TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corporation (AMTD)

Goldman Sachs US Financial Services Conference 2011

December 7, 2011; 11:30 am ET

Executives

Fred Tomczyk - Chief Executive Officer

Analysts

Unidentified Participants

Presentation

Unidentified Company Representative

I think we’ll go ahead and get started here to keep on track. So it’s my pleasure to introduce Fred Tomczyk, the CEO of TD Ameritrade. Fred’s been the CEO since 2008, the COO before that and Fred’s been a big part of the changes that Ameritrade’s undergone in the last few years, including overhauling a lot in the technology, extending the trading suite to include options, as well as other areas and really driving an asset gathering strategy at the firm, which has been very successful. As a matter of fact it’s been more successful in the industry over the last few years.

I think a lot of these are topics Fred’s going to touch on, so I’ll stop there and just turn it over to Fred.

Fred Tomczyk

Thanks Dan and I’ll be brief, because I guess you want this to be conversational. So I’m just going to talk to one slide and whenever I talk to asset managers, I think one of the more harder questions you know people always ask is give me five reasons why I should consider your stock or invest in your stock, so that’s what this page drives you to.

So I think the first one is that we have a unique and differentiated business model. We are probably (ph) the only broker that has truly open architecture and multi channel approach to the market, both product and channel and I think most other firms either have a channel they are biased to, even though they have all the channels.

Ours is all driven to be confident for you, just right from the client. We are not an asset manager and we are not a product manufacturer per say, so everything’s designed in everybody’s incentives to just gather assets, retain assets and deepen the relationships with clients. All of our sort of model is designed to line up with the security terms against certain types of the markets that we find are attractive and have a good opportunity, so that’s worked very well for us.

The second thing is we do have market leadership in trading. I think we processed more revenue trades everyday than the other players in the business. We had around 400,000 trades per day last year and you know on this side, we are clearly the leader in the derivative side, because about third of our trading volume are now derivatives. I’d say 25% out of 26% are options and another 5% or 6% in futures, 1% or so in forex. Well just mainly concentrated in options with to a less extent futures.

And we continue to innovate and we continue to – we’ve rolled out now our three tier trading platform which we’ll continue to enhance from there going forward, between our standard Ameritrade site and trading platform, what we call trade architect, which will have a lot of functionality as a mid tier platform and then I think a firm which is the high end, which is really for the more professional type of trader, the very active trader and the option trader and the new (ph) trader in particular.

On the asset gathering side, you know we started on this journey four years ago. We’ve done very well. We gathered assets at double digit rates, which is the highest in the industry for three years in a row now and that’s, if you think the way I think about that, in the last three years we have gathered a $100 billion of net new assets; that’s a quarter of the clients firm and size today and so we’ve done quite well here.

Last year being the best one, a record year for us at $41 billion or 12% organic growth rate, which I think is probably the best in the industry by probably double. I don’t think anybody’s even probably the next close is at half that rate.

I think also to understand our stock and our business model you have to understand the relationship we have with TDMA loans, 45% of TDMA trade. That plays out on a number of fronts, but primarily the one that I think is the most interest to investors is we sweep all of our client cash or most of our client cash through TDE, which was our money market funds, which is a very small part today, about $5 billion.

The bigger part is in the deposit account and so the way the arrangement works is we sweep it to TDE Bank. That is I guess $58 billion and that allows us because of the way the arrangement works is that we put it on essentially a bond ladder or a synthetic bond ladder that works off the LIBOR swap curve and so we basically are able to earn, the economics and the rewards, deposit banking and the duration extension, without taking the capital requirements or the credit risks of deposit banks, of banking in general.

So it’s a fairly conservative approach, but what that does is it gives us good economics for the cash management in an environment where it’s very hard to make money, at least a return on capital from your cash management and it also allows us the sense that our earnings and our free cash flow are essentially the same. So we’re not capital intensive at all and we take out a lot of free cash every year, which allowed us to be acquisitive. It also allowed us to have an aggressive return of capital strategy.

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