Schwab Institutional

• Annual revenues increased 20 percent to $966 million
• Pre-tax margin was 41.8 percent, up from 39.5 percent in 2005

Schwab Institutional (SI) is dedicated to helping independent investment advisors grow, compete, and succeed. We serve more than 5,000 advisors across the country, helping them meet their core custody and trading needs, run their businesses more efficiently, and support the growth of their firms. At more than two times the size of our nearest direct competitor, SI is the leader in serving the Registered Investment Advisor (RIA) industry – the fastest-growing segment of financial services.

Independent financial advisors are professional advisors who are not employed by any brokerage firm. Because they are fee-based, their advice is objective and in the client’s best interest. This is a philosophy that has always been at the heart of the way Schwab works with its clients. That’s also why independent advisors have turned to Schwab Institutional for the past 20 years to take care of important tasks, such as executing trades and preparing monthly statements for clients.

In 2006, SI delivered exceptional financial performance, increasing net new assets by 22 percent and revenues by 20 percent over the previous year. We ended 2006 on a high note with client assets reaching $502 billion, up 23 percent from the prior year and halfway to our goal of $1 trillion in client assets by the end of 2010. These strong results reflect continued growth in assets from existing advisor clients as well as our intensified efforts to attract assets from new clients.

During the year, we made investments to enhance our technology, products, and sales and service support. This included the introduction of a business development and marketing services program that builds on our existing practice management solutions. We also expanded our offering to advisors transitioning from full-commission brokerages to become independent investment advisors.

At the 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 Award for outstanding leadership, client commitment, and community engagement.

In 2007, as we celebrate our 20th year, we will step up our investment in our service, platform, products, and programs so we can help our clients grow their businesses at even faster rates. To commemorate our anniversary, we plan a series of programs and communications to recognize the contributions that independent advisors have made to the investing public.