Schwab Announces $3.5 Billion Capital Restructuring

The Charles Schwab Corporation (Nasdaq: SCHW) announced its plan to return approximately $3.5 billion in capital to stockholders and create a more efficient and cost-effective capital structure.

The plan includes a special cash dividend of $1.00 per common share, which will return approximately $1.2 billion to stockholders and a $2.3 billion share repurchase through a modified Dutch Auction Tender Offer and a separate Stock Purchase Agreement with Chairman and CEO Charles R. Schwab, the company’s largest stockholder. The special dividend is payable on August 24, 2007, to stockholders of record at the close of business on July 24, 2007. The Stock Purchase Agreement will maintain Mr. Schwab’s beneficial ownership of the company at its current level of approximately 18 percent.

The dividend and repurchase are being funded with $2.7 billion of after-tax proceeds from the sale of U.S. Trust Corporation and debt offerings of up to $750 million consisting of a combination of senior notes and hybrid capital securities. The Board also declared a regular quarterly cash dividend of $0.05 per common share.

The Tender Offer, which will commence July 3, 2007, will be for up to 84 million shares, representing approximately 7% of the company’s outstanding common stock, with the right to purchase up to an additional 25 million shares, subject to certain limitations and legal requirements. Stockholders will have the opportunity to tender some or all of their shares at a price per share not less than $19.50 or more than $22.50.

The Charles Schwab Corporation is a leading provider of financial services, with more than 300 offices and 6.9 million client brokerage accounts, 1.1 million corporate retirement plan participants, 165,000 banking accounts, and $1.4 trillion in client assets.

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PAYOUT YIELD ANALYSIS

With 1.25 billion shares outstanding, the $3.5 billion repurchase will yield $2.80 per share when completed. The annualized dividend of $0.20 combined with the $2.80 from the repurchase program will result in a Total Payout of $3.00 per share over the next 4 quarters. At $22 per share, the Total Payout Yield is projected to be 13.6%.

- Payout Yield Staff

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