Charles Schwab 2006 Annual Report Download

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WE’VE ALWAYS BEEN
DIFFERENT
2006 Annual Report

Table of contents

  • Page 1
    WE'VE ALWAYS BEEN DIFFERENT 2006 Annual Report

  • Page 2
    ... on the best judgment of the company's senior management. These statements relate to, among other things, the company's ability to grow revenues, margins, earnings, and net new assets (see "Letter from the Chief Executive Officer" and "Letter from the Chief Financial Officer"); the impact on the...

  • Page 3
    ... a difference in the lives of our clients - if it helps them live the way they want to live, today and into the future. At Schwab, we've made it our business to put the needs of investors first. To do things differently so that financial services are more affordable, understandable, and available...

  • Page 4
    A DIFFERENT KIND OF FIRM We gave individuals a direct, low-cost alternative to Wall Street. A DIFFERENT WAY TO BUY MUTUAL FUNDS We made investing easier and less expensive with a supermarket of no-load, no-transaction-fee mutual funds. 2

  • Page 5
    A DIFFERENT WAY TO INVEST Schwab.com introduced millions of people to online investing. ® 3

  • Page 6
    A DIFFERENT WAY TO HELP Our full range of suppor t for independent investment advisors makes us their top choice - by more than two-to-one. 4

  • Page 7
    A DIFFERENT APPROACH TO ADVICE Schwab is pioneering the ability to give ever yone objective help and guidance - in person, by phone, or online. The changes we're bringing about are making a difference in helping a growing number of people discover the power of investing. 5

  • Page 8
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  • Page 9
    WE'LL BE DIFFERENT UNTIL EVERYONE IS FINANCIALLY FIT Schwab will always be different because it's our purpose - our lifework - to give everyone who wants to improve their financial health the tools and guidance they need to succeed. That's the difference we want to make. 7

  • Page 10
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  • Page 11
    ...plan. The first step is to set an investing goal. What do you want to achieve? What investing style suits your needs? Self-directed investors can construct their own portfolio or select specific investments like Schwab Target Funds, which are actively managed to adjust as retirement nears. Clients...

  • Page 12
    ...the checkup tool offers investment alternatives. The Schwab Quarterly Portfolio Profile™ provides more in-depth market performance statistics and ratings information on all securities held in a Schwab account. For independent advisors, achieving progress requires different tools and support. That...

  • Page 13
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  • Page 15
    ... it easy for clients to get support in the way that works best for them. If it means personal contact, our financial professionals are ready to listen and help - on the phone or face-to-face at a local Schwab branch. Investors with larger and more complicated portfolios can tap the services of an...

  • Page 16
    OUR FAITH IN INVESTORS IS RETURNED BY THE TRUST THEY HAVE IN US Individual investors and advisors brought an average of more than $1.6 billion per week in net new assets to Schwab in 2006. 14

  • Page 17
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  • Page 18
    NET NEW CLIENT ASSETS in billions TOTAL CLIENT ASSETS in billions (at year end) NET REVENUES in billions $69.5 $48.8 $72.2 $942 $1,053 $1,239 $3.4 $3.6 $4.3 2004 2005 2006 2004 2005 2006 2004 2005 2006 NET INCOME in millions EARNINGS PER SHARE (diluted) DIVIDENDS DECLARED per ...

  • Page 19
    ...financial services, and we will continue to serve their expanding needs. Finally, Schwab Financial Products provides products and ser vices these businesses can use to meet the needs of our clients, whether that is with mutual funds, money market funds, fixed income securities, or banking products...

  • Page 20
    ... portfolios, we lowered the minimum investment for brokerage accounts and developed simple, goal-oriented financial products, such as target retirement date funds and 529 college savings accounts. - To reach an even wider range of consumers, Charles Schwab Bank® offers checking accounts, credit...

  • Page 21
    ... funds between banking and brokerage, or check their account balances on a single web page. Continued online improvements will help schwab.com become the ultimate integrator, bringing together all that Schwab has to offer. more focused company. In 2007, we plan to deliver double-digit revenue...

  • Page 22
    ALL OF OUR BUSINESSES SHARE A PASSION FOR DELIVERING THE VALUE AND PERFORMANCE OUR CLIENTS EXPECT, AND THE PERSONAL SERVICE THEY WANT. 20

  • Page 23
    ... 2005 Schwab Investor Services meets the needs of the individual investor, offering services online, by phone, or at more than 300 Schwab branches nationwide. In 2006, we served more than 5.2 million accounts and, by yearend, held over $670 billion in client assets. The Investor Services enterprise...

  • Page 24
    ... annual IMPACT® conference in November 2006, we introduced the industry-wide IMPACT Awards™ to recognize the leaders in the RIA industry. Among the inaugural award winners was Tim Kochis, co-founder and CEO of Kochis Fitz financial advisors in San Francisco, who won the Charles R. Schwab IMPACT...

  • Page 25
    ... for We began 2007 by announcing the acquisition the institutional-style, sub-advised Laudus of Global Real Analytics, LLC, a leader in Funds family and manages 69 Schwab Funds mutual funds, including nine funds that applied real estate analytics and Commercial Real Estate Index products, and have...

  • Page 26
    Money Matters participants at Columbia Park Clubhouse, a unit of Boys & Girls Clubs of San Francisco 24

  • Page 27
    ... annually since its founding in 1993. And Schwab employees make a difference by participating in fundraising, matching-gift programs, and volunteer work, this year contributing more than 5,000 hours of community service in one day alone - a day we set aside annually for employees to lend their time...

  • Page 28
    ... Executive Vice President, General Counsel, and Corporate Secretary CHARLES G. GOLDMAN Executive Vice President and Chief Operating Officer, Schwab Institutional JAN HIER-KING Executive Vice President, Human Resources JAMES D. McCOOL Executive Vice President, Schwab Corporate & Retirement Services...

  • Page 29
    ... MANAGEMENT COMMITTEE Center: Charles R. Schwab Front Row (left to right): Rebecca Saeger, Jan Hier-King, Walter W. Bettinger II, Christopher V. Dodds Back Row (standing, left to right): Charles G. Goldman, John S. Clendening, Deborah Doyle McWhinney, Randall W. Merk, Gideon Sasson, James D. McCool...

  • Page 30
    ... mutual fund offerings - and our asset management and administration fees, net interest, and other non-trading revenues together rose 24 percent in 2006 and equaled 83 percent of total net revenues during the fourth quarter, versus 79 percent in the fourth quarter of 2005. Sustained cost discipline...

  • Page 31
    ... provide personalized service to selected clients with less than $250,000 in assets, and new products like complimentary portfolio consultations and our Schwab Managed Portfolios mutual fund wrap offering. Schwab IS also made extraordinary progress with clients. Their "client promoter score," which...

  • Page 32
    ...Closing market price per share (at year end) Book value per common share (at year end) Net revenue growth Pre-tax profit margin from continuing operations Return on stockholders' equity Full-time equivalent employees (at year end, in thousands) Net revenues per average full-time equivalent employee...

  • Page 33
    ... Schwab Investor Services 13% Schwab Institutional 23% Mutual fund clearing services and other 29% Total client assets by business 17% Net Growth in Assets in Client Accounts (for the year ended) Net new client assets (2) 12% Net market gains (losses) Net growth (decline) New Brokerage Accounts...

  • Page 34
    ...1 General Corporate Overview 2 Products and Services 6 Risk Factors 10 Legal Proceedings 14 Selected Financial Data 15 Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Financial Statements and Supplementary Data 80 Directors...

  • Page 35
    Strategy + Design Unboundary l Printing by Lithographix, Inc. l Photography by David Lauridsen I Executive Photography by Robyn Twomey l This entire report is printed on recycled paper.

  • Page 36
    ... of the Audit Committee; member of the Nominating & Corporate Governance Committee. Paula A. Sneed Former Executive Vice President, Global Marketing Resources and Initiatives, Kraft Foods, Inc., a global food and beverage company Age: 59. Director since 2002. Member of the Compensation Committee...

  • Page 37
    ... Street San Francisco, CA 94105 Phone: (415) 783-4000 Website: www.deloitte.com Charles Schwab Foundation & Community Investor Services The Charles Schwab Foundation and Community Investor Services work together to fulfill the Foundation's mission to give back to communities by supporting employee...

  • Page 38
    ... Dividend Reinvestment and Stock Purchase Plan, or for assistance on stock ownership questions, contact: Transfer Agent & Registrar Wells Fargo Bank, N.A. Shareowner Services P.O. Box 64854 St. Paul, MN 55164 Phone: (800) 468-9716 E-mail: [email protected] The Charles Schwab Corporation...

  • Page 39
    "SUCCEED JUST ONCE WHEN THEY SAY YOU CAN'T, AND YOU WON'T EVER ACCEPT THE LIMITATIONS OF OTHERS. THAT'S THE SPIRIT THAT MAKES SCHWAB DIFFERENT." - CHUCK SCHWAB - 101 Montgomery Street San Francisco, CA 94104 (415) 636-7000 www.schwab.com www.aboutschwab.com MKT10448-19 (3/07)