ITEM 1. BUSINESS
Northbrook Life Insurance Company (hereinafter "Northbrook Life" or the "Company"), incorporated in 1978 as a stock life insurance company under the laws of the State of Illinois, has done business continuously since that time as "Northbrook Life Insurance Company". Northbrook Life's products, group and individual annuities and life insurance, have been approved by the states where offered.
Northbrook Life is a wholly owned subsidiary of Allstate Life Insurance Company ("Allstate Life"), a stock life insurance company incorporated under the laws of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company ("Allstate"), a stock property-liability insurance company incorporated under the laws of Illinois. With the exception of directors' qualifying shares, all of the outstanding capital stock of Allstate is owned by The Allstate Corporation ("Corporation"). The Corporation was capitalized in 1993 with the contribution of all of the outstanding common stock of Allstate. Sears, Roebuck and Co. ("Sears") had previously been the direct owner of all the common stock of Allstate. On June 9, 1993 the Corporation completed its initial public offering of 89,500,000 common shares. On June 30, 1995, Sears distributed its remaining 80.3% ownership in the Corporation to Sears common shareholders through a tax free dividend.
Northbrook Life's operations consist of one business segment which is the sale of life insurance and annuity products.
Northbrook Life and Allstate Life entered into reinsurance agreements, effective December 31, 1987, under which Northbrook Life automatically reinsures substantially all of its business with Allstate Life. Under the agreements, purchase payments under all general account contracts are automatically transferred to Allstate Life and become invested with the assets of Allstate Life, and Allstate Life accepts 100% of the liability under such contracts. However, the obligations of Allstate Life under the reinsurance agreement are to the Company. In addition, assets of the Company that relate to insurance in- force excluding separate account assets and, beginning in 1995, assets related to certain market value adjusted annuity contracts under employee benefit plans, are transferred to Allstate Life. Therefore, the funds necessary to support the operations of the Company are provided by Allstate Life and the Company is not required to obtain additional capital to support in-force or future business.
Under the Company's reinsurance agreements with Allstate Life, the Company reinsures all reserve liabilities with Allstate Life. The Company's variable contract assets and liabilities are held in legally-segregated, unitized separate accounts and are retained by the Company. The assets and liabilities related to certain market value adjusted annuity contracts under employee benefit plans will be held in the general account of the Company, however, the transactions related to such variable and market value adjusted contracts such as
premiums, expenses and benefits are transferred to Allstate Life.
Northbrook Life's and Allstate Life's general account assets must be invested in accordance with applicable state laws. These laws govern the nature and quality of investments that may be made by life insurance companies and the percentage of their assets that may be committed to any particular type of investment. Of Allstate Life's consolidated invested assets of $27,256 million on December 31, 1995, 81.5% was invested in fixed income securities, 2.9% in equities, 11.8% in mortgage loans, and 3.8% in real estate, short-term investments and other assets.
Northbrook Life is engaged in a business that is highly competitive because of the large number of stock and mutual life insurance companies and other entities competing in the sale of insurance and annuities. There are approximately 2,000 stock, mutual and other types of insurers in business in the United States. Several independent rating agencies regularly evaluate life insurer's claims paying ability, quality of investments and overall stability. A.M. Best Company assigns A+(Superior) to Allstate Life which automatically reinsures all net business of Northbrook Life. A.M. Best Company also assigns Northbrook Life the rating of A+(r) because Northbrook Life automatically reinsures all business with Allstate Life. Standard & Poor's Insurance Rating Services assigned AA+ (Excellent) to the Company's claims-paying ability and Moody's Investors Service assigned an Aa3 (excellent) financial stability rating to the Company. Northbrook Life shares the same ratings of its parent, Allstate Life.
Although the federal government generally does not directly regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways. Current and proposed measures which may significantly affect the Company's insurance business relate to the taxation of insurance companies, the tax treatment of insurance products and the removal of barriers preventing banks from engaging in the insurance business.
Northbrook Life is regulated by the Securities and Exchange Commission ("SEC") as an issuer of registered products. The SEC also regulates certain Northbrook Life Separate Accounts through which the Company issues variable annuity contracts.
ITEM 2.

ITEM 2. PROPERTIES
Northbrook Life occupies office space provided by its parent, Allstate Life, in Northbrook, Illinois. Expenses associated with these offices are allocated on a direct and indirect basis to Northbrook Life.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal proceedings pending to which the Company is a party or which would materially affect the Company. The Company is involved in pending and threatened litigation in the normal course of its business in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate the ultimate liability arising from such pending or threatened litigation to have a material effect on the financial condition of the Company.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the Company's outstanding shares are owned by its parent, Allstate Life. Allstate Life's outstanding shares are owned by Allstate. With the exception of director's qualifying shares, all of the outstanding capital stock of Allstate is owned by The Allstate Corporation ("Corporation"). The Corporation was capitalized in 1993 with the contribution of all of the outstanding common stock of Allstate. Sears, Roebuck and Co. ("Sears") had previously been the direct owner of all the common stock of Allstate. On June 9, 1993 the Corporation completed its initial public offering of 89,500,000 common shares. On June 30, 1995, Sears distributed its 80.2% ownership in the Corporation to Sears common shareholders through a tax free dividend.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following highlights significant factors influencing results of operations and financial position.
Northbrook Life Insurance Company ("the Company"), which is wholly owned by Allstate Life Insurance Company ("Allstate Life"), issues single and flexible premium fixed annuity contracts and universal life insurance policies. In addition, the Company issues flexible premium deferred variable annuity contracts, the assets and liabilities of which are legally segregated and reflected in the accompanying statements of financial position as the assets and liabilities of the Separate Accounts. Dean Witter Reynolds is the sole distributor of the Company's products and also manages the funds in which the assets of the Separate Accounts are invested.
The Company reinsures substantially all of its annuity deposits and life insurance in force with Allstate Life. Accordingly, the financial results reflected in the Company's statements of operations relate only to the investment of those assets of the Company that are not transferred to Allstate Life under the reinsurance treaties.
Variable annuity assets and liabilities are carried at fair value in the statements of financial position. Investment income and realized gains and losses of the Separate Account investments accrue directly to the contractholders (net of fees) and, therefore, are not included in the Company's statements of operations.
RESULTS OF OPERATIONS
In 1995, net investment income increased $1.9 million. This increase related to an increased level of investments which resulted from a $25 million capital contribution from Allstate Life during December 1994. Net investment income decreased in 1994 over 1993, primarily due to slightly lower portfolio yields, partially offset by the increase in investments during the year.
Realized capital gains after tax were $44 thousand in 1995 compared to capital losses of $125 thousand in 1994. Overall, the market values of fixed income securities were higher in 1995 than in 1994, which resulted in gains in 1995 and losses in 1994 when certain fixed income securities were sold in response to changes in market conditions.
Net income increased $1.4 million in 1995 reflecting the increase in net investment income and realized capital gains. The $0.8 million decrease in 1994 from 1993 is primarily attributable to increased realized capital losses and a higher effective income tax rate in 1994.
FINANCIAL POSITION
- --------
(1) Unrealized net capital gains (losses) exclude the effect of deferred income taxes.
Fixed income securities are classified as available for sale and carried in the statements of financial position at fair value. Although the Company generally intends to hold its fixed income securities for the long-term, such classification affords the Company flexibility in managing the portfolio in response to changes in market conditions.
At December 31, 1995 unrealized capital gains were $4.1 million compared to an unrealized capital loss of $2.4 million at December 31, 1994. The significant change in the unrealized capital gain/loss position is primarily attributable to declining interest rates.
Contractholder funds decreased by $453 million and reinsurance recoverable from Allstate Life under reinsurance treaties decreased by $449 million, reflecting policyholder transfers from fixed annuities to variable annuities and fixed annuity surrenders. Reinsurance recoverable from Allstate Life relates to policy benefit obligations ceded to Allstate Life.
Separate Accounts increased by $750 million attributable to sales of variable annuities, the favorable investment performance of the Separate Account funds, and the policyholder transfers previously described.
LIQUIDITY AND CAPITAL RESOURCES
In December 1994, Allstate Life made a $25 million capital contribution to the Company.
Under the terms of intercompany reinsurance agreements, assets of the Company that relate to insurance in force, excluding Separate Account assets, are transferred to Allstate Life who maintains the investment portfolios which support the Company's products.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
Index -----
Page ----
Independent Auditors' Report 8
Financial Statements:
Statements of Financial Position, December 31, 1995 and 1994 9
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 10
Statements of Shareholder's Equity for the Years Ended December 31, 1995, 1994 and 1993 11
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 12
Notes to Financial Statements 13
Schedule IV - Reinsurance for the Years Ended December 31, 1995, 1994 and 1993 23
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF NORTHBROOK LIFE INSURANCE COMPANY:
We have audited the accompanying Statements of Financial Position of Northbrook Life Insurance Company as of December 31, 1995 and 1994, and the related Statements of Operations, Shareholder's Equity and Cash Flows for each of the three years in the period ended December 31, 1995. Our audits also included Schedule IV--Reinsurance. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Northbrook Life Insurance Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, Schedule IV--Reinsurance, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 3 to the financial statements, in 1993 the Company changed its method of accounting for investment in fixed income securities.
/s/ Deloitte & Touche LLP
Chicago, Illinois March 1, 1996
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
See notes to financial statements.
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
See notes to financial statements.
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
See notes to financial statements.
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
See notes to financial statements.
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS
Northbrook Life Insurance Company (the "Company") is wholly owned by Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by Allstate Insurance Company ("Allstate"), a wholly-owned subsidiary of The Allstate Corporation (the "Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed its 80.3% ownership in the Corporation to Sears common shareholders through a tax-free dividend (the "Distribution").
The Company develops and markets single and flexible premium annuities and flexible premium deferred and variable annuity contracts to individuals in the United States through Dean Witter Reynolds ("Dean Witter")(Note 4). Other products include universal life and single premium life insurance.
Annuity contracts issued by the Company are subject to discretionary withdrawal or surrender by the contractholder, subject to applicable surrender charges. These contracts are reinsured with Allstate Life (Note 4) which selects assets to meet the anticipated cash flow requirements of the assumed liabilities. Allstate Life utilizes various modeling techniques in managing the relationship between assets and liabilities and employs strategies to maintain investments which are sufficiently liquid to meet obligations to contractholders in various interest rate scenarios.
The Company monitors economic and regulatory developments which have the potential to impact its business. Currently there is proposed federal legislation which would permit banks greater participation in securities businesses, which could eventually present an increased level of competition for sales of the Company's annuity contracts. Furthermore, the federal government may enact changes which could possibly eliminate the tax-advantaged nature of annuities or eliminate consumers' need for tax deferral, thereby reducing the incentive for customers to purchase the Company's products. While it is not possible to predict the outcome of such issues with certainty, management evaluates the likelihood of various outcomes and develops strategies, as appropriate, to respond to such challenges.
Certain reclassifications have been made to the prior year financial statements to conform to the presentation for the current year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LIFE INSURANCE ACCOUNTING
The Company writes long-duration insurance contracts with terms that are not fixed and guaranteed and single premium life insurance contracts, which are considered universal life-type contracts. The Company also sells long-duration contracts that do not involve significant risk of policyholder mortality or
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS) morbidity (principally single and flexible premium annuities, structured settlement annuities and supplemental contracts when sold without life contingencies) which are considered investment contracts. Limited payment contracts (policies with premiums paid over a period shorter than the contract period), primarily consist of structured settlement annuities and supplemental contracts when sold with life contingencies.
TRADITIONAL LIFE
The reserve for life insurance policy benefits, which relates to structured settlement annuities and supplementary contracts when sold with life contingencies, is computed on the basis of assumptions as to future investment yields, mortality, morbidity, terminations and expenses. These assumptions, which for traditional life are applied using the net level premium method, include provisions for adverse deviation and generally vary by such characteristics as plan, year of issue and policy duration. Reserve interest rates ranged from 7.3% to 9.5% during 1995.
UNIVERSAL LIFE-TYPE CONTRACTS
Reserves for universal life-type contracts are established using the retrospective deposit method. Under this method, liabilities are equal to the account balance that accrues to the benefit of the policyholder.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual contracts that include an investment component, including universal life-type contracts. Payments received are recorded as interest-bearing liabilities. Contractholder funds are equal to deposits received and interest accrued to the benefit of the contractholder less withdrawals, mortality charges and administrative expenses. During 1995, credited interest rates on contractholder funds ranged from 3.0% to 8.0% for those contracts with fixed interest rates and from 3.0% to 8.7% for those with flexible rates.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity contracts, the assets and liabilities of which are legally segregated and reflected in the accompanying statements of financial position as assets and liabilities of the Separate Accounts. Assets and liabilities of the Separate Accounts represent funds of Northbrook Variable Annuity Account and Northbrook Variable Annuity Account II ("Separate Accounts"), unit investment trusts registered with the Securities and Exchange Commission. The assets of the Separate Accounts are carried at fair value. Investment income and realized gains and losses of the Separate Accounts accrue directly to the contractholders and, therefore, are not included in the accompanying statements of operations. Revenues to the Company from the Separate Accounts consist of contract maintenance fees, administrative fees and mortality and expense risk charges, which are entirely ceded to Allstate Life.
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS) REINSURANCE
Premiums, contract charges, credited interest, and policy benefits are ceded and reflected net of such cessions in the statements of operations. Reinsurance recoverable and the related reserves for policy benefits and contractholder funds are reported separately in the statements of financial position.
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. Fixed income securities are carried at fair value. The difference between amortized cost and fair value, net of deferred income taxes, is reflected as a component of shareholder's equity. Provisions are made to write down the value of fixed income securities for declines in value that are other than temporary. Such writedowns are included in realized capital gains and losses.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an accrual basis. Interest income on mortgage-backed securities is determined on the effective yield method, based on the estimated principal repayments. Realized capital gains and losses are determined on a specific identification basis.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities and the enacted tax rates. Deferred income taxes also arise from unrealized capital gains or losses on fixed income securities carried at fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. ACCOUNTING CHANGE
Effective December 31, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires that investments classified as available for sale be carried at fair value. Previously, fixed income securities classified as available for sale were carried at the lower of amortized cost or fair value, determined in the aggregate. Unrealized holding gains and losses are reflected as a separate component of shareholder's equity, net of deferred income taxes. The net effect of adoption of this statement increased shareholder's equity at December 31, 1993 by $747, with no impact on net income.
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS) 4. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company reinsures substantially all business with Allstate Life. Premiums and contract charges ceded to Allstate Life were $2,284 and $52,348 in 1995, $1,886 and $38,306 in 1994, and $2,688 and $22,446 in 1993. Credited interest, policy benefits and other expenses ceded to Allstate Life amounted to $229,525, $243,326, and $525,467 in 1995, 1994, and 1993, respectively. Investment income earned on the assets which support contractholder funds was excluded from the Company's financial statements as those assets were transferred to Allstate Life under the terms of reinsurance treaties. Reinsurance ceded arrangements do not discharge the Company as the primary insurer.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and operated by Allstate in conducting its business activities. The Company reimburses Allstate for the operating expenses incurred by Allstate. The cost to the Company is determined by various allocation methods and is primarily related to the level of services provided. Operating expenses, including compensation and retirement and other benefit programs, allocated to the Company were $5,341, $5,483 and $5,301 in 1995, 1994 and 1993, respectively. Investment-related expenses are retained by the Company. All other costs are assumed by Allstate Life under reinsurance agreements.
DEAN WITTER
The Company and Allstate Life have formed a strategic alliance with Dean Witter to develop, market and distribute proprietary annuity and life insurance products through Dean Witter account executives. Dean Witter provides a portion of the funding for these products through loans to an affiliate of the Company.
Under the terms of the strategic alliance, which is cancelable by either party, the Company has agreed to use Dean Witter as an exclusive distribution channel for the Company's products. Dean Witter is also the investment manager for the Dean Witter Variable Investment Series, the fund in which the assets of the Separate Accounts are invested.
5. INCOME TAXES
Allstate Life and its life insurance subsidiaries, including the Company, will file a consolidated federal income tax return. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective subsidiaries, whether or not such benefits generated by the subsidiaries would be available on a separate return basis. The Corporation and its domestic subsidiaries, including the Company (the "Allstate Group"), will be eligible to file a consolidated tax return beginning in the year 2000.
Prior to the Distribution, the Allstate Group joined with Sears and its domestic business units (the "Sears Group") in the filing of a consolidated federal income tax return (the "Sears Tax Group") and were parties to a federal income tax allocation agreement (the "Tax Sharing Agreement"). As a member of the
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
Sears Tax Group, the Corporation was jointly and severally liable for the consolidated income tax liability of the Sears Tax Group. Under the Tax Sharing Agreement, the Company, through the Corporation, paid to or received from the Sears Group the amount, if any, by which the Sears Tax Group's federal income tax liability was affected by virtue of inclusion of the Allstate Group in the consolidated federal income tax return. Effectively, this resulted in the Company's annual income tax provision being computed as if the Company filed a separate return, except that items such as net operating losses, capital losses, foreign tax credits, or similar items which might not be immediately recognizable in a separate return, were allocated according to the Tax Sharing Agreement and reflected in the Company's provision to the extent that such items reduced the Sears Tax Group's federal tax liability.
The Allstate Group and Sears Group have entered into an agreement which governs their respective rights and obligations with respect to federal income taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The agreement provides that all Consolidated Tax Years will continue to be governed by the Tax Sharing Agreement with respect to the Company's federal income tax liability and taxes payable to or recoverable from the Sears Group.
The components of the deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows:
The components of income tax expense are as follows:
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
The Company paid income taxes of $4,206, $4,219 and $1,175 in 1995, 1994 and 1993, respectively under the Tax Sharing Agreement. Included in these amounts are $2,651, $2,826 and $1,111 reimbursed to the Company by Allstate Life under the terms of reinsurance agreements for 1995, 1994 and 1993, respectively.
The Company had income taxes payable to Allstate Life of $233 and $4,634 at December 31, 1995 and 1994, respectively.
A reconciliation of the statutory federal income tax rate to the effective federal income tax rate is as follows:
6. INVESTMENTS
FAIR VALUES
The amortized cost, fair value and gross unrealized gains and losses for fixed income securities are as follows:
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities at December 31, 1995 are as follows:
Actual maturities may differ from those scheduled as a result of prepayments by the issuers.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities included in shareholder's equity at December 31, 1995 are as follows:
The change in unrealized net capital gains and losses for fixed income securities is as follows:
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
COMPONENTS OF INVESTMENT INCOME
Investment income by type of investment is as follows:
REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on investments are as follows:
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
The proceeds from sales of investments in fixed income securities, excluding calls, and related gross realized gains and losses are as follows:
SECURITIES ON DEPOSIT
At December 31, 1995, fixed income securities with a carrying value of $8,041 were on deposit with regulatory authorities as required by law.
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
7. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial assets and incurs various financial liabilities. The assets and liabilities of the Separate Accounts are carried at the fair value of the funds in which the assets are invested. The fair value of all financial assets other than fixed income securities and all liabilities other than contractholder funds approximates their carrying value as they are short-term in nature.
Fair values for fixed income securities are based on quoted market prices. The December 31, 1995 and 1994 fair values and carrying values of fixed income securities are discussed in Note 6.
The fair value of contractholder funds related to investment contracts is based on the terms of the underlying contracts. Reserves on investment contracts with no stated maturities (single premium and flexible premium deferred annuities) are valued at the fund balance less surrender charge. The fair value of immediate annuities and annuities without life contingencies with fixed terms are estimated using discounted cash flow calculations based on interest rates currently offered for contracts with similar terms and duration. Contractholder funds on investment contracts had a carrying value of $2,294,536 at December 31, 1995 and a fair value of $2,274,053. The carrying value and fair value at December 31, 1994 were $2,738,823 and $2,685,448, respectively.
8. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as reported herein in conformity with generally accepted accounting principles with statutory net income and capital and surplus, determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities:
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS) PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with accounting principles and practices prescribed or permitted by the insurance department of the State of Illinois. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners, as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company does not follow any permitted statutory accounting practices that have a material effect on statutory surplus or risk-based capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions, income, cash requirements of the Company and other relevant factors. The payment of shareholder dividends by insurance companies without the prior approval of the state insurance regulator is limited to formula amounts based on net income and capital and surplus, determined in accordance with statutory accounting practices, as well as the timing and amount of dividends paid in the preceding twelve months. The maximum amount of dividends that the Company can distribute during 1996 without prior approval of both the Illinois and California Departments of Insurance is $7,057.
NORTHBROOK LIFE INSURANCE COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report. The page number, if any, listed opposite a document indicates the page number in the sequential numbering system in the manually signed original of this Report where such document can be found.
(1) The financial statements filed as part of this Report are listed in Item 8.
(2) Financial Statement Schedules
Schedule IV - Reinsurance page 23
(3) Exhibits
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NORTHBROOK LIFE INSURANCE COMPANY
By /s/ Louis G. Lower, II -------------------------- Louis G. Lower, II Chief Executive Officer and Chairman (Principal Executive Officer)
Date March 29, 1996 ------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ Louis G. Lower, II -------------------------- Louis G. Lower, II Chief Executive Officer and Chairman (Principal Executive Officer)
Date March 29, 1996 ------------------------
By /s/ Barry S. Paul -------------------------- Barry S. Paul Assistant Vice President and Controller (Chief Accounting Officer)
Date March 29, 1996 ------------------------


Item 1. Business
(a) General Development of Business. The Charles Schwab Corporation (CSC) is -------------------------------- a holding company engaged, through its subsidiaries, in securities brokerage and related investment services. CSC's principal operating subsidiary, Charles Schwab & Co., Inc. (Schwab), serves an estimated 51% of the discount brokerage market, up from 50% (a) in 1994. Another subsidiary, Mayer & Schweitzer, Inc. (M&S), a market maker in Nasdaq securities, provides trade execution services to broker-dealers and institutional customers. During 1995, orders handled by M&S totaled over 7 billion shares, or approximately 7% of the total shares traded on Nasdaq. As used herein, the "Company" refers to CSC and its subsidiaries. Schwab was incorporated in California in 1971 and adopted the name Charles Schwab & Co., Inc. after Mr. Charles R. Schwab became its owner and President. In September 1987, the Company raised $123 million in its initial public offering. Since becoming a publicly-owned entity, the Company has experienced significant growth in revenues, net income and customer assets. This growth has been accomplished through investment in technology, product and service development, marketing programs and customer service delivery systems. In addition, the Company has broadened its service capability through the acquisition and development of additional businesses. In October 1989, Charles Schwab Investment Management, Inc. (CSIM) was formed as a subsidiary of CSC. In January 1990, CSIM became the general investment adviser (employing a sub-adviser to perform portfolio management for certain funds), as well as the administrator for three proprietary money market funds. Substantially all of the balances previously invested by Schwab customers in other money market funds having similar investment objectives were transferred to these proprietary money market funds in January 1990. Schwab subsequently introduced additional proprietary mutual funds. The Company refers to all funds for which CSIM is the investment adviser as the SchwabFunds (registered trademark). In response to the continued growth of customer trading activity in Nasdaq securities and a desire to secure a capability to execute customer trades in these and other securities, CSC acquired M&S in July 1991. Since the acquisition, M&S has executed substantially all the Nasdaq security trades originated by the customers of Schwab, which in 1995 accounted for approximately 21% of Schwab's total trading volume. During July 1992, Schwab introduced nationally its no-transaction-fee mutual fund service, known as the Mutual Fund OneSource (registered trademark) service, which at December 31, 1995, enabled customers to trade 370 mutual funds in 44 well-known fund families without incurring brokerage transaction fees. In March 1992, CSC opened The Charles Schwab Trust Company (CSTC), which provides custody services for independent investment managers and serves as trustee for employee benefit plans (primarily 401(k) plans). CSTC's primary focus is to provide services to fee-based independent investment managers and 401(k) plan record keepers and administrators.
Developments During 1995
During 1995, the Company experienced record revenues, net income and growth in customer assets. Net income for 1995 was $173 million, or $.97 per share, up from $135 million, or $.77 per share, in 1994, and $118 million, or $.66 per share, in 1993. The Company's strong performance was due in part to the $59.1 billion, or 48%, increase in assets held in Schwab customer accounts. The Company invested $166 million in various capital expenditures during 1995, including the expansion of each of its regional customer telephone service centers, and enhancements to its data processing and telecommunications systems. The Company also opened 19 branch offices and made improvements to certain existing office facilities. During 1995, the Company paid approximately $68 million, net of cash received, for businesses acquired, the largest of which was ShareLink Investment Services plc (ShareLink), a retail discount securities brokerage firm located in the United Kingdom. During 1995, the Company's Board of Directors declared two stock splits of the Company's common stock effected in the form of stock dividends: a three-for-two common stock split payable March 1995; and a two-for-one common stock split payable September 1995. Share information throughout this report has been restated to reflect these transactions. Also, the Board increased the Company's quarterly cash dividend 29% in January 1995 to $.03 per share payable February 1995, and 33% in July 1995 to $.04 per share payable August 1995. During 1995, Schwab introduced e.Schwab (trademark), which provides customers with online trading capability and significant discounts from Schwab's standard commission rates for equity trades, along with discounts on other security trades.
(b) Financial Information About Industry Segments. The Company operates in a ---------------------------------------------- single industry segment: securities brokerage and related investment services. Fees received from the Company's proprietary mutual funds represented
(a) The Securities Industry Association revised its definition of discount brokers in 1995. Schwab's share in 1994 was revised to 50% from 42% under this new definition.
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approximately 12% of the Company's consolidated revenues in 1995. As of December 31, 1995, approximately 28% of Schwab's total customer accounts were located in California. The next highest geographic concentrations of total customer accounts were approximately 7% in each of New York and Florida.
(c) Narrative Description of Business. Schwab provides securities brokerage ---------------------------------- and related investment services to more than 3.4 million active (b) investor accounts. These accounts held $181.7 billion in assets at December 31, 1995. Schwab's primary focus is serving retail clients who seek a wide selection of quality investment services at fees that, in most cases, are substantially lower than those of full-commission firms. The table on the following page sets forth on a comparative basis the Company's revenues for the three years ended December 31, 1995. These revenue figures reflect developments in, and the composition of, the Company's business. Schwab primarily serves investors who wish to conduct their own research and make their own investment decisions and do not wish to pay, through brokerage commissions, for research or portfolio management. To attract and accommodate investors who want research and portfolio management, however, Schwab offers a variety of fee-based (primarily third-party) research and portfolio management products and services. This segment of customers who want research and portfolio management has become increasingly significant to Schwab's growth in customer assets and accounts. During 1995, Schwab customer assets held in accounts managed by approximately 5,600 active independent investment managers increased $18.0 billion (55%) to a total of $50.6 billion. As a market maker in Nasdaq securities, M&S generally executes customer trades as principal. Revenues from M&S' market-making activities, along with revenues from Schwab's specialist operations on the Pacific Stock Exchange, comprise substantially all of the Company's principal transaction revenues. The Company, through M&S and Schwab, maintains inventories of securities and acts as principal in transactions with its customers primarily as a result of its market-making activities in Nasdaq and exchange-listed securities, as well as overnight positions in money market funds relating to the accommodation of customer liquidity needs. Schwab's customer service delivery systems reduce dependency on the need for personal relationships between Schwab's customers and employees to generate orders. Schwab does not generally assign customers to individual employees. Each customer-contact employee has immediate access to the customer account and market-related information necessary to respond to any customer's inquiries, and for most customer orders, can enter the order and confirm the transaction. Customer orders involving certain types of transactions, such as those in fixed income securities and mutual funds, are handled by separate groups of registered representatives that specialize in such transactions. As a result of this approach, the departure of a registered representative generally does not result in a loss of customers for the firm. The securities brokerage industry is directly affected by fluctuations in volumes and price levels of securities transactions generally, which are affected by many national and international economic and political factors that cannot be predicted, including broad trends in business and finance, the availability of credit and capital, legislation and regulation affecting the United States and international business and financial communities, currency values, and the level and volatility of interest rates. Sustained low volumes of investment activity or of securities transactions generally, particularly if accompanied by low securities prices, could substantially reduce the Company's transaction-based revenues and could lead to reduced margin account balances, thus reducing interest revenue as well. Shifts in customer investment vehicle preferences from individual equity securities to products that have lower commissions per transaction, such as mutual funds, could also reduce transaction-based revenues, which include commission and principal transaction revenues. In connection with its information processing systems, its branch office network, its regional customer telephone service centers and other aspects of its business, the Company incurs substantial expenses that do not vary directly, at least in the short term, with fluctuations in securities transaction volumes and revenues. In the event of a material reduction in revenues, the Company may not reduce such expenses quickly and, as a result, the Company could experience reduced profitability or losses. Conversely, sudden surges in transaction volumes can result in increased profit and profit margin. To ensure that it has the capacity to process projected increases in transaction volumes, the Company has historically made substantial capital and operating expenditures in advance of such projected increases, including during periods of low transaction volumes. In the event that such growth in transaction volumes does not occur, the expenses related to such investments could, as they have in the past, cause reduced profitability or losses. Additionally, during recent periods of high transaction volumes and increased revenues, the Company has also made substantial capital and operating expenditures to enhance future growth prospects.
(b) Accounts with balances or activity within the preceding twelve months.
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Sources of Revenues (Dollar amounts in thousands)
Competition
The Company encounters rigorous competition from full-commission and discount brokerage firms, as well as from financial institutions, mutual fund sponsors, market makers in Nasdaq securities and other organizations. The general financial success within the securities industry over the past several years has strengthened existing competitors. Management believes that such success will continue to attract additional competitors such as banks, software development companies, insurance companies, providers of online financial and information services, and others as they expand their product lines. Some of these competitors are larger, more diversified, have greater capital resources, and offer a wider range of services and financial products than the Company. Particularly as financial services and products proliferate, to the extent such competitors are able to attract and retain customers on the basis of the convenience of one-stop shopping, the Company's business or its ability to grow could be adversely affected. In many instances, the Company is competing with such organizations for the same customers. Management believes that the main competitive factors are quality, convenience, price of services and products offered, and breadth of product line. Most discount brokerage firms charge commissions lower than Schwab. Full- commission brokerage firms also
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offer discounted commissions to selected retail brokerage customers. Many brokerage firms employ substantial funds in advertising and direct solicitation of customers to increase their market share of commission dollars and other securities-related income. If the well-capitalized brokerage firms pursue these competitive strategies successfully, Schwab's customer asset growth, commission revenues and profit margin could be adversely affected.
Marketing and Promotion
Advertising plays a crucial role in obtaining new customers, which have constituted an important source of revenue and revenue growth for the Company. The Company's advertising and market development expense for the years ended December 31, 1995, 1994 and 1993 was $53 million, $36 million and $41 million, respectively. For the same years, the numbers of new accounts opened were approximately 698,000, 688,000 and 644,000, respectively. Prior year amounts are restated to reflect the $1,000 minimum opening balance requirement for basic brokerage accounts implemented in July 1994. New account openings represent a significant portion of the growth in customer assets, which the Company believes is critical to growth in revenues. Accounts opened during 1995, 1994 and 1993 generated approximately 13%, 14% and 16% of total commission revenues during each of those years, respectively. The branch office network also plays a key role in building Schwab's business. Many customers prefer to open accounts in person in Schwab branch offices. With the customer service support of the regional customer telephone service centers, TeleBroker (registered trademark), StreetSmart (registered trademark) and e.Schwab (trademark), branch personnel are able to focus a significant portion of their time on business development. Schwab advertises regularly in financially-oriented newspapers and periodicals and occasionally in general circulation publications. Schwab advertisements appear regularly on national and local cable television and periodically on radio and independent television stations. Schwab also engages extensively in targeted direct mail advertising through monthly statement "inserts" and special mailings. Such efforts have increased Schwab's brand awareness among investors. In its advertising, as well as in promotional events such as press appearances, Schwab has aggressively promoted the name and likeness of its Chairman, Mr. Schwab. The Company believes there is a substantial benefit related to Mr. Schwab's association with the Company. The Company has an agreement with Mr. Schwab by which he, subject to certain limitations, has assigned to the Company and Schwab all service mark, trademark, and trade name rights in his name (and variations thereon) and likeness.
Products and Services
Accounts and Features. Each Schwab customer has a brokerage account through ---------------------- which securities may be purchased or sold. These securities include Nasdaq and exchange-listed securities, options, mutual funds and fixed income investments, including U.S. Treasuries, zero-coupon bonds, listed and OTC corporate bonds, municipal bonds, GNMAs, unit investment trusts and CDs. If approved for margin transactions, a customer may borrow a portion of the price of certain securities purchased through Schwab, or may sell securities short. Customers must have specific approval to trade options; as of December 31, 1995, approximately 169,000 accounts were so approved. To write uncovered options, customers must go through an additional approval process and must maintain a significantly higher level of equity in their brokerage accounts. Because Schwab does not pay interest on cash balances in basic brokerage accounts, it provides customers with an option to have cash balances in their accounts automatically swept into certain SchwabFunds (registered trademark) money market funds. In July 1994, Schwab instituted a $1,000 cash and/or securities minimum opening balance requirement for basic brokerage accounts. A customer may receive additional services by qualifying for and opening a Schwab One (registered trademark) brokerage account. A customer may remove available funds from his or her Schwab One account either with a personal check or a VISA debit card. When a Schwab One customer is approved for margin trading, the checks and debit card also provide access to margin cash available. For cash balances awaiting investment, Schwab pays interest to Schwab One customers at a discretionary rate of interest. Alternatively, Schwab One customers seeking tax-exempt income may elect to have cash balances swept into one of three tax-exempt SchwabFunds money market funds. During 1995, the number of active Schwab One accounts increased 19% and the customer assets in all Schwab One accounts increased 51%. Schwab acts as custodian, as well as broker, for Individual Retirement Accounts (IRAs). In Schwab IRAs, cash balances are swept daily into one of three SchwabFunds money market funds. During 1995, active IRAs increased 17% and customer assets in all IRAs increased 44%. Schwab also acts as custodian and broker for Keogh accounts. During 1995, Schwab continued to expand its Schwab 500 Brokerage (trademark) service to attract and retain customers who trade frequently. This service provides discounts from Schwab's standard commission rates, as well as customized services and information resources.
Customer Financing. Customers' securities transactions are effected on either ------------------- a cash or margin basis. Generally, a customer buying securities in a cash-only brokerage account is required to make payment by settlement date, usually three
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business days after the trade is executed. However, for purchases of certain types of securities, such as certain mutual fund shares, a customer must have a cash or money market fund balance in his or her account sufficient to pay for the trade prior to execution. When selling securities, a customer is required to deliver the securities, and is entitled to receive the proceeds, on settlement date. In an account authorized for margin trading, Schwab may lend its customer a portion of the market value of certain securities up to the limit imposed by the Federal Reserve Board, which for most equity securities is initially 50%. Such loans are collateralized by the securities in the customer's account. Short sales of securities represent sales of borrowed securities and create an obligation to purchase the securities at a later date. Customers may sell securities short in a margin account subject to minimum equity and applicable margin requirements and the availability of such securities to be borrowed and delivered. Interest on margin loans to customers provides an important source of revenue to Schwab. During the year ended December 31, 1995, Schwab's outstanding margin loans to its customers averaged approximately $3.2 billion, up from 1994's average of approximately $2.7 billion. In permitting a customer to engage in transactions, Schwab takes the risk of such customer's failure to meet his or her obligations in the event of adverse changes in the market value of the securities positions in his or her account. Under applicable rules and regulations for margin transactions, Schwab, in the event of such an adverse change, requires the customer to deposit additional securities or cash, so that the amount of the customer's obligation is not greater than specified percentages of the cash and market values of the securities in the account. As a matter of policy, Schwab generally requires its customers to maintain higher percentages of collateral values than the minimum percentages required under these regulations. Schwab may use cash balances in customer accounts to extend margin credit to other customers. Under SEC Rule 15c3-3, the portion of such cash balances not used to extend margin credit (increased or decreased by certain other customer- related balances) must be held in segregated investment accounts. The balances in these segregated investment accounts must be invested in qualified interest- bearing securities. To the extent customer cash balances are available for use by Schwab at interest costs lower than Schwab's costs of borrowing from alternative sources (e.g., balances in Schwab One (registered trademark) brokerage accounts) or at no interest cost (e.g., balances in other accounts and outstanding checks that have not yet cleared Schwab's bank), Schwab's cost of funds is reduced and its net income is enhanced. Such interest savings contribute substantially to Schwab's profitability and, if a significant reduction of customer cash balances were to occur, Schwab's borrowings from other sources would have to increase and such profitability would decline. To the extent Schwab's customers elect to have cash balances in their brokerage accounts swept into certain SchwabFunds (registered trademark) money market funds, the cash balances available to Schwab for investments or for financing margin loans are reduced. However, Schwab receives mutual fund service fees from such funds based on the daily average invested balances. See also "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference to Exhibit No. 13.1 of this report, and "Regulation" below.
Mutual Funds. CSIM provides investment advisory and administrative services ------------- to the SchwabFunds, which consisted of nine money market funds, six bond funds, three equity index funds and three asset allocation funds, containing stocks, bonds and cash equivalents, at December 31, 1995. Customer assets invested in the SchwabFunds totaled approximately $31.7 billion at December 31, 1995, a 36% increase over the prior year. The Company intends to offer additional proprietary mutual funds to its customers in the future. Through its Mutual Fund Marketplace (registered trademark) program, Schwab purchases and redeems for its customers shares of over 1000 mutual funds in over 200 fund families sponsored by third parties. At December 31, 1995, the Mutual Fund Marketplace totaled $50.0 billion in customer assets, including $23.9 billion in the Mutual Fund OneSource (registered trademark) service. The Mutual Fund Marketplace program provides Schwab's customers with the convenience of purchasing and redeeming mutual fund shares with a single telephone call and of using margin credit to purchase most mutual fund shares. Schwab charges a transaction fee on trades placed in the funds included in its Mutual Fund Marketplace (except as described below). Commissions from customer transactions in mutual fund shares comprised approximately 8% of Schwab's total commission revenues in 1995, compared to approximately 11% in 1994 and approximately 9% in 1993. At December 31, 1995, Schwab's Mutual Fund OneSource service enabled customers to trade 370 mutual funds in 44 well-known fund families without incurring brokerage transaction fees. The service is particularly attractive to investors who execute mutual fund trades directly with multiple mutual fund companies to avoid brokerage transaction fees and achieve investment diversity among fund families. While Schwab does not receive transaction fees (commissions) on customer transactions in the Mutual Fund OneSource program, it is compensated directly by the participating funds or their sponsors via fees received for providing record keeping and shareholder services. Such compensation is ongoing, based on daily balances of customer assets invested in the participating funds and held at Schwab.
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Market Making In Nasdaq and Exchange-Listed Securities. M&S provides trade ------------------------------------------------------- execution services in Nasdaq securities to broker-dealers, including Schwab, and institutional customers. In most instances, customer orders are routed directly to M&S' trading system and are executed automatically. M&S generally executes customer trades as principal. M&S business practices call for competitively- priced customer trade executions, generally defined as the highest bid price on a sell order and the lowest offer price on a buy order available through the National Association of Securities Dealers (NASD) member firms. Certain customer trades are executed on a negotiated basis. Substantially all Nasdaq security trades originated by the customers of Schwab are directed to M&S. In 1995's third quarter, the Company introduced a new service, Assurance Trading (trademark), which provides customers an opportunity for price improvement on certain trades in certain Nasdaq securities through the scanning of multiple computer systems for a price better than the current quoted Nasdaq inside price. During 1994, Schwab commenced operation of specialist posts on the Pacific Stock Exchange to make markets in exchange-listed securities and ended that year with five posts that collectively made markets in over 240 securities. At December 31, 1995, Schwab had fourteen specialist posts that collectively made markets in approximately 700 securities. The majority of trades originated by the customers of Schwab in exchange-listed securities for which Schwab makes a market are directed to these posts. In the normal course of its market making in Nasdaq and exchange-listed securities activities, M&S and Schwab maintain inventories in such securities on both a long and short basis. While long inventory positions represent M&S' and Schwab's ownership of securities, short inventory positions represent obligations of M&S and Schwab to deliver specified securities at a contracted price, which may differ from market prices prevailing at the time of completion of the transaction. Accordingly, long or short inventory positions may result in gains or losses as market values of such securities fluctuate.
Services for Independent Investment Managers. To attract the business of --------------------------------------------- accounts managed by fee-based independent investment managers, Schwab has a dedicated group through which, among other things, it assigns specific, experienced registered representatives to individual managers and occasionally provides certain research materials for the benefit of the managed accounts. Independent investment managers participating in this program may use SchwabLink (trademark) to access information in their customers' accounts directly from Schwab's computer data bases and to enter their customers' trades online. During 1995, Schwab added approximately 800 independent investment managers to this program, which at December 31, 1995 totaled more than 5,600. Schwab's brokerage business generated by independent investment managers and other professional investors represented approximately 13% of Schwab's total commission revenues in 1995, 14% in 1994 and 11% in 1993.
Customer Service Delivery Systems
Branch Office Network. Schwab believes that the existence of branch offices ---------------------- is important to increasing new account openings and maintaining high levels of customer satisfaction. At December 31, 1995, the Company maintained a network of over 225 branches throughout the United States, including a branch office in the Commonwealth of Puerto Rico and the United Kingdom. Schwab plans to continue its branch expansion program in 1996 by opening approximately 10 to 15 new branches. Customers can use branch offices to obtain market information, place orders, open accounts, deliver and receive checks and securities, and obtain related customer services in person, yet most branch activities are conducted by telephone and mail. Branch offices remain open during normal market hours to service customers in person and by telephone. Many branch offices offer extended office hours. Customer calls received during nonbranch hours are routed to regional customer telephone service centers.
Regional Customer Telephone Service Centers. Schwab's four regional customer -------------------------------------------- telephone service centers, located in Indianapolis, Denver, Phoenix and Orlando, handle calls to many of Schwab's toll-free numbers, customer calls that otherwise would have to wait for available registered representatives at branches during business hours, and calls routed from branches after hours and on weekends. Through the service centers, customers may place orders twenty- four hours a day, seven days a week, except for certain holidays. Customer orders placed during nonmarket hours are routed to appropriate markets the following business day. The capacity of the service centers allows new branches to be opened and maintained at lower staffing levels.
Electronic Delivery Services. Schwab provides automated brokerage services ----------------------------- through which investors may place orders, receive account information and obtain securities market information. These services are designed to provide added convenience for customers and minimize Schwab's costs of responding to and processing routine customer transactions. Schwab's TeleBroker Service (registered trademark) enables customers to place orders for stocks, options and certain mutual funds, including Mutual Fund OneSource (registered trademark) transactions, as well as obtain real-time securities quotes and account information electronically from any touchtone telephone. TeleBroker,
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which provides customers with an additional 10% discount on commissions, has become increasingly important in providing customers access to Schwab, particularly during periods of heavy customer activity. In 1994, Schwab introduced TeleBroker (registered trademark) in Spanish, and in 1995 Mandarin and Cantonese languages were added. Online access to brokerage and investment information services is also available through Schwab's online trading software, StreetSmart (registered trademark) for Windows (registered trademark) and Macintosh (registered trademark), introduced in October 1993 and July 1994, respectively. In 1995, Schwab enhanced its electronic delivery services by introducing a new online trading software, e.Schwab (trademark), and upgrading StreetSmart to a more powerful version. During 1995, TeleBroker and other electronic brokerage services handled over 75% of Schwab's customer calls.
Information Systems
Schwab's operations rely heavily on its information processing and communications systems. Schwab's system for processing a securities transaction is highly automated. Registered representatives equipped with online computer terminals can access customer account information, obtain securities prices and related information, and enter orders online. To support its customer service delivery systems, as well as other applications such as clearing functions, account administration, record keeping and direct customer access to investment information, Schwab maintains a sophisticated computer network connecting all of the branch offices and regional customer telephone service centers. Schwab's computers are also linked to the major registered United States securities exchanges, M&S, the National Securities Clearing Corporation and The Depository Trust Company. Failure of Schwab's information processing or communications systems for a significant period of time could limit Schwab's ability to process its large volume of transactions accurately and rapidly. This could cause Schwab to be unable to satisfy its obligations to customers and other securities firms, and could result in regulatory violations. External events, such as an earthquake or power failure, loss of external information feeds, such as security price information, as well as internal malfunctions, such as those that could occur during the implementation of system modifications, could render part of or all such systems inoperative. To enhance the reliability of the system and integrity of data, Schwab maintains carefully monitored backup and recovery functions. These include logging of all critical files intraday, duplication and storage of all critical data outside of its central computer site every 24 hours, and maintenance of facilities for backup and communications in San Francisco. They also include the maintenance and periodic testing of a disaster recovery plan that management believes would permit Schwab to recommence essential computer operations if its central computer site were to become inaccessible. To reduce the exposure to system failures caused by external factors, including earthquakes, the Company relocated its primary data center in 1993 from San Francisco to a newly constructed and owned site in Phoenix.
Clearing and Account Maintenance
Schwab performs clearing services for all securities transactions in customer accounts. Schwab clears the vast majority of customer transactions through the facilities of the National Securities Clearing Corporation or the Options Clearing Corporation. Certain other transactions, such as mutual fund transactions and transactions in securities not eligible for settlement through a clearing corporation, are settled directly with the mutual funds or other financial institutions. Schwab is obligated to settle transactions with clearing corporations, mutual funds and other financial institutions even if Schwab's customer fails to meet his or her obligations to Schwab. In addition, for transactions that do not settle through a clearing corporation, Schwab takes the risk of the other party's failure to settle the trade. See "Financial Instruments with Off-Balance-Sheet and Credit Risk" in the Notes to Consolidated Financial Statements in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report.
Employees
As of December 31, 1995, the Company had full-time, part-time and temporary employees, and persons employed on a contract basis that represented the equivalent of approximately 9,200 full-time employees, including approximately 8,000 full-time employees and part-time equivalents. None of the employees are represented by a union, and the Company believes its relations with its employees are good.
Regulation
The securities industry in the United States is subject to extensive regulation under both Federal and state laws. The SEC is the Federal agency charged with administration of the Federal securities laws. Schwab and M&S are registered as broker-dealers with the SEC. Schwab and CSIM are registered as investment advisers with the SEC. Much of the regulation of broker-dealers has been delegated to self-regulatory organizations, principally the
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NASD and the national securities exchanges such as the New York Stock Exchange, Inc. (NYSE), which has been designated by the SEC as Schwab's primary regulator with respect to its securities activities. The NASD has been designated by the SEC as M&S' primary regulator with respect to its securities activities. During 1995, the American Stock Exchange was Schwab's designated primary regulator with respect to options trading activities. The Chicago Board Options Exchange is Schwab's designated primary regulator with respect to options trading activities for 1996. These self-regulatory organizations adopt rules (subject to approval by the SEC) governing the industry and conduct periodic examinations of broker-dealers. Securities firms are also subject to regulation by state securities authorities in the states in which they do business. Schwab was registered as a broker-dealer in 50 states, the District of Columbia and Puerto Rico as of December 31, 1995. M&S was registered as a broker-dealer in 22 states as of December 31, 1995. The principal purpose of regulations and discipline of broker-dealers and investment advisers is the protection of customers and the securities markets, rather than protection of creditors and stockholders of broker-dealers and investment advisers. The regulations to which broker-dealers and investment advisers are subject cover all aspects of the securities business, including sales methods, trading practices among broker-dealers, uses and safekeeping of customers' funds and securities, capital structure of securities firms, record keeping, fee arrangements, disclosure to clients, and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules may directly affect the method of operation and profitability of broker-dealers and investment advisers. The SEC, self-regulatory organizations and state securities authorities may conduct administrative proceedings which can result in censure, fine, cease and desist orders, or suspension or expulsion of a broker-dealer or an investment adviser, its officers, or employees. Schwab and M&S have been the subject of such administrative proceedings. M&S is a significant participant in the Nasdaq market. During 1994, the Department of Justice, the SEC and the NASD commenced a series of investigations and regulatory actions involving the activities of many market makers in Nasdaq securities. These investigations and regulatory actions have continued into 1996. Current and proposed rulemaking, regulatory actions, improvements in technology, such as those which permit the introduction of Assurance Trading (trademark) (see also "Market Making in Nasdaq and Exchange-Listed Securities" above), changes in market practices and new market systems, if approved, could significantly impact the manner in which business is currently conducted in the Nasdaq market. The above factors, individually or in the aggregate, have had and could continue to have a material adverse impact on M&S' revenues from principal transactions. As registered broker-dealers and NASD member organizations, Schwab and M&S are required by Federal law to belong to the Securities Investor Protection Corporation (SIPC), which provides, in the event of the liquidation of a broker- dealer, protection for securities held in customer accounts held by the firm of up to $500,000 per customer, subject to a limitation of $100,000 on claims for cash balances. SIPC is funded through assessments on registered broker-dealers. In addition, in 1995, Schwab has purchased from private insurers additional account protection of up to $49.5 million per customer, as defined, for customer securities positions only. Stocks, bonds, mutual funds and money market funds are considered securities and are protected on a share basis for the purposes of SIPC protection and the additional protection (i.e., protected securities may either be replaced or converted into an equivalent market value as of the date a SIPC trustee is appointed). Neither SIPC protection nor the additional protection applies to fluctuations in the market value of securities. Schwab is also authorized by the Municipal Securities Rulemaking Board to effect transactions in municipal securities on behalf of its customers and has obtained certain additional registrations with the SEC and state regulatory agencies necessary to permit it to engage in certain other activities incidental to its brokerage business. Margin lending by Schwab and M&S is subject to the margin rules of the Board of Governors of the Federal Reserve System and the NYSE. Under such rules, broker-dealers are limited in the amount they may lend in connection with certain purchases and short sales of securities and are also required to impose certain maintenance requirements on the amount of securities and cash held in margin accounts. In addition, those rules and rules of the Chicago Board Options Exchange govern the amount of margin customers must provide and maintain in writing uncovered options. As a California state-chartered trust company, CSTC is authorized to conduct business in California, and is primarily regulated by the California State Banking Department. Since it provides employee benefit plan trust services, CSTC is also required to comply with the Employee Retirement Income Security Act of 1974 (ERISA) and, consequently, is subject to oversight by both the Internal Revenue Service and Department of Labor. CSTC is required under ERISA to maintain a fidelity bond for the protection of employee benefit trusts for which it serves as trustee. Charles Schwab Limited, a subsidiary of Schwab, is registered as an arranger with the Securities and Futures Authority (SFA) in the United Kingdom, and engages in business development activities on behalf of Schwab. ShareLink Limited, a subsidiary of ShareLink, is registered as a broker-dealer with the SFA in the United Kingdom.
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Net Capital Requirements
As registered broker-dealers, Schwab and M&S are subject to the Uniform Net Capital Rule (Rule 15c3-1) promulgated by the SEC (the Net Capital Rule), which has also been adopted through incorporation by reference in NYSE Rule 325. Schwab is a member firm of the NYSE and the NASD, and M&S is a member firm of the NASD. The Net Capital Rule specifies minimum net capital requirements for all registered broker-dealers and is designed to measure financial integrity and liquidity. Failure to maintain the required net capital may subject a firm to suspension or expulsion by the NYSE and the NASD, certain punitive actions by the SEC and other regulatory bodies, and ultimately may require a firm's liquidation. Because CSC itself is not a registered broker-dealer, it is not subject to the Net Capital Rule. However, if Schwab failed to maintain specified levels of net capital, such failure would constitute a default by CSC under certain debt covenants. "Net capital" is essentially defined as net worth (assets minus liabilities), plus qualifying subordinated borrowings, less certain deductions that result from excluding assets that are not readily convertible into cash and from conservatively valuing certain other assets. These deductions include charges that discount the value of firm security positions to reflect the possibility of adverse changes in market value prior to disposition. The Net Capital Rule requires notice of equity capital withdrawals to be provided to the SEC prior to and subsequent to withdrawals exceeding certain sizes. Such rule prohibits withdrawals that would reduce a broker-dealer's net capital to an amount less than 25% of its deductions required by the Net Capital Rule as to its security positions. The Net Capital Rule also allows the SEC, under limited circumstances, to restrict a broker-dealer from withdrawing equity capital for up to 20 business days. Schwab and M&S have elected the alternative method of calculation under paragraph (a)(1)(ii) of the Net Capital Rule, which requires a broker-dealer to maintain minimum net capital equal to 2% of its "aggregate debit items," computed in accordance with the Formula for Determination of Reserve Requirements for Brokers and Dealers (SEC Rule 15c3-3). "Aggregate debit items" are assets that have as their source transactions with customers, primarily margin loans. Under the alternative method of the Net Capital Rule, a broker- dealer may not (a) pay, or permit the payment or withdrawal of, any subordinated borrowings or (b) pay cash dividends or permit equity capital to be removed if, after giving effect to such payment, withdrawal, or removal, its net capital would be less than 5% of its aggregate debit items. Under NYSE Rule 326, Schwab is required to reduce its business if its net capital is less than 4% of aggregate debit items for more than 15 consecutive business days; NYSE Rule 326 also prohibits the expansion of business if net capital is less than 5% of aggregate debit items for more than 15 consecutive business days. The provisions of NYSE Rule 326 also become operative if capital withdrawals (including scheduled maturities of subordinated borrowings during the following six months) would result in a reduction of a firm's net capital to the levels indicated. If compliance with applicable net capital rules were to limit Schwab's or M&S' operations and their ability to repay subordinated debt to CSC, this in turn could limit CSC's ability to repay debt, pay cash dividends and purchase shares of its outstanding stock. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference to Exhibit No. 13.1 of this report. At December 31, 1995, Schwab was required to maintain minimum net capital under the Net Capital Rule of $82 million and had total regulatory net capital of $392 million. At December 31, 1995, the amounts in excess of 2%, 4% and 5% of aggregate debit items were $310 million, $229 million and $188 million, respectively. At December 31, 1995, M&S was required to maintain minimum net capital under the Net Capital Rule of $1 million and had total regulatory net capital of $6 million. At December 31, 1995, the amount in excess of 2% of aggregate debit items exceeded $5 million. CSTC's capital requirement is established by the California Superintendent of Banks under the California Financial Code (the Code). The Code requires that CSTC's ratio of contributed capital, as defined, to accumulated deficit shall exceed 2.5 to 1. At December 31, 1995, the ratio of contributed capital to accumulated deficit was 3.0 to 1. If CSTC's capital declines, or if the California Superintendent of Banks determines that additional capital is required for other reasons, CSC could be required to contribute additional capital to CSTC.
Item 2.

Item 2. Properties
The Company's corporate headquarters are located in a 28-story building at 101 Montgomery Street in San Francisco, California. The building contains approximately 296,000 square feet and is leased by Schwab under a term expiring in the year 2000. The current rental is approximately $8.7 million per year, subject to certain increases and obligations to pay certain operating expenses such as utilities, insurance and taxes. Schwab has three successive five-year options to renew the lease at the then market rental value. Schwab also leases space in other buildings for its San Francisco operations aggregating approximately 443,000 additional square feet at year-end 1995. M&S' headquarters are located in leased office space in Jersey City, New Jersey.
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The Company's primary data center is located in Phoenix, Arizona in a 105,000 square feet facility owned by the Company. All of Schwab's branch offices and three of its regional customer telephone service centers and M&S' branch offices are located in leased premises, generally with lease expiration dates five to ten years from inception. In September 1995, the Company entered into an agreement to purchase an office building containing approximately 330,000 square feet located in Phoenix, Arizona to be used for the expansion of its operations. The Company expects to close this transaction in April 1996 using general corporate resources or external financing.
Item 3.

Item 3. Legal Proceedings
The information required to be furnished pursuant to this item is set forth under the caption "Commitments and Contingent Liabilities" in the Notes to Consolidated Financial Statements in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders during the fourth quarter of 1995.
Item 4a. Executive Officers of the Registrant
See Item 10 in Part III of this report.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is listed on the New York and Pacific Stock Exchanges under the ticker symbol SCH. The number of common stockholders of record as of February 9, 1996 was 2,486. The other information required to be furnished pursuant to this item is set forth under the caption "Quarterly Financial Information (Unaudited)" in the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference to Exhibit No. 13.1 of this report.
Item 6.

Item 6. Selected Financial Data
The information required to be furnished pursuant to this item is set forth under the captions "Operating Results (for the year)," "Other (for the year)" and "Other (at year end)" in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required to be furnished pursuant to this item is set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference to Exhibit No. 13.1 of this report. Average balances and interest rates for the fourth quarters of 1995 and 1994 are summarized as follows (dollars in millions):
The increase in interest revenue, net of interest expense, from the fourth quarter of 1994 to the fourth quarter of 1995 was primarily due to higher levels of earning assets, partially
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offset by increases in average interest rates on funding sources compared to earning assets.
Item 8.

Item 8. Financial Statements and Supplementary Data
The information required to be furnished pursuant to this item is set forth in the Consolidated Financial Statements and under the caption "Quarterly Financial Information (Unaudited)" in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
The information relating to directors of the Company required to be furnished pursuant to this item is incorporated by reference from portions of the Company's definitive proxy statement for its annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 1995 (the Proxy Statement) under the captions "Election of Directors" (excluding all information under the caption "Information about the Board of Directors and Committees of the Board") and "Principal Stockholders."
Executive Officers of the Registrant
The following table provides certain information about each of the Company's current executive officers. Executive officers are elected by and serve at the discretion of the Company's Board of Directors. However, Mr. Schwab has an employment agreement with the Company through March 2000, which includes an automatic renewal feature that, as of each March 31 (beginning in 1996), extends the agreement for an additional year unless either party elects to not extend the agreement.
Executive Officers of the Registrant
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Mr. Schwab has been Chairman and Chief Executive Officer and a director of the Company since its incorporation in November 1986. Mr. Schwab was a founder of Schwab in 1971 and has been its Chairman since 1978. Mr. Schwab is currently a director of The Gap, Inc., Transamerica Corporation, AirTouch Communications and a trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, all registered investment companies.
Mr. Stupski has been Vice Chairman of the Company since July 1992 and a director of the Company since its incorporation in November 1986. Mr. Stupski was Chief Operating Officer of the Company from November 1986 to March 1994 and the Company's President from November 1986 to July 1992. He also served as Chief Executive Officer and Chief Operating Officer of Schwab from July 1988 to July 1992. He served as Vice Chairman of Schwab from July 1992 to August 1994.
Mr. Pottruck has been Chief Operating Officer and a director of the Company since March 1994, President of the Company and Chief Executive Officer of Schwab since July 1992, and President of Schwab since July 1988. Mr. Pottruck was Executive Vice President of the Company and Schwab from March 1987 to July 1992. Mr. Pottruck joined Schwab in March 1984.
Mr. Coghlan has been Executive Vice President of the Company and Schwab and General Manager of Schwab Institutional since July 1992. Mr. Coghlan joined Schwab in January 1986, became Vice President in 1988 and became Senior Vice President in 1990.
Mr. Gambs has been Executive Vice President - Finance, and Chief Financial Officer of the Company and Schwab since he joined the Company in March 1988.
Mr. Leemon has been Executive Vice President - Business Strategy of the Company and Schwab since September 1995. Before joining the Company in September 1995, Mr. Leemon held various positions with The Boston Consulting Group, Inc., a management consulting firm, from 1989 to 1995, including Vice President from 1990.
Ms. Lepore has been Executive Vice President and Chief Information Officer of the Company and Schwab since October 1993. Ms. Lepore joined Schwab in September 1983 and became Senior Vice President in 1989.
Mr. McCarthy has been Executive Vice President - Mutual Funds of the Company and Schwab and Chief Executive Officer of Charles Schwab Investment Management, Inc. since September 1995. Before joining the Company in September 1995, Mr. McCarthy was Chief Executive Officer of Jardine Fleming Unit Trusts Ltd., a mutual fund company, from 1994 to 1995. From 1987 to 1994, he held various executive positions with Fidelity Investments, including President of Fidelity Investments Advisor Group, President of National Financial Institutional Services and Executive Director of Fidelity Brokerage Group.
Ms. Sawi has been Executive Vice President - Electronic Brokerage of the Company and Schwab since May 1995. Ms. Sawi was President of Charles Schwab Investment Management, Inc. from April 1994 to September 1995. From April 1994 to May 1995, she was Executive Vice President - Mutual Funds of the Company and Schwab. Prior to that, Ms. Sawi was Executive Vice President - Marketing and Advertising of the Company and Schwab from January 1992 to April 1994. Ms. Sawi joined Schwab in November 1982.
Mr. Seip has been Executive Vice President - Retail Brokerage of the Company and Schwab since April 1994. He was President of Charles Schwab Investment Management, Inc. (CSIM) from July 1992 to April 1994 and Chief Operating Officer of CSIM from June 1991 to April 1994. From July 1992 to April 1994, Mr. Seip was Executive Vice President - Mutual Funds and Fixed Income Products of the Company and Schwab. He joined Schwab in January 1983. Prior to becoming Senior Vice President of Schwab and assuming his mutual fund responsibilities in June 1991, Mr. Seip was the divisional executive in charge of Schwab's retail branches east of the Mississippi.
Mr. Valencia has been Executive Vice President and Chief Administrative Officer of the Company and Schwab since February 1996. From March 1994 to February 1996, Mr. Valencia was Executive Vice President - Human Resources of the Company and Schwab. Before joining the Company in March 1994, he served as a Managing Director of Commercial Credit Corp., a subsidiary of the Travelers engaged in consumer finance for the Travelers, from January 1993 to February 1994. From 1975 to 1993, Mr. Valencia held various positions with Citicorp, including President and Chief Executive Officer of Transaction Technology, a subsidiary of Citicorp, from 1990 to 1993.
Item 11.

Item 11. Executive Compensation
The information required to be furnished pursuant to this item is incorporated by reference from portions of the Proxy Statement under the captions "Executive Compensation" (excluding all information under the caption "Board Compensation Committee Report on Executive
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Compensation" and "Performance Graph") and "Certain Transactions."
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required to be furnished pursuant to this item is incorporated by reference from portions of the Proxy Statement under the caption "Principal Stockholders."
Item 13.

Item 13. Certain Relationships and Related Transactions
The information required to be furnished pursuant to this item is incorporated by reference from a portion of the Proxy Statement under the caption "Certain Transactions."
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this Report --------------------------------------
1. Financial Statements
The financial statements and independent auditors' report are set forth in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report and are listed below:
Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Stockholders' Equity Notes to Consolidated Financial Statements Independent Auditors' Report
2. Financial Statement Schedules
The financial statement schedules required to be furnished pursuant to this item are listed in the accompanying index appearing on page.
(b) Reports on Form 8-K -------------------
None filed during the last quarter of 1995.
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(c) Exhibits --------
The exhibits listed below are filed as part of this annual report on Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 28, 1996.
THE CHARLES SCHWAB CORPORATION (Registrant)
BY: /s/ CHARLES R. SCHWAB ----------------------- Charles R. Schwab Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on March 28, 1996.
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THE CHARLES SCHWAB CORPORATION
Index to Financial Statement Schedules
Page ----
Independent Auditors' Report
Schedule I - Condensed Financial Information of Registrant: Condensed Balance Sheet Condensed Statement of Income and Retained Earnings Condensed Statement of Cash Flows
Schedule II - Valuation and Qualifying Accounts
Schedules not listed are omitted because of the absence of the conditions under which they are required or because the information is included in the Company's consolidated financial statements and notes in the Company's 1995 Annual Report to Stockholders, which are incorporated herein by reference to Exhibit No. 13.1 of this report.
INDEPENDENT AUDITORS' REPORT - ------------------------------
To the Stockholders and Board of Directors of The Charles Schwab Corporation:
We have audited the consolidated financial statements of The Charles Schwab Corporation and subsidiaries (the Company) as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated February 21, 1996; such consolidated financial statements and report are included in your 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedules of the Company and subsidiaries appearing on pages through. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP San Francisco, California February 21, 1996
SCHEDULE I
THE CHARLES SCHWAB CORPORATION (PARENT COMPANY ONLY)
Condensed Financial Information of Registrant Condensed Balance Sheet (In thousands, except share data)
SCHEDULE I
THE CHARLES SCHWAB CORPORATION (PARENT COMPANY ONLY)
Condensed Financial Information of Registrant Condensed Statement of Income and Retained Earnings (In thousands)
SCHEDULE I
THE CHARLES SCHWAB CORPORATION (PARENT COMPANY ONLY)
Condensed Financial Information of Registrant Condensed Statement of Cash Flows (In thousands)
SCHEDULE II
THE CHARLES SCHWAB CORPORATION
Valuation and Qualifying Accounts (In thousands)