TD Bank 2003 Annual Report Download - page 74

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Financial Results72
Pension benefit plan
The Bank’s principal pension plan, The Pension Fund Society of
The Toronto-Dominion Bank, is a defined benefit plan funded by
contributions from the Bank and from members. In accordance
with legislation, the Bank contributes amounts determined on
an actuarial basis to the plan and has the ultimate responsibility
for ensuring that the liabilities of the plan are adequately funded
over time.
Pension benefits are based upon the length of service and the
final five years’ average salary of the employees.
The table on the following page presents the financial position
of the Bank’s principal pension plan. The pension plan assets and
obligations are measured as at July 31.
During fiscal 2003, the Bank has recognized a compensation
expense of $9 million for the stock option awards granted during
the year in the Consolidated Statement of Operations. The fair
value of options granted was estimated at the date of grant
using the Black-Scholes valuation model with the following
assumptions: (i) risk-free interest rate of 4.29%, (ii) expected
option life of 5.5 years, (iii) expected volatility of 27.7% and (iv)
expected dividend yield of 3.37%. During the year, options were
granted with a weighted-average fair value of $7.49 per option.
Other stock-based compensation plans
Phantom share unit plans are offered to certain employees of
the Bank. The number of Bank phantom share units under these
plans at October 31, 2003 is 5,064,400 (2002 – 3,634,300;
2001 – 350,100) subject to final determination in December
2003 based on then current share prices. For the year ended
October 31, 2003, the Bank recognized compensation expense,
net of the effects of hedges, for these plans of $51 million
(2002 – $37 million; 2001 – $2 million).
A Senior Executive Deferred Share Unit Plan is offered to
eligible executives of the Bank. As at October 31, 2003, a total
of 1,377,471 deferred share units were outstanding (2002 –
1,309,764; 2001 – 1,197,524).
Employee savings plan
Under the Bank’s Employee Savings Plan (ESP), employees may
contribute up to 6% of their annual base earnings to a maximum
of $4,500 per calendar year toward the purchase of Bank com-
mon shares. The Bank matches 50% of the employee contribu-
tion amount. The Bank’s contributions vest once the employee
has completed two years of continuous service with the Bank.
For the year ended October 31, 2003, the Bank’s contributions
totalled $32 million (2002 – $18 million; 2001 – $13 million). As
at October 31, 2003, an aggregate of 5,236,646 common shares
were held under the ESP (2002 – 4,476,634; 2001 – 5,001,746).
The shares in the ESP are purchased in the open market and
are considered outstanding for computing earnings per share.
Dividends earned on Bank common shares held by the ESP are
used to purchase additional common shares for the ESP in the
open market.
NOTE 14 Employee future benefits
Options outstanding Options exercisable
Weighted average Weighted Weighted
remaining average average
Number contractualexercise Number exercise
Range of exercise prices outstanding life (years) price exercisable price
$10.44 – $11.81 1,293,662 2.4 $11.08 1,293,662 $11.08
$17.45 – $25.43 5,214,309 4.6 $22.05 5,214,309 $22.05
$27.15 – $40.55 10,550,500 6.9 $33.65 5,663,675 $33.40
$40.80 – $42.90 7,321,225 7.6 $41.32 2,604,138 $41.45
The following table summarizes information relating to stock
options outstanding and exercisable at October 31, 2003.