-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EmlpRY8UgN4Q5hTkEIrr24do7lA3UWYI0pSx9O3ohGdtNeWloE2c0rdwZhXtOkKW Wmj1q88++hiLvi/gno0peA== 0000316709-05-000037.txt : 20051017 0000316709-05-000037.hdr.sgml : 20051017 20051017151812 ACCESSION NUMBER: 0000316709-05-000037 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050930 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20051017 DATE AS OF CHANGE: 20051017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CHARLES CORP CENTRAL INDEX KEY: 0000316709 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 943025021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09700 FILM NUMBER: 051140874 BUSINESS ADDRESS: STREET 1: 120 KEARNY STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4156277000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 8-K 1 body.txt EARNINGS RELEASE, OCTOBER 17, 2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 October 17, 2005 Date of Report (Date of earliest event reported) THE CHARLES SCHWAB CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-9700 94-3025021 (State or other jurisdiction Commission (I.R.S. Employer of incorporation or organization) File Number Identification Number) 120 Kearny Street, San Francisco, CA 94108 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (415) 627-7000 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: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) THE CHARLES SCHWAB CORPORATION Item 2.02 Results of Operations and Financial Condition On October 17, 2005, The Charles Schwab Corporation issued a press release announcing its financial results for the quarter ended September 30, 2005. A copy of the press release is furnished as Exhibit 99.1 to this report. -1- THE CHARLES SCHWAB CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE CHARLES SCHWAB CORPORATION (Registrant) Date: October 17, 2005 /s/ Christopher V. Dodds ---------------------- ------------------------------ Christopher V. Dodds Executive Vice President and Chief Financial Officer -2- THE CHARLES SCHWAB CORPORATION Exhibit Index 99.1 Press Release dated October 17, 2005 ("Schwab Reports Quarterly Results - Net New Assets Total $23 Billion, Revenues Rise 14%") -3- EX-99 2 exh99_1.txt 8-K, OCTOBER 17, 2005 Exhibit 99.1 FOR IMMEDIATE RELEASE CONTACTS: Media Glen Mathison (415) 636-5448 Investors/Analysts Rich Fowler (415) 636-9869 SCHWAB REPORTS QUARTERLY RESULTS NET NEW ASSETS TOTAL $23 BILLION, REVENUES RISE 14% SAN FRANCISCO, October 17, 2005 - The Charles Schwab Corporation announced today that its net income for the quarter ended September 30, 2005 was $207 million. In comparison, the Company reported a net loss of $41 million for the third quarter of 2004 and net income of $186 million for the second quarter of 2005. For the nine months ended September 30, 2005, the Company's net income was $538 million, compared with net income of $233 million during the same period in 2004. Three Months Ended Nine Months Ended --September 30,-- % --September 30,-- % Financial Highlights 2005 2004 Change 2005 2004 Change - -------------------------------------------------------------------------------- Revenues (in millions) $1,138 $1,000 14% $3,284 $3,142 5% Net income (loss) (in millions) $207 $(41) n/m $538 $233 131% Diluted earnings per share $.16 $(.03) n/m $.41 $.17 141% Pre-tax profit margin(1) 28.9% 7.2% 26.7% 15.4% Return on stockholders' equity 19% (3)% 16% 7% 1. From continuing operations. n/m - not meaningful - -------------------------------------------------------------------------------- Note: The three and nine month periods ended September 30, 2004 reflect after-tax restructuring charges of $70 million and $71 million, respectively, and after-tax losses from discontinued operations of $87 million and $79 million, respectively. See Reconciliation of Net Income to Adjusted Operating Income for additional information. Chairman and CEO Charles Schwab commented, "Over the last fifteen months, our primary focus has been restoring our value proposition and reconnecting with our clients. Our success in this effort is reflected in Schwab's business momentum - September marked our fourth consecutive month of net new assets in excess of $6 billion and our net new assets of $23.4 billion for the third quarter of 2005 were 80% higher than last year's third quarter. Total client assets set a new record of $1.166 trillion at month-end September, up 16% from September 2004. Our total revenues increased by 14% versus a year ago and our net income rose to $207 million for the quarter, the second-highest level in our history." "To build on this foundation, Schwab is now focused on forging a new era of profitable growth by developing stronger relationships with our clients and helping them achieve better financial outcomes," Mr. Schwab continued. "Our commitment to driving profitable growth is reflected in our recent announcements regarding a new national advertising campaign, eliminating account service and order handling fees, and the expanded availability of managed accounts to all of our retail brokerage clients." CFO Christopher Dodds said, "Schwab has now achieved ten consecutive quarterly increases in its non-trading revenues, as the Company continues to benefit from its strength in attracting client assets and the rising interest rate environment. Non-trading revenues accounted for 84% of Schwab's total third quarter revenues. Our revenue growth, combined with our ongoing focus on expense discipline, yielded a 29% pre-tax margin for the third quarter of 2005 and a year-to-date pre-tax margin of 27%. Capital management remains a priority - we limited our capital expenditures to $25 million and repurchased $190 million of common stock during the third quarter, which helped the Company achieve a 19% return on equity, the highest quarterly level since the first quarter of 2000." Mr. Dodds added, "Client engagement continues to be strong thus far in October - daily average revenue trades for the first nine trading days of the month totaled 229,000." Business highlights for the third quarter (data as of quarter-end unless otherwise noted): Advised Investing o For accounts at the Company with an ongoing advice component (includes accounts enrolled in Schwab Private Client(TM) and Schwab Advised Investing(TM), accounts managed by independent investment advisors (IAs), and U.S. Trust(R) accounts): o Net new client assets during the quarter = $16.4 billion. o Total assets = a record $568 billion, up 20% year-over-year. o Total number of accounts = 1.6 million. Individual Investor Business o Number of clients enrolled in Schwab Private Client and Schwab Advised Investing = 55,600, up 7% from the prior quarter. o Eliminated account service fees on U.S. individual brokerage accounts(1) and the $3.00 order handling fee on equity trades. o Enhanced operating efficiency and client service by automating the archival of forms and electronic signatures. Schwab Institutional(R) Business o Total client assets associated with Schwab Institutional (SI) = $388 billion, up 23% year-over-year. o Client assets new to the Schwab Advisor Network(R) program during the quarter = $1.7 billion, up 17% year-over-year. o Client assets at Schwab associated with IA referral programs = $28.5 billion, up 25% year-over-year. o Announced enhancements to the PortfolioCenter(R) portfolio management system, with the addition of Export Wizard and PortfolioCenter Relationship Manager(R), which help IAs identify the difference between a portfolio's investment holdings and its target allocation, and enable them to more efficiently prepare and transmit trade instructions. o Hosted the IMPACT(R) 2005 Conference, drawing a record number of more than 2,000 IAs, exhibitors and strategic partners, and featuring more than 30 educational sessions, forums and workshops. Corporate Services Business o Net new assets during the quarter = $2.3 billion. o Total client assets in employer-sponsored retirement plans at Schwab = $143 billion, up 17% year-over-year. - -------------------------------- 1 Account service fees are periodic fees automatically charged to accounts that fail to meet asset, trading, or other published thresholds. Other fees still apply. Accounts exempt from account service fees are subject to a minimum balance charge of $30 per quarter for brokerage accounts or $50 per year for IRAs if, after receipt of notice and a notice period, their assets remain below account opening minimums of $2,500 for brokerage accounts or $2,000 for IRAs. The minimum balance charge is waived for accounts of households with balances of at least $10,000 or at least eight equity and/or options trades in the preceding 12 months. Excludes QRP, CRA, individual 401(k), 403(b)(7), SIMPLE IRA - plan level accounts, and all accounts held by clients who reside outside the U.S., its territories or possessions. U.S. Trust Business o Total referrals from Schwab to U.S. Trust were over 350, compared with over 360 in the prior quarter. o Client assets at U.S. Trust associated with the referral program = $5.6 billion, up 33% year-over-year and up $586 million from the prior quarter. o Total client assets at U.S. Trust = $146.9 billion, up 7% year-over-year. Products o Total client assets held in third-party Mutual Fund OneSource(R) funds = $131 billion, up 14% year-over-year. o Total client assets held in proprietary funds (Schwab Funds(R), Excelsior(R) and other) = $161 billion, up 6% year-over-year. o Total client assets held in fixed income securities = $151 billion, up 11% year-over-year. o For Charles Schwab Bank, N.A.: o Balance sheet assets = $5.9 billion, up 14% from the prior quarter. o Outstanding mortgage and home equity loans = $1.8 billion. o First mortgage originations during the quarter = $423 million. o Launched the Schwab Large-Cap Growth Fund(TM), a new fund that seeks long-term capital growth and will use Schwab Equity Ratings(R) to help identify stocks with excellent performance potential. o Debuted Schwab's ETF Center, offering clients access to exchange traded funds (ETF) through a single location that integrates research, selection, ratings, analysis and trading. o Commenced offering a number of Schwab mutual funds, including most of Schwab's active equity funds, all 10 fixed income funds and the Laudus MarketMasters Funds(TM), through third-party distributors to non-Schwab clients. The Charles Schwab Corporation (NYSE / Nasdaq: SCH), through its operating subsidiaries, provides securities brokerage and financial services to individual investors and the independent investment advisors who work with them. With over 7 million individual investor accounts and more than $1 trillion in client assets, The Charles Schwab Corporation is one of the nation's largest financial services firms. Its subsidiary Charles Schwab & Co., Inc. (member SIPC) provides a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plans; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent fee-based investment advisors. Its subsidiary Charles Schwab Bank, N.A. (member FDIC) provides banking and mortgage services and products. The corporation's other operating subsidiaries include U.S. Trust Corporation (member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web sites can be reached at www.schwab.com, www.schwabbank.com, www.ustrust.com, and www.cybertrader.com. ###
THE CHARLES SCHWAB CORPORATION Consolidated Statement of Income (In millions, except per share amounts) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Three Months Nine Months Ended Ended September 30, September 30, 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Asset management and administration fees $ 584 $ 523 $1,683 $1,547 Trading revenue 187 185 581 807 Interest revenue 509 317 1,385 855 Interest expense (178) (72) (483) (177) --------- --------- --------- --------- Net interest revenue 331 245 902 678 Other 36 47 118 110 - ------------------------------------------------------------------------------------------------------------------------------------ Total 1,138 1,000 3,284 3,142 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses Excluding Interest Compensation and benefits 481 455 1,390 1,430 Occupancy and equipment 83 97 246 299 Professional services 66 62 185 181 Depreciation and amortization 52 58 157 167 Communications 46 53 145 170 Advertising and market development 39 43 118 151 Restructuring charges (4) 112 17 114 Other 46 48 148 145 - ------------------------------------------------------------------------------------------------------------------------------------ Total 809 928 2,406 2,657 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before taxes on income 329 72 878 485 Taxes on income (123) (26) (335) (173) - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 206 46 543 312 Gain (loss) from discontinued operations, net of tax 1 (87) (5) (79) - ------------------------------------------------------------------------------------------------------------------------------------ Net Income (Loss) $ 207 $ (41) $ 538 $ 233 ==================================================================================================================================== Weighted-Average Common Shares Outstanding - Diluted 1,308 1,364 1,316 1,370 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings Per Share - Basic Income from continuing operations $ .16 $ .03 $ .42 $ .23 Gain (loss) from discontinued operations, net of tax - $ (.06) $ (.01) $ (.06) Net income (loss) $ .16 $ (.03) $ .41 $ .17 Earnings Per Share - Diluted Income from continuing operations $ .16 $ .03 $ .41 $ .23 Gain (loss) from discontinued operations, net of tax - $ (.06) - $ (.06) Net income (loss) $ .16 $ (.03) $ .41 $ .17 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends Declared Per Common Share $ .022 $ .020 $ .064 $ .054 - ------------------------------------------------------------------------------------------------------------------------------------ See Notes to Consolidated Statement of Income and Financial and Operating Highlights.
THE CHARLES SCHWAB CORPORATION Financial and Operating Highlights (Unaudited) | 2005 | 2004 | 2003 | - ------------------------------------------------------------------------------------------------------------------------------------ Third Second First Fourth Third Second First Fourth Third (In millions, except per share amounts and as noted) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Asset management and administration fees $ 584 $ 552 $ 547 $ 544 $ 523 $ 517 $ 507 $ 487 $ 468 Trading revenue (1) 187 187 207 218 185 261 361 327 312 Interest revenue, net of interest expense 331 297 274 258 245 224 209 193 181 Other 36 51 31 40 47 32 31 55 36 - ------------------------------------------------------------------------------------------------------------------------------------ Total 1,138 1,087 1,059 1,060 1,000 1,034 1,108 1,062 997 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses Excluding Interest Compensation and benefits 481 455 454 447 455 493 482 435 418 Occupancy and equipment 83 81 82 90 97 100 102 108 106 Professional services 66 57 62 64 62 61 58 52 44 Depreciation and amortization 52 51 54 59 58 53 56 65 69 Communications 46 48 51 53 53 56 61 59 59 Advertising and market development 39 43 36 33 43 46 62 39 31 Restructuring charges (2) (4) - 21 100 112 2 - 17 35 Other 46 49 53 54 48 54 43 54 39 - ------------------------------------------------------------------------------------------------------------------------------------ Total 809 784 813 900 928 865 864 829 801 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before taxes on income 329 303 246 160 72 169 244 233 196 Taxes on income (123) (117) (95) (58) (26) (62) (85) (87) (72) - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 206 186 151 102 46 107 159 146 124 Gain (loss) from discontinued operations, net of tax 1 - (6) (49) (87) 6 2 2 3 - ------------------------------------------------------------------------------------------------------------------------------------ Net Income (Loss) $ 207 $ 186 $ 145 $ 53 $ (41) $ 113 $ 161 $ 148 $ 127 ==================================================================================================================================== Basic earnings (loss) per share $ .16 $ .14 $ .11 $ .04 $ (.03) $ .08 $ .12 $ .11 $ .09 Diluted earnings (loss) per share $ .16 $ .14 $ .11 $ .04 $ (.03) $ .08 $ .12 $ .11 $ .09 Dividends declared per common share $ .022 $ .022 $ .020 $ .020 $ .020 $ .020 $ .014 $ .014 $ .014 Weighted-average common shares outstanding - diluted 1,308 1,314 1,326 1,348 1,364 1,373 1,375 1,371 1,366 - ------------------------------------------------------------------------------------------------------------------------------------ Performance Measures Revenue growth (decline) over prior year's quarter 14% 5% (4%) - - 6% 28% 12% 1% Pre-tax profit margin from continuing operations 28.9% 27.9% 23.2% 15.1% 7.2% 16.3% 22.0% 21.9% 19.7% Return on stockholders' equity (3) 19% 17% 13% 5% (3%) 10% 14% 13% 12% - ------------------------------------------------------------------------------------------------------------------------------------ Financial Condition (at quarter end) Cash and investments segregated (in billions) $ 15.5 $ 17.4 $ 18.5 $ 19.0 $ 19.6 $ 20.5 $ 20.8 $ 21.3 $ 22.4 Receivables from brokerage clients (in billions) $ 10.4 $ 9.9 $ 9.7 $ 9.8 $ 9.2 $ 9.3 $ 9.3 $ 8.6 $ 7.7 Total assets (in billions) $ 45.4 $ 46.5 $ 46.4 $ 47.1 $ 45.9 $ 47.3 $ 46.3 $ 45.9 $ 43.8 Payables to brokerage clients (in billions) $ 23.9 $ 25.4 $ 26.4 $ 27.2 $ 25.9 $ 26.9 $ 26.5 $ 27.2 $ 26.1 Long-term debt (in millions) $ 537 $ 565 $ 577 $ 585 $ 611 $ 645 $ 779 $ 772 $ 776 Stockholders' equity (in millions) $4,349 $4,318 $4,275 $4,386 $4,555 $4,732 $4,662 $4,461 $4,312 - ------------------------------------------------------------------------------------------------------------------------------------ Other Full-time equivalent employees (at quarter end, in thousands) 13.7 13.6 13.9 14.2 14.8 16.3 16.5 16.0 15.7 Capital expenditures - cash purchases of equipment, office facilities, property, and internal-use software development costs, net (in millions) $ 25 $ 29 $ 23 $ 43 $ 66 $ 51 $ 34 $ 50 $ 36 - ------------------------------------------------------------------------------------------------------------------------------------ Clients' Daily Average Trades (in thousands) (4) Revenue trades (5) 194.7 176.5 191.3 177.7 128.1 142.2 178.0 161.7 145.1 Schwab Institutional(R) (6) 12.7 10.2 9.9 8.7 8.2 8.4 8.5 N/A N/A Schwab Private Client(TM) (7) 14.2 11.3 10.0 9.4 7.8 6.8 5.6 N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total 221.6 198.0 211.2 195.8 144.1 157.4 192.1 N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------ Active Trader Daily Average Revenue Trades (in thousands) (5,8) 115.6 101.8 106.0 98.0 66.1 72.5 91.5 80.8 72.9 - ------------------------------------------------------------------------------------------------------------------------------------ Average Revenue Per Revenue Trade (5) $15.05 $16.28 $17.95 $19.32 $22.96 $30.06 $33.16 $32.60 $34.11 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Trading revenue includes commission and principal transaction revenues. (2) Restructuring charges include costs relating to workforce, facilities, systems hardware, software, and equipment reductions. (3) Calculated based on annualized quarterly net income (loss) and average stockholders' equity for the quarter. (4) Schwab Institutional(R) and Schwab Private Client(TM) (SPC) trading information for periods prior to 2004 is not available. (5) Revenue trades include all client trades (both individuals and institutions) that generate trading revenue (i.e., commission revenue or revenue from fixed income securities trading); also known as DART. (6) Includes trades placed by investment advisors enrolled in an asset-based pricing program. Trading activity is included in the program fees. (7) Includes eligible trades placed by individual investors enrolled in SPC. Specified levels of trading activity are included in SPC fees. (8) Active Trader includes all CyberTrader clients and Schwab clients enrolled in Schwab's Active Trader offer. Active Trader DART is included in total DART above. N/A Not available. See Notes to Consolidated Statement of Income and Financial and Operating Highlights.
THE CHARLES SCHWAB CORPORATION Reconciliation of Net Income to Adjusted Operating Income (Unaudited) | 2005 | 2004 | 2003 | - ------------------------------------------------------------------------------------------------------------------------------------ First Fourth Third Second First Fourth Third (In millions) Quarter Quarter Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Revenues $1,059 $1,060 $1,000 $1,034 $1,108 $1,062 $ 997 Non-operating revenue (1) - - (14) - - (17) - - ------------------------------------------------------------------------------------------------------------------------------------ Operating revenues $1,059 $1,060 $ 986 $1,034 $1,108 $1,045 $ 997 ==================================================================================================================================== Net income (loss) $ 145 $ 53 $ (41) $ 113 $ 161 $ 148 $ 127 Adjustments to reconcile net income (loss) to adjusted operating income: Other income (1) - - (14) - - (17) - Restructuring charges (2) 21 100 112 2 - 17 35 - ------------------------------------------------------------------------------------------------------------------------------------ Total adjusted items 21 100 98 2 - - 35 Tax (benefit) expense (8) (38) (37) (1) - 1 (15) Loss (gain) from discontinued operations, net of tax (3) 6 49 87 (6) (2) (2) (3) - ------------------------------------------------------------------------------------------------------------------------------------ Total adjusted items, net of tax 19 111 148 (5) (2) (1) 17 - ------------------------------------------------------------------------------------------------------------------------------------ Adjusted operating income, after tax (4) $ 164 $ 164 $ 107 $ 108 $ 159 $ 147 $ 144 ==================================================================================================================================== (1) Primarily consists of pre-tax gains recorded on sales of investments. (2) Restructuring charges reflect The Charles Schwab Corporation's (the Company's) 2004 cost reduction effort and previous restructuring initiatives under the Company's plan to reduce operating expenses due to continued economic uncertainties and difficult market conditions. These charges primarily include workforce, facilities, systems hardware, software, and equipment reductions. (3) Represents the summarized impact of the Company's sales of its capital markets business and its U.K. brokerage subsidiary. In the first quarter of 2005, includes a tax adjustment, severance costs for transitional employees, and facility exit costs associated with the Company's sale of its capital markets business. (4) In evaluating the Company's financial performance through the first quarter of 2005, management has used adjusted operating income, a non-GAAP income measure which excludes items as detailed in the table above. Management believes that adjusted operating income was a useful indicator of its historical financial performance, and a tool that provided meaningful insight into financial performance without the effects of certain material items.
The Charles Schwab Corporation Notes to Consolidated Statement of Income and Financial and Operating Highlights (Unaudited) The Company The consolidated statement of income and financial and operating highlights include The Charles Schwab Corporation and its majority-owned subsidiaries (collectively referred to as the Company), including Charles Schwab & Co., Inc., U.S. Trust Corporation, and CyberTrader, Inc. Prior period amounts have been adjusted to summarize the impact of the Company's sales of its capital markets business, Schwab Soundview Capital Markets, and its U.K. brokerage subsidiary, Charles Schwab Europe, in gain (loss) from discontinued operations. The consolidated statement of income and financial and operating highlights should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2004 Annual Report on Form 10-K for the year ended December 31, 2004 and the Company's Quarterly Reports on Form 10-Q for the periods ended March 31 and June 30, 2005. Certain prior periods' revenues and expenses have been reclassified to conform with the current period presentation. All material intercompany balances and transactions have been eliminated. ********** THE CHARLES SCHWAB CORPORATION Growth in Client Assets and Accounts (Unaudited) | 2005 | 2004 | 2003 | - ------------------------------------------------------------------------------------------------------------------------------------ Third Second First Fourth Third Second First Fourth Third (In billions, at quarter end, except as noted) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Assets in client accounts Schwab One(R), other cash equivalents and deposits from banking clients $ 36.3 $ 37.0 $ 37.5 $ 37.2 $ 35.7 $ 36.5 $ 35.4 $ 34.2 $ 31.8 Proprietary funds (Schwab Funds(R), Excelsior(R) and other): Money market funds 111.2 109.7 112.0 111.8 114.0 115.0 116.3 119.2 124.4 Equity and bond funds 50.1 46.3 46.4 43.1 38.4 37.5 36.8 34.2 30.7 - ------------------------------------------------------------------------------------------------------------------------------------ Total proprietary funds 161.3 156.0 158.4 154.9 152.4 152.5 153.1 153.4 155.1 - ------------------------------------------------------------------------------------------------------------------------------------ Mutual Fund Marketplace(R) (1): Mutual Fund OneSource(R) 130.7 125.1 122.2 127.8 114.5 115.2 115.1 101.5 90.1 Mutual fund clearing services 57.3 51.2 47.1 44.2 38.1 33.9 37.5 33.5 28.4 Other third-party mutual funds 138.1 126.4 120.3 114.4 103.6 101.7 100.5 98.4 88.3 - ------------------------------------------------------------------------------------------------------------------------------------ Total Mutual Fund Marketplace 326.1 302.7 289.6 286.4 256.2 250.8 253.1 233.4 206.8 - ------------------------------------------------------------------------------------------------------------------------------------ Total mutual fund assets 487.4 458.7 448.0 441.3 408.6 403.3 406.2 386.8 361.9 - ------------------------------------------------------------------------------------------------------------------------------------ Equity and other securities (1,2) 500.8 472.6 459.6 472.0 429.2 437.0 431.7 424.0 368.3 Fixed income securities (2) 151.2 147.0 141.7 140.5 136.5 130.6 132.1 130.2 122.2 Margin loans outstanding (10.2) (9.7) (9.6) (9.8) (9.1) (9.1) (9.1) (8.5) (7.5) - ------------------------------------------------------------------------------------------------------------------------------------ Total client assets $1,165.5 $1,105.6 $1,077.2 $1,081.2 $1,000.9 $ 998.3 $ 996.3 $ 966.7 $ 876.7 ==================================================================================================================================== Net growth in assets in client accounts (for the quarter ended) Net new client assets (3) $ 23.4 $ 11.2 $ 16.1 $ 16.8 $ 13.0 $ 6.7 $ 13.8 $ 24.9 $ 10.6 Net market gains (losses) 36.5 17.2 (20.1) 63.5 (10.4) (4.7) 15.8 65.1 21.4 - ------------------------------------------------------------------------------------------------------------------------------------ Net growth (decline) $ 59.9 $ 28.4 $ (4.0) $ 80.3 $ 2.6 $ 2.0 $ 29.6 $ 90.0 $ 32.0 ==================================================================================================================================== U.S. Trust client assets (4) $ 146.9 $ 139.8 $ 138.8 $ 141.1 $ 137.3 $ 137.0 $ 135.8 $ 137.2 $ 116.1 - ------------------------------------------------------------------------------------------------------------------------------------ New client accounts (in thousands, for the quarter ended) 128.7 144.3 150.6 133.6 114.2 139.1 159.8 145.5 123.9 Active client accounts (in millions) (5) 7.1 7.2 7.3 7.3 7.4 7.5 7.5 7.5 7.6 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Excludes all proprietary money market, equity, and bond funds. (2) All amounts have been adjusted to reclassify exchange-traded unit investment trusts from fixed income securities to equity and other securities. (3) Includes inflows of $3.0 billion in the third quarter of 2005 at U.S. Trust related to two Special Fiduciary business clients. Includes a one-time special dividend from Microsoft Corporation of $1.2 billion in the fourth quarter of 2004. Includes individual inflows (outflows) of $2.1 billion and ($6.0) billion in the third and second quarters of 2004, respectively, related to mutual fund clearing clients. Includes inflows of $12.1 billion in the fourth quarter of 2003 at U.S. Trust related to the acquisition of State Street Corporation's Private Asset Management group. Data excludes mutual fund capital gains reinvestments, which were $3.7 billion and $1.1 billion in the fourth quarters of 2004 and 2003, respectively. (4) Included in total client assets above. (5) Active client accounts are defined as accounts with balances or activity within the preceding eight months.
The Charles Schwab Corporation Monthly Market Activity Report For September 2005 Investor activity for 7.1 million active client accounts(1) 2004 2005 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul - ------------------------------------------------------------------------------------------------------------------------------------ Change in Client Assets (in billions of dollars) Net New Assets (2) 5.9 3.9 4.6 8.3 4.0 6.3 5.8 1.1 3.9 6.2 6.3 Net Market Gains (Losses) 12.5 10.3 32.0 21.2 (17.7) 15.0 (17.4) (16.8) 26.9 7.1 30.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total Client Assets (at month end, in billions of dollars) 1,000.9 1,015.1 1,051.7 1,081.2 1,067.5 1,088.8 1,077.2 1,061.5 1,092.3 1,105.6 1,142.3 ==================================================================================================================================== Market Indices (at month end) Dow Jones Industrial Average 10,080 10,028 10,428 10,783 10,490 10,766 10,504 10,193 10,468 10,275 10,641 Nasdaq Composite 1,897 1,975 2,097 2,175 2,062 2,052 1,999 1,922 2,068 2,057 2,185 Standard & Poor's 500 1,115 1,130 1,174 1,212 1,181 1,204 1,181 1,157 1,192 1,191 1,234 Schwab 1000 3,584 3,637 3,783 3,911 3,809 3,884 3,813 3,736 3,865 3,881 4,028 Clients' Daily Average Trades (in thousands) Revenue Trades (3) 132.5 153.7 192.1 187.3 185.9 190.9 196.6 182.7 169.4 177.3 189.5 Schwab Institutional(R) (4) 8.2 8.6 8.6 8.7 10.0 9.7 10.0 10.3 9.5 10.8 12.6 Schwab Private Client(TM) (5) 8.0 8.3 9.9 10.1 10.2 10.3 9.6 10.8 11.4 11.5 12.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total 148.7 170.6 210.6 206.1 206.1 210.9 216.2 203.8 190.3 199.6 214.1 ==================================================================================================================================== Daily Average Market Share Volume (in millions) NYSE 1,322 1,543 1,494 1,463 1,618 1,578 1,683 1,693 1,502 1,516 1,479 Nasdaq 1,511 1,731 1,828 2,042 2,172 1,950 1,849 1,839 1,686 1,748 1,674 - ------------------------------------------------------------------------------------------------------------------------------------ Total 2,833 3,274 3,322 3,505 3,790 3,528 3,532 3,532 3,188 3,264 3,153 ==================================================================================================================================== Mutual Fund Net Buys (Sells) (6) (in millions of dollars) Large Capitalization Stock 202.3 189.3 465.7 75.6 137.4 547.6 106.5 91.8 388.3 364.5 236.0 Small / Mid Capitalization Stock 336.8 434.1 719.9 454.7 46.8 573.2 514.5 39.0 150.7 486.8 438.8 International 445.8 441.0 884.2 893.8 946.4 1,115.6 1,006.6 587.5 485.7 411.7 513.7 Specialized 147.9 (8.5) 77.9 (34.4) 67.7 250.2 334.4 120.6 94.9 224.7 199.7 Hybrid 256.4 243.8 227.5 228.1 250.4 359.0 276.3 216.5 197.2 196.9 265.9 Taxable Bond 821.9 716.2 451.0 293.7 554.2 859.1 410.1 374.9 437.1 847.9 601.4 Tax-Free Bond 30.5 22.2 (7.5) 300.4 249.3 215.3 114.9 (67.8) 117.1 179.7 115.1 Money Market Funds (1,249.9)(1,165.3)(1,322.2) (22.8) 1,122.0 (1,575.9) 214.6 (985.5) (469.6)(1,409.0) 6.5 Clients opened 43,300 new accounts during September 2005. % change Aug Sep Mo. Yr.* - ---------------------------------------------------------------------- Change in Client Assets (in billions of dollars) Net New Assets (2) 10.3 6.8 (34%) 15% Net Market Gains (Losses) (2.8) 8.9 - ---------------------------------------------------- Total Client Assets (at month end, in billions of dollars) 1,149.8 1,165.5 1% 16% ==================================================== Market Indices (at month end) Dow Jones Industrial Average 10,482 10,569 1% 5% Nasdaq Composite 2,152 2,152 -- 13% Standard & Poor's 500 1,220 1,229 1% 10% Schwab 1000 3,983 4,009 1% 12% Clients' Daily Average Trades (in thousands) Revenue Trades (3) 189.1 205.7 9% 55% Schwab Institutional(R) (4) 11.8 13.8 17% 68% Schwab Private Client(TM) (5) 14.4 16.0 11% 100% - ---------------------------------------------------- Total 215.3 235.5 9% 58% ==================================================== Daily Average Market Share Volume (in millions) NYSE 1,441 1,683 17% 27% Nasdaq 1,539 1,716 12% 14% - ---------------------------------------------------- Total 2,980 3,399 14% 20% ==================================================== Mutual Fund Net Buys (Sells) (6) (in millions of dollars) Large Capitalization Stock 198.5 386.3 Small / Mid Capitalization Stock 374.3 332.1 International 765.7 945.7 Specialized 78.8 230.1 Hybrid 177.5 261.4 Taxable Bond 761.4 678.5 Tax-Free Bond 113.4 61.7 Money Market Funds 944.6 (286.2) (1) Active client accounts are defined as accounts with balances or activity within the preceding eight months. (2) August 2005 data includes inflows of $3.0 billion at U.S. Trust related to two Special Fiduciary business clients. December 2004 data includes a one-time special dividend from Microsoft Corporation of $1.2 billion. September 2004 data includes an individual inflow of $2.1 billion related to a mutual fund clearing client. Data excludes mutual fund capital gains reinvestments, which were $3.7 billion in December 2004. (3) Includes all client trades (both individuals and institutions) that generate either commission revenue or revenue from principal markups (i.e., fixed income); also known as DART. (4) Includes trades placed by investment advisors enrolled in an asset-based pricing program. Trading activity is included in the program fees. (5) Includes eligible trades placed by individual investors enrolled in Schwab Private Client(TM) (SPC). Specified levels of trading activity are included in SPC fees. (6) Represents the principal value of client mutual fund (no-load, low-load, load) transactions handled by Schwab and U.S. Trust, including transactions in Schwab Funds(R), Excelsior(R) Funds and other proprietary funds. Includes institutional funds available only to Investment Managers. Effective in March 2005, money market fund net buys (sells) include all Excelsior(R) Fund transactions. Prior amounts have been adjusted to reflect this presentation. * September 2005 vs. September 2004 The Charles Schwab Corporation
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