2016 Annual Report

FINANCIAL RESULTS OVERVIEW Taxes

Reported total income and other taxes increased $881 million, or 32%, compared with last year, reflecting an increase in income tax expense of $620 million, or 41%, compared with last year, and an increase in other taxes of $261 million, or 21%, compared with last year. Adjusted total income and other taxes were up $625 million from last year, reflecting an increase in income tax expense of $364 million, or 20%, from last year.

The Bank’s reported effective tax rate was 20.1% for 2016, compared with 16.6% last year. The year-over-year increase was largely due to an increase in taxes associated with the Bank’s insurance business, lower tax-exempt dividend income, changes in business mix, and the tax impact associated with the restructuring charges last year.

T ABLE 11

For a reconciliation of the Bank’s effective income tax rate with the Canadian statutory income tax rate, refer to Note 26 of the 2016 Consolidated Financial Statements.

The Bank’s adjusted effective income tax rate for 2016 was 20.2%, compared with 18.3% last year. The year-over-year increase was largely due to an increase in taxes associated with the Bank’s insurance business, lower tax-exempt dividend income, and changes in business mix.

The Bank reports its investment in TD Ameritrade using the equity method of accounting. TD Ameritrade’s tax expense of $214 million in 2016, compared with $221 million last year, was not part of the Bank’s effective tax rate.

(millions of Canadian dollars, except as noted) Provision for income taxes – reported

NON-GAAP FINANCIAL MEASURES – Reconciliation of Reported to Adjusted Provision for Income Taxes 2016

$ 2,143

Adjustments for items of note: Recovery of (provision for) incomes taxes1,2 Amortization of intangibles

Fair value of derivatives hedging the reclassified available-for-sale securities portfolio Impairment of goodwill, non-financial assets, and other charges Restructuring charges

Charge related to the acquisition in U.S. strategic cards portfolio and related integration costs Litigation and litigation-related charge(s)/reserve(s)

Integration charges and direct transaction costs relating to the acquisition of the credit card portfolio of MBNA Canada

Set-up, conversion and other one-time costs related to affinity relationship with Aimia and acquisition of Aeroplan Visa credit card accounts Impact of Alberta flood on the loan portfolio Gain on sale of TD Waterhouse Institutional Services

Total adjustments for items of note Provision for income taxes – adjusted

Other taxes Payroll

Capital and premium

GST, HST, and provincial sales3 Municipal and business

Total other taxes Total taxes – adjusted Effective income tax rate – adjusted4 1

For explanations of items of note, refer to the “Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income” table in the “Financial Results Overview” section of this document.

2

The tax effect for each item of note is calculated using the statutory income tax rate of the applicable legal entity.

89

(1) (5) – – –

– –

– –

83 2,226

502 169 616 203

1,490 $ 3,716 20.2%

2015 $ 1,523 95

(7) –

215 31 5

– –

– –

339 1,862

485 135 428 181

1,229 $ 3,091 18.3%

3 Goods and services tax (GST) and Harmonized sales tax (HST). 4

2014 $ 1,512 93

(6) – – – –

44 47

(6) (35) 137 1,649

435 157 426 172

1,190 $ 2,839 17.5%

Adjusted effective income tax rate is the adjusted provision for income taxes before other taxes as a percentage of adjusted net income before taxes.

TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS

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