TD AMERITRADE HOLDING CORP - FORM 8-K - EX-99.1

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8-K - 8-K - TD AMERITRADE HOLDING CORP	d380637d8k.htm

Exhibit 99.1


At the Company
Kim Hillyer		Jeff Goeser
Director, Communications		Director, Investor Relations and Finance
(402) 574-6523		(402) 597-8464
kim.hillyer@tdameritrade.com		jeffrey.goeser@tdameritrade.com

TD Ameritrade’s Strong Asset Gathering Momentum Continues

On Pace for 4th Consecutive Year of Double-Digit Organic Asset Growth Rate

Net New Assets of $9.7 billion, up 23% year-over-year

Diluted Earnings per Share of $0.28

Client Assets of $445 billion

OMAHA, Neb., July 17, 2012 – TD Ameritrade Holding Corporation (NYSE: AMTD) has released results for the third quarter of fiscal 2012. Year-to-date, the company has gathered net new client assets of $30.7 billion, or an annualized growth rate of 11 percent, and is on track for a fourth consecutive year of double-digit organic client asset growth.

The Company’s results for the quarter ended June 30, 2012 include the following:⁽¹⁾

•

Net income of $154 million, or $0.28 per diluted share

•

Net new client assets of $9.7 billion, an annualized growth rate of 9 percent of beginning client assets

•

Average client trades per day of approximately 355,000

•

Net revenues of $667 million, 57 percent of which were asset-based

•

Operating income of $254 million, or 38 percent of net revenues

•

Pre-tax income of $247 million, or 37 percent of net revenues

•

EBITDA⁽²⁾ of $295 million, or 44 percent of net revenues

•

Interest rate sensitive assets⁽³⁾ of $79 billion, up 7 percent since June 30, 2011

•

Client assets of approximately $445 billion

“TD Ameritrade continued its organic growth momentum despite the difficult operating environment. Year-to-date, we have gathered net new client assets of $30.7 billion, or an annualized growth rate of 11 percent, and we remain on track for a fourth consecutive year of double-digit organic client asset growth,” said Fred Tomczyk, president and chief executive officer. “We remain focused on executing against our strategy and on managing what we can control in this difficult and uncertain environment. Our balance sheet is strong, and we remain well positioned to deal with today’s uncertain macroeconomic environment.”

“TD Ameritrade had a strong quarter despite lower trading volumes and a difficult interest rate environment,” said Bill Gerber, executive vice president and chief financial officer. “Expenses declined this quarter as we made good traction on process improvements and increased our focus on containing expenses. This environment will continue to be financially challenging, but our strategy is working, and our disciplined approach to expense management and allocating resources prudently to support our growth will continue to be a priority.”

Stock Repurchases

During the third quarter of fiscal 2012, TD Ameritrade repurchased approximately 2.5 million shares of its common stock at an average price of $17.77 per share, for approximately $44.0 million. Year to date, the Company has repurchased 10.0 million shares at an average price of $16.61 per share.

As of June 30, 2012, the Company had 26.8 million shares remaining on its existing stock repurchase authorization.

Quarterly Dividend

The Company has declared a $0.06 per share quarterly cash dividend, payable on Aug.14, 2012 to all holders of record of common stock as of July 31, 2012.

Company Hosts Conference Call

TD Ameritrade will host its June Quarter conference call this morning, July 17, 2012, at 8:30 a.m. EDT (7:30 a.m. CDT). Participants may listen to the call by dialing 877-881-2595. The Company will also webcast the conference live at www.amtd.com and will make all accompanying materials available to participants prior to the call. A phone replay of the call will be available by dialing 855-859-2056 and entering the Conference ID 81516068 beginning at 11:30 a.m. EDT (10:30 a.m. CDT).

The Company asks that interested parties visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date corporate financial information, presentation announcements, transcripts and archives. You can also follow the Company on Twitter, @TDAmeritradePR. Web site links, corporate titles and telephone numbers provided in this release, although correct when published, may change in the future.

AMTD-E

About TD Ameritrade Holding Corporation

Millions of investors and independent registered investment advisors (RIAs) have turned to TD Ameritrade’s (NYSE: AMTD) technology, people and education to help make investing and trading easier to understand and do. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how—bringing Wall Street to Main Street for more than 36 years. An official sponsor of the 2012 U.S. Olympic Team, TD Ameritrade has time and again been recognized as a leader in investment services. Please visit the TD Ameritrade newsroom or www.amtd.com for more information.

Safe Harbor

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, 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, but are not limited to: general economic and political conditions and other securities industry risks, fluctuations in interest rates, stock market fluctuations and changes in client trading activity, credit risk with clients and counterparties, increased competition, systems failures, delays and capacity constraints, network security risks, liquidity risks, 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. 18, 2011 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, except to the extent required by the federal securities laws.

⁽¹⁾Please see the Glossary of Terms, located in “Investor” section of www.amtd.com for more information on how these metrics are calculated.

⁽^{2 )}See attached reconciliation of non-GAAP financial measures.

⁽³⁾ Interest rate sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of June 30, 2012.

Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org) /SIPC (www.SIPC.org) /NFA (www.nfa.futures.org).

TD AMERITRADE HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

In thousands, except per share amounts

(Unaudited)


	Quarter Ended									Nine Months Ended
	June 30, 2012			Mar. 31, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	266,078		$	292,054		$	281,591		$	831,516		$	912,607
Asset-based revenues:
Interest revenue		119,975			108,139			132,334			338,869			371,959
Brokerage interest expense		(1,607	)		(1,445	)		(1,052	)		(4,459	)		(3,581	)

Net interest revenue		118,368			106,694			131,282			334,410			368,378

Insured deposit account fees		206,339			209,209			196,817			620,590			562,759
Investment product fees		54,034			46,232			43,938			143,753			125,075

Total asset-based revenues		378,741			362,135			372,037			1,098,753			1,056,212

Other revenues		22,446			18,953			31,154			63,530			90,382


Net revenues		667,265			673,142			684,782			1,993,799			2,059,201


Operating expenses:
Employee compensation and benefits		176,455			174,222			168,564			523,442			500,632
Clearing and execution costs		21,891			24,132			22,648			66,064			71,566
Communications		28,470			26,727			27,057			83,332			81,782
Occupancy and equipment costs		36,342			37,122			36,318			111,317			104,663
Depreciation and amortization		18,334			17,696			16,914			53,015			49,629
Amortization of acquired intangible assets		22,941			23,042			24,083			69,278			72,747
Professional services		39,708			44,175			42,882			128,893			123,257
Advertising		50,248			83,543			48,109			190,419			204,092
Other		18,739			23,361			35,668			66,269			71,291

Total operating expenses		413,128			454,020			422,243			1,292,029			1,279,659


Operating income		254,137			219,122			262,539			701,770			779,542

Other expense:
Interest on borrowings		7,060			7,274			6,916			21,378			25,227
Loss on debt refinancing		—			—			1,435			—			1,435

Total other expense		7,060			7,274			8,351			21,378			26,662


Pre-tax income		247,077			211,848			254,188			680,392			752,880

Provision for income taxes		93,248			75,150			96,793			237,904			278,778


Net income	$	153,829		$	136,698		$	157,395		$	442,488		$	474,102


Earnings per share—basic	$	0.28		$	0.25		$	0.28		$	0.81		$	0.83
Earnings per share—diluted	$	0.28		$	0.25		$	0.27		$	0.80		$	0.82

Weighted average shares outstanding—basic		547,682			548,578			570,287			548,673			573,034
Weighted average shares outstanding—diluted		553,043			554,366			576,784			554,237			579,168

Dividends declared per share	$	0.06		$	0.06		$	0.05		$	0.18		$	0.15

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

(Unaudited)


	June 30, 2012		Sept. 30, 2011
Assets:
Cash and cash equivalents	$	909,766	$	1,031,963
Short-term investments		129,619		3,557
Segregated cash and investments		3,546,772		2,519,249
Broker/dealer receivables		1,053,066		834,469
Client receivables, net		8,738,710		8,059,410
Goodwill and intangible assets		3,422,041		3,491,330
Other		1,113,911		1,185,784

Total assets	$	18,913,885	$	17,125,762

Liabilities and stockholders’ equity:

Liabilities:
Broker/dealer payables	$	2,184,238	$	1,709,572
Client payables		10,099,387		8,979,327
Long-term debt		1,341,644		1,336,789
Other		948,227		984,257

Total liabilities		14,573,496		13,009,945
Stockholders’ equity		4,340,389		4,115,817

Total liabilities and stockholders’ equity	$	18,913,885	$	17,125,762

TD AMERITRADE HOLDING CORPORATION

SELECTED OPERATING DATA

(Unaudited)


	Quarter Ended									Nine Months Ended
	June 30, 2012			Mar. 31, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Key Metrics:
Net new assets (in billions)	$	9.7		$	10.8		$	7.9		$	30.7		$	29.1
Net new asset growth rate (annualized)		9	%		11	%		8	%		11	%		11	%
Average client trades per day		355,449			387,571			369,716			370,081			393,297

Profitability Metrics:
Operating margin		38.1	%		32.6	%		38.3	%		35.2	%		37.9	%
Pre-tax margin		37.0	%		31.5	%		37.1	%		34.1	%		36.6	%
Return on client assets (annualized)		0.22	%		0.20	%		0.24	%		0.21	%		0.25	%
Return on average stockholders' equity (annualized)		14.3	%		13.0	%		15.1	%		14.0	%		15.7	%
EBITDA⁽¹⁾ as a percentage of net revenues		44.3	%		38.6	%		44.1	%		41.3	%		43.7	%

Debt and Liquidity Metrics:
Interest on borrowings (in millions)	$	7.1		$	7.3		$	6.9		$	21.4		$	25.2
Average debt outstanding (in billions)	$	1.3		$	1.3		$	1.3		$	1.3		$	1.3
Leverage ratio (average debt/annualized EBITDA⁽¹⁾)		1.1			1.2			1.0			1.1			1.1
Interest coverage ratio (EBITDA⁽¹⁾/interest on borrowings)		41.8			35.7			43.7			38.5			35.7
Liquid assets—management target⁽¹⁾ (in billions)	$	1.0		$	0.9		$	0.8		$	1.0		$	0.8
Liquid assets—regulatory threshold⁽¹⁾ (in billions)	$	1.6		$	1.5		$	1.4		$	1.6		$	1.4
Cash and cash equivalents (in billions)	$	0.9		$	1.0		$	1.3		$	0.9		$	1.3

Transaction-Based Revenue Metrics:
Total trades (in millions)		22.4			24.0			23.3			69.4			74.1
Average commissions and transaction fees per trade⁽²⁾	$	11.88		$	12.15		$	12.08		$	11.98		$	12.30
Average client trades per funded account (annualized)		15.5			17.1			16.7			16.3			18.0
Activity rate—funded accounts		6.2	%		6.8	%		6.6	%		6.5	%		7.1	%
Trading days		63.0			62.0			63.0			187.5			188.5

Spread-Based Asset Metrics:
Average interest-earning assets (excluding conduit business) (in billions)	$	14.8		$	15.5		$	14.0		$	14.7		$	13.5
Average insured deposit account balances (in billions)		59.0			58.4			48.6			58.7			46.7

Average spread-based balance (in billions)	$	73.8		$	73.9		$	62.6		$	73.4		$	60.2


Net interest revenue (excluding conduit business) (in millions)	$	118.3		$	106.6		$	131.2		$	334.2		$	368.1
Insured deposit account fee revenue (in millions)		206.3			209.2			196.8			620.6			562.8

Spread-based revenue (in millions)	$	324.6		$	315.8		$	328.0		$	954.8		$	930.9


Avg. annualized yield—interest-earning assets (excluding conduit business)		3.15	%		2.73	%		3.70	%		3.00	%		3.58	%
Avg. annualized yield—insured deposit account fees		1.38	%		1.42	%		1.60	%		1.39	%		1.59	%
Net interest margin (NIM)		1.74	%		1.69	%		2.07	%		1.71	%		2.04	%

Interest days		91			91			91			274			273

Fee-Based Investment Metrics:
Money market mutual fund fees:
Average balance (in billions)	$	4.9		$	5.0		$	8.8		$	5.2		$	8.8
Average annualized yield		0.09	%		0.04	%		0.06	%		0.07	%		0.11	%

Fee revenue (in millions)	$	1.1		$	0.5		$	1.4		$	2.8		$	7.3


Other fee-based investment balances:
Average balance (in billions)	$	83.3		$	79.9		$	73.2		$	78.5		$	68.8
Average annualized yield		0.25	%		0.23	%		0.23	%		0.24	%		0.23	%

Fee revenue (in millions)	$	52.9		$	45.7		$	42.5		$	141.0		$	117.8


Average fee-based investment balances (in billions)	$	88.2		$	84.9		$	82.0		$	83.6		$	77.6
Average annualized yield		0.24	%		0.22	%		0.21	%		0.23	%		0.21	%

Investment product fee revenue (in millions)	$	54.0		$	46.2		$	43.9		$	143.8		$	125.1


Client Account and Client Asset Metrics:
New accounts opened		171,000			183,000			154,000			494,000			495,000

Funded accounts (beginning of period)		5,703,000			5,645,000			5,547,000			5,617,000			5,455,000
Funded accounts (end of period)		5,736,000			5,703,000			5,592,000			5,736,000			5,592,000
Percentage change during period		1	%		1	%		1	%		2	%		3	%

Client assets (beginning of period, in billions)	$	452.4		$	406.3		$	412.3		$	378.7		$	354.8
Client assets (end of period, in billions)	$	445.0		$	452.4		$	413.7		$	445.0		$	413.7
Percentage change during period		(2	%)		11	%		0	%		18	%		17	%

⁽¹⁾ See attached reconciliation of non-GAAP financial measures.

⁽²⁾ Average commissions and transaction fees per trade excludes TD Waterhouse UK business.

NOTE: See Glossary of Terms on the Company's web site at www.amtd.com for definitions of the above metrics.

TD AMERITRADE HOLDING CORPORATION

SELECTED OPERATING DATA

(Unaudited)


	Quarter Ended									Nine Months Ended
	June 30, 2012			Mar. 31, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Net Interest Revenue (excluding Conduit Business):
Segregated cash:
Average balance (in billions)	$	4.0		$	5.6		$	2.9		$	4.6		$	3.0
Average annualized yield		0.10	%		0.07	%		0.05	%		0.07	%		0.09	%

Interest revenue (in millions)	$	1.0		$	1.0		$	0.4		$	2.4		$	2.2

Client margin balances:
Average balance (in billions)	$	8.7		$	7.9		$	9.4		$	8.1		$	8.8
Average annualized yield		4.13	%		4.06	%		4.32	%		4.17	%		4.40	%

Interest revenue (in millions)	$	91.2		$	81.2		$	103.4		$	257.5		$	295.2

Securities borrowing/lending (excluding conduit business):
Average securities borrowing balance (in billions)	$	0.5		$	0.6		$	0.5		$	0.5		$	0.5
Average securities lending balance (in billions)	$	1.9		$	1.6		$	1.8		$	1.7		$	1.7

Interest revenue (in millions)	$	27.2		$	25.5		$	28.1		$	77.4		$	73.0
Interest expense (in millions)		(1.2	)		(1.1	)		(0.4	)		(3.1	)		(1.8	)

Net interest revenue—securities borrowing/lending (excluding conduit business) (in millions)	$	26.0		$	24.4		$	27.7		$	74.3		$	71.2

Other cash and interest-earning investments:
Average balance (in billions)	$	1.6		$	1.4		$	1.2		$	1.5		$	1.2
Average annualized yield		0.06	%		0.09	%		0.06	%		0.09	%		0.10	%

Interest revenue—net (in millions)	$	0.3		$	0.3		$	0.1		$	1.0		$	0.8

Client credit balances:
Average balance (in billions)	$	9.1		$	10.1		$	8.7		$	9.3		$	8.4
Average annualized cost		0.01	%		0.01	%		0.02	%		0.01	%		0.02	%

Interest expense (in millions)	($	0.2	)	($	0.3	)	($	0.4	)	($	1.0	)	($	1.3	)


Average interest-earning assets (excluding conduit business) (in billions)	$	14.8		$	15.5		$	14.0		$	14.7		$	13.5
Average annualized yield (excluding conduit business)		3.15	%		2.73	%		3.70	%		3.00	%		3.58	%

Net interest revenue (excluding conduit business) (in millions)	$	118.3		$	106.6		$	131.2		$	334.2		$	368.1


Conduit Business:
Average balance (in billions)	$	0.4		$	0.2		$	0.3		$	0.2		$	0.3

Securities borrowing—conduit business:
Average annualized yield		0.30	%		0.21	%		0.31	%		0.24	%		0.28	%

Interest revenue (in millions)	$	0.3		$	0.1		$	0.3		$	0.5		$	0.7

Securities lending—conduit business:
Average annualized cost		0.20	%		0.09	%		0.25	%		0.14	%		0.18	%

Interest expense (in millions)	($	0.2	)	$	0.0		($	0.2	)	($	0.3	)	($	0.4	)


Average interest-earning assets—conduit business (in billions)	$	0.4		$	0.2		$	0.3		$	0.2		$	0.3
Average annualized yield—conduit business		0.10	%		0.12	%		0.06	%		0.10	%		0.10	%

Net interest revenue—conduit business (in millions)	$	0.1		$	0.1		$	0.1		$	0.2		$	0.3


Net Interest Revenue (total):
Average interest-earning assets (excluding conduit business) (in billions)	$	14.8		$	15.5		$	14.0		$	14.7		$	13.5
Average interest-earning assets—conduit business (in billions)		0.4			0.2			0.3			0.2			0.3

Average interest-earning assets—total (in billions)	$	15.2		$	15.7		$	14.3		$	14.9		$	13.8


Average annualized yield—total		3.08	%		2.69	%		3.62	%		2.94	%		3.50	%

Net interest revenue (excluding conduit business) (in millions)	$	118.3		$	106.6		$	131.2		$	334.2		$	368.1
Net interest revenue—conduit business (in millions)		0.1			0.1			0.1			0.2			0.3

Net interest revenue—total (in millions)	$	118.4		$	106.7		$	131.3		$	334.4		$	368.4

NOTE: See Glossary of Terms on the Company's web site at www.amtd.com for definitions of the above metrics.

TD AMERITRADE HOLDING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

In thousands, except percentages

(Unaudited)


	Quarter Ended																		Nine Months Ended
	June 30, 2012						Mar. 31, 2012						June 30, 2011						June 30, 2012						June 30, 2011
	$			% of Net Rev.			$			% of Net Rev.			$			% of Net Rev.			$			% of Net Rev.			$			% of Net Rev.
EBITDA (1)
EBITDA	$	295,412			44.3%		$	259,860			38.6%		$	302,101			44.1%		$	824,063			41.3%		$	900,483			43.7%
Less:
Depreciation and amortization		(18,334	)		(2.7%	)		(17,696	)		(2.6%	)		(16,914	)		(2.5%	)		(53,015	)		(2.7%	)		(49,629	)		(2.4%	)
Amortization of acquired intangible assets		(22,941	)		(3.4%	)		(23,042	)		(3.4%	)		(24,083	)		(3.5%	)		(69,278	)		(3.5%	)		(72,747	)		(3.5%	)
Interest on borrowings		(7,060	)		(1.1%	)		(7,274	)		(1.1%	)		(6,916	)		(1.0%	)		(21,378	)		(1.1%	)		(25,227	)		(1.2%	)
Provision for income taxes		(93,248	)		(14.0%	)		(75,150	)		(11.2%	)		(96,793	)		(14.1%	)		(237,904	)		(11.9%	)		(278,778	)		(13.5%	)

Net income	$	153,829			23.1%		$	136,698			20.3%		$	157,395			23.0%		$	442,488			22.2%		$	474,102			23.0%


	As of
	June 30, 2012			Mar. 31, 2012			Dec. 31, 2011			Sept. 30, 2011			June 30, 2011
Liquid Assets - Management Target (2)
Liquid assets - management target	$	993,324		$	917,528		$	917,975		$	851,888		$	801,535
Plus:
Broker-dealer cash and cash equivalents		386,693			507,740			443,679			656,206			982,768
Trust company cash and cash equivalents		74,230			74,881			61,857			108,587			38,887
Investment advisory cash and cash equivalents		24,470			17,868			11,283			7,184			41,184
Less:
Corporate short-term investments		(126,083	)		(50,377	)		—			—			—
Excess broker-dealer regulatory net capital		(442,868	)		(441,162	)		(516,532	)		(591,902	)		(540,728	)

Cash and cash equivalents	$	909,766		$	1,026,478		$	918,262		$	1,031,963		$	1,323,646


	As of
	June 30, 2012			Mar. 31, 2012			Dec. 31, 2011			Sept. 30, 2011			June 30, 2011
Liquid Assets - Regulatory Threshold (2)
Liquid assets - regulatory threshold	$	1,553,833		$	1,484,684		$	1,422,160		$	1,407,513		$	1,350,737
Plus:
Broker-dealer cash and cash equivalents		386,693			507,740			443,679			656,206			982,768
Trust company cash and cash equivalents		74,230			74,881			61,857			108,587			38,887
Investment advisory cash and cash equivalents		24,470			17,868			11,283			7,184			41,184
Less:
Corporate short-term investments		(126,083	)		(50,377	)		—			—			—
Excess trust company Tier 1 capital		(9,849	)		(9,381	)		(9,025	)		(8,555	)		(8,410	)
Excess broker-dealer regulatory net capital		(993,528	)		(998,937	)		(1,011,692	)		(1,138,972	)		(1,081,520	)

Cash and cash equivalents	$	909,766		$	1,026,478		$	918,262		$	1,031,963		$	1,323,646

Note: The term “GAAP” in the following explanation refers to generally accepted accounting principles in the United States.

(1)

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 holding company's 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.

(2)

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 broker-dealer 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.). “Liquid assets – management target” is based on more conservative measures of broker-dealer net capital than “liquid assets – regulatory threshold” (defined below) because we prefer to maintain significantly more conservative levels of net capital at the broker-dealer subsidiaries than the regulatory thresholds require. 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 broker-dealer subsidiary in excess of 5% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of the applicable “early warning” net capital requirement 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, such as the need to provide funding for a significant strategic business transaction.

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