UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

TD AMERITRADE Holding Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)		0-49992 (Commission File Number)		82-0543156 (I.R.S. Employer Identification Number)
4211 South 102nd Street Omaha, Nebraska (Address of principal executive offices)				68127 (Zip Code)

Registrant’s telephone number, including area code: (402) 331-7856

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 9.01 Financial Statements and Exhibits.

     On January 27, 2006, TD AMERITRADE Holding Corporation (the “Company”) filed a Current Report on Form 8-K in connection with the acquisition of TD Waterhouse Group, Inc. (“TD Waterhouse”) on January 24, 2006. On April 10, 2006, the Company filed Amendment No. 1 to such Form 8-K to satisfy the requirements of Item 9.01 (a) and (b) of Form 8-K in connection with the acquisition of TD Waterhouse. This Amendment No. 2 to Form 8-K is being filed solely to provide updated TD Waterhouse audited financial statements and pro forma financial information for purposes of meeting the requirements of Rule 3-05 and Article 11 of SEC Regulation S-X with respect to possible future registration statements under the Securities Act of 1933.

(a) Financial Statements of Businesses Acquired

     The audited consolidated financial statements of TD Waterhouse, including TD Waterhouse’s consolidated statements of financial condition as of October 31, 2005 and 2004 and consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended October 31, 2005, are presented beginning on the following page.

Consolidated Financial Statements
As at October 31, 2005 and 2004
and for each of the three years in the period
ended October 31, 2005

TD Waterhouse Group, Inc.
Index to Consolidated Financial Statements

		Page(s)
Report of Independent Auditors			4
Consolidated Financial Statements
Consolidated Statements of Financial Condition			5
Consolidated Statements of Income			6
Consolidated Statements of Changes in Stockholders’ Equity			7
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			9-35
Consent

Report of Independent Auditors

To the Board of Directors
and Stockholders of
TD Waterhouse Group, Inc.:

In our opinion, the accompanying consolidated statements of financial condition and the related consolidated statements of income, changes in stockholders’ equity and cash flows present fairly, in all material respects, the financial position of TD Waterhouse Group, Inc. and its subsidiaries (collectively, the “Company”) at October 31, 2005 and October 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

New York, New York
September 12, 2006

TD Waterhouse Group, Inc.

		2005				2004
Assets
Cash and cash equivalents		$	62,765			$	222,716
Investment securities
Held to maturity (market value of $0 and $2,830,814)			—				2,831,595
Available for sale, at market value			—				6,940,966
Trading			172,942				1,873,353
Restricted investment securities, at cost			—				32,695
Receivables from customers			3,594,647				5,069,332
Securities purchased under agreements to resell			—				1,515,855
Receivables from brokers and dealers			34,985				79,140
Deposits paid for securities borrowed			24,163				91,845
Deposits with clearing organizations			38,840				54,872
Loans, net of allowance for loan losses of $0 and $600			—				24,479
Receivables from affiliates			86,575				8,526
Furniture, equipment and leasehold improvements, at cost, less accumulated depreciation and amortization of $54,325 and $98,055			61,742				123,933
Capitalized software, net of accumulated amortization of $45,736 and $67,263			26,369				30,637
Intangible assets			6,189				12,409
Goodwill			704,929				859,289
Deferred tax assets			40,241				34,569
Other assets			43,636				112,246
Total assets		$	4,898,023			$	19,918,457
Liabilities, minority interest and stockholders’ equity
Liabilities
Bank loans and overdrafts		$	110,288			$	43,309
Interest bearing deposits			—				8,631,570
Deposits received for securities loaned			1,236,922				1,081,561
Securities sold, not yet purchased			3,001				5,136
Payables to brokers and dealers			48,181				176,119
Payables to customers			1,658,177				5,391,422
Swap contracts with affiliate, at fair value			—				726,837
Payables to affiliates			7,523				544,151
Non interest bearing deposits			—				351
Taxes payable			84,305				27,144
Deferred tax liabilities			38,538				75,583
Accrued compensation and other liabilities			176,659				229,541
Liabilities qualifying as risk based capital
Subordinated debt with affiliate			30,000				30,000
Total liabilities			3,393,594				16,962,724
Minority interest			—				61,277
Commitments and contingent liabilities (Note 14)
Stockholders’ equity
Preferred stock of subsidiary Cdn$1,000 par value: unlimited shares authorized, 0 and 17,100 shares issued and outstanding, at October 31, 2005 and 2004, respectively			—				11,829
Common stock — Class A, $0.01 par value, 355 million shares authorized, 352,944,959 issued and outstanding			3,530				3,530
Common stock — Class B, $0.01 par value, 18 million shares authorized, 0 and 17,724,648 shares issued and outstanding at October 31, 2005 and 2004, respectively			—				177
Additional paid-in capital			1,878,932				1,785,631
Retained earnings			1,172,498				1,024,776
Affiliate notes receivable (Note 3)			(1,550,731	)			—
Accumulated other comprehensive income			200				68,513
Total stockholders’ equity			1,504,429				2,894,456
Total liabilities, minority interest and stockholders’ equity		$	4,898,023			$	19,918,457

The accompanying notes are an integral part of these consolidated financial statements.

TD Waterhouse Group, Inc.

		2005				2004				2003
Revenues
Interest income
Margin loans		$	205,201			$	139,264			$	96,627
Investment securities			—				395				433
Other			10,291				3,724				18,195
Total interest income			215,492				143,383				115,255
Interest expense
Interest bearing deposits			—				489				886
Deposits received for securities loaned			26,146				9,381				11,533
Customer deposits			12,615				2,073				2,980
Bank loans and overdrafts			547				275				134
Interest paid to affiliates			299				—				—
Subordinated debt			1,992				1,992				1,992
Total interest expense			41,599				14,210				17,525
Net interest income			173,893				129,173				97,730
Non-interest income
Commissions and fees			289,742				330,520				322,993
Gain on principal transactions			23,394				28,210				21,116
Net gain / (loss) on sale of available for sale securities			24,600				1				(3,750	)
Mutual fund and related revenue			85,269				88,370				83,039
Fees from affiliates			111,252				96,953				48,520
Other			58,699				60,689				45,425
Total non-interest income			592,956				604,743				517,343
Net revenue			766,849				733,916				615,073
Operating expenses
Employee compensation and benefits			272,713				265,427				239,995
Floor brokerage, exchange and clearing fees			41,272				42,050				28,986
Occupancy			45,540				41,183				47,295
Advertising and promotion			85,290				75,777				52,740
Depreciation and amortization			39,511				40,862				37,879
Equipment			30,186				30,580				29,099
Communications and data processing			48,243				49,490				69,222
Professional fees			28,509				29,005				20,255
Stationery and postage			22,119				22,984				20,819
Other			60,987				51,228				14,405
Total operating expenses			674,370				648,586				560,695
Income from continuing operations before income taxes			92,479				85,330				54,378
Income tax provision			19,253				24,260				17,857
Income from continuing operations			73,226				61,070				36,521
Discontinued operations (Note 3)
Income from discontinued operations before income tax and minority interest			435,492				167,685				40,338
Income tax provision			206,449				61,533				26,273
Income from discontinued operations before minority interest			229,043				106,152				14,065
Minority interest			12,022				9,150				5,828
Income from discontinued operations			217,021				97,002				8,237
Net income		$	290,247			$	158,072			$	44,758

The accompanying notes are an integral part of these consolidated financial statements.

TD Waterhouse Group, Inc.

																																										Accumulated
						Preferred Stock								Common Stock								Common Stock								Additional								Affiliate				Other
		Comprehensive				of Subsidiary								Class A								Class B								Paid-In				Retained				Notes				Comprehensive				Total
		Income				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Earnings				Receivable				(Loss)/Income				Equity
Balance at October 31, 2002,							17,100			$	11,829				352,944,959			$	3,530				17,724,648			$	177			$	1,770,745			$	822,722			$	—			$	(9,313	)		$	2,599,690
Increase in APIC from surrendered and exercised stock options																															12,537																12,537
Increase in APIC re: deemed contribution for stock compensation																															750																750
Dividend on preferred stock of subsidiary																																			(358	)											(358	)
Comprehensive Income
Net income		$	44,758																																44,758												44,758
Net change in appreciation on investment securities, available for sale, held by bank subsidiaries, net of taxes of $1,095			(1,865	)																																							(1,865	)			(1,865	)
Translation adjustment arising during the year, net of taxes of $7,848			45,323																																								45,323				45,323
Comprehensive income		$	88,216
Balance at October 31, 2003							17,100			$	11,829				352,944,959			$	3,530				17,724,648			$	177			$	1,784,032			$	867,122			$	—			$	34,145			$	2,700,835
Increase in additional paid-in capital from surrendered and exercised stock options																															577																577
Increase in additional paid-in capital re: deemed contribution for stock compensation																															1,022																1,022
Dividend on preferred stock of subsidiary																																			(418	)											(418	)
Comprehensive Income
Net income		$	158,072																																158,072												158,072
Net change in appreciation on investment securities, available for sale, held by bank subsidiaries, net of taxes of $4,107			6,994																																								6,994				6,994
Translation adjustment arising during the year, net of taxes of $16,077			27,374																																								27,374				27,374
Comprehensive income		$	192,440
Balance at October 31, 2004							17,100			$	11,829				352,944,959			$	3,530				17,724,648			$	177			$	1,785,631			$	1,024,776			$	—			$	68,513			$	2,894,456
Increase in additional paid-in capital from surrendered and exercised stock options																															1,395																1,395
Distribution to parent re: deemed dividend for stock compensation expense																																			(165	)											(165	)
Dividend on preferred stock of subsidiary																																			(381	)											(381	)
Distribution to parent re: sale of subsidiaries at value below book value																																			(2,444	)											(2,444	)
Capital contribution re: sale of subsidiary to parent at value above book value																															110,794																110,794
Decrease in capital for redemption of Class B stock																							(17,724,648	)			(177	)			(18,888	)			(139,535	)											(158,600	)
Contribution to capital relating to Class D Preferred shares of international subsidiary							323,000				275,983																																				275,983
Distribution of capital re Class B preferred shares relating to sale of international subsidiary							(17,100	)			(11,829	)																																			(11,829	)
Distribution of capital re Class D preferred shares relating to sale of international subsidiary							(323,000	)			(275,983	)																																			(275,983	)
Notes receivable from affiliate																																							(1,550,731	)							(1,550,731	)
Comprehensive Income
Net income		$	290,247																																290,247												290,247
Net change in appreciation on investment securities, available for sale, held by bank subsidiaries, net of taxes of $3,303			(5,632	)																																							(5,632	)			(5,632	)
Translation adjustment arising during the year, net of taxes of $11,594			16,297																																								16,297				16,297
Reclass of translation gains realized during the year, net of taxes of $48,407			(78,978	)																																							(78,978	)			(78,978	)
Comprehensive income		$	221,934
Balance at October 31, 2005							—			$	—				352,944,959			$	3,530				—			$	—			$	1,878,932			$	1,172,498			$	(1,550,731	)		$	200			$	1,504,429

The accompanying notes are an integral part of these consolidated financial statements.

TD Waterhouse Group, Inc.

		2005				2004				2003
Cash flows from operating activities
Net income		$	290,247			$	158,072			$	44,758
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization			55,267				56,231				55,743
Deferred tax assets			(19,908	)			(16,392	)			10,955
Deferred tax liabilities			3,724				12,589				1,321
Minority interest in earnings of consolidated subsidiary			12,022				9,150				5,828
Provision for loan losses			99				(346	)			1,141
Allowance for doubtful customer accounts			985				1,915				1,969
Foreign exchange gain on disposal of foreign subsidiaries			(127,385	)			—				—
Write down of investments			278				—				83,096
Net accretion of discount on investment securities held to maturity			(59,740	)			(18,350	)			(16,549	)
Net amortization of discount on investment securities available for sale			2,543				275				166
Net increase in interest payable on swaps			(10,714	)			2,397				2,787
Deemed (dividend) / contribution re: stock compensation			(165	)			1,022				750
Goodwill impairment			—				—				11,104
(Increases) decreases in operating assets
Cash segregated under federal regulations			—				—				200,000
Trading investment securities			(348,465	)			(164,978	)			(888,401	)
Securities purchased under agreements to resell			974,249				92,212				623,673
Receivables from customers			(617,322	)			(509,824	)			(1,322,870	)
Receivables from brokers and dealers			13,865				(7,517	)			70,702
Deposits paid for securities borrowed			67,682				(9,673	)			53,802
Deposits with clearing organizations			5,945				12,501				(26,134	)
Receivables from affiliates			(16,081	)			(7,904	)			—
Current tax receivable			—				—				11,573
Other assets			(9,700	)			1,174				1,927
Increases (decreases) in operating liabilities
Deposits received for securities loaned			155,361				172,101				836,486
Securities sold, not yet purchased			3,030				1,296				(5,346	)
Payables to brokers and dealers			(2,297	)			(17,508	)			(20,690	)
Payables to customers			354,060				(227,526	)			547,178
Payable to affiliates			(483,637	)			438,252				(101,405	)
Taxes payable			66,288				6,621				(5,196	)
Accrued compensation and other liabilities			107,473				18,417				29,696
Cash provided by operating activities			417,704				4,207				208,064
Cash flows from investing activities
Purchase of investment securities held to maturity			(154,901,433	)			(159,254,047	)			(125,872,530	)
Proceeds from maturities of investment securities held to maturity			155,266,249				157,690,654				126,259,378
Purchase of investment securities available for sale			(3,443,259	)			(4,450,315	)			(3,298,193	)
Proceeds from maturities of investment securities available for sale			1,818,674				3,035,793				2,336,712
Proceeds from sale of investment securities available for sale			848,928				16,935				15,165
Purchase of restricted securities			(14,062	)			(10,085	)			(7,070	)
Net decrease in loans			(3,863	)			17,672				6,174
Purchase of furniture, equipment and leasehold improvements			(44,033	)			(38,066	)			(31,213	)
Capitalized software			(22,148	)			(15,723	)			(1,520	)
Purchase of intangible assets			—				(1,491	)			(5,350	)
Proceeds from disposals of businesses, net			947,477				—				18,397
Cash used in investing activities			452,530				(3,008,673	)			(580,050	)
Cash flows from financing activities
Bank loans and overdrafts			66,979				(6,453	)			(9,524	)
Net increase in interest bearing deposits			345,038				2,823,743				466,008
Net increase in non interest bearing deposits			1,142				145				(372	)
Dividend paid on subsidiary preferred stock			(408	)			(426	)			(369	)
Capital Contribution from Parent for subsidiary Class D Preference Shares			266,921				—				—
Notes receivable from affiliate			(1,550,731	)			—				—
Redemption of Class B common stock			(158,600	)			—				—
Cash provided by financing activities			(1,029,659	)			2,817,009				455,743
Effect of exchange rate differences on cash and cash equivalents			(526	)			(10,652	)			5,554
(Decrease) increase in cash and cash equivalents			(159,951	)			(198,109	)			89,311
Cash and cash equivalents, beginning of year			222,716				420,825				331,514
Cash and cash equivalents, end of year		$	62,765			$	222,716			$	420,825
Supplemental disclosures of cash flow information
Cash paid for interest		$	211,642			$	66,247			$	95,326
Cash paid for income taxes		$	133,494			$	81,870			$	44,394
Non cash financing activity
Forfeit of stock option		$	4,877			$	—			$	—

The accompanying notes are an integral part of these consolidated financial statements.

TD Waterhouse Group, Inc.

1.		Organization and description of business
		Through January 24, 2006, TD Waterhouse Group, Inc. (the “Company” or “TDW Group”), a Delaware holding company, was a wholly owned subsidiary of The Toronto-Dominion Bank (“TD Bank”). Through its operating subsidiaries, it was a leading provider of online financial services to investors in the U.S.
		The Company was formerly a public company which was 89.3% owned by TD Bank through its wholly owned subsidiary, TD Waterhouse Holdings, Inc. (“TDW Holdings”). On November 26, 2001, TD Bank completed the merger of the Company with its former parent, TDW Holdings, and the Company is the surviving entity of the merger. The merger was the second step in a two-step acquisition. The first step, a cash tender offer for all outstanding shares of the Company at $9.50 per share, was completed on November 14, 2001, and a subsequent offering period was completed on November 21, 2001.
		On June 22, 2005, TD Bank entered into an agreement of Sale and Purchase (the “Purchase Agreement”) with Ameritrade Holding Corporation (“Ameritrade”). Pursuant to the Purchase Agreement, as amended, Ameritrade agreed to purchase from TD Bank (the “Share Purchase”) all of the capital stock of the Company, in exchange for 196,300,000 shares of Ameritrade common stock and $20,000 in cash. The sale of the Company to Ameritrade was completed on January 24, 2006.
		During October 2005, TDW Group conducted a reorganization (“Reorganization”) in anticipation of the Ameritrade Share Purchase, in which it sold its foreign retail securities brokerage businesses and U.S. banking business to TD Bank. The Company retained its United States retail securities brokerage business.
		The Company’s operating subsidiaries at October 31, 2005 are detailed below:

	•		TD Waterhouse Investor Services, Inc. (“TDW US”), formerly Waterhouse Securities, Inc., a wholly owned U.S. registered broker-dealer which provides discount brokerage services to retail customers in the U.S.
	•		National Investor Services Corp. (“NISC”), a wholly owned U.S. registered broker-dealer which provides execution and clearance services for affiliates, including TDW US, and third party broker-dealers.
	•		TD Waterhouse Capital Markets, Inc. (“TDW CM”), a market maker in over-the-counter equity securities, primarily those traded on the NASDAQ Stock Market and the OTC Bulletin Board. TDW CM is a wholly owned securities brokerage firm registered with the Securities and Exchange Commission (“SEC”) and is a member of the National Association of Securities Dealers, Inc. (“NASD”). Through March 31, 2005, TDW CM operated as a Boston Stock Exchange, Inc. specialist in listed securities.

During May 2005, the Company sold TD Waterhouse Asset Management (“TDWAM”), formerly Waterhouse Asset Management, to a TD Bank subsidiary. TDWAM was a wholly owned U.S. registered investment advisor which provided investment advice to a series of affiliated mutual funds.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

During October 2005, as part of the Reorganization described above, the Company disposed of the following subsidiaries:

	•		TD Waterhouse Investor Services (Canada) Inc. (“TDW Canada”), an approximately 90% owned registered broker-dealer which provides discount brokerage services to customers in Canada.
	•		TD Waterhouse Investor Services (Hong Kong) Inc. (“TDW HK”), a non operating subsidiary.
	•		TD Waterhouse Bank, NA (“TDW Bank”), formerly Waterhouse National Bank, is a wholly owned federally chartered banking institution and a member of the Federal Deposit Insurance Corporation (“FDIC”). TDW Bank provides banking services to the customers of its affiliate, TDW US. TDW Bank offers checking accounts, checking accounts with overdraft protection and certificates of deposit. TDW Bank also offers credit cards and mortgages through unaffiliated third parties. In addition, TDW Bank provides brokerage customers the ability to keep un-invested funds in an FDIC insured money market account with check writing and debit card options.
	•		CTUSA, Inc. (“CTUSA”), is a wholly owned holding company of TD Bank USA, F.S.B. (“TDB USA”), which is a Federal Savings Bank chartered under Section 5 of the Home Owners’ Loan Act and regulated by the Office of Thrift Supervision.

		During the year ended October 31, 2004, R.J. Thompson Holdings, Inc., TD Waterhouse Advertising, Inc., and TD Waterhouse Technology Services ceased to be operating entities and were dissolved.
2.		Summary of significant accounting policies
		Basis of consolidation and form of presentation
		The accompanying consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant inter-company transactions have been eliminated in consolidation. Through October 27, 2005, the approximately 10% non-controlling interest in TDW Canada held by an affiliate was reflected net of tax in the consolidated balance sheets as minority interest and separately in the consolidated statements of income. As discussed in Note 3, on October 27, 2005, the Company transferred its approximately 90% interest in TDW Canada to TD Bank.
		Use of estimates
		The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
		Cash and cash equivalents
		The Company considers all highly liquid investments with original maturities of three months or less (except for amounts designated as investment securities) to be cash equivalents, including cash due from banks and money market investments.
		Statements of cash flows
		Cash flows from discontinued operations were combined with cash flows from continuing operations in the operating, investing and financing categories on the statements of cash flows.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		Preferred Stock
		Through October 26, 2005, TDW Canada had 17,100 shares of Class B preferred stock issued and outstanding. Holders of the Class B preferred shares were entitled to receive floating rate preferential cumulative cash dividends payable quarterly. The Company could at any time following May 20, 2005, the fifth anniversary of the issuance of the Class B preferred shares, redeem the shares for CDN$1,000 per share. Additionally, upon liquidation, dissolution or wind-up, holders were entitled to CDN$1,000 per share plus accrued cumulative dividends before any amount could be paid or any assets of TDW Canada distributed to the holders of the common shares. In anticipation of the Reorganization, TD Bank contributed to TDW Canada CDN$323,000 in consideration for 323,000 Class D preferred shares. Subsequent to the Reorganization, the Class B preferred shares were exchanged into Class C preferred shares issued by TDW Canada to TD Bank.
		Investment securities
		Investment securities classified as held to maturity and available for sale are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”). Pursuant to SFAS 115, in instances where the Company has the positive intent and ability to hold to maturity, debt investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts using the interest method over the period of maturity. Debt and equity investment securities classified as available for sale are carried at fair value with unrealized gains and losses, net of income tax effects, reported as a net amount within accumulated other comprehensive income, until realized. These securities are predominantly fixed rate mortgage-backed securities denominated in Canadian Dollars and strategic equity investments. Gains or losses on sales of securities are recognized by the specific identification method and are recorded in non-interest income. The fixed interest rates and currency risks inherent in the mortgage-backed securities have been hedged by cross currency interest rate swap contracts.
		The cross currency interest rate swap contracts are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), which establishes accounting and reporting standards for all derivative instruments and hedging activities, and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value, as either assets or liabilities. The Company has designated the cross currency interest rate swap contracts as hedges of the fair value of the underlying Canadian Dollar mortgage-backed securities. Changes in fair value of a derivative that is highly effective, and that is designated and qualifies as a fair value hedge, along with changes in fair value of the hedged asset and liability that are attributable to the hedged risk, are recorded in current period earnings. The cross currency interest rate swap contracts are structured such that the terms of the contracts mirror those of the underlying mortgage-backed securities. Market value gains and losses on the swaps are expected to offset market value gains and losses on those securities with no net impact on earnings.
		Trading securities at October 31, 2004 are comprised of Canadian Dollar fixed rate mortgage-backed securities held by TDW Canada, which are managed by interest rate swap contracts; corporate stocks; bonds; and U.S. government securities owned by the broker-dealer subsidiaries. Trading securities at October 31, 2005 are comprised of corporate stocks, bonds and U.S. government securities. Trading securities are carried at fair value with unrealized gains and losses reported in income.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		Financing transactions
		Deposits paid for securities borrowed and deposits received for securities loaned are recorded at the amount of cash collateral advanced or received. Deposits paid for securities borrowed transactions require the Company to deposit cash with the lender. With respect to deposits received for securities loaned, the Company receives collateral in the form of cash in an amount generally in excess of the market value of the securities loaned. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded, as necessary.
		Securities purchased under resale agreements consist of the purchase of a security with the commitment by the Company to resell the security to the original seller at a specified price. Securities purchased under resale agreements are carried at cost. The difference between the cost of the purchase and the predetermined proceeds the Company receives on a resale agreement is recorded as interest income.
		Customers’ securities transactions
		Customers’ securities transactions are recorded on a settlement date basis with related commission income and expenses recorded on a trade date basis. Fees consist primarily of commissions for directing order executions and clearing fees. Proprietary securities transactions are recorded on a trade date basis.
		Restricted investment securities
		Federal Reserve Bank Stock and Federal Home Loan Bank Stock are classified as restricted securities and recorded at cost (par value). The carrying value of these two securities at October 31, 2004 is $25,440 and $7,255, respectively. These securities are not readily marketable, but can be sold back to the issuer or to another member institution at par value. There were no restricted investment securities held at October 31, 2005.
		Loans and allowances for losses
		Loans are carried at their principal amount outstanding. Unearned income on loans is accreted to interest income using a method that approximates a level yield over the life of the loan. Loan origination fees and certain direct loan origination costs are deferred and amortized over the appropriate lending period as a component of interest income.
		Loans are placed on non-accrual status when there is doubt as to collectibility of principal or interest or if payment of principal or interest is contractually 90 days past due. However, at the judgment of senior credit management, loans that are 90 days past due, but which are well collateralized and in the process of collection, may continue to be recorded on an accrual basis. Interest accrued, but not collected at the date a loan is placed on non-accrual status, is reversed against interest income. Interest income on non-accrual loans is recognized only as cash is received. However, where there is doubt regarding the ultimate collectibility of the loan principal, cash receipts are applied to reduce the carrying value of the loan. Loans are restored to accrual status only when interest and principal payments are brought current and future payments are reasonably assured.
		TDW Bank establishes an allowance for loan losses to reflect management’s best judgment of the net realizable value of the loans. The allowance for loan losses is increased by charges to income and recoveries of loan previously charged off, and is decreased by charge-offs. TDW Bank’s periodic evaluation of the adequacy of the allowance is based on TDW Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		Receivables from customers
		Interest revenue on customer margin loans is recognized and collected in the month earned. Amounts earned are based on average daily settlement balances in a customer account and days in the period. A 100% allowance is recorded for unsecured or partially secured receivables that are over 30 days old. The allowance at October 31, 2005 and 2004 was $8,468 and $9,102, respectively, and represents all unsecured and partially secured receivables.
		The Company’s broker-dealer subsidiaries establish an allowance for losses on receivables from customers to reflect management’s best judgment of the level of non-collectible receivables that will be experienced.
		Furniture and equipment and lease accounting
		Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms or their estimated useful lives. Depreciation of capitalized furniture and equipment is provided on a straight-line basis generally using estimated useful lives of three to five years. Leases with escalating rents are expensed on a straight-line basis over the life of the lease.
		Capitalized software
		In accordance with Accounting Standards Executive Committee (AcSEC) Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes all direct costs associated with the application development of this software including software acquisition costs, consulting costs, and internal payroll costs. The Statement requires these costs to be amortized once the application development stage is complete. Amortization is provided on a straight-line basis generally using estimated useful lives of two to seven years. At October 31, 2005 and 2004, these capitalized costs had a book value of $26,369 and $30,637, respectively, net of $45,736 and $67,263 of accumulated amortization, respectively. The total expense related to these costs was $11,123, $15,055 and $12,987 for the years ended October 31, 2005, 2004 and 2003, respectively. The expense related to these costs from continuing operations was $10,169, $12,198 and $8,825 for the years ended October 31, 2005, 2004, and 2003, respectively.
		Business combinations, goodwill and intangible assets
		For business combinations that have been accounted for under the purchase method, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill in the consolidated statements of financial condition. Pursuant to the purchase method, the results of operations, changes in equity and cash flows of acquired companies and businesses are included in operations from the date of acquisition. There were no significant acquisitions during the years ended October 31, 2005, 2004 and 2003.
		The Company applies SFAS No. 142, Goodwill and Intangible Assets (“SFAS 142”). Under the standard, goodwill, including goodwill acquired before initial application of the standard, is not amortized but should be tested for impairment at least annually. During the year ended October 31, 2005, the Company wrote off goodwill of $58,525 related to its subsidiaries sold as part of the Reorganization and such amount was included in the determination of the gain on sale of subsidiaries, as discussed in Note 3. No impairment charges resulted from the annual impairment test for the year ended October 31, 2004. In fiscal year 2003, the Company determined that goodwill related to certain international subsidiaries sold had become impaired. Accordingly, the Company recorded an $11,104 impairment charge that is included in other expenses in the consolidated statements of income for the year ended October 31, 2003.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		Refer to Note 3 for additional information regarding goodwill impairment.
		The changes in the carrying amounts of goodwill are as follows:

October 31, 2003 Balance		$	852,978
Foreign Currency Translation			7,311
Other			(1,000	)
October 31, 2004 Balance		$	859,289
Foreign Currency Translation			3,902
Goodwill written off related to sale of TDW Canada			(58,408	)
Goodwill written off related to sale of CTUSA			(117	)
Goodwill on books of TDW Canada			(99,737	)
October 31, 2005 Balance		$	704,929

		Intangible assets other than goodwill are amortized over their useful lives. At October 31, 2005 and 2004, the net book value of intangible assets was $6,189 and $12,409, net of accumulated amortization of $8,638 and $4,040, respectively, the majority of which relates to purchased technology from the November 2001 R.J. Thompson Holdings, Inc. acquisition, which is being amortized over a three year useful life that began in February 2004. The technology purchased was used as the framework for the development of the next generation trading platform, which was available for customer use in February 2004. Amortization expense for the years ended October 31, 2005, 2004 and 2003 was $5,339, $4,040 and $0, respectively.
		Estimated future amortization expense for existing identifiable intangible assets is set forth below:

2006		$	4,942
2007		$	1,247

		Mutual fund and related revenue
		Mutual fund and related revenue consists of fees earned for providing investment advisory services to a series of related mutual funds, and trailer fees for services provided to third-party mutual funds and affiliated mutual funds. Such revenue is recorded when earned. During the years ended October 31, 2005, 2004 and 2003, the Company earned $194,043, $202,735 and $144,713, respectively, in such fees, net of fees waived which approximated $5,717, $11,227 and $17,488, respectively. Fees earned from mutual funds managed by an affiliated investment advisor for the years ended October 31, 2005, 2004 and 2003 were $39,813, $50,928 and $55,587, respectively.
		Advertising and promotion
		Advertising production costs are expensed when the advertising campaign commences. Costs of communicating advertising are expensed as the services are received. Other promotion costs are expensed as incurred.
		Recent accounting pronouncements
		On July 13, 2006, the FASB released FIN 48 Accounting for Uncertainty in Income Taxes, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		take on a tax return. The Company is currently evaluating the impact of FIN 48, which is effective as of the beginning of a company’s fiscal year beginning after December 15, 2006.
		Stock based compensation
		The Company’s employees are eligible for participation in the stock-based compensation plan of TD Bank, which is described more fully in Note 13. Effective November 1, 2002, the Company adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), prospectively for all employee awards granted, modified, or settled after November 1, 2002, concurrently with the adoption of SFAS 123 by its parent, TD Bank. Therefore, the cost related to stock-based employee compensation included in the determination of net income for 2005, 2004 and 2003 is less than that which would have been recognized if the fair value method had been applied to all awards since the effective date of SFAS 123. SFAS 123R, the revision of SFAS 123, was issued in December 2004 and is effective for the Company for the annual reporting period beginning after December 15, 2005. The Company does not expect the new rules to have a material impact on the Company’s results of operations or financial condition.
		The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS 123, to all outstanding and unvested stock option-based employee compensation awards.
		The underlying assumptions to these fair value calculations are discussed in Note 13.

		For the Year Ended October 31
		2005				2004				2003
Net income, as reported		$	290,247			$	158,072			$	44,758
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects			1,140				1,885				1,317
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(1,593	)			(2,296	)			(2,626	)
Pro forma net income		$	289,794			$	157,661			$	43,449

		Income taxes
		In the United States, the Company files a consolidated federal income tax return and combined state and local income tax returns. The Company also files separate income tax returns in other countries, as required.
		The Company records deferred tax assets and liabilities for the difference between the tax basis of assets and liabilities and the amounts recorded for financial reporting purposes, using current tax rates. Deferred tax expenses and benefits are recognized in the consolidated statements of income for changes in deferred tax assets and liabilities.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		The Company reviews its deferred tax assets for realizability. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowance are included in the Company’s income tax provision in the period of change.
		Foreign currency translation
		Assets and liabilities of international subsidiaries are translated based on the end-of-period exchange rates from local functional currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The resulting translation losses or gains are reported as a component of accumulated other comprehensive income in the consolidated statements of financial condition.
3.		Goodwill impairment, business dispositions and discontinued operations
		TD Bank’s strategy for TDW Group was to be an integrated global discount brokerage, which included US, Canada, and other internationally critical markets. TD bank’s senior management team formally decided that the “integrated global discount brokerage” strategy was not successful. As a result, TD Bank changed its strategy towards its international brokerage operations with a view toward exiting loss generating businesses.
		The separate geographic reporting units were assessed for goodwill impairment based on the criteria set forth in SFAS 142. The fair value of the reporting units was determined based on discounted cash flows and/or public market comparables. As a result of these reviews, during fiscal 2003, the Company recorded goodwill impairment charges of $11,104 that consisted of $3,701 for its Australian subsidiary and $7,403 for its other international subsidiaries.
		As part of the October 2005 Reorganization, the Company wrote down to zero the goodwill related to the subsidiaries it sold, TDW Canada and CTUSA, in the amounts of $58,408 and $117, respectively. These amounts were included in the determination of the gain on sale of subsidiaries which was recorded as additional paid in capital in the October 31, 2005 consolidated statement of financial condition.
		In addition to the goodwill impairment, the related investment and intercompany receivable accounts were determined to be impaired and accordingly, charges of $79,872 were recorded in fiscal 2003. The charges were determined based on the estimated realizable value of the reporting units upon sale or liquidation.
		In fiscal 2005 and 2003, the Company wrote-down its carrying value of investments in several privately owned technology based business service organizations classified as available for sale securities. These minority owned investments were previously carried at cost and were written down by $95 and $3,750, respectively, to reflect deterioration in the financial condition of the investees based on available financial data.
		These impairments and write-downs are reflected in the consolidated statements of income as follows:

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		2005				2004				2003
Other non-interest income			—				—			$	15,211
Discontinued Operations			—				—			$	64,661
Subtotal			—				—			$	79,872
Other			—				—				(526	)
Loss on available for sale securities		$	95				—			$	3,750
Write-down of Investments		$	95				—			$	83,096

		The above charges in other non-interest income primarily represent write downs of the Company’s equity investments in joint ventures to reflect deterioration in the financial condition of the investees, based on available financial data.
		Discontinued operations for 2003 represents losses from TD Waterhouse Australia, its discount brokerage operations in Australia, in the amount of $19,602, TDW Holdings Europe BV in the amount of $42,028 and the write-down of assets related to other international subsidiaries in the amount $3,031 that were recognized in connection with the sale of these entities.
		In May 2003, the Company completed the sale of TD Waterhouse Australia, to the Commonwealth Bank of Australia Group for $16,915. The sale generated a loss on disposal of $19,602.
		In June 2003, the Company completed the sale of TDW Holdings Europe BV to TD Bank for $293,000, which approximated net book value. In July 2003, the Company sold 23% of its 50% ownership interest in DBS TD Waterhouse Holdings PTE LTD (“DBS TDW”) to DBS Vickers Securities Holdings PTE LTD, reducing its ownership to 27%. The Company recognized a $2,300 pre-tax loss on the sale which is included in other non-interest income. In October 2003, the Company sold the remaining investment in DBS to TD Bank at net book value of $2,300.
		In May 2005, the Company sold TDWAM to a TD Bank subsidiary for $23,175 cash, which was $2,263 below book value. As such, $2,263 was recorded as a distribution to TD Bank.
		The October 2005 Reorganization entailed the receipt of dividends from and the sale of all foreign brokerage business entities and the U.S. banking entities to TD Bank.
		On October 27, 2005, TDW Canada paid the Company a dividend of $532,315, which represented the Company’s 90% interest in TDW Canada’s retained earnings of $427,011, a foreign currency translation gain of $78,569, and additional paid in capital of $26,735. The Company then sold its approximately 90% owned interest in TDW Canada to TD Bank for $376,251 cash, based on an independent valuation of TDW Canada, which was $132,710 in excess of book value (including a goodwill write-off of $58,408). $48,725 of this excess amount was recorded as a foreign currency translation gain previously recorded in other comprehensive income and $83,985 was recorded as additional paid in capital.
		On October 28, 2005, the Company sold TDW Bank to TD Bank for $659,000 cash, representing TDW Bank’s book value.
		On October 20, 2005, CTUSA paid the Company a dividend of $8,768. The Company then sold CTUSA to TD Bank for $115 cash, representing CTUSA’s book value, and wrote off goodwill of $117 which was recorded as a distribution to TD Bank.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		On October 20, 2005, TDW Hong Kong (“TDW HK”), a subsidiary of the Company, paid the Company a dividend of $47, and returned capital of $64 to TD Bank. The Company then sold TDW HK to TD Bank for $851 cash, which was $163 in excess of book value. $91 of this excess amount was recorded as a foreign currency translation gain previously recorded in other comprehensive income and $74 was recorded as additional paid in capital.
		In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, the results of operations of TDW Canada, TDW Bank, CTUSA and TDW HK for the current and prior periods have been reported as discontinued operations in the consolidated statements of income.
		On October 28, 2005, subsequent to the Company’s sale of TDW Canada and TDW Bank, a TD Bank subsidiary issued promissory notes of $1,550,731 to the Company in exchange for cash. The notes accrue interest at the reverse repo rate set by an affiliate, less two basis points, and are payable on demand but not later than October 31, 2006. The notes receivable from affiliate are reflected as a deduction from stockholders’ equity in the October 31, 2005 statement of financial condition. The notes were repaid on January 24, 2006 prior to the consummation of the Ameritrade Share Purchase. As contemplated in the Purchase Agreement, on January 24, 2006, the Company distributed to TD Bank excess capital of the Company of $1,769,831, prior to the consummation of the Share Purchase.
4.		Investment securities
		Investment securities have been classified in the consolidated statements of financial condition according to management’s intent and ability to hold to maturity. After the Reorganization, the Company did not own any held to maturity investment securities at October 31, 2005. The following table presents information related to the Company’s portfolio of investment securities held to maturity as at October 31, 2004.

		October 31, 2004
						Gross
		Amortized				Unrealized								Fair
		Cost				Gains				(Losses)				Value
U.S. government agency securities		$	1,880,052			$	46			$	(772	)		$	1,879,326
Mortgage-backed securities			951,543				41				(96	)			951,488
Total investment securities — held to maturity		$	2,831,595			$	87			$	(868	)		$	2,830,814

		At October 31, 2004, securities carried at approximately $135,000 were pledged for purposes required or permitted by law. This was in consideration of TDW Bank being able to request advances from and incur indebtedness to the Federal Reserve Bank of New York.
		The following table summarizes the held-to-maturity securities with unrealized losses as of October 31, 2004. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		October 31, 2004
		Less than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
U.S. Treasury obligations		$	—			$	—			$	—			$	—			$	—			$	—
U.S. agency obligations			648,944				(720	)			—				—				648,944				(720	)
State or local housing agency obligations			—				—				—				—				—				—
Other			52,207				(8	)			88,152				(44	)			140,359				(52	)
Mortgage-backed securities			406,051				(96	)			—				—				406,051				(96	)
Total temporarily impaired		$	1,107,202			$	(824	)		$	88,152			$	(44	)		$	1,195,354			$	(868	)

		TDW Bank and TDB USA had both the intent and the financial ability to hold the temporarily impaired securities to recover their fair value. In addition, they have concluded that, based on the creditworthiness of the issuers and any underlying collateral, the unrealized losses on each security in the above table represents a temporary impairment and does not require an adjustment to the carrying amount of any of the securities.
		After the Reorganization, the Company did not hold any investment securities available for sale at October 31, 2005. The following table presents information related to the Company’s portfolio of investment securities available for sale at October 31, 2004:

		October 31, 2004
						Gross
		Amortized				Unrealized								Fair
		Cost				Gains				(Losses)				Value
Canadian government guaranteed mortgage backed securities		$	5,671,709			$	713,490			$	—			$	6,385,199
U.S. equity securities			3,500				9,118				—				12,618
U.S. government agency securities			447,587				172				(547	)			447,212
U.S. state and municipal securities			95,448				932				(443	)			95,937
Total investment securities — available for sale		$	6,218,244			$	723,712			$	(990	)		$	6,940,966

The following table summarizes the available for sale securities with unrealized losses as of October 31, 2004. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

TD Waterhouse Group, Inc.
Notes to Consolidated Financial Statements
(in US$ thousands, except share data)

		Less than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
October 31, 2004		Value				Losses				Value				Losses				Value				Losses
U.S. government agency securities		$	306,545			$	(547	)		$	—			$	—			$	306,545			$	(547	)
U.S. state and municipal securities			19,382				(142	)			11,423				(301	)			30,805				(443	)
Total temporarily impaired		$	325,927			$	(689	)		$	11,423			$	(301	)		$	337,350			$	(990	)

		The Company had both the intent and the financial ability to hold the temporarily impaired securities to recover their fair value. In addition, the Company reviewed the investments and determined, based on creditworthiness of the issuers and any underlying collateral, the unrealized losses on each security in the above table represents a temporary impairment that does not require adjustments to the carrying amount of any of the securities as of October 31, 2004.
		The scheduled maturities of held-to-maturity securities and available-for-sale securities (other than equity securities) are as follows at October 31, 2004:

		October 31, 2004
		Held to Maturity								Available for Sale
		Amortized				Market				Amortized				Market
		Cost				Value				Cost				Value
Due in one year or less		$	2,742,744			$	2,741,966			$	266,549			$	314,628
Due from one year through five years			28,196				28,182				5,934,720				6,600,046
Due after five years through ten years			—				—				12,721				12,898
Due after ten years			60,655				60,666				754				776
Total		$	2,831,595			$	2,830,814			$	6,214,744			$	6,928,348