
|                                 
|                                 
|                                 
|                                 
|Securities loaned                 |  |                | 4,111,677  |              |  |            | 3,962,958 |            |  |             | 1,033,964 |  |  |   | 916,700   |  |  |   | 403,765   | 
|                                 
|                                 
|                                 
|                                 
|Payable to customers              |  |                | 2,849,485  |              |  |            | 2,016,535 |            |  |             | 1,947,430 |  |  |   | 1,190,480 |  |  |   | 764,457   | 
|                                 
|                                 
|                                 
|                                 
|Equity                            |  |                | 2,223,923  |              |  |            | 1,952,120 |            |  |             | 995,135   |  |  |   | 619,519   |  |  |   | 535,795   | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                  |  |                |         |      |  |        |         |      |  |   |         |  |  |   |         | 
|--------------------------------- |  | -------------- | ------- | ---- |  | ------ | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                  |  |                |         |     
|                                  |  | 1995           |         | 1994
|                                  |  |                |         |     
|                                  |  | Canada         |         | U.S. |  | Canada |         | U.S.
|                                  |  |                |         |      |  |        |         |     
|                                  |  |               
|                                  |  | (in thousands)
|                                 
|                                 
|                                 
|                                 
|Statement of financial condition  |  |                |         |      |  |        |         |      |  |   |         |  |  |   |         | 
|                                 
|                                 
|                                 
|                                 
|Cash and cash equivalents         |  | $              | 42,441  |      |  | $      | 14,553  |      |  | $ | 43,484  |  |  | $ | 9,806   | 
|                                 
|                                 
|                                 
|                                 
|Securities owned, at market value |  |                | 26,912  |      |  |        | 1,450   |      |  |   | 28,965  |  |  |   |        | 
|                                 
|                                 
|                                 
|                                 
|Receivables from customers        |  |                | 339,239 |      |  |        | 415,885 |      |  |   | 326,984 |  |  |   | 285,165 | 
|                                 
|                                 
|                                 
|                                 
|Total assets                      |  |                | 696,025 |      |  |        | 457,107 |      |  |   | 674,431 |  |  |   | 322,932 | 
|                                 
|                                 
|                                 
|                                 
|Securities loaned                 |  |                | 72,639  |      |  |        |        |      |  |   | 74,689  |  |  |   |        | 
|                                 
|                                 
|                                 
|                                 
|Payable to customers              |  |                | 496,387 |      |  |        | 121,632 |      |  |   | 436,537 |  |  |   | 96,992  | 
|                                 
|                                 
|                                 
|                                 
|Equity                            |  |                | 51,836  |      |  |        | 55,054  |      |  |   | 36,827  |  |  |   | 42,556  | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The pro forma combined statement of income data for the year
	ended October 31, 1996 has been prepared to give effect to
	the acquisition of the Waterhouse Securities Group on
	October 31, 1996, as if the acquisition had occurred on
	November 1, 1995. The pro forma adjustment represents the
	amortization of goodwill for the year ended October 31,
	1996 in the amount of $19,488 related to the acquisition of the
	Waterhouse Securities Group. There were no other pro forma
	adjustments.
|   
|(2) | Shares used to compute pro forma per share data for the year
	ended October 31, 1998 represent common stock outstanding
	immediately after the reorganization described elsewhere in this
	report but before the offerings. The shares include 36,000,000
	shares of common stock issuable on the exchange of the
	exchangeable preference shares of our Canadian subsidiary issued
	to TD Bank in the reorganization.                                                                                 

33



---



TD WATERHOUSE GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS




|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

The following discussion and analysis of the financial condition
and results of operations of TD Waterhouse Group, Inc. (the
Company) is based on the consolidated results of our
U.S. and international businesses. A more detailed discussion of
the accounting principles used to consolidate the assets,
liabilities and results of operations of the businesses and the
specific entities included in the consolidation is set forth in
Notes 1, 2 and 3 to our consolidated financial statements,
on pages 53 to 56 of this report.

Overview

We are one of the largest online financial services providers in
the world. We offer investors a broad range of brokerage, mutual
fund, banking and other consumer financial products on an
integrated basis through 231 branches in the U.S., Canada, the
U.K., Australia, and Hong Kong. In fiscal year 2000, we also
formed joint ventures with partners in India and Japan to
provide those countries with online financial services. Our
common stock trades on the New York and Toronto stock exchanges.
Our principal stockholder is TD Bank, one of Canadas
largest financial institutions.

Revenues

Commissions and fees, which account for the majority of total
revenues, include commissions earned for executing customer
trades; payments received by us from market-makers, exchanges
and other execution agents for order flow; and fees for
providing trade execution and clearance services to financial
institutions in the U.S. and Canada. Commissions and fees are
primarily affected by changes in transaction volumes and changes
in the commission or fee rates charged per transaction.
Commissions, which account for more than 92% of commissions and
transaction fees, fluctuate based on the number of active
customer accounts, the average number of trades per account and
the average commission per revenue trade. Active customer
accounts have grown 43%, to 3.11 million as at October 31,
2000, from 2.17 million as at October 31, 1999, which was
up 35% from 1.61 million as at October 31, 1998. We define
active accounts as accounts that had purchase, sale or other
activity, or a balance, during the previous calendar quarter.
The growth in trading volumes in the U.S. and major global
equities markets, along with the migration of customers to the
online channel, resulted in a 25% increase in the average number
of trades per active account for fiscal 2000 over fiscal 1999,
which had grown by 30% over fiscal 1998. The effect of such
increases has been partially offset by a decrease in the average
commission per revenue trade, to approximately $21 per trade in
fiscal 2000, down 10% from approximately $23 per trade in fiscal
1999, which was down 20% from approximately $29 per trade in
fiscal 1998. This has been due primarily to the introduction of
our online trading products in the U.S. in early 1997, which
provided customers using our online services with discounts from
our standard commission schedule. Customer use of online trading
has steadily increased to 73% of trades conducted during fiscal
2000, up from 62% for fiscal 1999, which was up from 45% for
fiscal 1998. We use other broker-dealers to execute our
customers orders, and receive revenue from these
broker-dealers for this order flow. Payments for order flow have
not increased commensurate with increases in trading volumes, as
a result of changes in regulations and market conventions that
caused market-makers and execution agents to change their
payment policies for order flow by reducing the payment per
trade and by limiting the types of trades on which payments are
made. Order flow revenue has been consistently less than 4% of
total revenue for the periods discussed herein. Transaction fees
for execution and clearing services have grown since 1996 due to
the addition of new clients in the U.S. and Canada, and general
increases in market volumes.

Mutual fund and related revenue represents customary trailer
fees from third-party and affiliated mutual funds in the U.S.
and Canada and, in the U.S. only, fees for shareholder services,
administration and investment management services provided to
our proprietary money market and mutual funds. Such fees are

34



---





We also receive fees for providing referral and administrative
services to our affiliate, TD Waterhouse Bank, N.A.
(TDWB), which are based on the daily cash balances
our customers choose to sweep into a Federal Deposit Insurance
Corporation (FDIC) insured money market account with
TDWB. Customer balances invested that were swept into the
FDIC-insured account totaled $4.9 billion as at October 31,
2000, which was an increase of 11% over the $4.4 billion held as
at October 31, 1999. The $4.4 billion balance at fiscal
1999 year end represented an increase of 76% over the $2.5
billion invested as at October 31, 1998. In addition, we
provide investment advisory services to TDWB with respect to
TDWBs fixed income portfolio, and receive a fee based on
the market value of the assets under management. Fees related to
services provided to TDWB are classified as mutual fund and
related revenue.

Net interest revenue is the difference between interest earned
on our interest-earning assets (which primarily consist of
margin loans to customers) and the interest expense associated
with our interest-bearing liabilities (which include free credit
balances in customers accounts, deposits received for
stock loaned, and other borrowings). Net interest revenue is
principally affected by changes in customer margin balances as
well as the prevailing net interest spread. Net interest spread
represents the difference between the rate we charge customers
on margin loans (based on the broker call rate) and the rate we
pay our customers (which is our lowest-cost source of funds) or
the rate we pay our other creditors. In the U.S., securities
regulations place limits on the amount of customer funds we can
use to finance our business, while no such limitations exist in
Canada. Accordingly, the net interest spread from our Canadian
brokerage operations has exceeded that of our U.S. operations.

Other revenue consists primarily of revenues derived from
ancillary services such as floor brokerage and retirement
account administration. Other revenue is also derived from
foreign exchange transactions on customer investments in stocks
traded on exchanges outside the customers home country,
fees from affiliates, and gains on proprietary holdings of
securities.

Our primary markets are the U.S. and Canada, which accounted for
66% and 29%, respectively, of our fiscal 2000 consolidated
revenues; 74% and 24%, respectively, of our consolidated
revenues for fiscal 1999; and 69% and 29%, respectively, for
fiscal 1998. At October 31, 2000, customers in the U.S.
held approximately 2.6 million of our total customer accounts,
and approximately 1.1 million were held by customers in Canada,
rounded as reflected in the table below. The table below shows
the growth in our business over the past three years in each of
our operating regions:

|                                                    |  |      |           |      |  |      |           |  |  |   |           | 
|--------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|Fiscal year ended October 31                        |  | 2000 |           | 1999 |  | 1998
|                                                    |  |      |           |      |  |     
|United States                                       |  |      |           |      |  |      |           |  |  |   |           | 
|                                                   
|                                                   
|                                                   
|                                                   
|Revenues (in thousands)                             |  | $    | 1,040,688 |      |  | $    | 709,214   |  |  | $ | 423,789   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Net Income before taxes and goodwill (in thousands) |  | $    | 274,359   |      |  | $    | 167,863   |  |  | $ | 93,731    | 
|                                                   
|                                                   
|                                                   
|                                                   
|Total accounts                                      |  |      | 2,574,000 |      |  |      | 1,989,000 |  |  |   | 1,510,000 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Average daily trades                                |  |      | 142,000   |      |  |      | 88,000    |  |  |   | 42,200    | 
|                                                   
|                                                   
|                                                   
|                                                   
|Total customer assets (in billions)                 |  | $    | 121.3     |      |  | $    | 96.6      |  |  | $ | 58.6      | 

35



---



|                                                    |  |      |           |      |  |      |         |   |  |   |         |  
|--------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Fiscal year ended October 31                        |  | 2000 |           | 1999 |  | 1998
|                                                    |  |      |           |      |  |     
|Canada                                              |  |      |           |      |  |      |         |   |  |   |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|Revenues (in thousands)                             |  | $    | 453,932   |      |  | $    | 228,967 |   |  | $ | 180,051 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Net income before taxes and goodwill (in thousands) |  | $    | 177,270   |      |  | $    | 62,861  |   |  | $ | 47,252  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total accounts                                      |  |      | 1,055,000 |      |  |      | 700,000 |   |  |   | 593,000 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Average daily trades                                |  |      | 37,200    |      |  |      | 17,000  |   |  |   | 12,900  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total customer assets (in billions)                 |  | $    | 34.6      |      |  | $    | 23.2    |   |  | $ | 16.1    |  
|                                                   
|                                                   
|                                                   
|                                                   
|Outside North America                               |  |      |           |      |  |      |         |   |  |   |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|Revenues (in thousands)                             |  | $    | 80,795    |      |  | $    | 21,936  |   |  | $ | 10,621  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Net income before taxes and goodwill (in thousands) |  | $    | (26,501   | )    |  | $    | (10,796 | ) |  | $ | (4,505  | )
|                                                   
|                                                   
|                                                   
|                                                   
|Total accounts                                      |  |      | 752,000   |      |  |      | 272,000 |   |  |   | 199,000 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Average daily trades                                |  |      | 8,500     |      |  |      | 2,100   |   |  |   | 1,100   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total customer assets (in billions)                 |  | $    | 3.0       |      |  | $    | 1.9     |   |  | $ | 1.2     |  

Operating expenses

Our largest operating expense is employee compensation and
benefits, which includes salaries and wages, incentive
compensation and related employee benefits, and taxes. We employ
a small number of commissioned sales representatives; therefore,
compensation and benefits do not vary directly with changes in
commission revenue. Most associates do, however, receive annual
incentive compensation based on the overall operating results of
our operations in each geographical region as well as individual
employee performance. Therefore, a significant portion of
compensation and benefits expense will fluctuate based on our
operating results. Prior to the beginning of the third fiscal
quarter on May 1, 2000, compensation expense also reflected
the change in intrinsic value of TD Bank stock options granted
to our employees under TD Banks stock option plan.
Effective May 1, 2000, certain holders signed legally
binding waivers to forfeit their right to a shareless exercise
as provided by the plan. As a result, no further expense will be
recorded for the change in the intrinsic value of the stock
options.

Execution and clearing costs include fees paid to floor brokers
and exchanges for trade execution costs, fees paid to
third-party vendors for data processing services, and fees paid
to clearing entities for certain clearance and settlement
services. Execution and clearing costs, with the exception of
data processing expenses, generally fluctuate based on
transaction volume. Data processing services are generally
provided under longer-term fixed fee arrangements with providers.

Occupancy and equipment expense includes the costs of leasing
and maintaining our office space and branch network, the lease
and rental costs related to computers and other equipment, and
depreciation and amortization expense associated with our fixed
assets and leasehold improvements. Occupancy and equipment
expense is affected primarily by increases in the number of
branches and employees.

Advertising and marketing includes media, print and direct mail
advertising expenses and other costs incurred to create brand
awareness, promote our product and service offerings, and
introduce new products and services. Due to the rapid
development of new products and services and increased
competition, advertising and marketing expense has increased
significantly from period to period. Management expects this
trend to continue, as evidenced by our announcement of an
expected $165 million branding and advertising campaign. As with
other variable expenses, this expense will be managed to keep in
step with revenue growth.

Communications expense includes telephone expenses, which are
generally affected by changes in customer transaction volumes
and the increased use of electronic communications channels and
online service offerings.

We have been active in acquiring new businesses to rapidly
expand our operations, including Marathon Brokerage in 1993,
Waterhouse Securities Group in 1996, Pont Securities Limited in
1997 and Rivkin Croll Smith, Kennedy Cabot & Co., Jack
White & Company and Gall & Eke in 1998. In the
fiscal year 2000, we acquired YorkSHARE Limited in the U.K., CT
Securities Inc. in Canada and Dealwise Limited in the U.K.

36



---





We also provided the initial funding of two joint ventures in
Japan and India, which were completed in the second fiscal
quarter, and began activity in the third quarter. The results of
operations for these joint ventures with The Bank of
Tokyo-Mitsubishi, Ltd., which provides access to the Japanese
market, and with Tata Finance Limited, which provides access to
the developing market in India, are reflected in other income
and are accounted for under the equity method of accounting.

Professional fees include fees paid to consultants engaged to
support our product, service and systems development efforts, as
well as legal and accounting fees. These expenses generally
fluctuate with overall changes in the level of business activity.

Other expenses consist of account administration costs such as
statement production, and general administrative expenses and
other costs including printing and supplies, along with fees
paid to TD Banks branch network for their support and
other costs, including postage. They also include expenses for
trading errors and provisions against our margin loan portfolio.

We are subject to income taxes in each country in which we
operate. The difference between our effective tax rate and the
U.S. statutory rate of 35% differs from period to period, but
primarily results from state and local taxes in the U.S.,
provincial taxes in Canada and the effect of certain
non-deductible expenses, most notably the amortization of
goodwill.

Effect of Recent Market Conditions

During our first two quarters of fiscal 2000, stock markets in
the U.S. and Canada experienced a significant increase in market
price levels and trading volume, which contributed to an
increase in investor interest in buying and trading securities.
During this period, we reached record levels of trading volume,
revenues and net income. However, in the third and fourth
quarters of fiscal 2000, market price levels and trading volume
decreased considerably from their peak levels earlier in the
year and the stock markets became increasingly volatile. Our
revenues and net income were affected by this downturn. Although
we achieved record results in the second half of the fiscal year
when compared to historical corresponding periods, nevertheless,
such results were lower than those achieved earlier in the year.
We remained profitable by carefully managing our expenses,
including customer acquisition costs, in response to these
changing market conditions, which continued through the first
quarter of our fiscal year 2001.

We adjust our expenses to the extent possible in anticipation of
and in response to such changes in financial market conditions
and customer trading patterns. Certain of our expenses
(including incentive compensation, portions of communications,
and execution and clearing costs) vary directly with changes in
financial performance or customer trading activity. Expenses
relating to the level of temporary employees, contractors,
overtime hours, professional services, and advertising and
marketing are adjustable over the short term to help us achieve
our financial objectives. Additionally, developmental spending
(including branch openings, product and service rollouts, and
certain information technology systems improvements) is
generally discretionary and can be altered in response to market
conditions. However, a significant portion of our expenses such
as salaries and wages, occupancy and equipment, depreciation and
amortization of goodwill do not vary directly, at least in the
short term, with fluctuations in revenues or securities trading
volumes. Also, we view our developmental spending as essential
to our future growth, and therefore attempt to avoid major
adjustments in such spending unless faced with a sustained
slowdown in customer trading activity. Given the nature of our
revenues and expenses, continued severe market fluctuations and
decreased investor activity could have a material adverse effect
on our business, financial condition and operating results in
future periods. Our results for any interim period are not
necessarily indicative of results for a full year.

37



---



Results of Operations

The following table provides the statements of income data for
the periods indicated as a percentage of total revenues:

|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|---------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|Year ended October 31              |  | 2000 |       | 1999 |  | 1998
|                                   |  |      |       |      |  |     
|Revenues                           |  |      |       |      |  |      |       |   |  |  |       |  
|                                  
|                                  
|                                  
|                                  
|Commissions and fees               |  |      | 63.8  | %    |  |      | 66.0  | % |  |  | 66.6  | %
|                                  
|                                  
|                                  
|                                  
|Mutual fund and related revenue    |  |      | 9.4   |      |  |      | 10.2  |   |  |  | 9.6   |  
|                                  
|                                  
|                                  
|                                  
|Net interest revenue               |  |      | 22.3  |      |  |      | 19.5  |   |  |  | 19.2  |  
|                                  
|                                  
|                                  
|                                  
|Other                              |  |      | 4.5   |      |  |      | 4.3   |   |  |  | 4.6   |  
|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|Total revenues                     |  |      | 100.0 | %    |  |      | 100.0 | % |  |  | 100.0 | %
|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|Expenses                           |  |      |       |      |  |      |       |   |  |  |       |  
|                                  
|                                  
|                                  
|                                  
|Employee compensation and benefits |  |      | 26.9  | %    |  |      | 28.9  | % |  |  | 29.8  | %
|                                  
|                                  
|                                  
|                                  
|Execution and clearing costs       |  |      | 10.7  |      |  |      | 13.9  |   |  |  | 15.5  |  
|                                  
|                                  
|                                  
|                                  
|Occupancy and equipment            |  |      | 8.3   |      |  |      | 8.3   |   |  |  | 9.2   |  
|                                  
|                                  
|                                  
|                                  
|Advertising and marketing          |  |      | 7.0   |      |  |      | 6.5   |   |  |  | 5.4   |  
|                                  
|                                  
|                                  
|                                  
|Communications                     |  |      | 4.0   |      |  |      | 4.3   |   |  |  | 5.0   |  
|                                  
|                                  
|                                  
|                                  
|Amortization of goodwill           |  |      | 2.8   |      |  |      | 3.9   |   |  |  | 5.4   |  
|                                  
|                                  
|                                  
|                                  
|Professional fees                  |  |      | 3.0   |      |  |      | 2.6   |   |  |  | 2.5   |  
|                                  
|                                  
|                                  
|                                  
|Other                              |  |      | 13.1  |      |  |      | 12.6  |   |  |  | 10.3  |  
|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|Total expenses                     |  |      | 75.8  | %    |  |      | 81.0  | % |  |  | 83.1  | %
|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|Income before income taxes         |  |      | 24.2  | %    |  |      | 19.0  | % |  |  | 16.9  | %
|                                  
|                                  
|                                  
|                                  
|Income tax provision               |  |      | 10.9  |      |  |      | 8.9   |   |  |  | 8.9   |  
|                                   |  |      |       |      |  |      |       |   |  |  |       |  
|Net income                         |  |      | 13.3  | %    |  |      | 10.1  | % |  |  | 8.0   | %
|                                   |  |      |       |      |  |      |       |   |  |  |       |  

Financial Overview

Years ended October 31, 2000, 1999 and 1998


2000 versus 1999

Net income for the fiscal year ended October 31, 2000 set a
new record at $210.3 million, up 116.0% from fiscal year 1999
net income of $97.3 million. Fiscal year 2000 revenues also set
a new record at $1,575 million, up 64.1% from $960.1 million in
fiscal year 1999. This was due primarily to a 58.6% increase in
commissions and transaction fees, a 50.7% increase in mutual
fund and related revenue, an 88.0% increase in net interest
revenue and a 73.0% increase in other revenue.

Total operating expenses during fiscal year 2000 were $1,194
million, up 53.5% from $777.6 million for fiscal year 1999. This
increase resulted largely from a $147.0 million increase in
compensation and benefits costs, which included the impact of
almost 2,200 new associates to handle increased business volume,
of whom more than 1,200 were dedicated to retail service.
Increases were also experienced in volume-driven clearing costs
($34.7 million), occupancy and equipment in connection with the
expanded staffing, branch expansion and infrastructure upgrades
($50.1 million), increased marketing and advertising expenses
related to the national advertising and global branding
campaigns ($48.0 million), and other expenses, including trading
errors and margin loan portfolio provisions, and general and
account administration costs ($85.8 million).

1999 versus 1998

Net income for the fiscal year ended October 31, 1999 was a
record $97.3 million, up 99.8% from fiscal year 1998 net income
of $48.7 million. Fiscal year 1999 revenues were also a record
$960.1 million, up 56.2% from $614.5 million in fiscal year
1998, primarily due to a 54.7% increase in commissions and
transaction fees, a 66.8% increase in mutual fund and related
revenue, and a 58.7% increase in net interest revenue.

38



---



Total operating expenses during fiscal year 1999 were
$777.6 million, up 52.1% from $511.0 million for
fiscal year 1998, primarily resulting from the significant
growth in our business and the full-year impact of our 1998
acquisition of Jack White & Company.

Commissions and fees

2000 versus 1999

Commissions and fees were $1,005 million for the fiscal
year ended October 31, 2000, up $371.0 million, or
58.6%, from fiscal year 1999. The total number of trades
executed increased 77.3% as our customer account base grew, and
our online offering increased in popularity. Average commission
per revenue trade decreased 10.2% to approximately $21 due to
the expanding popularity of our online brokerage services, which
are offered at a lower price than traditional agent-based
trading. For fiscal year 2000, total daily average online trades
and total daily electronic trades, reflected in the table below,
as rounded, represented 73% and 77% of total trades,
respectively, as compared to 62% and 66%, respectively, for
fiscal year 1999.

We added approximately 1,017,000 new customer accounts during
fiscal year 2000, excluding acquisitions, an increase of 38%
from approximately 739,000 new accounts added during fiscal year
1999. Our advertising and marketing expense per new account was
approximately $109 for fiscal year 2000 versus approximately $85
for fiscal year 1999.

|                                      |  |      |         |      |  |          |         |  |  |  |     |   
|------------------------------------- |  | ---- | ------- | ---- |  | -------- | ------- |  |  |  | --- | --
|Fiscal year ended October 31          |  | 2000 |         | 1999 |  | % change
|                                      |  |      |         |      |  |         
|Average trades per day                |  |      |         |      |  |          |         |  |  |  |     |   
|                                     
|                                     
|                                     
|                                     
|Total daily average online trades     |  |      | 137,500 |      |  |          | 66,600  |  |  |  | 106 |   
|                                     
|                                     
|                                     
|                                     
|Touch-tone                            |  |      | 6,200   |      |  |          | 4,400   |  |  |  | 42  |   
|                                      |  |      |         |      |  |          |         |  |  |  |     |   
|Total daily average electronic trades |  |      | 143,700 |      |  |          | 71,000  |  |  |  | 102 |   
|                                     
|                                     
|                                     
|                                     
|Agent trades                          |  |      | 44,000  |      |  |          | 36,100  |  |  |  | 22  |   
|                                      |  |      |         |      |  |          |         |  |  |  |     |   
|Total daily average trades            |  |      | 187,700 |      |  |          | 107,100 |  |  |  | 75  | % 
|                                      |  |      |         |      |  |          |         |  |  |  |     |   
|Average commission per revenue trade  |  | $    | 20.68   |      |  | $        | 23.02   |  |  |  | (10 | )%

1999 versus 1998

Commissions and fees were $633.5 million for the fiscal
year ended October 31, 1999, up $224.1 million, or
54.7%, from fiscal year 1998. The total number of trades
executed increased 90.6% as our customer base grew due to the
rapid growth of our core franchise. The average commission per
revenue trade decreased 20.1% to approximately $23, due to the
increased proportion of trades placed through our online
brokerage channels. For fiscal year 1999, total daily average
online trades and total daily electronic trades, reflected in
the table below, as rounded, represented 62% and 66%,
respectively, as compared to 45% and 51%, respectively, for
fiscal year 1998.

We added approximately 739,000 new customer accounts during
fiscal year 1999, an increase of 45% from the approximately
511,000 new accounts added during fiscal year 1998. Our
advertising and marketing expense per new account was
approximately $85 for fiscal year 1999 versus approximately $65
for fiscal year 1998.

|                                      |  |      |         |      |  |          |        |  |  |  |     |   
|------------------------------------- |  | ---- | ------- | ---- |  | -------- | ------ |  |  |  | --- | --
|Fiscal year ended October 31          |  | 1999 |         | 1998 |  | % change
|                                      |  |      |         |      |  |         
|Average trades per day                |  |      |         |      |  |          |        |  |  |  |     |   
|                                     
|                                     
|                                     
|                                     
|Total daily average online trades     |  |      | 66,600  |      |  |          | 25,200 |  |  |  | 164 |   
|                                     
|                                     
|                                     
|                                     
|Touch-tone                            |  |      | 4,400   |      |  |          | 3,400  |  |  |  | 28  |   
|                                      |  |      |         |      |  |          |        |  |  |  |     |   
|Total daily average electronic trades |  |      | 71,000  |      |  |          | 28,600 |  |  |  | 148 |   
|                                     
|                                     
|                                     
|                                     
|Agent trades                          |  |      | 36,100  |      |  |          | 27,600 |  |  |  | 31  |   
|                                      |  |      |         |      |  |          |        |  |  |  |     |   
|Total daily average trades            |  |      | 107,100 |      |  |          | 56,200 |  |  |  | 91  | % 
|                                      |  |      |         |      |  |          |        |  |  |  |     |   
|Average commission per revenue trade  |  | $    | 23.02   |      |  | $        | 28.82  |  |  |  | (20 | )%

39



---



Mutual fund and related revenue

2000 versus 1999

Mutual fund and related revenue was $148.3 million for the
fiscal year ended October 31, 2000, up $49.9 million,
or 50.7%, from the prior fiscal year. This increase was
primarily due to a strong increase in customer assets in
third-party mutual funds, proprietary money market and mutual
funds, and money market accounts.

1999 versus 1998

Mutual fund and related revenue was $98.4 million for the
fiscal year ended October 31, 1999, up $39.4 million,
or 66.8%, from the prior fiscal year. This increase was
primarily due to a significant increase in customer assets in
third-party mutual funds and proprietary money market and mutual
funds, including the full-year impact of the acquisition of Jack
White & Company.

Net interest revenue

2000 versus 1999

Net interest revenue was $351.1 million for the fiscal year
ended October 31, 2000, up $164.2 million, or 87.9%,
from fiscal year 1999. This increase was due primarily to a
90.0% increase in average customer margin loans to
$8.52 billion during fiscal year 2000 from
$4.48 billion during fiscal year 1999. Our net interest
spread decreased to 2.50% in fiscal year 2000 from 2.59% in
fiscal year 1999. This was due primarily to the margin loan
volumes of our U.S. operations growing more rapidly (92%)
than the volumes of our Canadian operations (79%), as our U.S.
operations have a lower net interest spread than their Canadian
counterparts.

1999 versus 1998

Net interest revenue was $186.8 million for the fiscal year
ended October 31, 1999, up $69.1 million, or 58.7%,
from fiscal year 1998. This increase was due primarily to an
83.5% increase in average customer margin loans to
$4.48 billion during fiscal year 1999 from
$2.44 billion during fiscal year 1998. Our net interest
spread decreased to 2.59% in fiscal year 1999 from 3.02% in
fiscal year 1998 due primarily to the rapid growth of our U.S.
operations, which have a lower net interest spread than our
Canadian operations.

Operating Expenses

Years ended October 31, 2000, 1999 and 1998


2000 versus 1999

Compensation and benefits expense was $424.6 million for
the fiscal year ended October 31, 2000, up
$147.0 million, or 53.0%, from the prior fiscal year. This
increase was primarily due to the increase in the number of
associates to support our rapid growth and to provide incentive
compensation in line with our operating results.

Execution and clearing costs were $168.2 million for fiscal
year 2000, up $34.7 million, or 26.0%, from fiscal year
1999. The increase was primarily due to the increased
transaction volume during the year, partially offset by the
savings derived from the operational leverage of our clearing
operations.

Occupancy and equipment expense was $130.1 million for the
fiscal year ended October 31, 2000, up $50.1 million,
or 62.6%, from fiscal year 1999. This increase was due primarily
to additional lease expenses for our expanded office space, as
well as increased lease and depreciation expenses for data
processing equipment. During fiscal year 2000, we opened a net
total of 17 new branches.

Advertising and marketing expense was $110.8 million in
fiscal year 2000, up $48.0 million, or 76.5%, from fiscal
year 1999. This increase primarily relates to increased national
advertising in the U.S., but also includes costs from the
foreign national advertising and branding campaigns launched in
the fourth quarter of fiscal 1999.

40



---



Communications expense was $62.7 million during fiscal year
2000, up $21.6 million, or 52.6%, from fiscal year 1999.
This increase was due primarily to increased trading volumes and
the opening of new branches.

Amortization of goodwill was $43.6 million for fiscal year
2000, up $6.2 million, or 16.5%, from fiscal year 1999.
This increase was due to the acquisitions of YorkSHARE Limited
in the U.K. in the first quarter of fiscal 2000, CT Securities
Inc. in Canada in the second quarter of fiscal 2000, and
Dealwise Limited in the U.K. in the third quarter of fiscal 2000.

Professional fees were $47.3 million in fiscal year 2000,
up $22.8 million, or 92.9%, from the prior fiscal year.
This increase was primarily due to additional fees incurred for
computer programming and systems consultants
($9.7 million), state registration fees ($5.2 million)
for the increased number of dedicated retail associates (up more
than 1,200) in call centers and branches, and an increase in
costs of management for international operations expansion.

Other expenses were $206.6 million for fiscal year 2000, up
$85.8 million, or 71.1%, from the prior fiscal year. This
increase in other expenses is a reflection of the overall
increase in the business, as it includes costs related to
account opening and maintenance, statement production, postage,
printing and supplies, along with increased account
administration support costs in Canada. The increase in other
expenses also reflects increased costs incurred for trading
errors and an increase in provisions on the margin loan
portfolio.

Our effective income tax rates for fiscal years 2000 and 1999
were 44.9% and 46.7%, respectively. Our effective tax rates,
excluding the effects of non-deductible goodwill, were 41.8% and
41.6%, respectively, for the fiscal years ended October 31,
2000 and 1999.

1999 versus 1998

Compensation and benefits expense was $277.6 million for
the fiscal year ended October 31, 1999, up
$94.2 million, or 51.4%, from the prior fiscal year. This
increase was due primarily to a greater number of associates and
to increases in incentive compensation consistent with our
increased profits.

Execution and clearing costs were $133.4 million for fiscal
year 1999, up $37.9 million, or 39.7%, from fiscal year
1998. The increase was due primarily to the corresponding
increase in trade volume during the year, partially offset by
the savings derived from the operational leverage of our
clearing business.

Occupancy and equipment expense was $80.0 million for the
fiscal year ended October 31, 1999, up $23.4 million,
or 41.3%, from fiscal year 1998. This increase was due primarily
to additional lease expenses on our expanded office space, as
well as increased lease and depreciation expenses on data
processing equipment. During fiscal year 1999, we opened 20 new
branches.

Advertising and marketing expense was $62.8 million for
fiscal year 1999, up $29.6 million, or 89.0%, from fiscal
year 1998. This increase relates primarily to increased national
advertising campaigns.

Communications expense was $41.1 million for fiscal year
1999, up $10.3 million, or 33.4%, from fiscal year 1998. This
increase was due primarily to increased trading volumes and the
opening of new branches.

Amortization of goodwill was $37.4 million for fiscal year
1999, up $4.4 million, or 13.3%, from fiscal year 1998.
This increase was due primarily to the full-year effect of the
acquisition of Jack White & Company, which occurred in
late May 1998.

Professional fees were $24.5 million in fiscal year 1999,
up $9.1 million, or 59.7%, from the prior fiscal year. This
increase was due primarily to additional fees incurred for
computer programming and systems consultants.

Other expenses were $120.8 million for fiscal year 1999, up
$57.7 million, or 91.4%, from the prior fiscal year,
consistent with the overall increase in business activity.

Our effective income tax rates for fiscal years 1999 and 1998
were 46.7% and 52.9%, respectively. Our effective tax rates,
excluding the effects of non-deductible goodwill, were 41.6% and
44.3%, respectively, for the fiscal years ended October 31,
1999 and 1998.

41



---



Quarterly Results

The following tables set forth certain unaudited quarterly
statements of income data and certain unaudited quarterly
operating data for the eight quarters ended October 31,
2000. In our opinion, this unaudited information has been
prepared on substantially the same basis as the financial
statements appearing on pages 49 to 52, and includes all
adjustments (consisting of normal recurring adjustments)
necessary to present fairly the unaudited quarterly data. The
unaudited quarterly data should be read in conjunction with the
financial statements and notes. The results for any quarter are
not necessarily indicative of results for any future period.

|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|---------------------------------- |  | ------------------------------------------------------------- | ------- | -------- |  | --------- | ------- | ----------- |  | ----------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                   |  |                                                              
|                                   |  | Quarter Ended                                                
|                                   |  |                                                              
|                                   |  | October 31,                                                   |         | July 31, |  | April 30, |         | January 31, |  | October 31,
|                                   |  | 2000                                                          |         | 2000     |  | 2000      |         | 2000        |  | 1999       
|                                   |  |                                                               |         |          |  |           |         |             |  |            
|                                   |  |                                                              
|                                   |  | (in thousands of dollars, except share and per share amounts)
|                                  
|                                  
|                                  
|                                  
|Revenues                           |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|                                  
|                                  
|                                  
|                                  
|Commissions and fees               |  | $                                                             | 205,880 |          |  | $         | 202,947 |             |  | $           | 336,871 |  |  | $ | 258,810 |  |  | $ | 149,397 | 
|                                  
|                                  
|                                  
|                                  
|Mutual fund and related revenue    |  |                                                               | 40,347  |          |  |           | 37,065  |             |  |             | 37,707  |  |  |   | 33,197  |  |  |   | 29,097  | 
|                                  
|                                  
|                                  
|                                  
|Net interest revenue               |  |                                                               | 92,268  |          |  |           | 88,846  |             |  |             | 94,046  |  |  |   | 75,917  |  |  |   | 61,851  | 
|                                  
|                                  
|                                  
|                                  
|Other                              |  |                                                               | 20,986  |          |  |           | 16,752  |             |  |             | 20,052  |  |  |   | 13,724  |  |  |   | 12,785  | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Total revenues                     |  |                                                               | 359,481 |          |  |           | 345,610 |             |  |             | 488,676 |  |  |   | 381,648 |  |  |   | 253,130 | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Expenses                           |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|                                  
|                                  
|                                  
|                                  
|Employee compensation and benefits |  |                                                               | 107,056 |          |  |           | 97,539  |             |  |             | 116,488 |  |  |   | 103,534 |  |  |   | 75,946  | 
|                                  
|                                  
|                                  
|                                  
|Execution and clearing costs       |  |                                                               | 38,275  |          |  |           | 40,610  |             |  |             | 48,154  |  |  |   | 41,149  |  |  |   | 32,851  | 
|                                  
|                                  
|                                  
|                                  
|Occupancy and equipment            |  |                                                               | 37,469  |          |  |           | 32,445  |             |  |             | 33,347  |  |  |   | 26,854  |  |  |   | 21,800  | 
|                                  
|                                  
|                                  
|                                  
|Advertising and marketing          |  |                                                               | 21,946  |          |  |           | 23,434  |             |  |             | 29,250  |  |  |   | 36,131  |  |  |   | 24,063  | 
|                                  
|                                  
|                                  
|                                  
|Communications                     |  |                                                               | 14,667  |          |  |           | 14,468  |             |  |             | 19,973  |  |  |   | 13,616  |  |  |   | 8,413   | 
|                                  
|                                  
|                                  
|                                  
|Amortization of goodwill           |  |                                                               | 11,803  |          |  |           | 11,556  |             |  |             | 10,576  |  |  |   | 9,625   |  |  |   | 9,537   | 
|                                  
|                                  
|                                  
|                                  
|Professional fees                  |  |                                                               | 15,888  |          |  |           | 11,477  |             |  |             | 11,318  |  |  |   | 8,602   |  |  |   | 7,849   | 
|                                  
|                                  
|                                  
|                                  
|Other                              |  |                                                               | 36,222  |          |  |           | 47,251  |             |  |             | 82,259  |  |  |   | 40,865  |  |  |   | 32,159  | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Total expenses                     |  |                                                               | 283,326 |          |  |           | 278,780 |             |  |             | 351,365 |  |  |   | 280,376 |  |  |   | 212,618 | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Income before income taxes         |  |                                                               | 76,155  |          |  |           | 66,830  |             |  |             | 137,311 |  |  |   | 101,272 |  |  |   | 40,512  | 
|                                  
|                                  
|                                  
|                                  
|Income tax provision               |  |                                                               | 33,966  |          |  |           | 32,339  |             |  |             | 60,691  |  |  |   | 44,256  |  |  |   | 19,588  | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Net income                         |  | $                                                             | 42,189  |          |  | $         | 34,491  |             |  | $           | 76,620  |  |  | $ | 57,016  |  |  | $ | 20,924  | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Earnings per share  basic         |  | $                                                             | 0.11    |          |  | $         | 0.09    |             |  | $           | 0.20    |  |  | $ | 0.15    |  |  | $ | 0.06    | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 
|Earnings per share  diluted       |  | $                                                             | 0.11    |          |  | $         | 0.09    |             |  | $           | 0.20    |  |  | $ | 0.15    |  |  | $ | 0.06    | 
|                                   |  |                                                               |         |          |  |           |         |             |  |             |         |  |  |   |         |  |  |   |         | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|---------------------------------- |  | ------------------------------------------------------------- | ------- | --------- |  | ----------- | ------- |  |  | - | ------- | 
|                                   |  |                                                              
|                                   |  | Quarter Ended                                                
|                                   |  |                                                              
|                                   |  | July 31,                                                      |         | April 30, |  | January 31,
|                                   |  | 1999                                                          |         | 1999      |  | 1999       
|                                   |  |                                                               |         |           |  |            
|                                   |  |                                                              
|                                   |  | (in thousands of dollars, except share and per share amounts)
|                                  
|                                  
|                                  
|                                  
|Revenues                           |  |                                                               |         |           |  |             |         |  |  |   |         | 
|                                  
|                                  
|                                  
|                                  
|Commissions and fees               |  | $                                                             | 155,455 |           |  | $           | 176,634 |  |  | $ | 152,044 | 
|                                  
|                                  
|                                  
|                                  
|Mutual fund and related revenue    |  |                                                               | 25,722  |           |  |             | 22,812  |  |  |   | 20,783  | 
|                                  
|                                  
|                                  
|                                  
|Net interest revenue               |  |                                                               | 51,668  |           |  |             | 39,311  |  |  |   | 34,004  | 
|                                  
|                                  
|                                  
|                                  
|Other                              |  |                                                               | 10,109  |           |  |             | 10,241  |  |  |   | 8,204   | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Total revenues                     |  |                                                               | 242,954 |           |  |             | 248,998 |  |  |   | 215,035 | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Expenses                           |  |                                                               |         |           |  |             |         |  |  |   |         | 
|                                  
|                                  
|                                  
|                                  
|Employee compensation and benefits |  |                                                               | 71,335  |           |  |             | 70,462  |  |  |   | 59,859  | 
|                                  
|                                  
|                                  
|                                  
|Execution and clearing costs       |  |                                                               | 32,489  |           |  |             | 33,424  |  |  |   | 34,679  | 
|                                  
|                                  
|                                  
|                                  
|Occupancy and equipment            |  |                                                               | 21,409  |           |  |             | 19,047  |  |  |   | 17,754  | 
|                                  
|                                  
|                                  
|                                  
|Advertising and marketing          |  |                                                               | 14,642  |           |  |             | 12,487  |  |  |   | 11,569  | 
|                                  
|                                  
|                                  
|                                  
|Communications                     |  |                                                               | 9,971   |           |  |             | 11,999  |  |  |   | 10,717  | 
|                                  
|                                  
|                                  
|                                  
|Amortization of goodwill           |  |                                                               | 9,290   |           |  |             | 9,284   |  |  |   | 9,279   | 
|                                  
|                                  
|                                  
|                                  
|Professional fees                  |  |                                                               | 6,422   |           |  |             | 6,166   |  |  |   | 4,082   | 
|                                  
|                                  
|                                  
|                                  
|Other                              |  |                                                               | 28,383  |           |  |             | 31,212  |  |  |   | 29,000  | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Total expenses                     |  |                                                               | 193,941 |           |  |             | 194,081 |  |  |   | 176,939 | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Income before income taxes         |  |                                                               | 49,013  |           |  |             | 54,917  |  |  |   | 38,096  | 
|                                  
|                                  
|                                  
|                                  
|Income tax provision               |  |                                                               | 22,621  |           |  |             | 24,954  |  |  |   | 18,029  | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Net income                         |  | $                                                             | 26,392  |           |  | $           | 29,963  |  |  | $ | 20,067  | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Earnings per share  basic         |  | $                                                             | 0.08    |           |  | $           | 0.09    |  |  | $ | 0.06    | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 
|Earnings per share  diluted       |  | $                                                             | 0.08    |           |  | $           | 0.09    |  |  | $ | 0.06    | 
|                                   |  |                                                               |         |           |  |             |         |  |  |   |         | 

42



---



|                                             |  |               |           |          |  |           |           |             |  |             |           |          |  |   |           |   |  |   |           |   |  |   |           |  
|-------------------------------------------- |  | ------------- | --------- | -------- |  | --------- | --------- | ----------- |  | ----------- | --------- | -------- |  | - | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                             |  |              
|                                             |  | Quarter Ended
|                                             |  |              
|                                             |  | October 31,   |           | July 31, |  | April 30, |           | January 31, |  | October 31, |           | July 31,
|                                             |  | 2000          |           | 2000     |  | 2000      |           | 2000        |  | 1999        |           | 1999    
|                                             |  |               |           |          |  |           |           |             |  |             |           |         
|Other Operating Data                         |  |               |           |          |  |           |           |             |  |             |           |          |  |   |           |   |  |   |           |   |  |   |           |  
|                                            
|                                            
|                                            
|                                            
|Pre-tax operating margin, excluding goodwill |  |               | 24.5      | %        |  |           | 22.7      | %           |  |             | 30.3      | %        |  |   | 29.1      | % |  |   | 19.8      | % |  |   | 24.0      | %
|                                            
|                                            
|                                            
|                                            
|Average commissions per revenue trade        |  | $             | 20.80     |          |  | $         | 19.69     |             |  | $           | 20.87     |          |  | $ | 21.36     |   |  | $ | 22.38     |   |  | $ | 22.07     |  
|                                            
|                                            
|                                            
|                                            
|Average trades per day:                      |  |               |           |          |  |           |           |             |  |             |           |          |  |   |           |   |  |   |           |   |  |   |           |  
|                                            
|                                            
|                                            
|                                            
|Online                                       |  |               | 110,000   |          |  |           | 115,600   |             |  |             | 189,500   |          |  |   | 136,900   |   |  |   | 70,000    |   |  |   | 69,900    |  
|                                            
|                                            
|                                            
|                                            
|Electronic(1)                                |  |               | 115,100   |          |  |           | 121,000   |             |  |             | 197,900   |          |  |   | 143,100   |   |  |   | 73,600    |   |  |   | 74,200    |  
|                                            
|                                            
|                                            
|                                            
|Total                                        |  |               | 151,900   |          |  |           | 156,800   |             |  |             | 254,800   |          |  |   | 190,000   |   |  |   | 103,500   |   |  |   | 108,600   |  
|                                            
|                                            
|                                            
|                                            
|Total accounts                               |  |               | 4,381,000 |          |  |           | 4,248,000 |             |  |             | 3,850,000 |          |  |   | 3,332,000 |   |  |   | 2,961,000 |   |  |   | 2,833,000 |  
|                                            
|                                            
|                                            
|                                            
|Total active accounts(2)                     |  |               | 3,109,000 |          |  |           | 3,011,000 |             |  |             | 2,813,000 |          |  |   | 2,372,000 |   |  |   | 2,168,000 |   |  |   | 2,066,000 |  
|                                            
|                                            
|                                            
|                                            
|Number of new accounts                       |  |               | 166,000   |          |  |           | 172,000   |             |  |             | 418,000   |          |  |   | 261,000   |   |  |   | 150,000   |   |  |   | 169,000   |  
|                                            
|                                            
|                                            
|                                            
|Total customer assets (in  billions)         |  | $             | 158.9     |          |  | $         | 162.6     |             |  | $           | 160.4     |          |  | $ | 150.3     |   |  | $ | 121.7     |   |  | $ | 112.7     |  
|                                            
|                                            
|                                            
|                                            
|Total associates                             |  |               | 8,298     |          |  |           | 8,436     |             |  |             | 8,121     |          |  |   | 7,040     |   |  |   | 6,110     |   |  |   | 5,981     |  
|                                            
|                                            
|                                            
|                                            
|Total branches                               |  |               | 231       |          |  |           | 227       |             |  |             | 224       |          |  |   | 219       |   |  |   | 212       |   |  |   | 210       |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                             |  |               |           |             |  |   |           |  
|-------------------------------------------- |  | ------------- | --------- | ----------- |  | - | --------- | -
|                                             |  |              
|                                             |  | Quarter Ended
|                                             |  |              
|                                             |  | April 30,     |           | January 31,
|                                             |  | 1999          |           | 1999       
|                                             |  |               |           |            
|Other Operating Data                         |  |               |           |             |  |   |           |  
|                                            
|                                            
|                                            
|                                            
|Pre-tax operating margin, excluding goodwill |  |               | 25.8      | %           |  |   | 22.0      | %
|                                            
|                                            
|                                            
|                                            
|Average commissions per revenue trade        |  | $             | 23.11     |             |  | $ | 24.14     |  
|                                            
|                                            
|                                            
|                                            
|Average trades per day:                      |  |               |           |             |  |   |           |  
|                                            
|                                            
|                                            
|                                            
|Online                                       |  |               | 69,400    |             |  |   | 56,900    |  
|                                            
|                                            
|                                            
|                                            
|Electronic(1)                                |  |               | 74,300    |             |  |   | 61,500    |  
|                                            
|                                            
|                                            
|                                            
|Total                                        |  |               | 118,000   |             |  |   | 98,000    |  
|                                            
|                                            
|                                            
|                                            
|Total accounts                               |  |               | 2,640,000 |             |  |   | 2,467,000 |  
|                                            
|                                            
|                                            
|                                            
|Total active accounts(2)                     |  |               | 1,884,000 |             |  |   | 1,736,000 |  
|                                            
|                                            
|                                            
|                                            
|Number of new accounts                       |  |               | 253,000   |             |  |   | 167,000   |  
|                                            
|                                            
|                                            
|                                            
|Total customer assets (in  billions)         |  | $             | 106.1     |             |  | $ | 95.7      |  
|                                            
|                                            
|                                            
|                                            
|Total associates                             |  |               | 5,310     |             |  |   | 4,534     |  
|                                            
|                                            
|                                            
|                                            
|Total branches                               |  |               | 210       |             |  |   | 200       |  




|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Electronic trades include transactions completed both online and
	by touch-tone telephone.                                 
|   
|(2) | Active accounts are accounts that had purchase, sale or other
	activity, or a balance during the previous calendar quarter.

During fiscal year 2000 we opened a net total of 17 new
branches, compared to the increase of 20 branches in fiscal 1999.

We have experienced, and expect to continue to experience,
significant fluctuations in quarterly operating results due to a
variety of factors, including general volume and volatility in
the securities markets, the impact of competition, levels of
online trading, changes in interest rates, changes in foreign
currency exchange rates, changes in regulations, our ability to
manage personnel and process online trading activity, the amount
and timing of capital expenditures, costs incurred in the course
of acquisitions, and general economic conditions. Our expense
structure is based on historical expense levels and the levels
of demand for our brokerage services. If demand for our
brokerage services declines and we are unable to adjust our cost
structure on a timely basis, it could have a material adverse
effect on our business, financial condition and operating
results.

Due to all of the foregoing factors, period-to-period
comparisons of our revenues and operating results are not
necessarily meaningful, and such comparisons cannot be relied on
as indicators of future performance. In addition, we cannot
assure you that we will be able to sustain the rates of revenue
growth that we have experienced in the past, improve our
operating results or sustain our profitability on a quarterly
basis.

Credit

Credit is extended to customers who purchase securities and
other financial products in their margin accounts. The customer
must deposit and maintain a minimum percentage ownership in her
or his portfolio. The extent of these loans is based on federal
regulations and internal policies. Consistent with the growth of
our business and robust markets, we have experienced a
substantial increase in margin loans over previous years. Stock
positions held in customer accounts are held as collateral for
these loans. Risk of credit loss arises if the market value of
the customers portfolio falls below the loan value in the
account, thus eliminating the equity. The risk of loss is
increased when there are progressive and/or rapidly declining
markets.

The control procedures that we employ include: authentication
and qualification of customer accounts; verification of checks;
ongoing review of margin maintenance requirement detail by
security and customer; intra-day margin account management;
planning for potential losses; and maintaining the effectiveness
of collections. Surveillance reports are utilized in our efforts
to ensure these loans are adequately secured, thus limiting
credit exposure. Our independent risk management function
monitors and modifies our risk management policies and
procedures as required.

43



---



Liquidity and Capital Resources

Historically, we have financed our customer securities
operations primarily through customer credit balances, deposits
received for securities loaned, and other short-term borrowings.
As of October 31, 2000, 88.5% of our assets consisted of
cash and cash equivalents or assets readily convertible into
cash (principally receivables from customers, receivables from
brokers and dealers, deposits paid for stock borrowed and
securities owned). Receivables from customers consist primarily
of margin loans to customers, which are secured by
customers readily marketable securities. Receivables from
brokers and dealers consist of amounts receivable for pending
securities transactions, which generally can be settled within
three business days. Deposits paid for securities borrowed
represent cash deposits placed with brokers securing marketable
securities borrowed by us. Securities owned consist primarily of
U.S. and Canadian government securities and other securities
that trade in highly liquid markets.

Capital expenditures and investments in new technology, services
and advertising have been primarily financed to date through
earnings from operations. Acquisitions of new businesses have
been funded through capital generated from our initial public
offering in June 1999, earnings from operations and
issuance of preferred and exchangeable preferred stock.

Net income plus depreciation and amortization was
$290.6 million, $151.0 million and $91.6 million
for the fiscal years ended October 31, 2000, 1999 and 1998,
respectively. Depreciation and amortization expense, which
relates to fixed assets, leasehold improvements and goodwill,
was $80.3 million, $53.6 million and
$42.9 million for the fiscal years ended October 31,
2000, 1999 and 1998, respectively. Capital expenditures were
$107.3 million, $62.2 million and $17.7 million
for the fiscal years ended October 31, 2000, 1999 and 1998,
respectively, and represented 6.8%, 6.5% and 2.9%, respectively,
of total revenues in each period. Capital expenditures,
excluding acquisitions of new businesses, during the fiscal
years ended October 31, 2000, 1999 and 1998 related
primarily to the purchase of communications and data processing
equipment, and leasehold improvements related to new branches
and office facilities. The cash cost of acquiring new
businesses, net of assets acquired and liabilities assumed, was
approximately $124.6 million, $12.0 million and
$292.2 million during the years ended October 31,
2000, 1999 and 1998, respectively.

Our broker-dealer subsidiaries are subject to regulatory
requirements intended to ensure their general soundness and
liquidity, which require that the broker-dealers comply with
certain minimum capital requirements. These regulations, which
differ in each country, generally prohibit our broker-dealer
subsidiaries from repaying borrowings from TD Bank, paying cash
dividends, making loans to us or to affiliates, or otherwise
entering into transactions which would result in a significant
reduction in their regulatory capital positions without prior
notification and/or the approval of a broker-dealers
principal regulator. Our capital structure is designed to
provide each entity and business with capital and liquidity
consistent with its business and regulatory requirements.

Recently Issued Accounting Standards

Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and
Hedging Activities, was issued in 1998. This standard
requires us to recognize all derivatives as either assets or
liabilities in our financial statements and to measure such
instruments at their fair values. Hedging activities must be
redesignated and documented pursuant to the provisions of the
standard. This standard is effective for all fiscal quarters of
fiscal years which begin after June 15, 2000. At this time,
we do not believe that adoption of this standard will have a
material impact on our financial condition and results of
operations.

In March 1998, the Accounting Standards Executive Committee
of the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, effective for fiscal years
beginning after December 15, 1998. SOP 98-1 requires
that certain costs of computer software developed or obtained
for internal use be capitalized and amortized over the useful
life of the related software. We have adopted this standard for
the fiscal year November 1, 1999 to October 31, 2000.

44



---



In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial
Statements, which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements.
Management does not believe that SAB No. 101 will have a
material impact on our financial condition and results of
operations.

Item 7A.  Quantitative and Qualitative Disclosures
About Market Risk

On January 28, 1997, the Securities and Exchange Commission
adopted new rules (Securities Act Release No. 7386)
that require disclosure about the policies used to account for
derivatives and certain quantitative and qualitative information
about market risk exposures. Market risk generally represents
the risk of loss that may result from the potential change in
the value of a financial instrument as a result of fluctuations
in interest rates and market prices. We have not traded or
otherwise engaged in transactions involving derivatives;
however, we may utilize such instruments for hedging purposes in
the future. We have established policies, procedures and
internal processes governing our management of market risks in
the normal course of our business operations.

As part of our brokerage business, we hold short-term
interest-earning assets (mainly margin loans to customers)
totaling $8.8 billion and $6.8 billion as at
October 31, 2000 and 1999, respectively, of which
$2.3 billion and $1.9 billion, respectively, were
denominated in foreign currencies, primarily the Canadian
dollar. Our interest-earning assets are financed by short-term
interest-bearing liabilities in the form of customer balances,
deposits received for stock loaned and secured bank loans. We
earn a net interest spread on the difference between amounts
earned on customer margin loans and amounts paid on stock loan
and customer credit balances. Since we establish the rate paid
on customer cash balances, a substantial portion of our interest
rate risk is under our direct management. We generally move
rates earned on loans in lockstep with rates paid on credit
balances in order to maintain a consistent net interest spread,
and therefore do not anticipate that changes in interest rates
will have a material adverse effect on our earnings and cash
flows. Similarly, since we manage the assets and liabilities
related to our brokerage business on a geographic basis, and
fund assets with liabilities denominated in the same currency as
the assets, we do not anticipate that changes in foreign
exchange rates will have a material adverse effect on our
earnings or cash flows.

We held marketable securities (securities owned) at
October 31, 2000 and 1999 that were recorded at fair values
of $138.5 million and $342.0 million, respectively, and had
sold securities short (securities sold, not yet purchased) as at
October 31, 2000 and 1999 with fair values of
$6.4 million and $3.6 million, respectively, which
exposes us to market price risk. This risk is estimated as the
potential loss in fair value resulting from a hypothetical 10%
adverse change in quoted market prices, and amounted to
approximately $14.5 million and $34.6 million as at
October 31, 2000 and 1999, respectively. Of these
positions, approximately $43.5 million and
$10.2 million of securities owned at October 31, 2000
and 1999, respectively, and $6.1 million and
$3.4 million of securities sold short at October 31,
2000 and 1999, respectively, were denominated in foreign
currencies, primarily the Canadian dollar. Therefore, we are
also exposed to foreign currency risk. This risk is estimated as
the potential loss in fair value resulting from a hypothetical
10% adverse change in foreign exchange rates, and amounted to
approximately $5.0 million and $1.4 million as at
October 31, 2000 and 1999, respectively.

In addition, the Company invested structural capital in its
international subsidiaries, exposing it to further foreign
exchange risk. These investments, which are recorded at the
historical cost in U.S. dollars, are subject to foreign currency
risk. The total historical equivalent U.S. dollar investment in
the Companys international subsidiaries and joint ventures
at October 31, 2000 and 1999 was $439.0 million and
$239.1 million, respectively. The foreign currency risk on
these investments, applying the hypothetical 10% adverse change
in foreign exchange rates, is estimated to be $43.9 million
and $23.9 million as at October 31, 2000 and 1999,
respectively. Actual results may differ.

45



---



Item 8.  Financial Statements and
Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTAL INFORMATION


CONSOLIDATED FINANCIAL STATEMENTS

|                                                           |  |   
|---------------------------------------------------------- |  | --
|                                                          
|                                                          
|                                                          
|                                                          
|Report of Management                                       |  | 47
|                                                          
|                                                          
|                                                          
|                                                          
|Report of Independent Accountants                          |  | 48
|                                                          
|                                                          
|                                                          
|                                                          
|Consolidated Statements of Financial Condition             |  | 49
|                                                          
|                                                          
|                                                          
|                                                          
|Consolidated Statements of Income                          |  | 50
|                                                          
|                                                          
|                                                          
|                                                          
|Consolidated Statements of Changes in Stockholders Equity |  | 51
|                                                          
|                                                          
|                                                          
|                                                          
|Consolidated Statements of Cash Flows                      |  | 52
|                                                          
|                                                          
|                                                          
|                                                          
|Notes to the Consolidated Financial Statements             |  | 53
|                                                          
|                                                          
|                                                          
|                                                          
|Financial Statement Schedules:                             |  |   
|                                                          
|                                                          
|                                                          
|                                                          
|Schedule II  Valuation and Qualifying Accounts            |  | 68

All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.

46



---



TD WATERHOUSE GROUP, INC.

REPORT OF MANAGEMENT

The consolidated financial statements of TD Waterhouse Group,
Inc. and related financial information presented elsewhere in
this Annual Report have been prepared by management, which is
responsible for the integrity, consistency, objectivity and
reliability of the information. Accounting principles generally
accepted in the United States have been applied and management
has exercised its judgement and made best estimates where deemed
appropriate.

The Companys accounting systems and related internal
controls are designed, and their supporting procedures
maintained, to provide reasonable assurance that financial
records are complete and accurate and that Company and customer
assets are safeguarded against loss and unauthorized use or
disposition. These supporting procedures include careful
selection and training of qualified staff, the establishment of
organizational structures providing a well-defined division of
responsibilities and accountability for performance, and the
communication of policies and guidelines of business conduct
throughout the Company.

The Audit Committee of the Board of Directors, which is
comprised of directors who are not officers or employees of the
Company, oversees managements responsibilities for the
financial reporting and internal control systems. The Audit
Committee meets periodically with our internal auditors, with
Company management and with PricewaterhouseCoopers LLP, an
independent accounting firm, to discuss accounting, auditing,
internal controls over financial reporting and other matters.

PricewaterhouseCoopers LLP has audited our consolidated
financial statements. They were given unrestricted access to all
the Companys financial records and related data. We
believe that all representations made to PricewaterhouseCoopers
LLP during their audit were valid and appropriate.

|                                                                |  |                                                         |  |                                                                     
|--------------------------------------------------------------- |  | ------------------------------------------------------- |  | --------------------------------------------------------------------
|/s/ Stephen D. McDonald                                         |  | /s/ Frank J. Petrilli                                   |  | /s/ B. Kevin Sterns                                                 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                               
|Stephen D. McDonaldChief Executive Officer
	and Deputy Chairman |  | Frank J. PetrilliPresident and
	Chief Operating Officer |  | B. Kevin SternsExecutive Vice President
	and Chief Financial Officer

47



---



REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and The Stockholders of TD
Waterhouse Group, Inc.

In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of TD Waterhouse Group, Inc. and its
subsidiaries at October 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three
years in the period ended October 31, 2000, in conformity
with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents
fairly, in all material respects the information set forth
therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.



| |                               
| | ------------------------------
| | /s/ PRICEWATERHOUSECOOPERS LLP
|
| | PricewaterhouseCoopers LLP    

New York, New York



48



---



TD WATERHOUSE GROUP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AT OCTOBER 31


|                                                                                                                          |                                            |                                  |           |            |  |   |           |           | 
|------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------------------- | --------- | ---------- |  | - | --------- | --------- | 
|                                                                                                                          |                                            | 2000                             |           | 1999      
|                                                                                                                          |                                            |                                  |           |           
|                                                                                                                          |                                            |                                 
|                                                                                                                          |                                            | (in thousands of dollars, except
|                                                                                                                          |                                            | share and per share data)       
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|ASSETS                                                                                                                    |                                            |                                  |           |            |  |   |           |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Cash and cash equivalents                                                                                                 |                                            | $                                | 859,579   |            |  | $ | 569,181   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Securities owned, at market value                                                                                         |                                            |                                  | 138,515   |            |  |   | 342,042   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Receivable from brokers and dealers                                                                                       |                                            |                                  | 104,266   |            |  |   | 194,370   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Receivable from customers                                                                                                 |                                            |                                  | 7,978,551 |            |  |   | 5,868,804 |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Deposits paid for securities borrowed                                                                                     |                                            |                                  | 640,750   |            |  |   | 664,299   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Receivable from affiliates                                                                                                |                                            |                                  | 5,039     |            |  |   | 7,010     |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Deposits with clearing organizations                                                                                      |                                            |                                  | 51,943    |            |  |   | 35,495    |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Fixed assets, net of accumulated depreciation                                                                             |                                            |                                  | 140,591   |            |  |   | 73,543    |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Goodwill, net of accumulated amortization                                                                                 |                                            |                                  | 804,266   |            |  |   | 654,081   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Other assets                                                                                                              |                                            |                                  | 265,817   |            |  |   | 182,991   |          
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|                                                                                                                          | Total assets                               |                                  | $         | 10,989,317 |  |   | $         | 8,591,816 | 
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                      |                                            |                                  |           |            |  |   |           |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Liabilities                                                                                                               |                                            |                                  |           |            |  |   |           |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Bank loans and overdrafts                                                                                                 |                                            | $                                | 963,031   |            |  | $ | 249,010   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Deposits received for securities loaned                                                                                   |                                            |                                  | 4,111,677 |            |  |   | 3,962,958 |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Securities sold, not yet purchased                                                                                        |                                            |                                  | 6,396     |            |  |   | 3,554     |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Payable to brokers and dealers                                                                                            |                                            |                                  | 105,467   |            |  |   | 160,254   |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Payable to customers                                                                                                      |                                            |                                  | 2,849,485 |            |  |   | 2,016,535 |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Payable to affiliates                                                                                                     |                                            |                                  | 358,907   |            |  |   | 32,323    |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Accrued compensation, taxes payable and other liabilities                                                                 |                                            |                                  | 370,431   |            |  |   | 215,062   |          
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|                                                                                                                          | Total liabilities                          |                                  |           | 8,765,394  |  |   |           | 6,639,696 | 
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|Commitments and contingent liabilities (Notes 7, 9 and 13)                                                                |                                            |                                  |           |            |  |   |           |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Stockholders Equity                                                                                                      |                                            |                                  |           |            |  |   |           |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Preferred stock, $0.01 par value:
	100 million shares authorized, one share issued and outstanding                        |                                            |                                  |          |            |  |   |          |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Preferred stock of subsidiaries, $23,700 par value:
	100,000 shares authorized, five shares issued and outstanding        |                                            |                                  | 119       |            |  |   | 119       |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Preferred stock of subsidiaries, Cdn $1,000 par value:
	unlimited shares authorized, 17,100 shares issued and outstanding |                                            |                                  | 11,829    |            |  |   |          |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Common stock, $0.01 par value:
	700 million shares authorized, 379,789,350 shares issued and
	outstanding                 |                                            |                                  | 3,798     |            |  |   | 3,764     |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Additional paid-in capital                                                                                                |                                            |                                  | 1,983,730 |            |  |   | 1,916,622 |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Retained earnings                                                                                                         |                                            |                                  | 241,757   |            |  |   | 31,441    |          
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Accumulated other comprehensive (loss)/income                                                                             |                                            |                                  | (17,310   | )          |  |   | 174       |          
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|                                                                                                                          | Total stockholders equity                 |                                  |           | 2,223,923  |  |   |           | 1,952,120 | 
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          
|                                                                                                                          | Total liabilities and stockholders equity |                                  | $         | 10,989,317 |  |   | $         | 8,591,816 | 
|                                                                                                                          |                                            |                                  |           |            |  |   |           |          

The accompanying notes are an integral part of these
consolidated financial statements.

49



---



TD WATERHOUSE GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED OCTOBER 31


|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |        |         | 
|-------------------------------------------------------- | -------------------------- | -------------------------------- | ----------- | ------- | --------- | ---- | ----------- | ------ | ------- | - | ----------- | ------ | ------- | 
|                                                         |                            | 2000                             |             | 1999    |           | 1998
|                                                         |                            |                                  |             |         |           |     
|                                                         |                            |                                 
|                                                         |                            | (in thousands of dollars, except
|                                                         |                            | share and per share data)       
|                                                        
|                                                        
|                                                        
|                                                        
|REVENUES                                                 |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                        
|                                                        
|                                                        
|                                                        
|Commissions and fees                                     |                            | $                                | 1,004,508   |         |           | $    | 633,530     |        |         | $ | 409,432     |       
|                                                        
|                                                        
|                                                        
|                                                        
|Mutual fund and related revenue                          |                            |                                  | 148,316     |         |           |      | 98,414      |        |         |   | 59,022      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Net interest revenue                                     |                            |                                  | 351,077     |         |           |      | 186,834     |        |         |   | 117,733     |       
|                                                        
|                                                        
|                                                        
|                                                        
|Other                                                    |                            |                                  | 71,514      |         |           |      | 41,339      |        |         |   | 28,274      |       
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                         |                            | Total revenues                   |             |         | 1,575,415 |      |             |        | 960,117 |   |             |        | 614,461 | 
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|EXPENSES                                                 |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                        
|                                                        
|                                                        
|                                                        
|Employee compensation and benefits                       |                            |                                  | 424,617     |         |           |      | 277,602     |        |         |   | 183,377     |       
|                                                        
|                                                        
|                                                        
|                                                        
|Execution and clearing costs                             |                            |                                  | 168,188     |         |           |      | 133,443     |        |         |   | 95,523      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Occupancy and equipment                                  |                            |                                  | 130,115     |         |           |      | 80,010      |        |         |   | 56,596      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Advertising and marketing                                |                            |                                  | 110,761     |         |           |      | 62,761      |        |         |   | 33,184      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Communications                                           |                            |                                  | 62,724      |         |           |      | 41,100      |        |         |   | 30,809      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Amortization of goodwill                                 |                            |                                  | 43,560      |         |           |      | 37,390      |        |         |   | 33,000      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Professional fees                                        |                            |                                  | 47,285      |         |           |      | 24,519      |        |         |   | 15,350      |       
|                                                        
|                                                        
|                                                        
|                                                        
|Other                                                    |                            |                                  | 206,597     |         |           |      | 120,754     |        |         |   | 63,144      |       
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                         |                            | Total expenses                   |             |         | 1,193,847 |      |             |        | 777,579 |   |             |        | 510,983 | 
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|Income before income taxes                               |                            |                                  | 381,568     |         |           |      | 182,538     |        |         |   | 103,478     |       
|                                                        
|                                                        
|                                                        
|                                                        
|Income tax provision                                     |                            |                                  | 171,252     |         |           |      | 85,192      |        |         |   | 54,765      |       
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                         | Net income                 |                                  | $           | 210,316 |           |      | $           | 97,346 |         |   | $           | 48,713 |        
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                         | Basic earnings per share   |                                  | $           | 0.56    |           |      | $           | 0.28   |         |   | $           | 0.15   |        
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|                                                         | Diluted earnings per share |                                  | $           | 0.55    |           |      | $           | 0.28   |         |   | $           | 0.15   |        
|                                                         |                            |                                  |             |         |           |      |             |        |         |   |             |       
|Weighted average number of shares
	outstanding  basic   |                            |                                  | 378,942,208 |         |           |      | 348,509,453 |        |         |   | 333,000,000 |       
|                                                        
|                                                        
|                                                        
|                                                        
|Weighted average number of shares
	outstanding  diluted |                            |                                  | 379,155,143 |         |           |      | 348,509,453 |        |         |   | 333,000,000 |       

The accompanying notes are an integral part of these
consolidated financial statements.

50



---



TD WATERHOUSE GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY

|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |   | 
|------------------------------------------------------------------------ | --------------------- | ------------------------- | ---------- | ------- |  | --------- | ----- | --------- |  | ---------- | -------- | -------- |  | ------------- | ------ |  |  | - | --------- |  |  | - | ------- |  |  | - | ------- | - | 
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  | Accumulated  
|                                                                         |                       | Historical                |            |         |  |           |       |           |  | Additional |          |          |  | Other        
|                                                                         |                       | Combined                  |            | Common  |  | Preferred |       | Preferred |  | Paid-in    |          | Retained |  | Comprehensive
|                                                                         |                       | Equity                    |            | Stock   |  | Stock     |       | Stock     |  | Capital    |          | Earnings |  | (Loss)/Income
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |              
|                                                                         |                       |                          
|                                                                         |                       | (in thousands of dollars)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Balance at October 31, 1997                                              |                       |                           | 619,519    |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Net income            |                           |            | 48,713  |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Capital Contributions |                           |            | 325,976 |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           | 927        |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Balance at October 31, 1998                                              |                       |                           | 995,135    |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Total comprehensive income for the year ended October 31,
	1998          |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net Income for the period from November 1, 1998 through
	June  23, 1999. |                       |                           | 65,905     |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Capital Contributions                                                    |                       |                           | 171,012    |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Historical Equity at June 22, 1999                                       |                       |                           | 1,232,052  |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Reorganization as of June 23, 1999 (Note 2)                              |                       |                           | (1,232,052 | )       |  |           |       |           |  | $          | 237,000  |          |  |               |        |  |  | $ | 934,801   |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds of the initial public offerings (Note 2)                    |                       |                           |            |         |  | $         | 3,764 |           |  |            |          |          |  |               |        |  |  |   | 981,821   |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Repayment of preferred shares                                            |                       |                           |            |         |  |           |       |           |  |            | (236,881 | )        |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income for the period from June 24, 1999 through
	October  31, 1999  |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  | $ | 31,441  |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  | $ | 174     |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Balance at October 31, 1999                                              |                       |                           |           |         |  |           | 3,764 |           |  |            | 119      |          |  |               |        |  |  |   | 1,916,622 |  |  |   | 31,441  |  |  |   | 174     |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Total Comprehensive Income for the year ended October 31,
	1999          |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income                                                               |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   | 210,316 |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Common stock (Notes 4 & 16)                                              |                       |                           |            |         |  |           | 34    |           |  |            |          |          |  |               |        |  |  |   | 67,108    |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Preferred shares of subsidiary, issued (Note 4)                          |                       |                           |            |         |  |           |       |           |  |            |          |          |  | $             | 11,829 |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   | (17,484 | )
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Total Comprehensive Income for the year ended October 31,
	2000          |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  
|Total Stockholders Equity at October 31, 2000                           |                       | $                         |           |         |  | $         | 3,798 |           |  | $          | 119      |          |  | $             | 11,829 |  |  | $ | 1,983,730 |  |  | $ | 241,757 |  |  | $ | (17,310 | )
|                                                                         |                       |                           |            |         |  |           |       |           |  |            |          |          |  |               |        |  |  |   |           |  |  |   |         |  |  |   |         |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                         |                       |                           |           |               |  |   |         |        | 
|------------------------------------------------------------------------ | --------------------- | ------------------------- | --------- | ------------- |  | - | ------- | ------ | 
|                                                                         |                       |                           |           | Total        
|                                                                         |                       | Total                     |           | Comprehensive
|                                                                         |                       | Equity                    |           | Income       
|                                                                         |                       |                           |           |              
|                                                                         |                       |                          
|                                                                         |                       | (in thousands of dollars)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Balance at October 31, 1997                                              |                       |                           | 619,519   |               |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Net income            |                           |           | 48,713        |  |   |         | 48,713 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Capital Contributions |                           |           | 325,976       |  |   |         |        | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           | 927       |               |  |   | 927     |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Balance at October 31, 1998                                              |                       |                           | 995,135   |               |  |   |         |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Total comprehensive income for the year ended October 31,
	1998          |                       |                           |           |               |  | $ | 49,640  |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Net Income for the period from November 1, 1998 through
	June  23, 1999. |                       |                           | 65,905    |               |  |   | 65,905  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Capital Contributions                                                    |                       |                           | 171,012   |               |  |   |         |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Historical Equity at June 22, 1999                                       |                       |                           | 1,232,052 |               |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Reorganization as of June 23, 1999 (Note 2)                              |                       |                           | (60,251   | )             |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds of the initial public offerings (Note 2)                    |                       |                           | 985,585   |               |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Repayment of preferred shares                                            |                       |                           | (236,881  | )             |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income for the period from June 24, 1999 through
	October  31, 1999  |                       |                           | 31,441    |               |  |   | 31,441  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           | 174       |               |  |   | 174     |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Balance at October 31, 1999                                              |                       |                           | 1,952,120 |               |  |   |         |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Total Comprehensive Income for the year ended October 31,
	1999          |                       |                           |           |               |  | $ | 97,520  |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Net income                                                               |                       |                           | 210,316   |               |  |   | 210,316 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Common stock (Notes 4 & 16)                                              |                       |                           | 67,142    |               |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Preferred shares of subsidiary, issued (Note 4)                          |                       |                           | 11,829    |               |  |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Translation adjustment arising during the period, net of taxes           |                       |                           | (17,484   | )             |  |   | (17,484 | )     
|                                                                         |                       |                           |           |               |  |   |         |       
|Total Comprehensive Income for the year ended October 31,
	2000          |                       |                           |           |               |  | $ | 192,832 |       
|                                                                         |                       |                           |           |               |  |   |         |       
|Total Stockholders Equity at October 31, 2000                           |                       | $                         | 2,223,923 |               |  |   |         |       
|                                                                         |                       |                           |           |               |  |   |         |       

The accompanying notes are an integral part of these
consolidated financial statements.

51



---



TD WATERHOUSE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED OCTOBER 31


|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | -------- | -
|                                                                                         |  | 2000                      |            | 1999 |  | 1998
|                                                                                         |  |                           |            |      |  |     
|                                                                                         |  |                          
|                                                                                         |  | (in thousands of dollars)
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net income                                                                               |  | $                         | 210,316    |      |  | $    | 97,346     |   |  | $ | 48,713   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustments to reconcile net income to cash provided by/(used
	in) operating activities: |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Depreciation and amortization                                                            |  |                           | 80,277     |      |  |      | 53,617     |   |  |   | 42,855   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|(Increases)/decreases in operating assets:                                               |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Securities owned                                                                         |  |                           | 201,893    |      |  |      | (265,763   | ) |  |   | (9,730   | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Receivable from brokers and dealers                                                      |  |                           | 83,700     |      |  |      | (122,653   | ) |  |   | 42,078   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Receivable from customers                                                                |  |                           | (2,167,916 | )    |  |      | (3,312,622 | ) |  |   | (799,163 | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Deposits paid for securities borrowed                                                    |  |                           | 2,123      |      |  |      | (431,614   | ) |  |   | (61,848  | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Receivable from affiliates                                                               |  |                           | 1,971      |      |  |      | 75,028     |   |  |   | (10,278  | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Deposits with clearing organizations                                                     |  |                           | (16,973    | )    |  |      | (19,581    | ) |  |   | (10,939  | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Other assets                                                                             |  |                           | (76,719    | )    |  |      | (141,219   | ) |  |   | (4,736   | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Increases/(decreases) in operating liabilities:                                          |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Bank loans and overdrafts                                                                |  |                           | 716,217    |      |  |      | 217,827    |   |  |   | 12,608   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Deposits received for securities loaned                                                  |  |                           | 166,642    |      |  |      | 2,928,994  |   |  |   | 117,264  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Securities sold, not yet purchased                                                       |  |                           | 3,046      |      |  |      | (1,433     | ) |  |   | (2,108   | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Payable to brokers and dealers                                                           |  |                           | (47,185    | )    |  |      | 7,389      |   |  |   | 58,494   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Payable to customers                                                                     |  |                           | 908,302    |      |  |      | 69,105     |   |  |   | 756,950  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Payable to affiliates                                                                    |  |                           | 300,621    |      |  |      | (8,464     | ) |  |   | 8,371    |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Accrued compensation, taxes payable and other liabilities                                |  |                           | 161,103    |      |  |      | 118,071    |   |  |   | 2,809    |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Cash provided by/(used in) operating activities                                          |  |                           | 527,418    |      |  |      | (735,972   | ) |  |   | 191,340  |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Purchase of furniture, equipment and leasehold improvements                              |  |                           | (107,291   | )    |  |      | (62,166    | ) |  |   | (17,661  | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Acquisitions of businesses, net of assets acquired and
	liabilities assumed              |  |                           | (124,615   | )    |  |      | (12,034    | ) |  |   | (292,202 | )
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Cash used in investing activities                                                        |  |                           | (231,906   | )    |  |      | (74,200    | ) |  |   | (309,863 | )
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Subordinated debt with affiliate                                                         |  |                           | 27,848     |      |  |      | (17,532    | ) |  |   | 22,138   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net proceeds from initial public offerings                                               |  |                           |           |      |  |      | 985,585    |   |  |   |         |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Capital contributions from parent                                                        |  |                           |           |      |  |      | 171,012    |   |  |   | 325,976  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Preferred share redemption                                                               |  |                           |           |      |  |      | (236,881   | ) |  |   |         |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Repayment of debt                                                                        |  |                           |           |      |  |      | (45,034    | ) |  |   |         |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Cash provided by financing activities                                                    |  |                           | 27,848     |      |  |      | 857,150    |   |  |   | 348,114  |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Effect of exchange rate differences on cash and cash equivalents                         |  |                           | (32,962    | )    |  |      | 174        |   |  |   | 927      |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Increase in cash and cash equivalents                                                    |  |                           | 290,398    |      |  |      | 47,152     |   |  |   | 230,518  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash and cash equivalents, beginning of period                                           |  |                           | 569,181    |      |  |      | 522,029    |   |  |   | 291,511  |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Cash and cash equivalents, end of period                                                 |  | $                         | 859,579    |      |  | $    | 569,181    |   |  | $ | 522,029  |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Supplemental disclosures of cash flow information:                                       |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash paid for interest                                                                   |  | $                         | 455,040    |      |  | $    | 187,245    |   |  | $ | 107,197  |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Cash paid for income taxes                                                               |  | $                         | 159,502    |      |  | $    | 81,198     |   |  | $ | 55,677   |  
|                                                                                         |  |                           |            |      |  |      |            |   |  |   |          |  
|Supplemental schedule of non-cash investing and financing
	activities                    |  |                           |            |      |  |      |            |   |  |   |          |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Preferred stock issued by subsidiary                                                     |  | $                         | 11,829     |      |  |      |           |   |  |   |         |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Exchangeable preference shares issued by subsidiary                                      |  | $                         | 67,142     |      |  |      |           |   |  |   |         |  

In connection with the acquisition of CT
Securities Inc. the Companys subsidiary, TDW Canada,
issued Canadian dollar preferred shares and exchangeable
preferred shares that are exchangeable at any time at the
holders (CT Financial Services Inc.) option for an
equivalent number of shares of the Companys common
stock.

The accompanying notes are an integral part of these
consolidated financial statements.

52



---



TD WATERHOUSE GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Description of the Business

TD Waterhouse Group, Inc. (the Company) is a
Delaware holding company which through its operating
subsidiaries is a leading provider of online financial services
to investors in the U.S., Canada, the U.K., Australia and Hong
Kong. The Company is 88.6% owned by The Toronto-Dominion Bank
(TD Bank) through its wholly-owned subsidiary,
TD Waterhouse Holdings, Inc. (TDW Holdings). The
Companys primary operating subsidiaries are:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TD Waterhouse Investor Services, Inc. (TDW US), a
	U.S.-registered broker-dealer which provides discount brokerage
	services to retail customers in the U.S.                                
|
| |  | National Investor Services Corp. (NISC), a
	U.S.-registered broker-dealer which provides execution and
	clearance services for affiliates, including TDW US, and
	third-party broker-dealers
|
| |  | TD Waterhouse Asset Management, Inc. (TDWAM), a
	U.S.-registered investment advisor which provides investment
	advice to a series of affiliated mutual funds                                
|
| |  | TD Waterhouse Advertising, Inc. (TDWA), a U.S.-based
	advertising firm which places advertising for affiliates                                                                              
|
| |  | Marketware International, Inc. (MWI), a software
	development firm which provides software solutions primarily to
	affiliates                                                               
|
| |  | TD Waterhouse Investor Services (Canada) Inc. (TDW
	Canada), a registered broker-dealer which provides
	discount brokerage services to retail clients in Canada                             
|
| |  | TD Waterhouse Investor Services (UK) Limited (TDW
	UK), a registered broker-dealer which provides discount
	brokerage services to customers in the U.K.                                     
|
| |  | TD Waterhouse Investor Services (Hong Kong) Limited (TDW
	HK), a registered broker-dealer which provides discount
	brokerage services to customers in Asia                                  
|
| |  | TD Waterhouse Holdings (Australia) Pty. Limited (TDW
	Australia), a registered broker-dealer which provides
	discount brokerage services to customers in Australia.                         

2.  Reorganization and Initial Public Offerings

In connection with the initial public offerings (the
Offerings) of the Companys common stock on
June 23, 1999, TD Bank reorganized its worldwide discount
brokerage operations so that they would be consolidated into the
Company and its subsidiaries. This reorganization included the
following steps:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TDW Holdings, formerly Waterhouse Investor Services, Inc.
	(WISI), which prior to the reorganization served as
	the U.S. holding company for TD Banks U.S. discount
	brokerage operations, converted the shares of common stock it
	held in one of its wholly-owned registered broker-dealer
	subsidiaries into shares of new common stock and preferred
	stock. The preferred stock is redeemable at any time, in whole
	or in part, at the issuers option for an aggregate
	redemption price of $237 million, pays dividends semi-annually
	at a variable rate based on London interbank offered rates, and
	has no fixed maturity. TDW Holdings contributed all of the
	common stock of its registered broker-dealer subsidiaries as
	well as all of the common stock of its other U.S. subsidiaries
	to the Company. A portion of the proceeds from the Offerings was
	used to fund the redemption of $236.9 million of the preferred
	stock in the 1999 financial year. TDW Holdings retained the
	remaining outstanding shares of preferred stock of the
	broker-dealer subsidiary.
|
| |  | TD Bank transferred its Canadian discount brokerage business and
	brokerage clearing business to the newly formed Canadian
	subsidiary, TDW Canada. In exchange, a series of 36 million
	exchangeable preference shares of the subsidiary, TDW Canada,
	and promissory notes of TDW Canada totaling                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

53



---



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | approximately $45 million were issued to TD Bank. A portion of
	the proceeds of the Offerings was used to repay these promissory
	notes in the 1999 financial year. The exchangeable preference
	shares are exchangeable at any time at TD Banks option for
	an equivalent number of shares of the Companys common
	stock, and have dividend rights equal to the equivalent number
	of shares of the Companys common stock. As part of the
	transfer, TDW Canada assumed all past liabilities of these
	businesses and each of TD Bank and TDW Canada indemnified the
	other and its relevant subsidiaries, and its respective
	directors, officers, agents and employees, against all past,
	present and future liabilities related to the transferred and
	retained businesses.
|
| |  | TDW Holdings received one special voting preferred share of the
	Company. The special voting preferred share has voting rights
	equal to the number of shares of the Companys common stock
	into which the exchangeable preference shares may be exchanged,
	and will be canceled when the exchangeable preference shares are
	no longer outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | TD Bank transferred ownership of its U.K., Australia and Hong
	Kong discount broker subsidiaries to the Company in exchange for
	shares of the Companys common stock and promissory notes
	totaling $27 million. A portion of the proceeds of the Offerings
	was used to repay these promissory notes in the 2000 financial
	year.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | The Company entered into a master services agreement with TD
	Bank pursuant to which certain services are made available to
	the Company and certain services are made available by the
	Company to TD Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In order to transfer its Canadian discount brokerage business to
us, TD Bank entered into transfer and assumption agreements with
TDW Canada, which in general provided for the transfer of assets
used exclusively in the transferred businesses. The assets were
transferred to TDW Canada immediately prior to the completion of
the Offerings.

The transfer and assumption agreements provided for TD Bank to
transfer all of its title to, and rights and interests in, the
assets. The transfer and assumption agreements provided for
assumptions and indemnities designed to place sole legal and
financial responsibility on TDW Canada for all liabilities known
or contingent relating to the transferred businesses, the past
and present operations, and the assets transferred or licensed
to TDW Canada. As a result, the liabilities assumed by TDW
Canada included all liabilities and obligations, actual or
contingent, relating to the transferred businesses, such as
accounts payable, contractual obligations, and ongoing or
presently unknown claims and suits. The transfer and assumption
agreements contained indemnification provisions in connection
with the conduct of TDW Canadas business after the
transfer of the transferred businesses, misstatements or
omissions in the offering prospectus with respect to the
transferred businesses, and the use of trademarks, trade names,
logos and other indemnities.

TD Bank similarly indemnified TDW Canada in respect of its past,
present and future businesses other than the transferred
businesses.

3.  Summary of Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
significant transactions and balances between and among the
Company and its subsidiaries have been eliminated in the
consolidation.

Use of estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.

54



---



Commissions and fees

Customers securities transactions are recorded on a
settlement date basis, with commission revenue and related
expenses recorded on a trade date basis. Fees consist primarily
of payments from market-makers and exchanges for directing order
executions, as well as clearing fees.

Mutual fund and related revenue

Mutual fund and related revenue consists of fees earned for
providing investment advisory services to a series of related
mutual funds, and trailer fees for services provided to
third-party mutual funds, affiliated mutual funds and an
affiliated bank. Such revenue is recorded when earned.

Net interest revenue

The Company reports interest revenue, which primarily arises
from margin loans to customers, net of the related financing
cost (interest expense). For the years ended October 31,
2000, 1999 and 1998, interest expense was $455,688, $193,026 and
$110,175, respectively.

Advertising and marketing

Advertising production costs are expensed when the advertising
campaign commences. Costs of communicating advertising are
expensed as the services are received. Other marketing costs are
expensed as incurred.

Depreciation and amortization of fixed assets

Depreciation of capitalized furniture and equipment is provided
on a straight-line basis using estimated useful lives of three
to five years. Leasehold improvements are amortized on a
straight-line basis over the lesser of the lease term or the
estimated useful life. Fixed assets are stated at cost net of
accumulated depreciation and amortization of $56,546 at
October 31, 2000 and $24,479 at October 31, 1999.
Depreciation and amortization expense is included in occupancy
and equipment expense in the consolidated statements of income.
The Company recorded depreciation and amortization of $36,717,
$16,227 and $9,855 for the years ended October 31, 2000,
1999 and 1998, respectively.

Prior to the reorganization, TDW Canada was charged rental
expense for its use of equipment and other fixed assets, which
were owned by TD Bank (see also Note 15). Under the
transfer and assumption agreement, TDW Canada acquired the
equipment and other fixed assets, and ceased paying rental
expenses in 1999. Prior to this acquisition, the rental expense
approximated the depreciation on such equipment. The Company was
charged $3,019 and $7,584 for the years ended October 31,
1999 and 1998, respectively. These costs have been included in
occupancy and equipment expense in the consolidated statements
of income.

Acquisitions and goodwill

All business combinations have been accounted for under the
purchase method and, accordingly, the excess of the purchase
price over the fair value of the net assets acquired has been
recorded as goodwill in the consolidated statements of financial
condition. Pursuant to the purchase method, the results of
operations, changes in equity and cash flows of acquired
companies and businesses are included in operations only for the
period between the date of acquisition and the end of that
financial year (Note 4).

Goodwill arising from acquisitions of businesses is amortized on
a straight-line basis over a period of no more than
20 years. Goodwill is stated at cost, net of accumulated
amortization of $138,291, $94,731 and $57,341 for the years
ended October 31, 2000, 1999 and 1998, respectively.

Income taxes

The Companys U.S. operations are included in the
consolidated federal income tax returns filed by an affiliate in
the United States. The Company files separate income tax returns
in other countries. The Company

55



---





The Company records deferred tax assets and liabilities for the
difference between the tax basis of assets and liabilities and
the amounts recorded for financial reporting purposes, using
current tax rates. Deferred tax expenses and benefits are
recognized in the consolidated statements of income for changes
in deferred tax assets and liabilities.

Cash and cash equivalents

For purposes of reporting cash flows, the Company considers all
highly liquid investments with original maturities of three
months or less (except for amounts designated as securities
owned) to be cash equivalents.

Securities owned

Proprietary securities owned and securities sold, not yet
purchased are recorded on a trade date basis and primarily
represent U.S. and Canadian government securities, other debt
instruments, equity securities and mutual fund positions, and
are carried at fair value with unrealized gains and losses
reported in income.

Financing transactions

Deposits paid for securities borrowed and deposits received for
securities loaned are recorded at the amount of cash collateral
advanced or received. Deposits paid for securities borrowed
transactions require the Company to deposit cash with the
lender. With respect to deposits received for securities loaned,
the Company receives collateral in the form of cash in an amount
generally in excess of the market value of the securities
loaned. The Company monitors the market value of the securities
borrowed and loaned on a daily basis, with additional collateral
obtained or refunded as necessary.

Foreign currency translation

Assets and liabilities of international subsidiaries are
translated based on the end-of-period exchange rates from local
currency to U.S. dollars. Results of operations are translated
at the average exchange rates in effect during the period. The
Companys investments in the structural capital of the
international subsidiaries have been recorded at the historical
cost in U.S. dollars. The resulting gains or losses are reported
as a component of accumulated other comprehensive (loss)/income
in the consolidated statements of financial condition.

Segment information

Statement of Financial Accounting Standards (SFAS)
No. 131, Disclosures about Segments of an Enterprise and
Related Information, establishes standards for reporting
information about the operating and geographic segments of the
Companys business. Currently, the nature and extent of the
Companys operations are such that it operates in only one
reportable segment, as a provider of discount brokerage
services. Information regarding the Companys geographic
segments is set forth in Note 18.

Derivative Instruments

SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended, requires the Company to
recognize all derivatives as either assets or liabilities in our
financial statements and to measure such instruments at their
fair values. At this time, the Companys activities do not
include any activity of this nature, and management does not
expect that adoption of this standard will have a material
impact on our financial condition and results of operations.

56



---



4.  Acquisitions

The Company has been active in acquiring discount brokerage
businesses. A description of the Companys more significant
acquisitions, including the date acquired, purchase price
(including acquisition costs) and goodwill recognized, follows:

Marathon Brokerage, a division of First Marathon Securities
Limited, a Canadian discount brokerage firm, was acquired in
October 1993 for $46 million and its operations were merged
into TDW Canada. The $42 million excess of the purchase price
over the fair value of the net assets acquired was recorded as
goodwill.

WISI, a U.S. bank holding company and nationwide discount
brokerage firm, was acquired by TD Bank in October 1996 for
cash and TD Bank common stock. For purposes of preparing the
consolidated financial statements of the Company, the discount
brokerage business of WISI was recorded by the Company as a
contribution of capital by TD Bank as of the close of business
on October 31, 1996. The purchase price assigned to the
discount brokerage business was $525 million. The $390 million
excess over the fair value of the net assets acquired from WISI
and contributed to the Company was recorded by the Company as
goodwill.

Kennedy Cabot & Co. (KCC), a discount brokerage
firm located in Beverly Hills, California, was acquired in
November 1997 for approximately $163 million, and its
operations were merged into TDW US. The acquisition was funded
by capital contributions from TD Bank, and goodwill of $159
million was recorded.

Pont Securities Limited (Pont) and Rivkin Croll
Smith (Rivkin), Australia-based discount brokerage
firms, were acquired during fiscal years 1997 and 1998,
respectively, for an aggregate price of $42 million, and their
operations were reorganized to create TDW Australia. The $38
million excess of the purchase price over the fair value of the
net assets acquired was recorded as goodwill.

Jack White & Company (Jack White), a
discount brokerage firm based in San Diego, California, was
acquired in May 1998 for $106 million, and its operations
were merged into those of TDW US. The acquisition was funded by
capital contributions from TD Bank, and the $102 million excess
of the purchase price over the fair value of the net assets
acquired was recorded as goodwill.

Gall & Eke (G&E), a U.K.-based discount
brokerage firm, was acquired in September 1998 for $13
million and merged with TDW UK. The $11 million excess of the
purchase price over the fair value of the net assets acquired
was recorded as goodwill.

YorkSHARE Limited, a U.K.-based discount broker operation, was
acquired in November 1999 for $15.7 million and its
operations were merged with those of the Companys
subsidiary, TDW UK. The $10 million excess of the purchase price
over the fair value of the net assets acquired was recorded as
goodwill.

CT Securities Inc., a subsidiary of CT Financial Services Inc.,
which in turn is a subsidiary of TD Bank, was acquired in
April 2000 for $96.8 million, and subsequently its
operations were merged into those of the Companys
subsidiary, TDW Canada. In accordance with the purchase
transaction and for purposes of preparing the consolidated
financial statements of the Company, this acquisition became
effective as of February 1, 2000. The $87 million excess of
the purchase price over the fair value of the net assets
acquired was recorded as goodwill.

Dealwise Limited, one of the United Kingdoms largest
discount brokerage firms, was acquired in May 2000 for
$123.4 million, and its operations are being merged into those
of the Companys subsidiary, TDW UK. The $103.0 million
excess of the purchase price over the fair value of the net
assets acquired was recorded as goodwill.

Pursuant to the purchase method of accounting, the accompanying
consolidated statements of income reflect the results of
operations of the aforementioned entities and businesses only
subsequent to the effective date of acquisition. No pro forma
information has been provided as the acquisitions undertaken in
this fiscal year are not material to the consolidated Company.

57



---



5.  Receivables From and Payables To Brokers and
Dealers

Receivables from and payables to brokers and dealers comprise
the following:

|                              |  |      |         |      |  |   |         | 
|----------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|As at October 31              |  | 2000 |         | 1999
|                              |  |      |         |     
|Receivable:                   |  |      |         |      |  |   |         | 
|                             
|                             
|                             
|                             
|Securities failed to deliver  |  | $    | 26,244  |      |  | $ | 63,774  | 
|                             
|                             
|                             
|                             
|Correspondent broker balances |  |      | 49,291  |      |  |   | 62,721  | 
|                             
|                             
|                             
|                             
|Clearing and other fees       |  |      | 14,182  |      |  |   | 56,453  | 
|                             
|                             
|                             
|                             
|Other                         |  |      | 14,549  |      |  |   | 11,422  | 
|                              |  |      |         |      |  |   |         | 
|                              |  | $    | 104,266 |      |  | $ | 194,370 | 
|                              |  |      |         |      |  |   |         | 
|                             
|Payable:                      |  |      |         |      |  |   |         | 
|                             
|                             
|                             
|                             
|Securities failed to receive  |  | $    | 26,089  |      |  | $ | 85,816  | 
|                             
|                             
|                             
|                             
|Correspondent broker balances |  |      | 53,808  |      |  |   | 84      | 
|                             
|                             
|                             
|                             
|Other                         |  |      | 25,570  |      |  |   | 74,354  | 
|                              |  |      |         |      |  |   |         | 
|                              |  | $    | 105,467 |      |  | $ | 160,254 | 
|                              |  |      |         |      |  |   |         | 

6.  Receivables From and Payables To Customers

Receivables from customers are generally collateralized by
marketable securities. Receivables from customers are reported
net of unsecured or partially secured amounts over 30 days,
and are recorded as an allowance for doubtful accounts. The
allowances were $33,048 and $10,781 as of October 31, 2000
and 1999, respectively.

Payables to customers primarily represent free credit balances
in customers accounts. The Company pays customers interest
on certain free credit balances at a rate based on prevailing
short-term money market rates. Interest expense for the years
ended October 31, 2000, 1999 and 1998 was $129,990, $66,943
and $58,226, respectively.

7.  Financing Activities

Bank loans and overdrafts primarily represent short-term
borrowings in the U.S. which bear interest at rates based
primarily on the U.S. Federal funds rate. The loans are
generally collateralized by customers margin securities,
valued at approximately $1,374,308 and $419,955 as of
October 31, 2000 and 1999, respectively. The following is a
summary of comparative bank loan data:

|                                                |  |      |           |      |  |   |         |  
|----------------------------------------------- |  | ---- | --------- | ---- |  | - | ------- | -
|As at October 31                                |  | 2000 |           | 1999
|                                                |  |      |           |     
|Average amount outstanding during period        |  | $    | 793,234   |      |  | $ | 222,222 |  
|                                               
|                                               
|                                               
|                                               
|Maximum amount outstanding during period        |  |      | 1,583,465 |      |  |   | 502,031 |  
|                                               
|                                               
|                                               
|                                               
|Weighted average interest rate at end of period |  |      | 6.97      | %    |  |   | 5.68    | %
|                                               
|                                               
|                                               
|                                               
|Weighted average interest rate during period    |  |      | 6.90      | %    |  |   | 5.33    | %

NISC maintains available bank credit lines totaling $3,010,000
and $1,555,000 as at October 31, 2000 and 1999,
respectively. Included within the October 31, 2000 balance
is a bank credit line of $1,500,000 with TD Bank. All the lines
require collateralization and bear interest at a rate based on
the U.S. Federal funds rate. At October 31, 2000 and 1999,
NISC had drawn down $841,000 and $196,000 on these credit lines,
respectively. TDW Canada has received unsecured letters of
credit agreements with TD Bank on behalf of two clearing
organizations totaling $148,675 and $64,600 at October 31,
2000 and 1999, respectively. TDW Canada pays an annual fee of 25
basis points on the notional value of the letters of credit,
which amounted to $733, $369 and $244 for the years ended
October 31, 2000, 1999 and 1998, respectively. There were
no borrowings outstanding under these lines at October 31,
2000 and 1999.

58



---



Deposits received for securities loaned primarily represent
short-term collateralized financing transactions, which bear
interest based on prevailing market rates (average rates of
6.00% and 4.69% for the years ended October 31, 2000 and
1999, respectively). In addition, TDW Canada acts as an
intermediary between lenders and borrowers of securities and
earns a net interest spread on stock loan and stock borrow
transactions.

8.  Stock Options

Certain employees of the Company participate in the
Companys stock option plan, which was adopted in
connection with the Offerings. Under the plan, options on the
Companys common shares are issued to employees for terms
of 10 years, vest over a four-year period and are
exercisable at the market price of the shares on the date the
options were issued. The Company has authorized the issuance of
a maximum of 32,850,000 shares of common stock under the stock
option plan. Outstanding options have a weighted average
exercise price of $19.35, have a weighted average remaining life
of 9.2 years and expire on dates ranging from
June 2009 to October 2010.

A summary of the Companys stock option activity is as
follows:

|                                      |  |        |           |                  |  |   |       | 
|------------------------------------- |  | ------ | --------- | ---------------- |  | - | ----- | 
|                                      |  |        |           | Weighted average
|                                      |  | Shares |           | exercise price  
|                                      |  |        |           |                 
|Outstanding at date of reorganization |  |        |          |                  |  |   |      | 
|                                     
|                                     
|                                     
|                                     
|Granted                               |  |        | 3,310,754 |                  |  | $ | 24.00 | 
|                                     
|                                     
|                                     
|                                     
|Canceled                              |  |        | 60,304    |                  |  |   | 24.00 | 
|                                      |  |        |           |                  |  |   |       | 
|Outstanding at October 31, 1999       |  |        | 3,250,450 |                  |  | $ | 24.00 | 
|                                      |  |        |           |                  |  |   |       | 
|Outstanding at October 31, 1999       |  |        | 3,250,450 |                  |  | $ | 24.00 | 
|                                     
|                                     
|                                     
|                                     
|Granted                               |  |        | 5,364,042 |                  |  |   | 17.30 | 
|                                     
|                                     
|                                     
|                                     
|Canceled                              |  |        | 800,899   |                  |  |   | 22.72 | 
|                                      |  |        |           |                  |  |   |       | 
|Outstanding at October 31, 2000       |  |        | 7,813,593 |                  |  | $ | 19.35 | 
|                                      |  |        |           |                  |  |   |       | 

The weighted average fair value of options granted during the
year ended October 31, 2000 was $12.65 per option. Options
granted during the year and outstanding at October 31, 2000
have a weighted average remaining contractual life of
9.4 years and expire on dates ranging from
January 2010 to October 2010.

In addition, certain employees of the Company participate in TD
Banks stock option plan. Under TD Banks stock option
plan, options on TD Bank common shares are issued to certain
employees of the Company for terms of 10 years, vest over a
four-year period and are exercisable at the market price of the
shares on the date the options were issued. During 1997, the
plan was modified to allow employees to elect to receive cash
for the options equal to their intrinsic value, being the
difference between the option exercise price and the current
market value of the shares. Pursuant to SFAS No. 123, the
Company has recorded compensation expense based on the annual
change in the intrinsic value of the stock options. The Company
recorded compensation expense/(income) in the amounts of $1,272,
$5,332 and $(117) for the years ended October 31, 2000,
1999 and 1998, respectively, for employee stock options. No
compensation expense was recognized for fiscal years prior to
1997. Effective May 1, 2000, certain option holders signed
legally binding waivers to forfeit their right to a shareless
exercise as provided by the plan, resulting in no further
expense being recorded for the change in intrinsic value of the
stock options. Outstanding options have exercise prices ranging
from $5.38 to $24.53, have a weighted average remaining
contractual life of 7.13 years, and expire on dates ranging
from April 2003 to December 2009.

59



---



A summary of the Companys portion of stock option activity
and related information of TD Bank is as follows:

|                                        |  |      |           |          |  |      |       |          |  |      |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|--------------------------------------- |  | ---- | --------- | -------- |  | ---- | ----- | -------- |  | ---- | --------- | -------- |  | - | ----- |  |  |  | --------- | - |  | - | ----- | 
|                                        |  |      |           | Weighted |  |      |       | Weighted |  |      |           | Weighted
|                                        |  |      |           | average  |  |      |       | average  |  |      |           | average 
|                                        |  |      |           | exercise |  |      |       | exercise |  |      |           | exercise
|For the year ended October 31           |  | 2000 |           | price    |  | 1999 |       | price    |  | 1998 |           | price   
|                                        |  |      |           |          |  |      |       |          |  |      |           |         
|Number outstanding, beginning of period |  |      | 1,811,950 |          |  | $    | 15.42 |          |  |      | 1,224,194 |          |  | $ | 10.74 |  |  |  | 821,792   |   |  | $ | 8.80  | 
|                                       
|                                       
|                                       
|                                       
|Granted                                 |  |      | 85,000    |          |  |      | 24.53 |          |  |      | 673,400   |          |  |   | 16.86 |  |  |  | 501,800   |   |  |   | 20.79 | 
|                                       
|                                       
|                                       
|                                       
|Transferred In                          |  |      | 198,700   |          |  |      | 10.69 |          |  |      |          |          |  |   |      |  |  |  |          |   |  |   |      | 
|                                       
|                                       
|                                       
|                                       
|Exercised                               |  |      | (230,425  | )        |  |      | 10.20 |          |  |      | (77,498   | )        |  |   | 7.41  |  |  |  | (97,300   | ) |  |   | 7.24  | 
|                                       
|                                       
|                                       
|                                       
|Forfeited                               |  |      | (115,750  | )        |  |      | 13.86 |          |  |      | (8,146    | )        |  |   | 16.00 |  |  |  | (2,098    | ) |  |   | 10.02 | 
|                                        |  |      |           |          |  |      |       |          |  |      |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|Number outstanding, end of period       |  |      | 1,749,475 |          |  | $    | 15.67 |          |  |      | 1,811,950 |          |  | $ | 15.42 |  |  |  | 1,224,194 |   |  | $ | 10.74 | 
|                                        |  |      |           |          |  |      |       |          |  |      |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|Exercisable, end of period              |  |      | 870,469   |          |  | $    | 13.38 |          |  |      | 581,275   |          |  | $ | 11.37 |  |  |  | 455,234   |   |  | $ | 7.55  | 
|                                        |  |      |           |          |  |      |       |          |  |      |           |          |  |   |       |  |  |  |           |   |  |   |       | 

The Company applies APB Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for its stock
compensation and, accordingly, does not recognize any
compensation cost associated with this plan in the consolidated
financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its options
under SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys net income for the year
ended October 31, 2000 would have been as follows:

|                                        |  |      |         |      |  |      |        |  |  |   |        | 
|--------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------ | 
|For the year ended October 31           |  | 2000 |         | 1999 |  | 1998
|                                        |  |      |         |      |  |     
|Net income as reported                  |  | $    | 210,316 |      |  | $    | 97,346 |  |  | $ | 48,713 | 
|                                       
|                                       
|                                       
|                                       
|Pro forma net income                    |  |      | 192,913 |      |  |      | 92,692 |  |  |   | 47,865 | 
|                                       
|                                       
|                                       
|                                       
|Basic earnings per share, as reported   |  |      | 0.56    |      |  |      | 0.28   |  |  |   | 0.15   | 
|                                       
|                                       
|                                       
|                                       
|Diluted earnings per share, as reported |  |      | 0.55    |      |  |      | 0.28   |  |  |   | 0.15   | 
|                                       
|                                       
|                                       
|                                       
|Pro forma basic earnings per share      |  |      | 0.51    |      |  |      | 0.27   |  |  |   | 0.14   | 
|                                       
|                                       
|                                       
|                                       
|Pro forma diluted earnings per share    |  |      | 0.51    |      |  |      | 0.27   |  |  |   | 0.14   | 

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions used for options granted during the
period: dividend yield of 0%; expected volatility of 69%;
risk-free interest rate of 5.75%; and an expected life of nine
years for all grants.

The fair value of each option grant issued by TD Bank is
estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for
options granted during the period: dividend yield of 2.2%;
expected volatility of 31%; risk-free interest rate of 5.58%;
and an expected life of seven years for all grants.

9.  Commitments and Contingent Liabilities

The Company leases office space and equipment under
noncancelable operating leases with third parties and affiliates
(Note 15) extending for periods in excess of one year. Future
minimum rental commitments under such leases as of
October 31, 2000 are as follows:

|                               |  |   |         | 
|------------------------------ |  | - | ------- | 
|For the year ending October 31 |  |  
|                               |  |  
|2001                           |  | $ | 46,978  | 
|                              
|                              
|                              
|                              
|2002                           |  |   | 43,176  | 
|                              
|                              
|                              
|                              
|2003                           |  |   | 38,336  | 
|                              
|                              
|                              
|                              
|2004                           |  |   | 32,674  | 
|                              
|                              
|                              
|                              
|2005                           |  |   | 30,631  | 
|                              
|                              
|                              
|                              
|Thereafter                     |  |   | 139,080 | 
|                               |  |   |         | 
|                               |  | $ | 330,875 | 
|                               |  |   |         | 

60



---



Rental expense amounted to approximately $38,768, $33,059 and
$22,300 for the years ended October 31, 2000, 1999 and
1998, respectively.

In the normal course of conducting its securities business, the
Company has been named as a defendant in certain lawsuits,
claims and legal actions. In the opinion of management, after
consultation with outside legal counsel, the ultimate outcome of
pending litigation and inquiries will not have a material
adverse effect on the financial condition or results of
operations of the Company.

10.  Net Capital Requirements

As registered broker-dealers and members of the New York Stock
Exchange, TDW US and NISC are subject to the Securities and
Exchange Commissions Uniform Net Capital Rule (the
Rule), which requires the maintenance of minimum net
capital. At October 31, 2000 and 1999, TDW US and NISC were
both in compliance with their respective capital requirements.
TDW US had net capital of $10,103 and $21,439 as at
October 31, 2000 and 1999, respectively, which was $5,419
and $18,918, respectively, in excess of its required net
capital. NISC had net capital of $806,347 and $380,967 as at
October 31, 2000 and 1999, respectively, which was $672,795
and $277,276, respectively, in excess of its required net
capital.

TDW Canada is a member of the Investment Dealers Association of
Canada (IDA) and is required to meet the
risk-adjusted capital rules, which require the maintenance of
minimum risk-adjusted capital of Cdn$250 (US$164 at October 31,
2000). As of October 31, 2000 and 1999, TDW Canada was in
compliance with such requirements.

TDW UK, TDW Australia and TDW HK are all subject to
broker-dealer capital requirements in their respective countries
and, as of October 31, 2000 and 1999, were in compliance
with such requirements as and when applicable.

11.  Employee Benefit Plans

Substantially all of the Companys full-time U.S. employees
are eligible to participate in the defined contribution profit
sharing and 401(k) plans sponsored by an affiliate. The Company
makes discretionary contributions to the profit sharing plan and
makes mandatory matching contributions to the 401(k) plan based
on a percentage of each employees contribution, up to 6%
of the employees compensation per pay period. The total
expenses recognized by the Company for contributions to the
profit sharing and 401(k) plans for the years ended
October 31, 2000, 1999 and 1998 were $29,473, $10,960 and
$6,400, respectively.

Substantially all of the Companys Canadian employees are
eligible to participate in TD Banks pension plan, in
which membership is voluntary, and funding is provided by
contributions from TD Bank and members of the plan. Each
year, actuarial valuations are made of the pension plans
maintained by TD Bank to determine the present value of the
accrued pension benefits. Pension plan assets are valued at
market values. Pension costs are determined based upon separate
accrued valuations using the projected benefit method pro-rated
on service and TD Bank managements estimates rather
than on valuations for funding purposes. There is no separate
actuarial valuation for the Company, but the Company is charged
its portion of pension expense by TD Bank. Pension
expense/(income) includes the cost of pension benefits for the
current years service, interest expense on pension
liabilities, income on plan assets, and the amortization of
pension adjustments on a straight-line basis over the expected
average remaining service life of TD Banks employee
group. The Companys pro-rata share of TD Banks
pension expense/(income) was $1,860, $1,433 and $(182) for the
years ended October 31, 2000, 1999 and 1998, respectively.

TD Bank also provides the Companys Canadian employees
with certain health care and life insurance benefits upon
retirement. Eligible employees are those who retire from
TD Bank and the Company at normal retirement age.
TD Bank recognizes the cost of these benefits as incurred
by the retirees. The pro rata share of this cost is charged to
the Company in the year it is incurred under the master services
agreement.

61



---



12.  Income Taxes

Income tax provision consists of the following:

|                              |              |      |         |        |   |      |        |        |   |   |        |        | 
|----------------------------- | ------------ | ---- | ------- | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | 
|For the year ended October 31 |              | 2000 |         | 1999   |   | 1998
|                              |              |      |         |        |   |     
|Current:                      |              |      |         |        |   |      |        |        |   |   |        |       
|                             
|                             
|                             
|                             
|                              | U.S. Federal |      | $       | 94,122 |   |      | $      | 54,071 |   |   | $      | 27,392 | 
|                             
|                             
|                             
|                             
|                              | State        |      |         | 13,012 |   |      |        | 8,121  |   |   |        | 4,696  | 
|                             
|                             
|                             
|                             
|                              | Foreign      |      |         | 75,208 |   |      |        | 29,512 |   |   |        | 21,180 | 
|                              |              |      |         |        |   |      |        |        |   |   |        |       
|Total current                 |              |      | 182,342 |        |   |      | 91,704 |        |   |   | 53,268 |       
|                              |              |      |         |        |   |      |        |        |   |   |        |       
|Deferred:                     |              |      |         |        |   |      |        |        |   |   |        |       
|                             
|                             
|                             
|                             
|                              | U.S. Federal |      |         | (6,754 | ) |      |        | (2,097 | ) |   |        | 1,149  | 
|                             
|                             
|                             
|                             
|                              | State        |      |         | (876   | ) |      |        | (931   | ) |   |        | 197    | 
|                             
|                             
|                             
|                             
|                              | Foreign      |      |         | (3,460 | ) |      |        | (3,484 | ) |   |        | 151    | 
|                              |              |      |         |        |   |      |        |        |   |   |        |       
|Total deferred                |              |      | (11,090 | )      |   |      | (6,512 | )      |   |   | 1,497  |       
|                              |              |      |         |        |   |      |        |        |   |   |        |       
|Total income tax provision    |              | $    | 171,252 |        |   | $    | 85,192 |        |   | $ | 54,765 |       
|                              |              |      |         |        |   |      |        |        |   |   |        |       

The temporary differences which have created deferred tax assets
and liabilities, included in other assets in the consolidated
statements of financial condition, are detailed below:

|                               |                               |      |        |        |   |   |        |        |  
|------------------------------ | ----------------------------- | ---- | ------ | ------ | - | - | ------ | ------ | -
|As at October 31               |                               | 2000 |        | 1999  
|                               |                               |      |        |       
|Deferred tax assets:           |                               |      |        |        |   |   |        |       
|                              
|                              
|                              
|                              
|                               | Depreciation and amortization |      | $      | 2,225  |   |   | $      | 1,326  |  
|                              
|                              
|                              
|                              
|                               | Accruals and allowances       |      |        | 10,532 |   |   |        | 3,611  |  
|                              
|                              
|                              
|                              
|                               | Foreign operations            |      |        | 7,044  |   |   |        | 3,484  |  
|                               |                               |      |        |        |   |   |        |       
|Total deferred tax assets      |                               |      | 19,801 |        |   |   | 8,421  |       
|                               |                               |      |        |        |   |   |        |       
|Deferred tax liabilities:      |                               |      |        |        |   |   |        |       
|                              
|                              
|                              
|                              
|                               | Goodwill and other            |      |        | (3,882 | ) |   |        | (3,592 | )
|                               |                               |      |        |        |   |   |        |       
|Total deferred tax liabilities |                               |      | (3,882 | )      |   |   | (3,592 | )     
|                               |                               |      |        |        |   |   |        |       
|Net deferred tax asset         |                               | $    | 15,919 |        |   | $ | 4,829  |       
|                               |                               |      |        |        |   |   |        |       

The Company determined that no valuation allowance against
deferred tax assets as at October 31, 2000 and 1999 was
necessary.

The following is a reconciliation of the provision for income
taxes and the amount computed by applying the U.S. Federal
statutory rate to income before income taxes:

|                                                                |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|For the year ended October 31                                   |  | 2000 |      | 1999 |  | 1998
|                                                                |  |      |      |      |  |     
|U.S. Federal statutory income tax rate                          |  |      | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|                                                               
|                                                               
|                                                               
|                                                               
|State and local income taxes, net of Federal income tax benefit |  |      | 2.1  |      |  |      | 3.9  |   |  |  | 4.8  |  
|                                                               
|                                                               
|                                                               
|                                                               
|Foreign provincial income taxes                                 |  |      | 4.4  |      |  |      | 3.4  |   |  |  | 6.7  |  
|                                                               
|                                                               
|                                                               
|                                                               
|Amortization of goodwill and other                              |  |      | 3.4  |      |  |      | 4.4  |   |  |  | 6.4  |  
|                                                                |  |      |      |      |  |      |      |   |  |  |      |  
|                                                                |  |      | 44.9 | %    |  |      | 46.7 | % |  |  | 52.9 | %
|                                                                |  |      |      |      |  |      |      |   |  |  |      |  



|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|13. | Financial Instruments With Off Balance Sheet Risk and
	Concentration of Credit Risk

In the normal course of business, the Company is exposed to off
balance sheet risk. The Company executes, as agent, securities
transactions on behalf of its customers. If either the customer
or the counterparty fails to perform, the Company may be
required to discharge the obligations of the nonperforming
party. In

62



---





In the normal course of business, the Company may deliver
securities as collateral in support of various secured financing
sources such as bank loans and deposits received for securities
loaned. In addition, the Company delivers customer securities as
collateral to satisfy margin deposits of various clearing
organizations. In the event the counterparty is unable to meet
its contracted obligation to return customer securities
delivered as collateral, the Company may be obligated to
purchase the securities in order to return them to the owner. In
such circumstances, the Company may incur a loss up to the
amount by which the market value of the securities exceeds the
value of the loan or other collateral received by, or in the
possession or control of, the Company.

Securities sold, not yet purchased represents obligations of the
Company to purchase securities at a future date. The Company may
incur a loss if the market value of the securities subsequently
increases.

For transactions in which the Company extends credit to
customers and counterparties, the Company seeks to control the
risks associated with these activities by requiring customers to
maintain margin collateral in compliance with various regulatory
and internal guidelines. The Company monitors required margin
levels daily and, pursuant to such guidelines, requests
customers to deposit additional collateral or reduce securities
positions when necessary.

The Company has a global retail customer base. The Company
conducts business with brokers and dealers, clearing
organizations and depositories that are primarily located in the
United States, Canada, Australia, the United Kingdom and Hong
Kong. The majority of the Companys transactions and,
consequently, the concentration of its credit exposures are with
customers, broker-dealers and other financial institutions in
the United States and Canada. This results in credit exposure in
the event that the counterparty fails to fulfill its contractual
obligations. The Companys exposure to credit risk can be
directly affected by volatile securities markets, which may
impair the ability of counterparties to satisfy their
contractual obligations. The Company seeks to control its credit
risk through a variety of reporting and control procedures,
including establishing credit limits based upon a review of the
counterpartys financial condition and credit rating. The
Company monitors collateral levels on a daily basis for
compliance with regulatory and internal guidelines, and requests
changes in collateral levels as appropriate.

14.  Fair Value of Financial Instruments

SFAS No. 107, Disclosure about Fair Value of Financial
Instruments, requires the disclosure of the fair value of
financial instruments, including assets and liabilities
recognized in the consolidated statements of financial
condition. Securities owned and securities sold, not yet
purchased are reported at their fair value based on market
quotes. Management estimates that the fair value of all other
financial instruments recognized in the consolidated statements
of financial condition (including deposits received for
securities loaned, receivables, payables and accruals, and bank
loans and overdrafts) approximates their carrying value, as such
financial instruments are short-term in nature, bear interest at
current market rates or are subject to restrictions or other
specific provisions which offset any fair value adjustments.

15.  Related Party Transactions

The Company transacts business and has extensive relationships
with TD Bank, TDW Holdings and other affiliates. Due to
these relationships, it is possible that the terms of these
transactions are not the same as those which would result from
transactions among unrelated parties. A description of these
transactions and relationships is set forth below.

General

Directors, officers and employees of the Company maintain cash
and margin accounts with the Companys broker-dealer
subsidiaries and execute securities transactions through these
firms in the ordinary course of business. As of October 31,
2000 and 1999, receivables from customers included $4,266 and
$6,678,

63



---





The Company, where possible, utilizes the commercial banking and
related services of TD Bank and its affiliates, which are
provided to the Company at standard commercial rates.

As more fully discussed in Note 3 and Note 12, the
Companys U.S. operations are included in the consolidated
Federal income tax returns and combined state and local income
tax returns of an affiliate filed in the U.S. The provisions
recorded by the Company for income taxes in the U.S. and Canada
do not differ materially from the provisions that would have
resulted had the Company filed separate income tax returns.

U.S. operations

TDWAM acts as investment advisor and provides various
administrative and shareholder services to a series of
proprietary mutual funds. TDWAM receives fees from the funds,
based primarily on the average daily net asset value of the
funds but may, at its discretion, choose to waive all or a
portion of the fees at any time.

TDWAM also provides investment advisory services to TD
Waterhouse Bank, N.A. (TDWB), an affiliated
commercial bank, with respect to TDWBs investments in
fixed income securities, and receives fees based on the market
value of the assets under management.

Customers of TDW US may elect to sweep the excess cash balances
held in their brokerage accounts into a Federal Deposit
Insurance Corporation (FDIC) insured money market
account offered by TDWB. In connection with this arrangement,
TDW US provides TDWB with record-keeping and shareholder
services and as compensation receives a fee based on the average
daily cash balance that its customers maintain at TDWB.

Fee income related to the aforementioned transactions and
relationships of the Company has been included in mutual fund
and related revenue in the accompanying consolidated statements
of income; the corresponding amounts are as follows:

|                              |  |      |         |      |  |      |         |   |  |   |        |  
|----------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|For the year ended October 31 |  | 2000 |         | 1999 |  | 1998
|                              |  |      |         |      |  |     
|Fees                          |  | $    | 74,913  |      |  | $    | 53,265  |   |  | $ | 23,719 |  
|                             
|                             
|                             
|                             
|Fees waived                   |  |      | (15,397 | )    |  |      | (13,854 | ) |  |   | (3,894 | )
|                              |  |      |         |      |  |      |         |   |  |   |        |  
|Fee income                    |  | $    | 59,516  |      |  | $    | 39,411  |   |  | $ | 19,825 |  
|                              |  |      |         |      |  |      |         |   |  |   |        |  

Commencing in fiscal 1998, NISC provided clearing services to a
U.S. affiliate of TD Bank and received clearing fees at
rates approximating those charged to third-party introducing
brokers. The income from this relationship was $1,623 and $867
for the years ended October 31, 2000 and 1999,
respectively. These fees have been included in commissions and
fees.

In addition the Company, primarily through TDW US, provides
TDWB with various marketing and administrative support services.
These services include the marketing of TDWBs FDIC insured
deposit accounts and various credit products. In addition to
these marketing services, TDW US provides TDWB with various
executive and administrative support services. These services
include audit, tax, human resources, employee benefits and
legal, as well as the provision of office space. The Company
also provides certain administrative and regulatory reporting
functions for TDWB. The Company is reimbursed for such services
on a cost recovery basis, in the amounts of $515 and $800 for
the years ended October 31, 2000 and 1999, respectively.
These amounts are included as a recovery in other expenses in
the consolidated statements of income.

In the normal course of business, the US subsidiaries of the
Company obtain funding for operations from TDW Holdings. This
funding is interest bearing and is payable on demand. In
aggregate, the Companys US

64



---





International operations

TDW Canada sells mutual funds, some of which are managed by
TD Asset Management Inc. (TD Asset Management). TD
Asset Management pays trailer fees to the Company based on the
net asset value of the mutual funds held by TDW Canadas
customers.

TDW Canada also pays TD Bank for account
administration support provided by the branch network in Canada.

TDW Canada provides clearing services to TD Bank and
affiliates at commercial rates. Prior to the reorganization and
the Offerings, this part of TDW Canada was a division of
TD Bank and, therefore, fees received by TDW Canada from
TD Bank were determined on a cost recovery basis.
Subsequent to the reorganization and the Offerings, fees for
such services were renegotiated at commercial rates.

Prior to the reorganization and the Offerings, all employees
involved in the TDW Canada businesses were employees of
TD Bank. TD Bank allocated compensation expense to the
Company for those periods based on an estimate of the actual
compensation earned by each TD Bank employee who performed
services for TDW Canada, plus an estimate of the related
employment benefits applicable to these employees, which was
based on a percentage of total compensation.

TD Bank provides significant administrative and other
services to TDW Canada. Charges for these services are
calculated on a cost recovery basis. A detailed description of
the services follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Some leases for TDW Canadas head office and branch
	locations are negotiated by TD Bank, and rental expense is
	allocated to the Company by TD  Bank. The rental charge
	includes the lease costs, insurance and management, and
	maintenance expenses. Rental amounts are also paid by the
	Company on TD Bank-owned property which TDW Canada
	occupies. TD Bank also charges TDW Canada for use of
	its equipment and provides hardware, software and telephone
	infrastructure services, which are charged to TDW Canada
	based on services used.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Professional services such as internal audit and legal are
	provided by TD Bank and charged to the Company at an hourly
	rate for specific work performed on TDW Canadas
	business. TD Banks systems research and development
	group works with TDW Canadas in-house systems group
	to provide software solutions and its services are also charged
	at an hourly rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Overhead costs associated with the following general services
	have been allocated to the Company based on the proportion of
	TDW Canadas revenues to total consolidated
	TD Bank revenues: payroll services and corporate human
	resource policy and procedures, financial statement
	consolidation, business planning, forecasting and tax planning,
	official external communications (which include press releases,
	annual and quarterly reporting, and investor, government and
	community relations), charitable donations and costs related to
	employee communications, and overall TD Bank marketing
	expenses (which include advertising and market research). In
	addition, economic research is provided to TDW Canada and
	is used for marketing and client education purposes, and the
	costs of preparing the research are charged based on usage.
	Policies and procedures for credit and market risk management
	are formulated centrally by TD Bank. Expense allocations
	are determined based on the time spent on each business.

TD Bank advances funding in the form of subordinated loans
to TDW Australia and TDW UK. TDW Australia
maintained available subordinated debt lines with an affiliate
totaling $23,741 and $25,507 for the years ended
October 31, 2000 and 1999, respectively. TDW UK
established and maintained a subordinated debt line with
TD Bank totaling $36,212 and $8,373 for the years ended
October 31, 2000 and 1999, respectively. As at
October 31, 2000, TDW Australia had drawn $2,606, and had
not drawn down on its line at October 31, 1999. TDW UK
had drawn down $27,521 and $4,606 on its line as at
October 31, 2000 and 1999, respectively.

65



---



Revenues and expenses resulting from the aforementioned
transactions and relationships of the Company, which are
included in the accompanying consolidated statements of income,
are as follows:

|                                |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|For the year ended October 31   |  | 2000 |        | 1999 |  | 1998
|                                |  |      |        |      |  |     
|Revenues                        |  |      |        |      |  |      |        |   |  |   |        |  
|                               
|                               
|                               
|                               
|Commissions and fees            |  | $    | 29,992 |      |  | $    | 21,166 |   |  | $ | 16,524 |  
|                               
|                               
|                               
|                               
|Mutual fund and related revenue |  |      | 11,567 |      |  |      | 7,366  |   |  |   | 5,959  |  
|                               
|                               
|                               
|                               
|Net interest revenue            |  |      | (1,138 | )    |  |      | (1,215 | ) |  |   | (1,038 | )
|                                |  |      |        |      |  |      |        |   |  |   |        |  
|Total revenues                  |  | $    | 40,421 |      |  | $    | 27,317 |   |  | $ | 21,445 |  
|                                |  |      |        |      |  |      |        |   |  |   |        |  
|Expenses                        |  |      |        |      |  |      |        |   |  |   |        |  
|                               
|                               
|                               
|                               
|Compensation and benefits       |  | $    | 4,543  |      |  | $    | 32,475 |   |  | $ | 52,717 |  
|                               
|                               
|                               
|                               
|Occupancy and equipment         |  |      | 6,097  |      |  |      | 11,017 |   |  |   | 17,065 |  
|                               
|                               
|                               
|                               
|Professional fees               |  |      | 5,262  |      |  |      | 3,431  |   |  |   | 3,600  |  
|                               
|                               
|                               
|                               
|Other expenses                  |  |      | 37,361 |      |  |      | 18,138 |   |  |   | 7,190  |  
|                                |  |      |        |      |  |      |        |   |  |   |        |  
|Total expenses                  |  | $    | 53,263 |      |  | $    | 65,061 |   |  | $ | 80,572 |  
|                                |  |      |        |      |  |      |        |   |  |   |        |  

16.  Stockholders Equity

Historical combined equity as at October 31, 1998
represents the net equity of the subsidiaries and divisions of
subsidiaries of TD Bank, which was contributed to the
Company in connection with the reorganization and Offerings.

NISC issued 10,000 preferred shares with a US$23,700 par value
as part of the reorganization. The shares carry a semi-annual
dividend based on six-month London interbank offering rates,
have no fixed maturity but are redeemable at any time, in whole
or in part, at the issuers option. Five shares remain
outstanding.

TD Waterhouse Canada, as part of the consideration in the
acquisition of CT Securities Inc. issued 17,100
Class B preferred shares with a Cdn$1,000 par value. The
shares are non-voting, carry a non-cumulative floating rate
dividend feature based on bankers acceptance rates in effect,
from time to time, payable quarterly, if declared, and are
redeemable, at the issuers option, five years following
the issue date of April 13, 2000.

Common stock in the consolidated statements of financial
condition includes 36 million shares of common stock (see
Note 2  Reorganization) and 3.37 million shares
of common stock (see Note 4  CT Securities
Inc.), which are issuable upon exchange of the exchangeable
preference shares of TDW Canada held by TD Bank and by CT
Financial Services Inc., respectively.

17.  Earnings Per Share

SFAS No. 128, Earnings Per Share, requires a dual
presentation of basic and diluted earnings per share
(EPS). Basic EPS excludes dilution and is computed
by dividing net income by the weighted average number of common
shares outstanding for the period, including the exchangeable
preference shares of TDW Canada (Notes 2, 4 and 16).
Diluted EPS reflects the potential reduction in EPS that could
occur if securities or other contracts to issue common stock
were exercised or converted into common stock. EPS under the
basic and diluted computations is as follows.

66



---



|                                                                |  |      |         |      |  |      |         |  |  |   |         | 
|--------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|For the year ended October 31                                   |  | 2000 |         | 1999 |  | 1998
|                                                                |  |      |         |      |  |     
|Net Income                                                      |  | $    | 210,316 |      |  | $    | 97,346  |  |  | $ | 48,713  | 
|                                                                |  |      |         |      |  |      |         |  |  |   |         | 
|Weighted average number of common shares outstanding 
	basic   |  |      | 378,942 |      |  |      | 348,509 |  |  |   | 333,000 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Common stock equivalent shares related to stock incentive plans |  |      | 213     |      |  |      |        |  |  |   |        | 
|                                                                |  |      |         |      |  |      |         |  |  |   |         | 
|Weighted average number of common shares outstanding 
	diluted |  |      | 379,155 |      |  |      | 348,509 |  |  |   | 333,000 | 
|                                                                |  |      |         |      |  |      |         |  |  |   |         | 
|Basic earnings per share                                        |  | $    | 0.56    |      |  | $    | 0.28    |  |  | $ | 0.15    | 
|                                                                |  |      |         |      |  |      |         |  |  |   |         | 
|Diluted earnings per share                                      |  | $    | 0.55    |      |  | $    | 0.28    |  |  | $ | 0.15    | 
|                                                                |  |      |         |      |  |      |         |  |  |   |         | 

For the prior periods, securities or other contracts to issue
common stock did not have a dilutive impact.

18.  International Operations

The total revenues, income before income taxes and identifiable
assets of the Companys businesses by geographic region are
summarized below:

|                              |               |      |           |           |   |      |         |         |   |   |         |         |  
|----------------------------- | ------------- | ---- | --------- | --------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|For the year ended October 31 |               | 2000 |           | 1999      |   | 1998
|                              |               |      |           |           |   |     
|Total revenues:               |               |      |           |           |   |      |         |         |   |   |         |        
|                             
|                             
|                             
|                             
|                              | United States |      | $         | 1,040,688 |   |      | $       | 709,214 |   |   | $       | 423,789 |  
|                             
|                             
|                             
|                             
|                              | Canada        |      |           | 453,932   |   |      |         | 228,967 |   |   |         | 180,051 |  
|                             
|                             
|                             
|                             
|                              | Other         |      |           | 80,795    |   |      |         | 21,936  |   |   |         | 10,621  |  
|                              |               |      |           |           |   |      |         |         |   |   |         |        
|Total                         |               | $    | 1,575,415 |           |   | $    | 960,117 |         |   | $ | 614,461 |        
|                              |               |      |           |           |   |      |         |         |   |   |         |        
|Income before income taxes:   |               |      |           |           |   |      |         |         |   |   |         |        
|                             
|                             
|                             
|                             
|                              | United States |      | $         | 240,163   |   |      | $       | 134,331 |   |   | $       | 64,243  |  
|                             
|                             
|                             
|                             
|                              | Canada        |      |           | 172,535   |   |      |         | 61,367  |   |   |         | 45,739  |  
|                             
|                             
|                             
|                             
|                              | Other         |      |           | (31,130   | ) |      |         | (13,160 | ) |   |         | (6,504  | )
|                              |               |      |           |           |   |      |         |         |   |   |         |        
|Total                         |               | $    | 381,568   |           |   | $    | 182,538 |         |   | $ | 103,478 |        
|                              |               |      |           |           |   |      |         |         |   |   |         |        

|                     |               |      |            |           |  |   |           |           |  |  |  |  | 
|-------------------- | ------------- | ---- | ---------- | --------- |  | - | --------- | --------- |  |  |  |  | 
|As at October 31     |               | 2000 |            | 1999      |  |  
|                     |               |      |            |           |  |  
|Identifiable assets: |               |      |            |           |  |   |           |           |  |  |  | 
|                    
|                    
|                    
|                    
|                     | United States |      | $          | 7,592,537 |  |   | $         | 6,327,880 |  |  |  |  | 
|                    
|                    
|                    
|                    
|                     | Canada        |      |            | 2,937,505 |  |   |           | 2,048,049 |  |  |  |  | 
|                    
|                    
|                    
|                    
|                     | Other         |      |            | 459,275   |  |   |           | 215,887   |  |  |  |  | 
|                     |               |      |            |           |  |   |           |           |  |  |  | 
|Total                |               | $    | 10,989,317 |           |  | $ | 8,591,816 |           |  |  |  | 
|                     |               |      |            |           |  |   |           |           |  |  |  | 

19.  Reconciliation of U.S. and Canadian Generally
Accepted Accounting Principles

The consolidated financial statements of the Company are
prepared in accordance with accounting principles generally
accepted in the United States (U.S. GAAP). Material
differences at October 31, 2000 and 1999 and for the fiscal
years ended October 31, 2000, 1999 and 1998 between U.S.
GAAP and accounting principles generally accepted in Canada
(Canadian GAAP) are described below:

|                                     |  |      |         |      |  |      |        |  |  |   |        |  
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------ | -
|For the year ended October 31        |  | 2000 |         | 1999 |  | 1998
|                                     |  |      |         |      |  |     
|Net income                           |  |      |         |      |  |      |        |  |  |   |        |  
|                                    
|                                    
|                                    
|                                    
|Net income based on U.S. GAAP        |  | $    | 210,316 |      |  | $    | 97,346 |  |  | $ | 48,713 |  
|                                    
|                                    
|                                    
|                                    
|Stock-based compensation, net of tax |  |      | 1,272   |      |  |      | 2,562  |  |  |   | (68    | )
|                                     |  |      |         |      |  |      |        |  |  |   |        |  
|Net income based on Canadian GAAP    |  | $    | 211,588 |      |  | $    | 99,908 |  |  | $ | 48,645 |  
|                                     |  |      |         |      |  |      |        |  |  |   |        |  

67



---



|                                         |  |      |            |      |  |   |           |  |  |  |  | 
|---------------------------------------- |  | ---- | ---------- | ---- |  | - | --------- |  |  |  |  | 
|As at October 31                         |  | 2000 |            | 1999 |  |  
|                                         |  |      |            |      |  |  
|Statement of financial condition         |  |      |            |      |  |   |           |  |  |  |  | 
|                                        
|                                        
|                                        
|                                        
|Total assets based on U.S. GAAP          |  | $    | 10,989,317 |      |  | $ | 8,591,816 |  |  |  |  | 
|                                        
|                                        
|                                        
|                                        
|Customer transactions as of trade date   |  |      | 1,022,291  |      |  |   | 1,218,236 |  |  |  |  | 
|                                         |  |      |            |      |  |   |           |  |  |  |  | 
|Total assets based on Canadian GAAP      |  | $    | 12,011,608 |      |  | $ | 9,810,052 |  |  |  |  | 
|                                         |  |      |            |      |  |   |           |  |  |  |  | 
|Total liabilities based on U.S. GAAP     |  | $    | 8,765,394  |      |  | $ | 6,639,696 |  |  |  |  | 
|                                        
|                                        
|                                        
|                                        
|Customer transactions as of trade date   |  |      | 1,022,291  |      |  |   | 839,411   |  |  |  |  | 
|                                         |  |      |            |      |  |   |           |  |  |  |  | 
|Total liabilities based on Canadian GAAP |  | $    | 9,787,685  |      |  | $ | 7,479,107 |  |  |  |  | 
|                                         |  |      |            |      |  |   |           |  |  |  |  | 

Stock-based compensation

During 1997, the TD Bank employee stock option plan was modified
to allow option holders to elect to receive cash for an
options intrinsic value, which is the difference between
the options exercise price and the current market value of
the shares. In accounting for stock options with this feature,
SFAS No. 123 requires expensing the annual change in the
intrinsic value of the stock options. For options that have not
fully vested, the change in intrinsic value is amortized over
the remaining vesting period. For purposes of preparing its
Canadian GAAP financial statements, TD Bank does not record
compensation expense for stock-based compensation, but rather
cash payments to option holders are charged to retained
earnings. Effective May 1, 2000, certain option holders
signed legally binding waivers to forfeit their right to a
shareless exercise as provided by the plan, resulting in no
further expense being recorded for the change in intrinsic value
of the stock options as from that date. Accordingly, this
resulted in the U.S. GAAP to Canadian GAAP reconciling amount
for the year remaining at the year-to-date figure as at
April 30, 2000, the end of the second financial quarter.

Customers securities transactions

Under U.S. GAAP, customers securities transactions are
recorded on a settlement date basis. Under Canadian GAAP,
customers securities transactions are recorded on a trade
date basis.

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

|                                     |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|------------------------------------ |  | -------------- | ------ | --------- |  | ------ | ------ | ------- |  | ---------- | - |  |  | - | ------ | - |  | - | ------ | 
|                                     |  |                |        |           |  |        |        |        
|                                     |  |                |        | Additions |  |        |        |        
|                                     |  |                |        |           |  |        |        |        
|                                     |  | Balance at     |        | Charged   |  |        |        |         |  | Balance at
|                                     |  | Beginning      |        | to        |  |        |        | Written |  | End of    
|Descriptions                         |  | of Year        |        | Expense   |  | Other* |        | Off     |  | Year      
|                                     |  |                |        |           |  |        |        |         |  |           
|                                     |  |               
|                                     |  | (in thousands)
|                                    
|                                    
|                                    
|                                    
|For the year ended October 31, 2000: |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|                                    
|                                    
|                                    
|                                    
|Allowance for doubtful accounts      |  | $              | 10,781 |           |  | $      | 23,760 |         |  | $          | 0 |  |  | $ | (1,493 | ) |  | $ | 33,048 | 
|                                     |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|For the year ended October 31, 1999: |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|                                    
|                                    
|                                    
|                                    
|Allowance for doubtful accounts      |  | $              | 4,731  |           |  | $      | 7,395  |         |  | $          | 0 |  |  | $ | (1,345 | ) |  | $ | 10,781 | 
|                                     |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|For the year ended October 31, 1998: |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 
|                                    
|                                    
|                                    
|                                    
|Allowance for doubtful accounts      |  | $              | 2,619  |           |  | $      | 3,128  |         |  | $          | 0 |  |  | $ | (1,016 | ) |  | $ | 4,731  | 
|                                     |  |                |        |           |  |        |        |         |  |            |   |  |  |   |        |   |  |   |        | 




|  |                                                           
|- | ----------------------------------------------------------
|* | Represents collections of previously written-off accounts.

68



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Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

During the years ended October 31, 2000 and 1999, there
were no changes in or disagreements with our accountants on
accounting and financial disclosure.

Part III

Item 10.  Directors and Executive Officers of
the Company

The information about Directors required to be furnished
pursuant to this item is incorporated by reference from portions
of our definitive proxy statement for our 2001 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days
after October 31, 2000 (the Proxy Statement).
Information with respect to our Executive Officers is included
on pages 20-21 of this filing in Item 1.
Business-Executive Officers of the Registrant.

Item 11.  Executive Compensation

The information required to be furnished pursuant to this item
is incorporated by reference from portions of the Proxy
Statement.

Item 12.  Security Ownership of Certain
Beneficial Owners and Management

The information required to be furnished pursuant to this item
is incorporated by reference from portions of the Proxy
Statement.

Item 13.  Certain Relationships and Related
Transactions

The information required to be furnished pursuant to this item
is incorporated by reference from portions of the Proxy
Statement.

Part IV

Item 14.  Exhibits, Financial Statement
Schedules and Reports on Form 8-K

(a)  The following documents are filed as part of this
Report:

1.  Financial Statements and Financial Statement Schedules

See Item 8. Financial Statements and Supplementary
Data

2.  Exhibits

|        |     |             |  |                                                                                                                                                                
|------- | --- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|        | 2.1 |             |  | Transfer and Assumption Agreement between TD Bank and TD
	Waterhouse Investor Services (Canada) Inc.                                                           
|        | 2.2 |             |  | Transfer and Assumption Agreement between TD Securities Inc. and
	TD Waterhouse Investor Services (Canada) Inc.                                                
|        | 2.3 |             |  | Share Transfer Agreement between TD Bank and TD Waterhouse.                                                                                                    
|        | 3.1 |             |  | Amended and Restated Certificate of Incorporation of TD
	Waterhouse.                                                                                           
|        | 3.2 |             |  | By-laws of TD Waterhouse (Incorporated by reference to
	Exhibit 3.2 of the Companys Registration Statement on
	Form S-1, Registration No. 333-77521).         
|        | 4.1 |             |  | Specimen common stock certificate (Incorporated by reference to
	Exhibit 4.1 of the Companys Registration Statement on
	Form S-1, Registration No. 333-77521).

69



---



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 4.2   |             |  | Amended and Restated Support and Exchange Agreement dated
	April 13, 2000 by and among the Company, TD Waterhouse
	Canada, TD Waterhouse Holdings, Inc., TD Securities Inc., CT
	Financial Services, Inc. and TD Bank (Incorporated by reference
	to Exhibit 4.1 of the Companys Quarterly Report on Form
	10-Q for the quarterly period ended April 30, 2000).
|        | 4.3   |             |  | Exchangeable Preference Share Terms of TD Waterhouse Investor
	Services (Canada), Inc. (Incorporated by reference to
	Exhibit 4.3 of the Companys Registration Statement on
	Form S-1, Registration No. 333-77521).                                                                                                                                            
|        | 4.4   |             |  | Certificate of Designation creating Special Voting Preferred
	Stock of TD Waterhouse.                                                                                                                                                                                                                                                                           
|        | 4.5   |             |  | Specimen Special Voting Preferred stock certificate
	(Incorporated by reference to Exhibit 4.5 of the
	Companys Registration Statement on Form S-1,
	Registration No.  333-77521).                                                                                                                                                                             
|        | 10.1  |             |  | 1999 TD Waterhouse Group, Inc. Stock Incentive Plan
	(Incorporated by reference to Exhibit 4.1 of the
	Companys Registration Statement on Form S-8,
	Registration No. 333-40236).                                                                                                                                                                              
|        | 10.2  |             |  | The Toronto-Dominion Bank 1993 Stock Option Plan (Incorporated
	by reference to Exhibit 10.2 of the Companys
	Registration Statement on Form S-1, Registration No. 
	333-77521).                                                                                                                                                                               
|        | 10.3  |             |  | Master Services Agreement between TD Waterhouse and TD Bank
	dated June 28, 1999, as amended.                                                                                                                                                                                                                                                                   
|        | 10.4  |             |  | Tax Sharing Agreement between TD Waterhouse and TD Waterhouse
	Holdings, Inc.                                                                                                                                                                                                                                                                                   
|        | 10.5  |             |  | TD Bank Long Term Capital Plan. (Incorporated by reference to
	Exhibit 10.5 of the Companys Annual Report on
	Form  10-K for the fiscal year ended October 31, 1999).                                                                                                                                                                                          
|        | 10.6  |             |  | Employment Agreement, dated as of October 1, 1999 between
	Stephen D. McDonald and the Company. (Incorporated by reference
	to Exhibit 10.6 of the Companys Annual Report on
	Form 10-K for the fiscal year ended October 31, 1999).                                                                                                                           
|        | 10.7  |             |  | Employment Agreement, dated as of October 1, 1999 between
	Frank J. Petrilli and the Company. (Incorporated by reference to
	Exhibit 10.7 of the Companys Annual Report on
	Form 10-K for the fiscal year ended October 31, 1999).                                                                                                                             
|        | 10.8  |             |  | Employment Agreement, dated as of October 1, 1999 between
	John G. See and the Company. (Incorporated by reference to
	Exhibit 10.8 of the Companys Annual Report on
	Form 10-K for the fiscal year ended October 31, 1999).                                                                                                                                   
|        | 10.9  |             |  | Employment Agreement, effective as of June 1, 2000 between
	Bharat B. Masrani and the Company.                                                                                                                                                                                                                                                                  
|        | 10.10 |             |  | Employment Agreement, dated as of October 1, 1999 between
	Richard J. Rzasa and the Company.                                                                                                                                                                                                                                                                    
|        | 10.11 |             |  | The Toronto-Dominion Bank 2000 Stock Incentive Plan.                                                                                                                                                                                                                                                                                                            
|        | 10.12 |             |  | Amendment to the Master Services Agreement between TD Bank and
	TD Waterhouse effective as of June 28, 1999.                                                                                                                                                                                                                                                    
|        | 10.13 |             |  | Amendment to the Master Services Agreement between TD Bank and
	TD Waterhouse dated April 13, 2000.                                                                                                                                                                                                                                                             
|        | 10.14 |             |  | TD Waterhouse Group, Inc. Covered Employee Cash Incentive Plan.                                                                                                                                                                                                                                                                                                 
|        | 21.1  |             |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                           
|        | 27.1  |             |  | Financial Data Schedule.                                                                                                                                                                                                                                                                                                                                        

(b)  Reports on Form 8-K



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | No reports on Form 8-K were filed during the fourth quarter
	of the fiscal year ended October 31, 2000.

(c)  Exhibits



| |                                    
| | -----------------------------------
| | See Section (a)(2) of this Item 14.

70



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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                          
| | -------------------------
| | TD WATERHOUSE GROUP, INC.

Dated: January 26, 2001

| |     |                       
| | --- | ----------------------
| | By: | /s/STEPHEN D. MCDONALD

| |                            
| | ---------------------------
| |                            
| | Stephen D. McDonald        
| | Chief Executive Officer and
| | Deputy Chairman            

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.

|                                                           |  |                                                                                                      |  |                 
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | ----------------
|Signature                                                  |  | Title                                                                                                |  | Date            
|                                                           |  |                                                                                                      |  |                 
|/s/ A. CHARLES BAILLIEA. Charles Baillie                   |  | Chairman of the Board                                                                                |  | January 26, 2001
|/s/ STEPHEN D. MCDONALDStephen D. McDonald                 |  | Chief Executive Officer,
	Deputy Chairman and Director
	(Principal Executive Officer)                |  | January 26, 2001
|/s/ FRANK J. PETRILLIFrank J. Petrilli                     |  | President, Chief Operating
	Officer and Director                                                     |  | January 26, 2001
|/s/ JOHN G. SEEJohn G. See                                 |  | Vice Chairman and Director                                                                           |  | January 26, 2001
|/s/ LAWRENCE M. WATERHOUSE, JR.Lawrence M. Waterhouse, Jr. |  | Director                                                                                             |  | January 26, 2001
|/s/ DR. WENDY K. DOBSONDr. Wendy K. Dobson                 |  | Director                                                                                             |  | January 26, 2001
|/s/ STEVEN B. DODGESteven B. Dodge                         |  | Director                                                                                             |  | January 26, 2001
|/s/ LEO J. HINDERY, JR.Leo J. Hindery, Jr.                 |  | Director                                                                                             |  | January 26, 2001
|/s/ JOHN M. THOMPSONJohn M. Thompson                       |  | Director                                                                                             |  | January 26, 2001
|/s/ B. KEVIN STERNSB. Kevin Sterns                         |  | Executive Vice President
	and Chief Financial Officer
	(Principal Financial and
	Accounting Officer) |  | January 26, 2001

71