Press Release

401k Participants Invest New Money in Bonds, Conservative Funds

Quarterly SDBA Indicators(TM) Report Shows Participants Favor Conservative Investments while Maintaining Solid Positions in Equities

SAN FRANCISCO, CA, December 18, 2002 -- Charles Schwab Corporate Services' third quarter SDBA Indicators report found that while self-directed brokerage account (SDBA) investors held onto their equity positions, they directed nearly 95% of net new assets into taxable bond funds, asset allocation funds, fixed income securities, and money market funds.

"Through the worst bear market in memory, SDBA users held steady to an overall philosophy of diversification while increasing allocations in bonds and other conservative investments," said Mark Coffrini, vice president, Charles Schwab Corporate Services. "Year over year, SDBA allocations are very consistent. At 43%, mutual fund investment totals are unchanged. We have seen a modest 4% decrease in equity holdings, 21% in third quarter 2002, down from 25% in third quarter 2001. Cash and equivalents are at 29%, up 3% over last year, and fixed income is at 7%, which is up 1% over last year."

The SDBA Indicators report profiles the investment behavior of approximately 60,000 401k plan participants investing through Schwab's self-directed brokerage account, the Schwab Personal Choice Retirement Account(R) (PCRA). SDBAs are brokerage accounts within 401k plans that provide participants access to investments (stocks, mutual funds, fixed income securities) outside of their plan's core fund offerings. Schwab publishes the SDBA Indicators to provide the industry with an in-depth look at the demographics and investing activity of plan participants who use the SDBA option.

Schwab has been a leader in the SDBA market since 1994, when it launched the PCRA. The largest provider of SDBAs in the country*, Schwab administers more than 5,300 retirement plans with more than 100,000 individual SDBA accounts and $5.1 billion in total assets as of September 2002.

SDBA Indicators key findings for the third quarter of 2002:

• SDBA participants continued to invest conservatively. Specifically, participants:
  • Held 36% of their total SDBA assets in cash and equivalents and fixed income securities.
  • Maintained equity positions in market stalwarts such as CitiGroup, General Electric, and Johnson & Johnson; only three top ten holdings were in technology companies -- Microsoft, Intel and Cisco Systems. Wal-Mart and Merck joined the top 10 list, replacing Home Depot and IBM respectively in the ninth and tenth spots.
  • Averaged 2.1 trades in the quarter, compared with 2.2 trades in the second quarter 2002.
  • Investors shifted assets to manage market fluctuations. To diversify their holdings and/or seek out higher performing assets, investors:
• Nearly doubled allocations in taxable bond funds, asset allocation funds, fixed income securities, and money market funds, which together accounted for almost 95% of the net asset flows in the third quarter, compared with 49% in the second quarter.
• Continued to increase investments in Real Estate Investment Trusts (REITs), which represented almost 60% of the financial service equities sector's net asset flows for the third quarter, a 227% increase over the second quarter level of 18.3%.
• Investors used SDBAs to gain access to a broader array of mutual funds. Though 401k plans generally provide a selection of mutual funds, participants still purchased additional mutual funds through their SDBAs:
  • Participants held 43% of their SDBA assets in mutual funds.
  • Leading companies represented in the top ten mutual fund holdings included American Century, Fidelity, Janus, PIMCO and Vanguard.

The report represents data collected from all plan participants who currently have at least a $5,000 balance in a Schwab PCRA account through their 401k plan. Data is extracted monthly on all accounts that are open as of month-end and meet the minimum balance requirement.

Data contained in this quarterly report is from the third quarter 2002. The next report, fourth quarter 2002, will be available in February. The third quarter 2002 report and all prior reports are available at www.schwab.com/sdbaindicators.

Charles Schwab Corporate Services provides individual investing support services through employers, including employee retirement and stock option plans, IRA rollover accounts and individual/personal accounts. Charles Schwab Corporate Services also offers retirement plan services including recordkeeping services, software, trustee and custodial services, and the Schwab Personal Choice Retirement Account(R) (PCRA) (self-directed brokerage account through Charles Schwab & Co., Inc.). Total client assets in employer-sponsored retirement plans at Schwab equaled $84 billion in September 2002.

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