TD Ameritrade. Sandler O Neill 2011 Global Exchange & Brokerage Conference New York, NY June 9, 2011

Transcription

1 1 TD Ameritrade Sandler O Neill 2011 Global Exchange & Brokerage Conference New York, NY June 9, 2011 TD Ameritrade, Inc., member FINRA/SIPC/NFA, is a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

2 SAFE HARBOR 2 This document contains forward-looking statements within the meaning of the federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws. In particular, any projections regarding our future revenues, expenses, earnings, capital expenditures, effective tax rates, client trading activity, benefits of the thinkorswim acquisition, accounts or stock price, as well as the assumptions on which such expectations are based, are forward-looking statements. These statements reflect only our current expectations and are not guarantees of future performance or results. These statements involve risks, uncertainties and assumptions that could cause actual results or performance to differ materially from those contained in the forward-looking statements. These risks, uncertainties and assumptions include general economic and political conditions, interest rates, market fluctuations and changes in client trading activity, increased competition, systems failures and capacity constraints, ability to service debt obligations, ability to realize the expected benefits from the thinkorswim acquisition, new laws and regulations affecting our business, regulatory and legal matters and uncertainties and other risk factors described in our latest Annual Report on Form 10-K, filed with the SEC on Nov. 19, 2010 and our latest Quarterly Report on Form 10-Q filed thereafter. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

3 OUR MISSION 3 To Be The Better Investment Firm For Today s Investor

4 SENIOR MANAGEMENT 4 Fred Tomczyk President and CEO 25+ years in Financial Services Guiding force behind Company s current growth strategy a focus on Trading and Asset Gathering, backed by a strong service and sales culture and aggressive marketing capabilities Helped negotiate the Company s acquisition of TD Waterhouse USA in 2005, a deal that helped springboard the firm s move into asset gathering Tom Bradley President, TD Ameritrade Institutional More than 25 years experience in the industry John Bunch President, Retail Distribution EVP of branch distribution for TD Waterhouse 14 years with Charles Schwab Karen Ganzlin Chief Human Resources Officer Former SVP of HR in wealth management for TD Bank Bill Gerber EVP, Chief Financial Officer More than 10 years with firm Played a major role in the firm s M&A activity Marv Adams EVP, Chief Operating Officer Over 30 years technology and operations experience, much in financial services David Kimm Chief Risk Officer Nearly 30 years in financial services 15 of which included risk management Ellen Koplow EVP, General Counsel & Corporate Secretary More than 10 years with firm Former managing principal of the Columbia, MD office of Miles & Stockbridge, P.C. Peter Sidebottom EVP, Product, Marketing and Client Experience 20+ years in financial services Steve Quirk SVP, Trader Group 23-year trading career beginning in 1987 as a Chicago Board of Options Exchange (CBOE) market maker

5 COMPANY HISTORY s SEC bans practice of fixed brokerage commissions First Omaha Securities established, offering discount brokerage services 1980 s 1983 Ameritrade Clearing, Inc. is established 1988 Touch-tone phone trades offered 2000 s 2001 Acquisition of National Discount Brokers Corp Merger with Datek Online Holdings 2006 Acquisition of TD Waterhouse USA $ Acquisition of thinkorswim Group Inc. $303 $278 $ s $355 $ s 1994 K. Aufhauser & Co. offers first online trade (1) 1997 Initial Public Offering on NASDAQ Ending Total Client Assets ($B) $11 $23 $36 $26 $34 $55 $69 $83 Ticker: AMTD Exchange: NASDAQ Price: $21.68 (2) Market Cap ($B): $12.5 (2) Mar YTD 2011 (1) The Company purchased K. Aufhauser & Co. in (2) As of close of business April 18, 2011.

6 PROGRESSION OF BUSINESS MODEL 6 Building an Industry Consolidating an Industry Growing an Industry 2008-Present Joe Ricketts Founder and CEO 1975 one of first to offer discount brokerage services 1983 launched Ameritrade Clearing, Inc introduced the first quote and order entry system using a touch-tone phone 1995 acquired first company to offer online trading (1) Order received in August 1994 ($18 flat rate commission) 1996 brought institutional investing software to retail investors with Accutrade for Windows 1999 offered trading via the SprintPCS SM Wireless Web the first via wireless phone Joe Moglia - CEO Focus on Active Trader client segment 10 acquisitions and mergers in 8 years, solidifying our position in the Active Trader space National Discount Brokers Corp. first major acquisition 2002 Datek Online Holdings solidified position as #1 in Trades/Day 2006 TD Waterhouse USA instrumental in transition to asset gathering strategy Instrumental in consolidating the retail brokerage industry. Fred Tomczyk COO 2007 President and CEO Present Key in orchestrating merger with TD Waterhouse Shifted growth strategy from M&A to M&A + Organic Growth Shifted focus from Trading to Trading + Asset Gathering Invested in marketing, distribution and technology Acquired thinkorswim to enhance capabilities in the Trader space Transitioned firm from Service to a Service + Sales culture FY-End 2001 Client Assets: $26B Market Cap: $0.8B FY-End 2008 Client Assets: $275B Market Cap: $9B Current (2) Client Assets: $412B Market Cap: $12.5B (1) The Company acquired K. Aufhauser & Co. in (2) As of close of business April 18, 2011.

7 LARGE AND GROWING OPPORTUNITY 7 US Financial Assets $37T Market expected to grow to $50T by 2014 (1) TD Ameritrade $412B Clients Assets (2) Differentiated Business Model High Margin / Low Capital Significant cash flow/capital generation Conservative balance sheet Business Segments Trading - #1 Market Share (3) Asset Gathering double-digit NNA (4) growth rate (5) over last 3 years Growth Opportunities Strong secular trends Organic growth M&A (1) Source: Cerulli Quantitative Update The State of US Retail and Institutional Asset Management. (2) As of 3/31/2011. (3) Source: Internally estimated daily average revenue client trades (DARTS) based on last twelve months publicly available reports for E*Trade Financial, optionsxpress and Charles Schwab. (4) Net new assets (NNA) consists of total client asset inflows, less total client asset outflows, excluding activity from business combinations. Client asset inflows include interest and dividend payments and exclude changes in client assets due to market fluctuations. Net new assets are measured based on the market value of the assets as of the date of the inflows and outflows. (5) NNA growth rate is annualized net new assets as a % of client assets as of the beginning of the period.

8 INVESTMENT THEMES 8

9 SIX INVESTMENT THEMES FOR TD AMERITRADE 9 1. Unique and differentiated business model 2. Market leadership in trading 3. Premier asset gatherer 4. Unique relationship with TD 5. Well-positioned for rising interest rates 6. Strong cash generation and strong financial position CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE

10 1. UNIQUE AND DIFFERENTIATED BUSINESS MODEL 10 CLIENT NEEDS TRADING, INVESTING, ADVICE CLIENT-CENTRIC MULTI- CHANNEL DELIVERY Web Phone Education Branch RIAs BROAD PRODUCT RANGE OPEN ARCHITECTURE Tools and information Seminars and coaching Planning services Packaged products Cash management WELL-ALIGNED WITH SECULAR GROWTH TRENDS (1) Growth in the internet Growth in active traders/selfdirected investors Growth in household financial assets & savings Advisors move toward independent models A UNIQUE AND DIFFERENTIATED BUSINESS MODEL WELL-ALIGNED WITH SECULAR GROWTH TRENDS (1) Sources: Cerulli, ICI, Federal Reserve Flow of Funds Report, Tower Group Active Trader Report.

11 UNIQUE AND DIFFERENTIATED BUSINESS MODEL 11 Operating Margin 60% 50% 40% 30% 20% 10% 0% 53% 53% 36 Forecasted Operating Margin Range 41 46% 42 Return on Avg. Client Assets (bps) (1) 38% FY07 FY08 FY09 FY10 FY11 EPS (3) $1.06 $1.33 $1.10 $1.00 $0.90-$ % (2) Business model combined with TD relationship drives: Low capital intensity High return on equity Industry-leading operating margin (4) Strong cash and capital generation Mar YTD FY11 Operating margin: 38% ROCA: 26bps EPS: $0.55 (1) Return on average client assets (ROCA) = annualized pre-tax income divided by average client assets. (2) FY11 forecast per 10/26/10 outlook statement. (3) Earnings per diluted share (EPS). (4) Source: Based on last twelve months of publicly available reports for E*Trade Financial, optionsxpress, and Charles Schwab.

12 2. MARKET LEADERSHIP IN TRADING (1) Trades Per Day & Activity Rate (2) Trades per Day 301 (K) % 6.3% 7.3% 6.9% (3) FY07 FY08 FY09 FY10 FY11 Pro-forma (5) 6.0% 7.2% 8.1% Forecasted Trades per Day Range %- 7.3% (4) Market: 8-10% projected growth in active traders (6) Mar YTD FY11: 405K/7.4% (2) Rated Best for Options Traders by Barron s (7) Advanced trading platform with robust analytics, tools, and functionality Growth strategies Tiered platform strategy: Trade Architect Product proliferation: options, futures, forex Education Mobile platform (1) Source: Internally estimated daily average revenue client trades (DARTS) based on last twelve months publicly available reports for E*Trade Financial, optionsxpress and Charles Schwab. (2) Funded account activity rate. Average client trades per day during the period divided by the average number of total funded accounts during the period. (3) Effective in Oct 2007, average client trades per day have been adjusted to exclude non-revenue-generating mutual fund trades. (4) FY11 forecast per 10/26/10 outlook statement. (5) Pro-forma combined with thinkorswim funded activity rate. (6) Source: Celent analysis, May (7) Source: Barron s 16 th annual online-broker review, March 14, 2011.

13 3. PREMIER ASSET GATHERER 13 $40 $30 $20 $10 $0 Actual NNA ($B) (1) $12.4 $22.8 $26.6 Forecasted NNA Range ($B) $33.9 5% (2) 8% (2) 10% (2) 11% (2) $24-$38 7.0%- 11% (2) $ % (2) FY07 FY08 FY09 FY10 FY11 (3) Opportunity in $7 trillion market (4) Strong secular growth and demographic trends Among premier asset gatherers in NNA growth rates Mar YTD FY11: $21.2B/12% (2) Double-digit growth rate eight of last ten quarters Highest rated for Best Long-term Investing by Barron s (5) Early stage vs. late stage Both Retail and Institutional channels performing well Ongoing investments in sales, product platform, marketing (1) Net new assets (NNA) consists of total client asset inflows, less total client asset outflows, excluding activity from business combinations. Client asset inflows include interest and dividend payments and exclude changes in client assets due to market fluctuations. Net new assets are measured based on the market value of the assets as of the date of the inflows and outflows. (2) NNA growth rate is annualized net new assets as a % of client assets as of the beginning of the period. (3) FY11 forecast per 10/26/10 outlook statement. (4) Source: Forrester North America Technographics Benchmark Survey, 2009 (U.S. Households with investable assets of $60K-$1M). Total U.S. Households investable assets $18.5T. (5) Barron s 16 th annual online-broker review, March 14, Tied with another Broker-Dealer.

14 4. UNIQUE RELATIONSHIP WITH TD (1) TD BANK OWNS ~ 43% OF TD AMERITRADE (2) 14 TD Ameritrade sweeps client cash ($48B as of 3/31/11) from brokerage accounts into TD Bank Economics and rewards of retail deposit banking without the risks or capital requirements of banking TD Asset Management provides money market mutual funds ($9B as of 3/31/11) to TD Ameritrade clients TD retains 6bps and TD Ameritrade retains balance of management fee Pursuing cross-selling opportunities TD Ameritrade to provide investment services through TD branches and banking products to brokerage clients (U.S.) TD Ameritrade to provide access to U.S. markets to TD Waterhouse U.K./Canada clients (1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A. and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A.,TD Bank USA, N.A., TD Asset Management, TD Waterhouse U.K., and TD Waterhouse Canada are affiliated through The Toronto-Dominion Bank. (2) As of March 31, 2011.

15 5. WELL POSITIONED FOR RISING INTEREST RATES 15 Ending Balances ($B) Interest Earning Assets MMF IDA (1) $54.7 $ 7.9 $26.2 $20.6 $63.1 $13.0 $9.4 $40.8 $70.3 $14.0 (2) $8.7 $47.6 Mar '09 Mar '10 Mar '11 Immediate benefit with Fed Funds increases Immediate benefit with Fed Funds increases, but capped Immediate benefit with additional benefit over time with re-pricing of laddered investment portfolio Balances up 29% from Mar 09 Strong organic growth Revised cash management strategy Well positioned for rising interest rates EPS sensitivity to 100bps rate increase year 1 and beyond (3) $0.28 in year 1 $0.37 in year 2 $0.46 in year 3 (1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A., and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank. (2) Ending balances as of Mar. 31, 2011 consisted of $9.5B in client margin balances, $2.8B in segregated cash, and $1.6B in other balances. (3) Impact on spread-based and money market mutual fund revenues following an immediate interest rate increase. Assumes fed funds increase results in a parallel shift to the LIBOR/Swap yield curve. Sensitivity relates to first 100bps increase. Assumes ~ $9B of IDA investments mature annually. * Certain totals may not foot due to rounding.

16 SPREAD-BASED REVENUE 16 Spread-Based Revenue ($M) $325 $291 $265 $270 $225 $203 Avg. Spread-Based Balance ($B) $309 $125 Mar Qtr '07 Mar Qtr '08 Mar Qtr '09 Mar Qtr '10 Mar Qtr '11 NIM (1) $ % 4.53% 5.00% $60 $60 $ % $ % $ % 2.06% 2.04% $30 $24 $25 $ % $20 $ % $0 0.00% Mar Qtr '07 Mar Qtr '08 Mar Qtr '09 Mar Qtr '10 Mar Qtr '11 Avg. Fed Funds Rate 5.25% 3.22% 0.25% 0.25% 0.25% Growing spread-based revenue Strong organic growth Revised cash management strategy Offsets declining NIM (1) IDA (2) net yield bottomed in Dec Qtr 10 Organic growth continues Rising rates will create a tailwind (1) NIM (net interest margin) is a measure of the net yield on our average spread-based assets. (2) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A., and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank.

17 6. STRONG CASH GENERATION AND STRONG FINANCIAL POSITION 17 (Dollars in millions) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Liquid Assets Regulatory Threshold (1) ($M) Liquid Assets Management Target (1)(2) ($M) $1,337 $1,198 $1,076 $727 $751 $561 Mar '10 Sep '10 Mar '11 Liquid Assets Management Target readily available for deployment/return Priorities to deploy/return capital to shareholders M&A Investments for growth Share repurchases Dividends (1) See attached reconciliation of non-gaap financial measures. (2) Management Target for Clearing subsidiary minimum capital requirement is 10% of aggregate debits. Management Target for TD Ameritrade, Inc. minimum capital requirement is $50M. Trust subsidiary excess is excluded from Management Target.

18 WE HAVE PRUDENTLY DEPLOYED EXCESS CASH 18 Net income ($M) Cash used on mergers and acquisitions (M&A), debt repayments, share repurchases, and dividends ($M) $2,000 $1,500 $1,000 $500 $0 $1,553 92% $1,424 10/1/08 3/31/11 Strong cash generation 92% deployed or returned to shareholders FY09-Mar YTD FY11 (1) M&A: $267M Debt repayments: $288M Share repurchases: $812M Dividends: $57M FY11 update Mar YTD FY11: 5.2M shares repurchased 24.8M share repurchases remaining on 30M Board authorization Introduced $0.05 quarterly cash dividend in December 2010 (1) Cash used for M&A, debt repayments, share repurchases, and dividends divided by net income. Excludes shares repurchased for payroll taxes on equity award distributions.

19 STRATEGIC UPDATE 19 Continue to build on our organic growth momentum Asset gathering and trading Strategically invest to build earnings power IDA (1) net yield has now bottomed Interest rates no longer a headwind to earnings growth Further upside as rates rise Deploy/return capital to shareholders Return 40%-60% of earnings through dividends and share repurchases CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE (1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A., and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank.

20 CREATING LONG-TERM SHAREHOLDER VALUE Unique and differentiated business model 2. Market leadership in trading 3. Premier asset gatherer 4. Unique relationship with TD 5. Well-positioned for rising interest rates 6. Strong cash generation and strong financial position CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE

21 21 TD Ameritrade Sandler O Neill 2011 Global Exchange & Brokerage Conference New York, NY June 9, 2011 TD Ameritrade, Inc., member FINRA/SIPC/NFA, is a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

22 SENSITIVITY ANNUAL IMPACT TO EPS 22 3K average client trades per day = $ % funded activity rate (1) = $0.01 $4.4B fee-based assets (2) = $0.01 $455M spread-based assets (3) = $ K new accounts = $ bps fed move = +$0.07 (4) (1) Funded account activity rate. Average client trades per day during the period divided by the average number of total funded accounts during the period. (2) Client assets invested in money market mutual funds, other mutual funds and Company programs such as AdvisorDirect and Amerivest, on which we earn fee revenues. (3) Client and brokerage-related asset balances, including client margin balances, segregated cash, insured deposit account balances, deposits paid on securities borrowing (excluding conduit-based assets) and other cash and interest-earning investment balances. (4) Impact on spread-based and money market mutual fund revenues in the first twelve months following an immediate interest rate increase. Assumes fed funds increase results in a parallel shift to the LIBOR/Swap yield curve. Sensitivity relates to first 100bps increase.

23 RATE HISTORY FY07-FY11(YTD) % 5.25% 5.25% 5.25% 5.18% Avg. Spread- Based Bal. ($B) 5.00% 4.00% 4.50% 4.43% 4.35% 4.45% 4.76% 4.53% 4.52% 4.34% 4.39% 3.78% $ % 3.98% 3.94% 3.90% 3.68% 3.52% 3.49% 3.50% 3.22% 3.57% $24 $ % 2.00% 3.05% 2.83% $ % 2.20% 2.17% 2.07% 2.06% 1.98% 1.87% 1.73% 1.70% $ % 2.00% 2.12% 2.04% 1.99% 2.04% 1.00% 1.06% 1.61% 1.56% 1.60% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.00% Dec Qtr Mar Qtr Jun Qtr Sep Qtr Dec Qtr Mar Qtr Jun Qtr Sep Qtr Dec Qtr Mar Qtr Jun Qtr Sep Qtr Dec Qtr Mar Qtr Jun Qtr Sep Qtr Dec Qtr Mar Qtr '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 '09 '09 '09 '10 '10 '10 '10 '11 (1) (2) IDA Net Yield NIM Avg. Fed Funds (1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A., and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank. (2) NIM (net interest margin) is a measure of the net yield on our average spread-based assets.

24 IDA (1) NET YIELD INCREASES 24 $200 $170 Revenue ($M) $180 $177 $178 $187 $100 Mar Qtr '10 Jun Qtr '10 Sep Qtr '10 Dec Qtr '10 Mar Qtr '11 $ % $39 Avg. Balance ($B) Net Yield 1.70% $42 $ % $ % $ % 1.80% 1.70% 1.60% 1.50% $30 Mar Qtr '10 Jun Qtr '10 Sep Qtr '10 Dec Qtr '10 Mar Qtr ' % (1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A., and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank.

25 RECONCILIATION OF FINANCIAL MEASURES 25

26 26 TD AMERITRADE HOLDING CORPORATION RECONCILIATION OF FINANCIAL MEASURES In thousands, except percentages (Unaudited) Fiscal Year Ended Sept. 30, 2010 Sept. 30, 2009 Sept. 30, 2008 Sept. 30, 2007 $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. EBITDA (1) EBITDA $ 1,114, % $ 1,219, % $ 1,438, % $ 1,233, % Less: Depreciation and amortization (57,032) (2.2%) (45,891) (1.9%) (36,899) (1.5%) (26,237) (1.2%) Amortization of acquired intangible assets (100,463) (3.9%) (73,870) (3.1%) (59,275) (2.3%) (54,469) (2.5%) Interest on borrowings (44,858) (1.8%) (40,070) (1.7%) (78,447) (3.1%) (118,173) (5.4%) Provision for income taxes (319,897) (12.5%) (415,700) (17.3%) (459,585) (18.1%) (388,803) (17.9%) Net income $ 592, % $ 643, % $ 803, % $ 645, % As of Mar. 31, Sept. 30, Mar. 31, Liquid Assets - Management Target (2) Liquid assets $ 750,552 $ 561,361 $ 727,245 Plus: Broker-dealer cash and cash equivalents 626, , ,329 Trust company cash and cash equivalents 70,701 50,937 82,331 Investment advisory cash and cash equivalents 36,964 28,944 23,401 Less: Excess broker-dealer regulatory net capital (403,804) (326,368) (442,726) Cash and cash equivalents $ 1,081,138 $ 741,492 $ 833,580 As of Mar. 31, Sept. 30, Mar. 31, Liquid Assets - Regulatory Threshold (2) Liquid assets $ 1,336,533 $ 1,076,256 $ 1,197,979 Plus: Broker-dealer cash and cash equivalents 626, , ,329 Trust company cash and cash equivalents 70,701 50,937 82,331 Investment advisory cash and cash equivalents 36,964 28,944 23,401 Less: Excess trust company Tier 1 capital (9,379) (12,284) (3,120) Excess broker-dealer regulatory net capital (980,406) (828,979) (910,340) Cash and cash equivalents $ 1,081,138 $ 741,492 $ 833,580

27 27 Note: The term "GAAP" in the following explanation refers to generally accepted accounting principles in the United States. (1) (2) EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a non-gaap financial measure as defined by SEC Regulation G. We consider EBITDA an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our senior revolving credit facility. EBITDA eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities. Our liquid assets metrics are considered non-gaap financial measures as defined by SEC Regulation G. We include the excess capital of our broker-dealer and trust company subsidiaries in the calculation of our liquid assets metrics, rather than simply including broker-dealer and trust company cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the brokerdealer and trust company subsidiaries to the parent company. We consider our liquid assets metrics to be important measures of our liquidity and of our ability to fund corporate investing and financing activities. The liquid assets metrics should be considered as supplemental measures of liquidity, rather than as substitutes for cash and cash equivalents. We define liquid assets - management target as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments and (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 10% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ($50 million in the case of our primary introducing broker-dealer, TD Ameritrade, Inc.). We consider liquid assets - management target to be a measure that reflects our liquidity that would be readily available for corporate investing or financing activities under normal operating circumstances. We define liquid assets - regulatory threshold as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments, (c) regulatory net capital of (i) our clearing brokerdealer subsidiary in excess of 5% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of 120% of the minimum dollar net capital requirement or in excess of 8 1/3% of aggregate indebtedness and (d) Tier 1 capital of our trust company in excess of the minimum dollar requirement. We consider liquid assets - regulatory threshold to be a measure that reflects our liquidity that would be available for corporate investing or financing activities under unusual operating circumstances.

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