Please stand by. Good day, everyone, and welcome to today’s TD Ameritrade March Quarter Earnings Conference Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I’ll turn the call over to Donna Kush. Please go ahead, Madam.

Thank you. Good morning, everyone. By now you’ve probably seen our two press releases that were made public this morning. You can also view a copy of our releases, listen to the call, and submit any questions to us via our new corporate website, which is still our ticker symbol, at amtd.com. We will be discussing a number of financial metrics in this call, so in order to more easily follow along with us, we strongly encourage participants to download and print the presentation for this call now on the home page of amtd.com. Also, if you want to contact us directly after the conference call, please call investor relations at 800-237-8692. Before we begin, I would like to not that this call contains forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These statements involve risk, uncertainties and assumptions that may cause actual results to differ materially from those anticipating. Listeners to the call are advised to review the risk factors contained in our most recent annual report on form 10-K, and quarterly report on 10-Q for descriptions of risk, uncertainties, and assumptions related to the forward-looking statements. In this call, TD Ameritrade management will discuss some non-GAAP financial measures, specifically operating margins, EBITDA, non-GAAP EPS, and liquid assets. Listeners can find a reconciliation of these financial measures to the most comparable GAAP financial measures and the other required disclosures in the slide presentation during this call, which again can be found on our corporate website at amtd.com. Note that this call is intended for investors and analysts and may not be reproduced in the media in whole or in part without prior consent of TD Ameritrade. This call will cover March quarter earnings and marks the first quarter of combined results since the close of the TD Waterhouse acquisition. At this time, I’ll turn the call over to TD Ameritrade CEO, Joe Moglia, who will be followed by TD Ameritrade’s CFO and PAO, Randy MacDonald. Joe.

Thank you very much, Donna, and good morning, everybody. This is an exciting day for us with the launch of the new TD Ameritrade. We’ve got an awful lot going on. This morning, what I’m going to try to do is give you an update with regards to highlights from the quarter. I want to take you through once again what our actual growth strategy is. I will review with you our new client value propositions and how we came to those numbers. We’re going to give you an update with regards to our outlook going forward, and I’d like to spend a few minutes discussing what our new brand and advertising campaign is really all about. So, if you focus specifically now on the March quarter, I’d like to point out that the TD Ameritrade deal is accretive as of now. When we first talked about the deal, we said that the deal actually wouldn’t be accretive until the latter part of the first 12 months. We are accretive already and we are very pleased with that. If you notice on the slide that says March quarter 2006, we’ve broken that down for you into two categories; our normal GAAP numbers, and we also wanted to include what the GAAP numbers would look like excluding the gain and the benefit that we had gotten from Knight. I will focus on the numbers excluding Knight. On an earnings per share basis, we came in at $0.22, which was the second-best quarter in our company’s history. Net income was a record $124 million. Our pre-tax income was a record $203 million. Now, the record pre-tax percentage came in at 41% -- I’m sorry, the pre-tax margins came in at 41%. Now that number is not a record, but I point that…

Thanks, Joe. I’m going to cover the following topics, and I’ll go through them pretty quickly. I’ll go through the impact of the pricing change, the revenue opportunity update, I’ll then go through our asset-based revenues as they compare the outlook. I’ll give you an update on the operating expense synergies, go through the outlook, updating that, talk about some recent growth trends. We provided you with some sensitivity on certain growth factors, and lastly, I’ll talk about non-GAAP EPS. Before I get started with that, refer you to slide 11, it’s the Deal Immediately Accretive, Record Asset-Based Revenue slide. I want to make three points. The first point is on EPS. TD Waterhouse deal was immediately accretive, so when you look at the same quarter last year EPS, excluding Knight, it was $0.17, and this quarter it’s $0.22 excluding Knight, or 29% accretive. The second point is that the $0.22 EPS excluding Knight, that’s the second best quarter in the firm’s history, and excluding about $20 million of non-recurring deal related expenses, EPS would have been $0.02 higher, and that would have been a record. The third point that I want to make is the current mix of business is a record for the firm, so the same quarter last year asset-based revenues were only 39% of revenues. This quarter, they’re 50%. So that’s a 28% increase, and that’s even considering that we saw a 12% increase in activity rates versus the December quarter. Then, of course, we had all those records that Joe talked about. With regard to the impact of our new pricing, I need to ground everyone in the historical commission rates, so let’s turn to slide 12, called the Blended Commission Rates. The legacy Ameritrade advertised commission rate was $10.99. however, the actual rate average…

Thank you. The question and answer session will be conducted electronically. (Operator Instructions) Our first question will come from Patrick Pinschmidt with Merrill Lynch.

Good morning, guys. Okay, I guess the first question is on the money market deposit accounts, and looking at the projected rate earned for 2007, it’s 3.17 to 3.27. That’s unchanged from your last guidance. I was just wondering, is this going to be sensitive at all to some of the rate increases, or there’s just a lag there? How should we understand that line?

Those are really fees, so those are negotiated fees, so they are not rate-sensitive. They’re like the 12b1 fees.

The MMDA net rate earned?

No, you said money market.

Oh, sorry, I meant the MMDA.

Oh, the MMDA absolutely is tied to that, yes, Patrick. Now, the reason I think you’re asking that question is that rate is the net rate, so that reflects us also assuming that we would share some of those rate increases with clients, so that is where the extension strategy would take place, so we do expect those rates to get better, but of course, you do have then the bank is paying the client’s directly, so what we get is the net rate. So rate earned by the bank less what they have to pay clients, less the cost of running the bank, that’s what we get net and that’s what we’re showing net.

Okay, and then in terms of your projections for the sweep, initially that was 15%. You scaled it back to zero. Has your thinking changed there?

No, it’s not changed a lot, but what we are seeing is more and more people are rate sensitive. We have seen some people move their MMDA into money market, elect a money market fund, but generally, we’re still planning on having more funds going to the sweeps.

But you don’t have a target rate, like 10% or anything like that?

No, I mean, this is part of pricing in the market place. You have to be very sensitive. You don’t want to have clients leave because they’re not getting enough money on a high cash balance, so we have to be rate sensitive. It’s part of our pricing and our value prop.

Okay, and then finally on expense guidance for ’07, can you help me flesh out some of the changes in the different line items you mentioned, the higher tech spending, but I was looking at particularly professional services, that was up about $15 million. Does that reflect some of the tech spending? Is there something going on?

Yeah, that’s exactly. The professional is when we go out and hire contractors to help us build widgets and so there, you don’t have to hire them full-time. Plus the skills are somewhat unique that you don’t necessarily need to hire someone in who’s got JavaScript experience when you don’t need to keep them long term. So we outsource that, and that’s the line where the consultants would show up, is professional services. So you’re exactly right, Patrick.

Okay, great, thank you very much.

Thank you. Next from Citigroup, Prashant Bhatia has our next question.

Hi, I just wanted to get an update on the back-office integration. How is that going on the retail brokerage side, and if we were to get a summer slowdown, could you accelerate the integration sooner as opposed to I think January of ’07 when you were targeting?

The answer is it wouldn’t accelerate because of seasonal conditions. It’s really dependent on programmers getting projects completed. So I’m still thinking it’s around Christmas time, or right thereafter.

Okay, and also, you broke out the $32 billion in mutual fund balances that are earning I guess 16 basis points, what exactly is that?

Those are primarily 12B1 fees. We’re selling mutual funds and we’re getting a sales commission.

Okay, and also, when you I guess came up with the new pricing, part of it was to stem some attrition, can you give us a feel for what you were seeing in terms of the reasons clients were leaving Ameritrade? Also, the reasons clients were leaving TD? How much of that do you think was based on price versus products, services or other things?

Prashant, the number one reason that we had why clients were leaving us was because they wanted to consolidate their business elsewhere. So an individual might have felt really good about their active trader relationship with us, but not as good about some of the other parts of the relationship with us. From a TD perspective, they were pleased with what they had from a long-term investor perspective, but not as pleased with what they may have had from an active trader perspective. So consequently, the number one reason why client drop was to try to consolidate their assets at another firm that gave them the best of all the worlds that they were interested in. We believe we are addressing that now. The second reason was price, and that was mostly for the lower-balanced accounts.

Okay, great, and just finally, your interest expense is going up, I guess, in ’07, but you said you were paying down debt, so I just wanted to understand why that would happen.

The reason why the interest rate has gone up is because it’s a variable interest rate, so with the movements of the Fed going up, that meant the interest on our borrowings were going up. Now, altogether we borrowed $1.9 billion. Remember, Randy had addressed earlier that there were incremental non-cash capital in the broker deal when TD Waterhouse came over to us. That was about $300 million. That was TD’s money. So that gave us $2.2 billion worth of debt. We’ve already paid TD back $200 million of it. We’re down to $2 billion, so we are paying down our debt. The borrowings is the $1.9 billion, and the rate of that has gone up because interest rates have gone up.

Okay, great, thank you.

We’ll go next to Rich Repetto with Sandler O’Neill.

Hi, guys. The first question is, Randy, I was hopping around here a little bit, but just trying to get these growth initiatives, because the expense line items, you’re at negative $0.03 impact in ’07 on the expense side. Could you detail those a little bit more?

Yes, we had rounding of a penny. I mean, that literally was just sort of trying to be accurate, so it’s sort of cats and dogs. The other two cents, Rich, are that professional services line. Those are the people that we’ve gone out and hired in technology. It’s about $20 million in ’07, but it’s the first half of ’07, not the second half of ’07, so you can think of it as a camel’s hump. We have a lot of projects going on through right after Christmas, and then those people, because they’re consultants, we just don’t renew the contracts.

And these weren’t foreseen before, I guess?

Right, we’ve decided to do some projects that we think are going to fuel some growth initiatives. Go ahead, Joe.

Rich, if you’ll remember, we talked about our philosophy for ’06 to ’08, and that we would then, and the real key for us being successful with regards to the integration, was positioning ourselves for how we would look like going into 2008, and if we needed to make any incremental decisions or investments right now that helped us do that, we would do it. So for example, the increase in the technology spend is to provide us with what we believe will be better value propositions down the road. So those are expected to be increased for the ‘06/’07 timeframe. Frankly, we would expect those to go away in 2008.

Okay, and then I guess the next question is on TD, the earlier question was interesting about the earning of 16 basis points on the mutual fund revenue. I guess now that you’ve had a couple of months at TD, can you tell us what the net flows look like there on a monthly basis and what the return on client assets at TD, or even the net flows of the company for the quarter, I guess.

It’s kind of hard to do that just yet. I’m anticipating sometime this year we’re going to have their historical databases loaded in and have much better insight into actual flows. Part of some of the technology spend you see is exactly that. So unfortunately, stay tuned. I anticipate that information being available to us and then to you over the next few quarters.

So even say March, we don’t have a good figure on what the net money that TD brought in?

I don’t.

Okay.

But we’ll take a closer look at that, Rich, and if we have anything specific, we will get back to you on it.

Yes.

Okay, and I guess one last thing, no tax rate for ’07 either, is that just because it’s a little bit less clear with the TD integration, or did I miss it?

Yes, you’re exactly right, and with all the branches in all the different states, it is definitely a different state tax profile, and you know, we’re still getting our arms around that, but I think the rate that we have in there is probably our best guess at this point.

I guess one other. Joe, you made a pretty good emphasis on how much time and effort and the difficult decision, or how much the different options you went through to come up with a straight $9.99, you know, some might say that may or may not help with account growth in that some people have some teaser rates out there that are lower, and that they may be getting left off the hook as far as e-trade and Schwab by you staying at sort of a flat $9.99. Any comment there?

I think one of the things that our clients told us is that they don’t like teaser rates. They don’t like you to come in with one rate and then change that later on. They told us they don’t like you coming in and, you know, they do X amount of trades this month and next month, they do a few less because they’re on vacation and their rates changes. Those are the things that people have told us. Having said that, literally, there are a lot of people to look at this and come to different conclusions. Our job, we felt, was to balance our growth in market share with our balance in long-term profitability. That’s what we were trying to do. On a risk reward basis, we think this was the best decision that we could have made at this time. Rich, one other thing, because I didn’t want to avoid this. When you asked the question about the increase in expenses, you said “now had you not anticipated that�?? We didn’t answer that specifically. That request for the incremental expenses, so we could do more projects, and these are all client-oriented projects, was only made several weeks ago and it was approved several weeks ago, so they weren’t anticipated until they were asked for. We told our people, you will be held accountable for the roll-out of the value propositions and the client experiences that take place here from now ad infinitum, so if there’s something you need to really provide a great client experience, you ask for it now. That’s basically what happened.

Joe, just to make sure we put an emphasis, that was just the first six months of ’07, Rich, that $0.02, the $20 million.

No, I understand, but I would think that it would be fair if they’re going to ask for the money to at least ask for, well, I guess it isn’t fair because you don’t know when the return on that money is going to occur. Maybe not in ’07, but anyway, congratulations, Joe, on the un milone contract there.

Thank you very much, Rich.

I should say duce milone. Thank you.

Thank you. We’ll go next to Mike Vinciquerra with Raymond James and Associates.

Good morning. I appreciate all the extra detail this morning, guys, a lot of stuff going on here. Joe, when you look at your opportunities for outside, you’ve calculated no growth here at all for accounts or assets, but when you look across the board, it is regional fund fees, is it additional cash, is it Amerivest kind of wrap product? Where do you see the real opportunity when you look at what’s most right for it?

Well, I think literally I think our really making Amerivest the best portfolio allocation service in the market place I believe will really make a difference. That will be one of our goals. Within the long-term investor space, you’ve got to be able to provide them with a full suite of solutions that the client cares about, but we also need to be really effective, we need to have something that differentiates us, and we think that does. Standing behind the independent advisors is a very, very big deal. It helps them with regard to the growth of their overall business. Then, in the active trader space, frankly, it really is, I know for the last two or three years, every time we have a call we talk about price, and if I were in your shoes, I would be talking about it as well, and frankly, we do it as well. But we’re really trying to listen to what the clients care about, and if it were only price, what we would do is we would cut a lot of our costs in many, many other areas, and we’d come up with a lower price, and we thought that was the case. Now, I don’t want to see a price war in the industry, but having said that, if there’s going to be a price war, I’d rather be at the firm that has the best operating margins in the industry. But that’s not what anybody’s telling us, Mike. What they’re telling us is it’s a combination of all these things. That’s why we are so focused away from the price to make sure that if you come to us as a client, you’re expecting a certain level of service, products, etc. We’re going to give you that. We want to surprise you as a client on the upside. We want to make you feel that you legitimately have a great relationship with us. So at the end of the day, what we’re really going to look at is we think that will then result in a positive response with regard to asset growth, account growth, better retention, and just more overall business, across the current client base we have. We can make a lot of money just by the current client base doing more business with us. Now, Mike, did that answer your question?

No, it does. I was just kind of curious where you thought the asset flows, what categories it seemed to you that you had the most opportunity with the mutual fund screener or the Waterhouse branch of the table, or what not.

You know, the reality is every client cares about something different, so the mutual fund screener, we think is a great product. Away from the mutual fund screener, this market motion detector that we’re rolling out now, we think is a great product. Different clients sort of care about different things, and you’ve got to have enough for them that we’re really trying to serve their needs, and that’s what’s going on. So you get back even to Rich’s question, when he said how do you know where the real return’s going to come from? The truth is when you’re breaking it down by specific offering, the truth, you really don’t know. Now, everybody could put numbers on a piece of paper. But you don’t know until you’ve had a chance to see the response in action, and that’s sort of what we’re looking at.

That’s fair. Thank you very much. I wanted to ask a question just on your stock sale, Joe. Is it even possible for you to turn around and do a sale directly to TD Waterhouse to avoid commission costs and keep it off the market?

The answer is as long as TD -- TD, not TD Waterhouse -- as long as TD is in the marketplace themselves with the 10b5-1 plan. Their responsibility is to buy stock in the open market, so the answer there is no, so we are just going to do this in the open markets ourselves.

Okay, and then finally, Randy, on the debt itself, I presume that you’re leading the rate variables so that you’re essentially match-funded, so to speak, with the yields on the asset side of things. There’s no desire at this point to try to hedge and lock in a rate?

That’s correct at this point, although you know, we’re certainly looking at the futures market and asking ourselves whether there is an opportunity to lock in the right side of our balance sheet for some amount, so that is an active discussion that we’re having internally.

Thanks very much.

Thank you. We’ll go next to Howard Chen with Credit Suisse.

Good morning, Joe, good morning, Randy. Joe, you spoke earlier in your comments to the market share opportunity that you see versus the full commission firms. I know it’s obviously early with regard to the new value proposition, but more curious about what early returns you may have experienced under the combined brand, and you know, one of your competitors spoke positively with regard to market share wins from the full commission firms here in the last couple of months.

Howard, what’s the question?

So the question is I’m just more curious about early returns. I think you’ve got some experience outside the new value proposition, in terms of attaching the full commission.

Right, well, we have always experience positive returns from the full commission firms, but the fact of the matter is at Legacy Ameritrade, we were never attacking the full commission firms. We were focused in the active trader market in our space. Now, the real object, along with TD Waterhouse, now is TD Ameritrade, we are aggressively going after the long-term investor and the independent advisor. So now that we are doing that, we’re just going to lever the same core competencies we have with the active trader space with the same focus on the long-term investor and the needs of the long-term investor, plus to differentiate over Amerivest to be able to do that. So I can’t imagine how we couldn’t do that and combine that with the Waterhouse sales force, investment centers, and branches without having a far more positive impact on the full commercial firms than we’ve had in the past. The priority reason for that is remember, we’re going after the mass affluent, and the full commission firms are absolutely focused, no matter what they say, on the high net worth client. They can’t get to the mass affluent clients. We’re going to focus on that and we’re going to do a better product and service offering than we’ve ever had in the past.

Okay, thanks. Randy, sorry if I missed this in the prepared remarks, but can you speak to the product mix this quarter? Clearly average commission per trade was fairly healthy.

Can you ask that question more specifically? When you say…

Options versus equities, and -- what I’m trying to get at is what was the options versus equities mix this quarter and is any of that baked into the forward average commission per trade guidance?

The answer is the options business is up again this quarter, but again, being conservative, we used more the historical ratio.

In the forward guidance?

In the forward guidance, we’ve been probably using more the historical rate rather than recent trends, but the recent trend, pretty much every quarter now for about three or four quarters, we’ve seen a healthy increase in the ratio of options trades.

Okay, and then on slide 19, that $100 million incremental revenue sensitivity that you’re speaking to, I know it’s early, but what time frame does management get comfortable baking in the incremental revenues from those assets or the new accounts and then places it two quarters, four quarters, how should we think about that?

Yes, I think four quarters would be kind of far out, but you know, whether it’s next quarter or the quarter after, I can’t tell you. One of the earlier questions was more about flows on the Waterhouse side. I think we have our arms the flows on the Ameritrade side. I’d like to see some of our internal flow funds, or flow of funds before we really start to bake anything in, but we do use our historical models to create that guidance, so if we do see trends like the options, the percentage of options going up, we use that. That keeps bumping up as it bumps up, and that would be true for balances as well. March was very encouraging -- $1.1 billion above our guidance. That was a pretty encouraging number to me, but that’s very short-term, and I’d hate to take 65 days and annualize it.

I hear you. Following up on the incremental growth investment questions, if there’s more incremental growth investment from here, how should we think about that, gross of incremental cost savings or net of incremental cost savings? I.E., do you need to find more cost savings to invest? Do you find more investable ideas internally?

Howard, I think it would be a fair assumption that any increments to our cost structure over the span of the integration will be going away at the end of the integration. That’s probably a good rule of thumb for you to take a look at. As I’ve said before, we think we need to spend a little bit more to make us stronger coming out, we will. But remember, we are also committed to, as of now, still saying that we can reach that $330 million fixed cost run rate, and that’s still our objective. So we’ll be very clear in terms of our transparency as far as that goes. We increased our costs. You’ll understand why. If it's meant for the integration, they would go away at the end of the integration.

Thanks, and then one final one for me. The five bullets on your integration update slide, are those initiatives all on pace, ahead, or below what you originally expected?

On pace.

Okay, great, thanks so much guys.

We’ll go next to Michael Hecht with Banc of America.

Good morning, guys. Quick question, did you guys where the account attrition is running today on the TD Waterhouse side? It seems like it’s running low, given where the balances are. I just wanted to clarify when the actual account conversion from TD Waterhouse to Ameritrade will take place? I’m just trying to get a sense of what kind of key dates we should be looking out for here.

Well, you can see by the combined numbers, we’re not breaking out the historical numbers, but certainly much better than guidance, and the conversion of the Waterhouse, the back-office conversion that was mentioned earlier, that’s the clearing broker switching over. They clear through ADP. That will happen around Christmas or the first of the year.

Okay, great. I also noted on the website this morning, with the new pricing strategy, you have an offer out there to get 50 free trades and $100 in cash for opening a new account between now and June 30th. I’m just wondering what’s the impact of that offer and the outlook statement? Could you talk a little bit about your experience with some of those teaser offers in the past and how sticky those accounts end of being?

I think that that’s a fair question, Mike. Now, we don’t give color on individual offerings that we hand out because frankly, the ones that we really like are the ones that work and the ones that work are the ones we continue to do. The ones we’re not crazy about are the ones that don’t work and they’re the ones we need to change or eliminate. So we don’t talk about individual ones. Some work, some don’t. I just told you how we’ll handle those.

Okay. Can you talk also about your price on margin debit balances and how those are changing this morning with the new value proposition? I seem to remember that TD Waterhouse schedule being a bit higher, so I’m just wondering if they’re under one schedule now, and if you can comment on part of that as part of the competitive environment you’re seeing for the pricing on margin debit balance there and whether you’re feeling any pressure to lower pricing there?

Pricing is something that we’ve looked at in conjunction with the commission price, so when Joe refers to the pricing change, it’s all in. The value proposition is not just the commission rate. There is harmonization of the rate, so there is one rate schedule. I think we’ve been fairly competitive. One thing we’ve seen over time with all of our tests, all of our surveys, the labs that Joe mentioned, is there’s generally been insensitivity to rates, except when you get to higher balances, and we do have tiered rate structure there that I think is very competitive. So it’s part of what we look at when we look at client retention and the value proposition is absolutely important, but probably relative to everything else, less important than some of the other things.

Okay. Can you also talk about how this morning’s pricing changes may be impacting the Izone offer you guys have out there, the $5 trade offer?

It won’t have any impact on the Izone offer, so anybody, frankly, that already has a lower price than the $9.99, gets that grandfathered.

Now, can you give us any color on how that offer has been going, as far as mix goes or just how receptive clients have been?

Again, Mike, it goes well, but it’s still small. So frankly, we like that offering out there, but it’s a very, very small niche in the marketplace. But it’s been positive, that’s the reason why it’s still out there.

Okay, sorry, I just have a couple more here. You also mentioned Amerivest as part of the new value proposition, I’m just wondering, any changes in Amerivest in terms of pricing? Can you talk at all about how much client assets are in Amerivest now and the average rate you’re running on those?

Right. We don’t have any real changes as of now as far as Amerivest goes. We continue to be at 35 basis points if you’re over $100,000 and 50 basis points if you’re less than that, number one. Number two, the numbers are still small enough that we don’t want to disclose that, but again, I am pleased with the progress being made in Amerivest, and I think now that our company’s TD Ameritrade and that we have the sales force behind it, we should be doing even better than that in the future. But it’s not something we break out or be too aggressive about talking about, but you know how important it is to us, and at some point, I’ll be delighted to be able to do that, but we’re not there now.

Okay, and can you talk about how much in assets you have in the RAA business today, and how many RAA clients you have as a combined firm?

Yes, in RAA we had about $55 billion, and I think the clients -- is it 4,000?

A little over four, yes.

A little over 4,000.

Going back to Amerivest, in terms of modest growth, the emphasis is there. I mean, we don’t have a whole lot built in for Amerivest ramping up.

Okay, my last question, I’m just curious what the average MMDA rate your customer earns was in the quarter and where you’re kind of assuming that goes over time?

We haven’t disclosed that. The net rate that we show you is the only thing we’ve been showing the public, but we’ll think about that in the future.

Is that a rate that we should be able to get out on your website or something?

Yes, they’re the advertised rates, but obviously the advertised rates and the negotiated rates are two different things, there’s tiering, so what you don’t have is the mix of cash. Obviously someone with $100,000 of cash gets a very different rate than someone with $50 in cash. Unfortunately, we don’t show you that mix.

Just generally, I mean, I would guess the MMDA rate is higher than what you pay on free credits, but it’s probably somewhat lower than what someone’s getting in the money fund?

Naturally, yes, absolutely, Michael.

Okay, great. Thanks, guys.

Our next question comes from Matt Snowling with Friedman, Billings, Ramsey.

Good morning. I promise to be quick here. I’m just wondering, as you move more towards kind of an asset-gathering model, why the flat pricing and commission versus maybe a tier structure where you can kind of incent your high balance customers?

Because the objective was to figure out a way we could maximize our overall market share growth with our overall profitability, and we thought that one price across the board worked. But I’d go back to, Matt, what we were saying before. Our clients said to us, be simple, be fair, be transparent, and we thought part of that simplicity and transparency, that one simple price across the board frankly worked very nicely for us three years ago when we actually increased our prices, so we felt we had a pretty good track record. We felt that worked, and moving to the one price fits all is part of our brand. Clients helped us, we’re trying to give the clients what want -- simple, transparent, up front, no games, that’s your price, period.

Okay, fair enough. One quick question then, can you give us the timing of when you plan on rebranding the branches, maybe retooling or retraining the sales force for Amerivest?

Yes, we rebranded the branches this morning, and as far as training for the sales force with regard to Amerivest, we’ve already started that.

When do you expect to be done?

You know what, I don’t know if we’ll ever be done on that. There’s always going to be something new, a better wrinkle, a better offering, a better service, a better bell and whistle, and as always, better ways that you can understand what a client is really trying to get at by their questions and how you handle those, so I think the sales instruction effort never ends.

I guess, Joe, I was trying to get at when can we actually expect to start seeing some sort of benefit from the…

From Amerivest?

Right.

I would like to believe that we’re going to see some sort of benefit immediately, and frankly, we have, but it’s small. In the grander scheme of things, it doesn’t matter. I think everything we’ve been talking about, Matt, is sort of what we’re going to look like coming out of the integration, and I would say coming out of ’07, we should start to feel pretty good. We would hope we feel pretty good about what those results are, but none of this happens overnight, but rest assured, it’s a priority for us, so it’s not going to be something you’re going to slip through the cracks and we’re going to make believe one day we are at.

Okay, thanks.

Next we’ll hear from Richard Herr of KBW.

Hi, good morning. Just on the outlook statement, it looks, fiscal 2005, you had an average rate per trade of about $13.12, and in 2007, you’re guiding us in the range of $12.85 to $13.35. With the dollar price cut, how do you continue to maintain a similar average rate per trade similar to what you had at legacy Ameritrade?

Sure, Richard. Actually, let’s go back then to slide 12, if you have that handy. Do you?

Yes.

So starting with that advertised rate at $10.99, we had $13.03 versus the $10.99, and that’s because you also have payment for order flow, plus the options business mix drives that up, then you blend in Waterhouse, which obviously is a much higher rate, but the overall percentage of that business to the total business is much smaller. So the difference between our $13 and the blended rate of $14 is not significant because Waterhouse is so much smaller in trades and so much bigger in asset-based revenues. So when we then have a $1 pricing impact, you’re back down to what we saw for historical rates. Does that make sense?

Yes, that helps a little bit, but it was my assumption that you had Waterhouse at $9.99 and prices higher at $14.99, and I think a $17.00 price point, if you’re giving up all those higher price points, I guess the question is how do you still get to around the $13 number, but I guess that kind of gets me what I was looking for.

Yes, I think the math is right in front of you. I did that slide because I think everyone had that exact question, Rich, and rather than make you guys all guess, I just simply gave you the math. I think that’s a great question. If I were you, that’s the question I would’ve had, for that reason. Waterhouse was a much, much higher advertised price, so how does this work again that you’re only having a $1 impact because of $9.99 across the board? But study that. If that doesn’t make sense to you, absolutely give us a call, and we’ll walk through that math with you.

Okay, and a follow-up on the pricing. Joe, back in January, we talked about segmentation, and it looks like the attrition rates you've given us in March, it looks pretty good. What was the impetus? Was it just more feedback from customers about pricing that made you stick with the one price and then just decide to cut by a dollar?

Yes, that would be very fair, Rich.

Lastly, how does April look?

We already told you we're coming in so far, as far as April goes, 270,000 trades per day. Do you want me to give you a lot more color on all the other numbers for April?

No, that's fine. Thank you very much.

Thanks, Rich.

Our next question comes from Casey Ambrich with Millennium Partners.

Good morning. Thank you for taking the questions. One question and two details. The first question is what happens -- in the new Ameritrade's guidance if the Fed begins cutting in 2007?

I'm sorry?

What happens to your guidance in 2007 if the Fed begins cutting?

We would build those cuts, we will build what actually happens into our numbers.

It would be dilutive, right?

Let me elaborate a little bit. Joe is absolutely right. We don't anticipate any Fed rate increases, but I think the MMDA, that is where we're extending out on the yield curve. The duration of those assets going out to more like two years. We would in effect be locking in two-year rates there. Basically the rest of the business would re-price.

Down?

Yes.

Re-price down?

Yes.

I just want to make sure. It is not there. Finally one other question was, I notice on Slide 20 I think it is, you're adding back the interest on the borrowings to get your non-GAAP earnings?

Yes.

Is that the way it should be done?

Well, it is the way we are presenting it.

Those borrowings are from the dividend though, right?

Yes. The borrowing funded a lot of dividend. It funded $4 of the $6 dividend.

So why are you backing it out?

Because that is representative of the financing of the deal. We're looking forward and saying once we have the debt paid off; also, what is the basis for funding the debt? Those are the two reasons and this is a focus more, frankly for bond holders, but also frankly for investors. A couple years out when that debt is retired, what are we going to look like?

Okay. Joe, maybe you can answer this. I remember going back a few years with the Company, the one thing the Company wanted to do is have the one price, $10.99, one price for everybody. Just simplify it. Now there is a lot of talk about customization. What made it such a huge 180 transformation in probably a year? You are talking about $10.99 versus now three segments, multiple customization?

Casey, we're still at $9.99. From $10.99 or $9.99 across all the segments period. The concept you just referenced is still what we believe in and that's the reason why we came up with the number. Don't confuse the $9.99 pricing everybody, period versus our client segmentation strategy that happens to cover three business segments: The active trader, the long-term investor and the independent advisor. We're still at $9.99.

Okay. One last thing. Joe, I think it is good idea you're selling some stock. You made a lot of money for shareholders. I was just looking at the holders, though. Did the Rickett's family also sell stock? Looks like they sold 14 million shares, is that right?

The Rickett's family had sold some stock as part of the secondary a while ago. They have not sold since then.

It was well before the deal.

Thank you very much.

Thanks, Casey.

We'll go next to Paul Frisco with Montana Capital.

Joe, asked and answered. Thanks, guys.

Hi, Paul.

Operator, how are we doing? Any more questions?

We have two more questions in the queue. The next is from Richard Lee with Citadel Investments.

It is Andrew Rickshaw. Good morning, guys. I had a question for you, Joe. I didn't see in the release a lot of detail about your incentive compensation agreement. I assume that's based on performance. Are any of the metrics in the incentive comp arrangement you have now based on the guidance that has been set today, and beating that guidance or exceeding that guidance?

It doesn't have anything to do with the guidance. It is metrics that get established, in effect, at the beginning of the year for what the comp committee and the board feel would be good results for that particular year. Then a schedule gets set for if things do not go well, we get paid less. If things do go well, we get paid more. It has nothing to do with whatever we do with guidance over the span of the year.

Has the basis been set yet for just for '06 or for '06 into '07? Where --

There is a guideline for '06. There are numbers that specifically we're going to use as far as '06 goes. Then there are guidelines that have been established for '07 and '08. All of the '07 and '08 numbers obviously would get re-evaluated at the end of '06.

Are there stock options that are part of this package that you received?

No. Other than the base salary, every nickel is performance based, number one. Number two, two-thirds of my contract is all equity anyway. That would be, in effect, restricted shares. Andrew, specifically -- maybe you were getting at this. We lower guidance and then beat guidance later on -- Do we get compensated for that? No. If that's what you were getting at.

I just ask because you guys seem to be truly conservative in the guidance and it seems like we have six or seven metrics here which you have guided to that are probably conservative and you might have been hinting at that; I am sorry, I am trying to understand the thinking. Was it just extreme conservatism or other thoughts going around that?

In terms of guidance?

Yes.

It was very simply we knew we were going to have to take a hard dollar hit because of the increase in the commission, and we have not yet seen any of the potential benefits yet. For the last five years we've never built in positive results into our numbers because we thought we might wind up seeing them; we did that after we started to deliver, and we had actual progress. That's it.

I guess we'll look forward to the progress, then.

Yes, we will, too.

Okay.

Our next and final question will come from Barry Cohen with Merrill Lynch.

Thanks for taking the call. I didn't hear -- and I apologize if you said it -- what is your debt down payments schedule?

Was the question the schedule of payment of the debt?

I would like to know what your anticipation is in terms of dollars of debt repayment this year and next?

Yes, I think we're thinking it is about 75% or so of the EBITDA; or maybe more like 50%. Why don't we take a look at that, what we are doing in the outlook. The way you get to that number, Barry, may be too circuitous. We have to take a look at that. If you essentially take the interest rate and basically do an inversion calculation, you will get to the balance outstanding each quarter. Maybe what we need to do, Bill, is put the pay down out there on the outlook. Why don't we take a look at that. I think that is a good question. The way you get there, take the interest expense and divide by the rate that we're giving you.

Right. I just didn't know if -- when you take a look, I understand where you're getting at. Maybe I asked the question the wrong way. So when you take a look at your outlook for the year and get EBITDA, how much of the free cash or cash flow do you anticipate paying down debt?

Virtually all of it. We have Uncle Sam. EBITDA and Uncle Sam and what's left over really is what we're going to start putting towards the debt. We already just 65 days into the quarter, we already repaid $200 million. We're going to aggressively pay down the debt is the answer, if that's what you're getting at. I thought you were being more quantitative.

No, I am not that smart.

Okay, Barry.

Thank you.

We have no other questions at this time.

Folks, I think it is important to remind you what we talked about a couple minutes ago about our 2006-2008 philosophy. We know and we expect to be held to what we're going to look like coming out of '07 and going into '08 as a clear indication of how successful we were with the overall integration. We know that. We will make decisions in '06 and '07 that will help us be stronger in '08. I really am excited about the rollout of the new brand and the value propositions. Give us a little time. We will give you more color next quarter. We might also be able to give you a little bit of color if we can -- I don't know if we can -- on the Analyst/Investor Day that takes place May 23rd. Hopefully we get a chance to actually see you there. Thanks for spending time with us. I know it was a little longer than normal this morning. There is a lot of stuff going on and there was a lot of stuff to talk about. Thank you everybody for joining us this morning.

That does conclude our conference today. We would like to thank everybody for their participation. Have a nice day.