The Charles Schwab Corporation Corporate Overview Data as of September 2004

1
The Charles Schwab CorporationCorporate
OverviewData as of September 2004

2
The Charles Schwab CorporationCorporate
OverviewTable of Contents

• Page
• I. Description of Business 3
• A. Mission, Vision and Values 6
• B. Competitive Advantages 8
• C. Strategic Priorities 16
• D. Corporate Structure 19
• II. Financial Management 26
• III. Selected Financial and Operating Data 34
• IV. Earnings Release and SMART Report 45

3
Description of Business
4
Schwab is a distributor and manufacturer of
financial services focusing on a core client base
of individual investors and the investment
advisors who serve them. The Company has the
Description of Business

• vision and values,
• competitive advantages,
• strategic focus and
• corporate structure
• needed to remain an industry leader.

5
The financial services marketplace is
experiencing profound change.
Description of Business

• 75 million baby boomers are entering their
  prime saving and investing years.
• U.S. investable wealth is estimated at nearly 18
  trillion.
• Social security is expected to lack adequate
  funding.
• Company-sponsored retirement plans have largely
  shifted from defined benefit to defined
  contribution.
• Clients are willing to use the PC and telephone
  to take charge of their personal investing, but
  many need guidance.

6
Our Mission
Description of Business
To provide the most useful and ethical financial
services in the world.
7
Our vision is supported by a strong set of values.
Description of Business
Vision To be recognized by our service quality,
investment insight and client relationships as
the most trusted firm in the financial services
business.
To be fair, empathetic, and responsive
in serving our clients.
To respect and reinforce our colleagues and
the spirit of teamwork.
To always earn and be worthyof our clients
trust.
To strive relentlessly to innovate what we do
and how we do it.
8
Schwab has a distinct set of competitive
advantages that make it uniquely capable of
winning in the marketplace.
Description of Business

• Broad product line at a superior value
• National brand names
• Ability to combine people and technology in
  unique ways
• Full-choice model for the individual investor
• Continued significant insider ownership

9
We offer clients access to a broad array of
products, including
Description of Business

• Stocks, Options and Futures
• Mutual Fund Marketplace
• OneSource, SchwabFunds - Money Market Funds,
  Stock Bond Funds, Index Funds, Fund of Funds.
• Excelsior Laudus.
• Certificates of Deposit (CDs)
• Bonds and Treasuries
• Corporate, Municipal, Mortgage-backed, Agencies,
  Bond funds.
• Preferred stocks, Unit Investment Trusts (UITs).
• Annuities and Term Life Insurance
• Managed Accounts

10
Schwab also provides products and services that
complement its core offerings.
Description of Business

• Asset Management Products and Services (AMPS) and
  Fixed Income continually look for ways to enhance
  the broad range of investment alternatives
  available to clients.
• Schwabs Corporate Services (SCS) enterprise
  provides individuals with investment services and
  advice through their workplace.
• Schwab Bank provides access to mortgage, HELOC,
  deposit and credit card products.

11
Our brands resonate well with the full spectrum
of investors.
Description of Business

• Since 1Q99, we have ranked first or second for
  new account consideration among affluent
  investors.
• Investors with more than 100,000 in investable
  assets were asked which major brokerage firm they
  would most likely consider when opening an
  account.
• U.S. Trust is the premier brand for the ultra
  high net worth, specializing in comprehensive
  wealth management, private banking and
  multi-generational relationships.
• We are recognized for the comprehensive services
  offered to self-directed clients.
• Watchfire GomezPro and Forbes have named us the
  1 or 2 Online Broker since 1Q00 in recognition
  of our range of services, planning tools and
  research.

Source Brand Tracking Survey
12
Combining people and technology means
Description of Business

• Providing multiple distribution channels.
• Clients can visit one of our 321 offices or
  access Schwab via telephonic, online and wireless
  channels.
• Schwab remains an online leader 88 of our
  total trades are placed through online channels.
• Building scaleable product and service offerings
  while maintaining a competitive cost structure.
• Advice is offered through our branch network,
  call centers and online tools.
• Web-enabled tools, interactive web-based advice
  seminars, Marketplace internal Web site, Schwab
  Equity Ratings, solutions for investment
  advisors.
• Actively-trading investors have access to state
  of the art order entry, routing and management
  technology through Schwab and CyberTrader.

13
Our ability to build a full-choice firm focused
on the individual investor has made us the
industry leader in gathering assets.
Description of Business
Client Assets ( in billions)
Schwab Personal Choice
Affluent Advice Relationships
ActiveTraderServices
OnlineInvesting
Strategic Heritage
IndependentInvestmentAdvisors
MutualFundInvesting
BranchNetwork 18 x 7Service
EquityTransactions
LowerCommissions
MarketAccess
MoreChoice
MoneyManagement
Investment Insight
LowerCommissions
Direct Access
Full Choice
14
Schwab is supported by continued significant
insider ownership.
Description of Business
Data as of June 2004

• Chuck Schwab and other Executive Committee
  members control over 260 million shares, or just
  under 20 of shares outstanding.
• Including other officers, employees and
  directors, insider ownership totals over 350
  million shares, or 26 of shares outstanding.

15
Leveraging our competitive advantages to win in
the marketplace means gathering and retaining
client assets through long-term relationships.
Description of Business

• Our fundamental strength indicators include
• Net new client assets
• Total client assets
• New accounts

16
Our strategic priorities currently include
Description of Business

• Build and maintain our differentiation as the
  firm that delivers the most ethical and useful
  services in the world, with a focus on
  independent investors and the advisors who serve
  them.
• Improve the Companys financial performance by
  enhancing the value delivered to clients,
  simplifying and streamlining the organization and
  expanding returns on capital.
• Combine people and technology to deliver high
  value, unconflicted investing, trading, and
  banking services.
• Add products where we can provide higher client
  value, increase our profitability, and mitigate
  our cyclicality.

17
The strategic blueprint below illustrates how
we think about our strategy overall, and how we
evaluate our growth opportunities.
Description of Business
More Services, Offers, Pricing Options, Advising
Capabilities, Relationship Options
Core (50-500k)
Affluent (500k)
Active (48)
Advisors
Advisors
The Expanded Core
Adding New Investment Instruments and Banking
Products
Strengthening our Foundational Capabilities
18
Recent strategic progress includes
Description of Business

• Schwab Personal Choice, launched in February
  2004, provides investors with a full range of
  trading, investing and advice services tailored
  and priced to their needs and preferences.
• We reduced online equity trade commissions in
  June 2004. We also announced further price
  reductions in October 2004. Lower-cost trades
  are now available for individual investor and
  investment advisor clients based on either their
  household asset level or their trading activity.
• We launched Schwab Bank in April 2003 with an
  initial focus on mortgages, pledged-asset
  mortgages, HELOCs and deposits.
• Our banking offer is aimed at complementing our
  existing capabilities and facilitating household
  asset consolidation.
• Clients now have access to a VISA credit card.
• Our acquisition of State Streets Private Asset
  Management group strengthens U.S. Trusts
  presence in the New England wealth market.

19
Schwab is structured as a set of enterprises...
Description of Business
Client Enterprises
Segments
Individual Investor
Active Trader
Serve individual investors directly
Global Dollar
U.S. Trust
U.S. Trust
Institutional Investor
Schwab Institutional
Serve individual investors indirectly
Corporate Services
Develop product solutions for all investors
Fixed Income
Asset Management Products and Services
Schwab Bank

• Administrative/Support Enterprises
• Schwab Technology
• Schwab Operations

• Finance, Risk Strategy
• Marketing

• Human Resources
• Business Strategy

20
that combine to form a full-choice financial
services firm designed to meet the needs of all
types of individual investors.
Description of Business
Schwab Personal Choice Offers
Active Trading
Independent Investing
Advised Investing
Schwab Advisor Network
Schwab Private Client
Schwab Signature Trading
Signature
Foundational
Tiered service levels
Cyber Trader
U.S. Trust
Delegator
Self-Directed
Validator
A La Carte Advice
Schwab Comprehensive Consultation
Schwab Personal Financial Plan
Schwab Equity Compensation Consultation
Schwab Retirement Consultation
21
The Individual Investor Group utilizes multiple
channels to serve actively trading and
independent investors, as well as investors who
seek some level of advice.
Description of Business

• Provide help and advice through 283 branch
  offices.
• 45 of new accounts are opened through our branch
  offices.
• 19 offices and our automated telephone system
  provide Chinese, Korean, Spanish and Vietnamese
  language services.
• Handle trades and account administration through
  four telephone service centers.
• Includes several electronic channels such as the
  website, TeleBroker , Schwab by Phone and
  wireless channels.
• Active traders have access to schwab.com,
  StreetSmart Pro and CyberTrader platforms.

32 of employees, 53 of revenues, 5.8
million active accounts
22
Schwab Institutional provides over 5,000
independent fee-based investment advisory firms
(IAs) with back-office business solutions.
Description of Business

• Includes securities brokerage, record keeping and
  additional services, such as transition support,
  along with market and regulatory updates.
• Partners with IAs through the Advisor Network
  referral service.
• Client assets associated with referral programs
  total 23 billion to-date.
• Promotes advisor growth by
• Allowing them to outsource technology - Advisor
  branded web services, portfolio accounting,
  reconciliation and reporting.
• Expanding the wealth management services and
  investment alternatives available to IAs and
  their clients.
• Working with U.S. Trust to develop the trust and
  private banking services, research and
  specialized products IAs need.

5 of employees, 17 of revenues, 1.3 million
active sub-accounts
23
Corporate Services serves individuals through
their workplace.
Description of Business

• Leverages the brand, breadth, distribution and
  values of Schwab for the benefit of corporations
  and their employees.
• Combines retirement plan, equity compensation
  plan and retail group sales provides a single
  point of contact and a seamless experience for
  plan participants.
• Offers 401(k) recordkeeping, advice and other
  retirement plan services directly through
  SchwabPlan and indirectly through alliances with
  third-party administrators.
• Assets in employer-sponsored retirement plans
  total 122 billion.
• Provides stock option plan administration to
  corporate clients and trade execution and
  education services to their employees.

5 of employees, 4 of revenues
24
U.S. Trust provides investment management,
fiduciary and private banking services to high
net worth individuals and institutional clients.
Description of Business

• Provides premier client service to our most
  affluent clients and their families.
• Receives referrals from Schwab investment
  consultants.
• Combines Schwabs high-tech capabilities with
  their traditional high-touch service to create a
  comprehensive set of wealth management services
  for emerging affluent and affluent investors.
• Serves clients through 38 offices located in most
  major wealth centers in the U.S.

17 of employees, 20 of revenues
25
Asset Management Products and Services (AMPS)
continually seeks to enhance our already broad
range of investment alternatives.
Description of Business

• Manages Schwabs relationship with third party
  mutual funds as well as proprietary SchwabFunds.
• Clients now have access to just under 1,900 third
  party funds from over 300 families, including
  nearly 1,100 OneSource funds.
• SchwabFunds include money market, bond, index and
  quantitatively-oriented equity funds, as well as
  our fund of funds and sector fund series.
• AXA Rosenberg adoption (Laudus) provides more
  choice.
• Continually explores expanding proprietary funds
  and developing research capabilities.
• Invests in the OneSource and Laudus brands.

26
Financial Management
27
For Schwab, financial success means achieving
superior growth rates and consistent margins.
Financial Management
Annual Corporate Objectives
YTD September 2004
1998 - 2003 Average

• Operating Revenue Growth 20 6 10
• After-tax Operating Profit Margin 12
  12.5 12.0
• Return on Equity 20 14 7

28
Schwabs expense management is guided by an
investment philosophy that continually balances
long-term investment with short-term
profitability.
Financial Management

• Development spending is adjusted but not stopped
  throughout market cycles which, in our
  experience, follow three different patterns
• Seasonality
• Temporary Slowdowns
• Extended Slowdowns

29
Schwabs track record in managing its variable
revenue stream.
Financial Management
Seasonality slowdowns
1Q94 2Q94 Change Revenues 288 258 (10) Expen
ses 224 205 (8) After-Tax Margin 13.3 12.4
Temporary slowdowns (pre-election)
2Q96 3Q96 Change Revenues 492 430 (13) Expen
ses 373 333 (11) After-Tax Margin 14.3 13.3
Extended slowdowns
2002 2003 Change Revenues 4,091 4,070 (1) Ex
penses 3,442 3,291 (4) After-Tax
Margin 10.0 12.0
Note Dollars in millions. Based on operating
results. 1994 and 1996 data excludes U.S. Trust.
30
The development spending evaluation process is a
rigorous annual process, which is refined
quarterly.
Financial Management

• The process includes
• Alignment with our strategic focus.
• Peer review by finance executives.
• Evaluation using multiple benchmarks.
• Quarterly review of various projects by the
  Executive Committee.
• Review of projects after completion.

31
Whats included in development spending?
Financial Management
2004 Plan
Productivity Process Improvement (e.g.,
workflow enhancements, Imaging, New cost
accounting system)
Personal Choice, US Trust Personal Wealth
Solutions, Fixed Income Initiatives, Corporate
Services Initiatives, Banking Initiatives
Compliance, Regulatory, Technology Enhancement
Note Development spending on this slide refers
to project development only and excludes
advertising and marketing.
32
Schwabs liquidity and capital management reflect
a straightforward balance sheet...
Financial Management

• Size is driven by liabilities.
• Over 90 of the balance sheet is client-related.
• Credit balances are used to fund client activity.
• One complication Cash and Equivalents does not
  equate
  
  
  
  to available Corporate resources.
• A substantial portion relates to ongoing
  operations (supporting margin loans).
• Trade Settlement.

33
that does not require significant external
funding.
Financial Management

• Substantial cash flow is used to support
• Low, growth-oriented common stock dividend,
• Opportunistic, dilution-linked share repurchases,
• Debit-driven incremental capital requirements,
• Capital expenditures of about 5 of Net Revenues
  and
• Corporate acquisitions.
• Our A2/A- Medium Term Note program is used to
  provide
  
  
  
  flexibility and manage our cost of
  capital.

34
Selected Financial and Operating Data
35
Selected Financial Operating Data
Components of Client Assets
12/31/93 9/30/04 95.8
Billion 1,000.9 Billion
Fixed Income Securities 10.0
Schwab Money Market Funds Schwab One 20.1
Fixed Income Securities 155.7
OneSource 114.5
Other Mutual Fund Marketplace 103.6
OneSource 8.3
Schwab Money Market Funds Schwab One 149.7
Schwab Proprietary Funds 38.4
Other Mutual Fund Marketplace 16.6
Mutual Fund Clearing Services 38.1
Schwab Proprietary Funds 1.3
Equities 39.5
Equities 400.9
Excludes U.S. Trust Stocks Net of Margin
Loans
36
Client Assets
Selected Financial Operating Data
(billions)
(billions)
(1)
(3)
(2)
(1) Includes 12 billion related to the
acquisition of State Street Corporations Private
Asset Management group. (2) Includes a one-time
6 billion outflow related to our mutual fund
clearing business. (3) Includes a one-time 2
billion inflow related to our mutual fund
clearing business.
37
Client Accounts
Selected Financial Operating Data
(millions)
(000s)
38
Trading Activity
Selected Financial Operating Data
Frequency Proxy
DART (000s)
Annualized Revenue Trades per 100K in Average
Client Assets.
39
Offices and Employees (end of period)
Selected Financial Operating Data
Full-Time Equivalents (000s)
Offices
40
Components of Net Revenues
Selected Financial Operating Data
of Total Revenues 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03
1Q03 4Q02 3Q02
Commissions 17 23 30 29 29 29 25 29 29
Principal Transactions 2 2 2 2
2 3 3 2 3 Trading Related 19 25 32 3
1 31 32 28 31 32 Asset
Management Administration Fees 53 50 46 47
47 46 50 46 44 Net Interest
Income 25 22 19 18 18 18 20 20 21 Other 3
3 3 4 4 4 2 3 3 Non-trading
Related 81 75 68 69 69 68 72 69 68 Total
100 100 100
100 100 100 100 100 100
Note Revenues have been restated to reflect
Schwab Soundview Capital Markets and Charles
Schwab Europe as discontinued operations in
accordance with GAAP.
41
Operating Expenses as a of Net Revenues
Selected Financial Operating Data
of Total Revenues 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03
1Q03 4Q02 3Q02
Compensation Benefits 46 48 44
42 42 43 45 43 45 Occupancy
Equipment 10 10 9 10 11 11 12 12 11 Depreciat
ion Amortization 6 5 5 6 7 7
9 8 8 Communications 5 5 6 6 6
6 6 6 6 Professional Services 6 6
5 5 4 4 4 4 4 Advertising Market
Development 4 4 6 4 3 2 5 6
5 Commissions, Clearance Floor Bkg. 1 1
1 1 1 1 1 1 1 Other 4 4
3 4 3 4 4 5 4 Total 82
83 79 78 77 78 86
85 84
Note Revenues and expenses have been restated
to reflect Schwab Soundview Capital Markets and
Charles Schwab Europe as discontinued operations
in accordance with GAAP.
42

Selected Financial Operating Data
Operating Revenues, Expenses and Profitability
Basis Points

10.9
10.4
52bps
40 bps
43 bps
33 bps
Note Results exclude non-operating items, such
as gains or losses from discontinued operations,
a non-recurring gain on the sale of an
investment, restructuring charges, impairment
charges, acquisition-related costs, as well as a
non-recurring tax benefit.
43
Selected Cash Flow Data
Selected Financial Operating Data

• 2003 2002 2001 2000 1999

Net Income 472 109 199 718 666
Depreciation/Amortization 284 312 404
307 182 Non-cash restructuring and Impairment
Charges 18 79 80 0
0 Total 774 500 683 1,025 848 Capital
Expenditures (86) (89) (222) (596) (302) Capital
ized Software Development Costs (67) (71) (79)
(109) (68) Debit Capital (207) 295 671
72 (742) Free Cash Flow 414 635 1,053 392
(264) Share Repurchases (32) (299) (368)
0 (54) Dividends Paid (67) (60) (61)
(62) (61) Net Long-Term Borrowings (100) (114)
(40) 252 99
44
Mutual Fund Market ShareBased on Direct-Marketed
Stock and Bond Funds
Selected Financial Operating Data
N/A
N/A
Source Strategic Insight/Mutual Funds Finance
Note Share Values Include Schwab Only