TD Bank 2003 Annual Report Download - page 73

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Financial Results 71
Weighted Weighted Weighted
average average average
exercise exercise exercise
2003 price 2002 price 2001 price
Number outstanding, beginning of year 23,859,413 $30.35 22,218,787 $26.65 23,403,443 $22.54
Granted 4,065,116 33.42 4,708,800 41.11 3,639,640 41.66
Exercised – cash ––(1,673,495) 17.51 (2,593,303) 15.30
– shares (2,900,483) 16.25 (836,754) 15.84 (1,303,943) 13.38
Forfeited/cancelled (644,350) 40.00 (557,925) 36.06 (927,050) 32.27
Number outstanding, end of year 24,379,696 $32.28 23,859,413 $30.35 22,218,787 $26.65
Exercisable, end of year 14,775,784 $28.87 13,239,598 $23.94 13,081,260 $20.49
Stock option plan
Under the Bank’s stock option plan, options on common shares
are periodically granted to eligible employees and non-employee
directors of the Bank for terms of 10 years, vesting over a four-
year period. These options provide holders with the right to
purchase common shares of the Bank at a fixed price equal to
the closing market price of the shares on the day prior to the
date the options were issued. Under this plan, 18,535,594
common shares have been reserved for future issuance (2002 –
22,075,610). The outstanding options expire on various dates to
March 2013. The Bank’s predecessor plan, the 1993 stock option
plan, expired in 2000 and there will be no further issuance of
stock options from this plan. The outstanding options under the
1993 stock option plan expire on various dates to July 2010. A
summary of the Bank’s stock option activity and related informa-
tion for the years ended October 31 is as follows:
Dividend reinvestment plan
The Bank offers a dividend reinvestment plan for its common
shareholders. Participation in the plan is optional and under the
terms of the plan, cash dividends on common shares are used
to purchase additional common shares. The common shares
may be purchased either from the Bank’s treasury at an average
market price based on the last five trading days before the date
of the dividend payment with a discount range of 0% to 5% at
the Bank’s discretion or from the open market at market price.
During the year, a total of 7,960,947 common shares (2002 –
5,171,110) have been issued from the Bank’s treasury at a
discount of 2.5% (2002 – 2.5%) of the average market price
under the dividend reinvestment plan.
Dividend restrictions
The Bank is prohibited by the Bank Act from declaring dividends
on its preferred or common shares if there are reasonable
grounds for believing that the Bank is, or the payment would
cause the Bank to be, in contravention of the capital adequacy
and liquidity regulations of the Bank Act or directions of the
Superintendent of Financial Institutions Canada. The
Superintendent of Financial Institutions Canada administers
a restriction under the Bank Act on the Bank’s ability to pay
dividends on common and preferred shares which assesses the
ongoing maintenance by the Bank of satisfactory regulatory
capital and liquidity. The Bank does not anticipate that these
conditions will restrict it from paying dividends in the normal
course of business.
The Bank is also restricted in the event that either TD Capital
Trust or TD Capital Trust II fails to pay semi-annual distributions in
full to holders of TD Capital Trust Securities. In addition, the ability
to pay dividends on its common shares without the approval of
the holders of the outstanding preferred shares is restricted
unless all dividends on the preferred shares have been declared
and paid or set apart for payment. Currently, these limitations
do not restrict the payment of dividends on preferred or
common shares.
Common shares
2003 2002
Number outstanding at beginning of year 645,399,134 628,451,159
Issued (cancelled) on acquisition of subsidiaries –(18,789)
Issued for cash (Note 22) –10,958,900
Issued on exercise of options 2,900,483 836,754
Issued as a result of dividend reinvestment plan 7,960,947 5,171,110
Number outstanding at end of year 656,260,564 645,399,134
NOTE 13 Stock-based compensation