Brokerage Financial Statement

Statement of Financial Condition

August 29, 2009

Below you will find the unaudited Statement of Financial Condition for ShareBuilder Securities Corporation (the "Company") as of June 30, 2009. The Statement of Financial Condition is furnished to customers on a semi-annual basis in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC).

The Company is a member in good standing of the Financial Industry Regulatory Authority (FINRA formerly known as the National Association of Securities Dealers) and Securities Investor Protection Corporation (SIPC). Customer accounts are secured up to $500,000 (limited to $100,000 for cash) by SIPC.

A COPY OF THE COMPANY'S MOST RECENT COMPLETE AUDITED FINANCIAL STATEMENTS PURSUANT TO SEC RULE 17A-5, IS AVAILABLE FOR EXAMINATION AT THE COMPANY'S MAIN OFFICE IN SEATTLE, WASHINGTON AND AT THE REGIONAL OFFICE OF THE SECURITIES AND EXCHANGE COMMISSION IN LOS ANGELES, CALIFORNIA.

If you have any questions with regard to this Statement of Financial Condition or your account please email our Customer Service team at customercare@sharebuilder.com or call 1-800-747-2537 between the hours of 8.00am to 9.00pm (ET), Monday through Friday.

ShareBuilder Securities Corporation
(An Indirect Wholly Owned Subsidiary of ING Bank, fsb)
Unaudited Statement of Financial Condition
June 30, 2009

Assets
Cash and cash equivalents	$ 29,581,638
Receivable from clearing organizations	155,701
Receivables from customers, net	42,348,495
Other receivable	1,990,671
Receivable from other affiliates	416,234
Securities owned, at fair value	1,801,521
Prepaid expenses and other assets	726,577
Goodwill	110,530,591
Intangible assets, net of amortization	88,384,257
Total assets	$ 275,935,685
Liabilities and stockholder's equity
Securities sold, not yet purchased	$ 1,548,140
Payable to customers	762,072
Accounts payable and accrued liabilities	10,031,327
Payable to ING Bank, net	5,216,243
Payable to SBC, net	2,007,048
Deferred tax liabilities, net	28,055,911
Total liabilities	$ 47,620,741
Subordinated loan from SBC	$ 35,000,000
Stockholder's equity:
Preferred stock, no par value:
Authorized shares - 30,000,000
Issued and outstanding shares - none	-
Common stock, no par value:
Authorized shares - 70,000,000
Issued and outstanding shares - 1,000,000	350,000
Additional paid in capital	217,525,124
Accumulated deficit	(24,560,180)
Total stockholder's equity	193,314,944
Total liabilities and stockholder's equity	$ 275,935,685

See accompanying notes.

1. Organization and Nature of Business

ShareBuilder Securities Corporation (the Company or SSC), a Washington corporation, was formed on July 1, 1998. The Company is a broker-dealer registered with the Securities and Exchange Commission (the SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). The Company provides broker-dealer services to self-directed investors. The Company is a wholly owned subsidiary of ShareBuilder Corporation (SBC). SBC is a wholly owned subsidiary of ING DIRECT Securities, Inc. (IDSI) which is a wholly owned subsidiary of ING Bank, fsb (ING Bank or the Parent).

The Company is subject to the risks and challenges associated with other companies at a similar stage of development, including dependence on the Parent and SBC, key individuals, continued successful development and marketing of services, and competition from substitute services and larger companies with greater financial, technical, management, and marketing resources.

2. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Statement of Financial Condition

The preparation of the statement of financial condition in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the statement of financial condition. Management believes that the estimates utilized in preparing its statement of financial condition are reasonable and prudent. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits, money market accounts, and investment accounts with financial institutions. Recorded amounts approximate fair value. The Company considers all cash deposits and highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Certain cash deposits may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits.

Securities Owned and Securities Sold, Not Yet Purchased

Securities owned include odd lot and fractional shares of readily marketable common stock, exchange-traded funds, and mutual funds retained when the Company purchases shares on behalf of customers and are reported on a settlement-date basis, which is materially consistent with the trade-date basis. Securities owned are recorded at fair value. Fair value is generally based on end-of-the-day quoted market prices.

Securities sold, not yet purchased are stated at market value and represent obligations to deliver specified securities at predetermined prices. Market value is generally based on published market prices or other relevant factors, including dealer price quotations. The Company is obligated to acquire the securities sold short at prevailing market prices in the future to satisfy these obligations. Accordingly, these transactions result in off-balance sheet risk as the Company's ultimate obligation to satisfy the sale of securities sold, not yet purchased may exceed the amount reflected in the statement of financial condition.

Securities owned and securities sold, not yet purchased also include major stock index option contracts that are used by the Company to reduce the risk of significant market fluctuation on the value of marketable securities. Stock index option contracts are recorded at fair value. The Company's derivative instruments do not qualify for hedge accounting.

Margin Lending Operations

The Company offers its margin lending product to eligible customers collateralized by their respective security and cash holdings. Margin lending is subject to the margin rules of the Board of Governors of the Federal Reserve System (Federal Reserve), the margin requirements of FINRA, and the Company's internal policies. Under the margin rules of the Federal Reserve, the customer is obligated to maintain net equity equal to 25 percent of the value of the securities in the account. However, the Company currently requires the customer to maintain net equity greater than or equal to 30 percent of the value of the securities in the account. The Company may increase this requirement up to 100 percent on certain accounts, groups of accounts, individual securities, or groups of securities, as deemed necessary.

Margin Risk

By permitting customers to purchase on margin, the Company is subject to risks inherent in extending credit, especially during periods of rapidly declining markets in which the value of the collateral held by the Company could fall below the amount of the customer's indebtedness. To the extent that the margin loans exceed customer cash balances, the Company may not be able to obtain financing on favorable terms or in sufficient amounts from the Parent, SBC, or its clearing partner. Sharp changes in market values of substantial amounts of securities and the failure by parties to the borrowing transactions to honor their commitments could have a material adverse effect on the Company's revenues and profitability. In the event a customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the customer's obligations. The Company monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or reduce positions, when necessary. Management is responsible for supervising the risks associated with leverage and monitors the customers' margin positions to identify customer accounts that may need additional collateral or liquidation. Management believes that it is unlikely that the Company will have to make any material payments under these arrangements.

Fair Value

On December 29, 2007, the Company adopted certain provisions of Statement of Financial Accounting Standards SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Accordingly, SFAS 157 does not require any new fair value measurement. On January 1, 2009, the Company adopted the remaining provisions of SFAS 157 as it relates to nonfinancial assets and liabilities that are not recognized or disclosed at fair value on a recurring basis. The adoption of SFAS 157 did not have a material impact on the statement of financial condition. The Company also adopted FASB Staff Position No. FIN 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3), which clarifies the application of SFAS 157, in an inactive market and illustrates how an entity would determine fair value when the market for a financial asset is not active. The adoption of FSP 157-3 did not have a material impact on the statement of financial condition. See note 6 for further information regarding fair value.

Receivables from and Payable to Customers

Receivables from and payable to customers include the amounts due from and due to customers on margin, securities, and cash transactions.

Allowance for Doubtful Accounts and Fraud Losses

The Company evaluates customer accounts at risk and with debit balance activity on a regular basis for evidence of potential fraud or uncollectibility. The Company determines its allowance by considering a number of factors, including previous loss history, the nature of the fraud activity and a specific customer's ability to pay its obligations to the Company. The allowance for doubtful accounts and fraud losses was $524,915 at June 30, 2009.

Goodwill and Intangible Assets

Goodwill is not amortized. Management assesses goodwill for impairment on at least an annual basis as of June 30 or more frequently if events and circumstances indicate impairment may have occurred. In performing the impairment tests, the Company utilizes a blended analysis of the present value of future discounted cash flows and market valuation approach to estimate the fair value of the Company as a whole.

Intangible assets are amortized over their estimate useful lives. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable. The Company evaluates recoverability by comparing the undiscounted cash flows associated with the asset to the asset's carrying amount.

Income Taxes

The Company is included in the consolidated federal income tax return of the Parent. The Company accounts for income taxes on a separate return basis. The Company receives reimbursement from or makes payment to the Parent for current taxes in accordance with the Tax Sharing Agreement between the Parent and its subsidiaries. In accordance with this agreement, the Parent determines the Company's share of federal income tax liability or benefit based on its contribution to the consolidated taxable income or loss.

The Company recognizes the deferred tax effects of temporary differences between book and tax bases of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not, based on current circumstances, are not expected to be realized.

On July 1, 2007, the Company adopted Financial Accounting Standard Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in tax positions and prescribes guidance related to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also requires recognition in the statement of financial condition of the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. As of June 30, 2009, the Company had no uncertain tax positions that FIN 48 requires be recognized or disclosed in the statement of financial condition.

New Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 is effective for fiscal years beginning after June 15, 2009. The Company will evaluate the impact of the adoption of SFAS 165 on the statement of financial condition for the annual reporting period ending December 31, 2009.

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140. The new standard eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires greater transparency of related disclosures. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009. The adoption of SFAS 166 will not have an impact on the statement of financial condition.

In June 2009, the FASB issued SFAS No. 168, The "FASB Accounting Standards Codification" and the Hierarchy of Generally Accepted Accounting Principles. This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. GAAP, authoritative and nonauthoritative. The FASB Accounting Standards Codification (the "Codification") will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company will begin to use the new guidelines and numbering system prescribed by the Codification when referring to GAAP in the annual reporting period ending December 31, 2009. As the Codification does not change or alter existing GAAP, it will not have any impact on the Company's statement of condition.

3. Receivables from and Payable to Clearing Organizations

The Company clears its proprietary and customer transactions with another broker-dealer through an omnibus relationship. The Company keeps a deposit of $25,000 to maintain this relationship.

4. Securities Owned and Securities Sold, Not Yet Purchased

Securities owned and securities sold, not yet purchased, include the following:

	June 30, 2009
	Securities Owned	Sold, Not Yet Purchased
Corporate stocks	$ 1,785,471	$ 1,540,040
Stock index option contracts	16,050	8,100
	$ 1,801,521	$ 1,548,140

The clearing broker has the right to hypothecate the corporate shares owned by the Company.

5. Financial Instruments

Cash and cash equivalents, cash segregated under regulation, securities owned, and receivables are carried at fair value or contracted amounts, which approximate fair value. Similarly, certain liabilities, including securities sold, not yet purchased, and certain payables are carried at fair value or contracted amounts approximating fair value at June 30, 2009. It is not practicable to estimate the fair value of the subordinated loan at June 30, 2009 since it is a related party transaction.

In the normal course of business, the Company may enter into transactions in financial instruments to reduce exposure to changes in the fair value of the portfolio. At June 30, 2009, the Company had 15 stock index call options and 15 stock index put options. The underlying values (notional amounts) of the call and put options are approximately $1,378,980 and $1,378,980, respectively. Such option contracts are exchange-traded and settle on a daily basis. The notional amounts are not reflected on the statement of financial condition and are indicative only of the position at June 30, 2009. These options are included at their fair value in the Statement of Financial Condition in Securities owned.

On January 1, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities, including how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. The adoption of SFAS 161 did not have a material impact on the statement of financial condition.

6. Fair Values of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. In accordance with SFAS 157, the Company applied the following fair value hierarchy:

Level 1 -	Assets and liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or future contracts.
Level 2 -	Assets and liabilities valued based on observable market data for similar instruments.
Level 3 -	Assets and liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require.

 

The following is a description of calculation methodologies used for assets and liabilities recorded at fair value and the basis for estimating fair value. These are reflected as recurring or nonrecurring in compliance with SFAS No. 157 disclosures.

Assets

Cash and cash equivalents - Cash equivalents include money market and investment accounts that hold excess liquid funds. The fair value measurement of these assets are based on quoted market prices in active markets, and therefore are recorded at fair value on a recurring basis and are classified as Level 1 assets.

Securities owned - Securities owned include odd lot and fractional shares of readily marketable common stock, exchange-traded funds and mutual funds retained when shares are purchased on behalf of customers. Securities owned also include major market stock option index contracts. The fair value measurement of these assets are based on quoted market prices in active markets, and therefore are recorded at fair value on a recurring basis and are classified as Level 1 assets.

Liabililties

Securities sold, not yet purchased - Securities sold, not yet purchased represent obligations to deliver specified securities at predetermined prices and stock option index contracts that are recorded at fair value on a recurring basis. Fair value measurement for securities sold, not yet purchased is based upon quoted market prices in active markets, and therefore are classified as Level 1 liabilities.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.

	June 30, 2009
	Total	Level 1	Level 2	Level 3
Assets
Cash and cash equivalents	$29,581,638	$29,581,638	$   -	$   -
Securities owned	$ 1,801,521	$ 1,801,521	$   -	$   -
Liabilities
Securities sold,not yet purchased	$ 1,548,140	$ 1,548,140	$   -	$   -

7. Goodwill and Intangible Assets

There were no adjustments in assets or liabilities recorded at fair value on a nonrecurring basis, and therefore no disclosures are required for the period ended June 30, 2009.

The gross carrying values and accumulated amortization of identifiable intangible assets are as follows:

	June 30, 2009
		Accumulated
	Gross	Amortization	Net
	(Dollars in Thousands)
Amortizing:
Customer and partner relationships	$ 76,500	$ (8,728)	$ 67,772
Developed technology	15,700	(5,103)	10,597
Trade name and trademark	10,600	(1,722)	8,878
License	1,350	(213)	1,137
Covenants	100	(100)	-
Total amortizing identifiable intangible assets	$ 104,250	$ (15,866)	$ 88,384

Customer relationship identifiable intangible assets related to partnership channels and direct channels are amortized on a straight-line basis over 14 years. Partner relationship channels are amortized on a straight-line basis over 17 years. Developed technology is amortized on a straight line basis over five years. Trade name and trademark identifiable intangible assets are amortized on a straight line basis over ten years. Licenses are amortized on a straight-line basis over 11 years. The weighted-average life for total amortizing identifiable intangible assets is 13 years, which includes a weighted average life of 14 years for the customer and partner relationships.

8. Income Taxes

The components of the Company's deferred tax assets and liabilities are as follows:

	June 30, 2009
Deferred tax assets:
Accrued vacation	$ 115,988
Allowance for doubtful accounts and fraud losses	183,720
Deferred revenue	12,524
Net operating loss carryforwards	2,168,509
Total deferred tax assets	2,480,741
Deferred tax liabilities:
Intangible assets	(30,536,652)
Total deferred tax liabilities	(30,536,652)
Net deferred tax liabilities	$ (28,055,911)

The Company does not have a valuation allowance because it is more likely than not that the deferred tax assets will be realized. The Company has net operating loss carryforwards of approximately $6.3 million, which are available to reduce future taxable income for federal income tax purposes. Such net operating loss carryforwards begin to expire in 2020. The Internal Revenue Code contains provisions that may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in ownership interests.

9. Related-Party Transactions

The Company has certain payables to and receivables from the Parent relating to its operating transactions arising from the normal course of business, including income taxes and payroll. The Company also records its allocated share of the Parent's expenses related to IT, marketing, payroll and benefits. The payables to and receivables from the Parent are included in "Payable to ING Bank, net" on the statement of financial condition.

The Company shares certain resources and office space with SBC and is charged a portion of compensation, benefits, accounting fees, office supplies, rent, depreciation, and other operating expenses based on proportionate usage. Additionally, the Company has a License and Royalty Agreement with SBC. The License Agreement provides for payments from the Company to SBC for the Company's ongoing use of the software, technology, and trademarks generated and owned by SBC. "Payable to SBC, net" reflects amounts payable for the aforementioned operating and License and Royalty Agreements for expenses paid by SBC on behalf of the Company.

In April 2008, the Company entered into a $35 million Subordinated Equity Loan Agreement with SBC that was indirectly financed by the Parent. Interest accrued at 4.75% per annum on the principal, and matures no earlier than April 2011. The subordinated loan was approved by FINRA and is available in computing net capital under the SEC's uniform net capital rule. To the extent that such borrowings are required for the Company's continued compliance with minimum net capital requirements, they may not be repaid. The proceeds from the subordinated loan were used to pay off the payable balance to the clearing broker and to support the margin credit and leverage needs of its customers. Accrued interest payable of $831,246 is included in "Payable to SBC, net" and $35,000,000 is reflected as "Subordinated loan from SBC" on the statement of financial condition.

The Company has a series of four dealer and omnibus operating agreements (Funds Agreements) with ING Funds Distributor, LLC, an indirect subsidiary of ING Group N.V. and an affiliate of the Company. The Funds Agreements provide the Company with revenue sharing arrangements in exchange for selling ING mutual funds. The Funds Agreements are omnibus in nature where customer records reside with the Company and the Company receives service fees from ING Funds Distributor, LLC for managing customer accounts. Receivable from other affiliates of $416,234 is included on the statement of financial condition at June 30, 2009.

10. Commitments and Contingencies

The Company is involved in litigation arising in the normal course of business. In the opinion of management, after consultation with legal counsel, the ultimate resolution of such litigation will not have a materially adverse effect on the Company's financial position.

In the normal course of business, the Company enters into underwriting commitments. There were no open transactions relating to such underwriting commitments at June 30, 2009.

11. Net Capital Requirements

The Company is subject to the U.S. Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1), which requires that the Company maintain minimum net capital equivalent to the greater of $250,000 or 1/15 of aggregate indebtedness, and requires that the ratio of aggregate indebtedness to net capital shall not exceed 15 to 1. At June 30, 2009, the Company had net capital of $53,505,321 as defined, which was $52,576,677 in excess of its required minimum net capital of $928,644. The Company's ratio of aggregate indebtedness to net capital was 0.26 to 1 at June 30, 2009.

Advances to affiliates, repayment of subordinated loans, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of the SEC Uniform Net Capital Rule or other regulatory bodies.

Under the clearing arrangement with the clearing broker, the Company is required to maintain certain minimum levels of net capital and to comply with other financial ratio requirements. The Company was in compliance with all such requirements at June 30, 2009.