Black Stock Ownership Up 30 Percent Over Five Years According to 5Th Annual Ariel-Schwab Black Investor Survey; Optimistic Investor Outlook Is Tempered by Terrorism/Recession Anxiety.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 12, 2002

The percentage of high-income Blacks (earning over $50,000 annually) who invest in the stock market is up 30 percent over the last five years, according to the 2002 Ariel Schwab Black Investor Survey. Over the same period, stock ownership among Whites with comparable incomes rose just 4%.

Specifically, 74% of high-income Blacks today own stocks or stock funds, which is 30% higher than the 1998 figure of 57%. White stock ownership, meanwhile, has remained statistically flat, moving from 81% to 84%, narrowing considerably the ownership gap between the two groups.

David Pottruck, President and co-CEO of Charles Schwab & Co., Inc. hailed the 30% jump saying; "Every new investor represents another positive step toward wealth-building and offers the promise of greater financial security and opportunity for the entire African-American community."

The latest survey also examines recent investor behavior in light of the lingering recession, a down market for much of 2001, and the September terrorist attacks. The survey uncovered both optimism as well as anxiety among investors, but shows that Blacks have generally held to their pre-set investment strategies despite recent events.

In fact, just a handful of Blacks and Whites (6% and 7% respectively) liquidated any investments as a result of last year's recession or acts of terrorism, while a high majority of both Black and White investors (74% and 68%) made no major changes to their portfolios.

Ariel Mutual Funds Chairman and Founder John Rogers highlighted these findings saying, "A fundamental principle of investing is knowing how to handle market cycles and maintaining the discipline to invest for the long term. It is especially heartening to see that we are demonstrating stability and confidence as investors through economically and politically uncertain times."

Less surprising, given their historically cautious money management habits, is that terrorism and the shaky economy have prompted more Blacks than Whites to update their wills (25% vs. 16%) and bolster their insurance policies (12% vs. 6%) last year. Moreover, among investors, more Blacks than Whites (38% vs. 24%) began reviewing investments more frequently last year. Roughly equal percentages of both groups (23% of Blacks and 26% of Whites) refinanced mortgages.

"The findings in this year's survey are very encouraging and reinforce our belief that a tremendous opportunity exists to empower African American investors," said Carla Arnold Foster, vice president, Specialized Segment Marketing, Charles Schwab & Co., Inc. "Blacks have taken a number of positive steps in the last five years to get their financial houses in order, and that's good news for our community and for our industry."

Financial Optimism Runs Strong Among Blacks and Whites...

The general mood among Blacks and Whites regarding financial matters is notably upbeat with 84% and 89% respectively saying they are "optimistic about their financial future." Moreover, all but a few (98% of Blacks and 96% of Whites) predict that their household financial situation will hold steady or improve in the next 12 months.

This confidence also extends to those investors with retirement plans, where average monthly savings has risen over last year for both groups (Blacks up from $200 to $237; Whites up from $242 to $280). Even more telling, among non-retirees surveyed, the percentage that feel they will "have enough money to live comfortably in old age" has also risen dramatically for Blacks, (60% to 72%) and slightly for Whites, (72% to 75%).

Another sign of enthusiasm for investing among Blacks is that, while 29% of Blacks surveyed this year have cut spending in the past year, 71% of this group says a major reason is to "put more money aside toward long-term savings and investments." By comparison, 19% of Whites say they have cut spending in the past year, and 59% of those say it is to save and invest more.

Furthermore, among non-investors, twice as many Blacks than Whites (42% vs. 21%) say they are "somewhat" or "very" likely to begin investing next year.

Ariel President Mellody Hobson said, "Given all that's happened in the past year, the positive outlook toward investing is especially remarkable and clearly suggests that Black participation in the stock market will continue to grow."

Moreover, while past Ariel-Schwab surveys have identified lack of trust in the financial services industry as a barrier to stock investing among Blacks, the new survey shows steadily increasing comfort with investment firms. Since 1998, the percentage of Blacks who have brokerage or mutual fund accounts is up from 50% to 71% while the percentage of Whites with either mutual fund or brokerage accounts has risen from 71% to 82%.

Ariel Chairman Rogers said, "Building trust among Blacks is vital for our industry. While we're clearly making progress, it's important to continue to reach out directly to our community and help promote greater diversity in the industry."

The economic policies of the Bush administration have also apparently gained a measure of faith among Blacks with 57% (versus 72% of Whites) today predicting, "the government will help pull the country out of recession." By contrast, a year ago, just 22% of Blacks believed that President Bush would have "a positive impact" on their personal financial situation, versus 56% of Whites.

...But Economic Anxiety Remains Just Below The Surface

Despite the general sense of optimism, the survey found that a sharply rising percentage of all investors agree that, "The recent stock market volatility has shaken [their] long-term confidence in the stock market." Blacks in agreement rose from 32% to 43% since last year; Whites went from 15% to 25%.

More Blacks than Whites (49% vs. 39%) also confessed to being, "more anxious about [their] financial situation than [they] were a year ago," and far fewer Blacks than Whites (46% vs. 68% respectively) think the economy will improve within the next 12 months.

Among non-retirees surveyed, roughly one in four of each group (24% of Blacks and 27% of Whites) plans to delay retirement due to the economic downturn. On average, the expected length of the delay is between five and six years.

In fact, according to the survey, a greater percentage of high-income Blacks and Whites are more anxious about "Saving enough for retirement" (27% and 32% respectively) than they are anxious about, "Experiencing a major terrorist attack," (22% and 22%), "Having the major breadwinner...be laid off," (18% and 13%), and "Saving enough for [their] children's education," (18% and 16%).

Schwab's Arnold Foster said that the signs of economic anxiety are, "Certainly something to watch, but they do not appear to be driving investors away. On the contrary, it seems to be making us all a lot smarter about our money."

The historical preference for real estate among Blacks also rebounded this year with 49% of African Americans calling it the "best investment overall," up from 40% last year and even higher than the 46% figure of 1998. The percentage of Whites who feel real estate is the "best investment overall," has remained constant over five years, hovering between 30% and 34%.

This year's random sample survey of 500 Blacks and 500 Whites earning over $50,000 annually is the fifth for the Ariel-Schwab partnership. It was conducted by telephone in late January and early February by Neuwirth Research, Inc.

Ariel Capital Management Inc. is a Chicago-based investment firm managing $10 billion in assets for institutions as well as individuals through the Ariel Mutual Funds. Ariel's web site is www.arielmutualfunds.com. Ariel Distributors, Inc. 200 E. Randolph, Chicago, IL 60601. Ariel and Schwab are separate entities, but co-sponsor the "Black Investor Survey." The Charles Schwab Corporation (NYSE:SCH), through Charles Schwab & Co., Inc. (member SIPC/NYSE), U.S. Trust Corporation, CyberTrader and its other operating subsidiaries, is one of the nation's largest financial services firms serving 7.7 million active accounts with $856.4 billion in customer assets through offices, regional client telephone service centers and automated telephonic and online channels. The Charles Schwab, U.S. Trust and CyberTrader sites can be reached at www.schwab.com, www.ustrust.com and www.cybertrader.com, respectively.

(c) Charles Schwab & Co., Inc. All rights reserved. 0402-8256

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