Schwab 401k Investors Continue to Invest Conservatively in Self-directed Brokerage Accounts; Quarterly SDBA Indicators Report Shows Increase in Popularity.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--June 19, 2002

Schwab Corporate Services' SDBA Indicators(TM) report found that self-directed brokerage account investors made conservative investing decisions in the first quarter of 2002. Despite access to a broad range of securities, participants chose to invest 45% of their assets in mutual funds. The study also shows that the number of self-directed brokerage accounts increased, with 5,346 new Schwab accounts opened in the first quarter of 2002. According to Cerulli Associates, total self-directed brokerage assets are expected to grow from $107 billion in 2000 to $340 billion by 2006, an increase of 218%.

"Even in a flat market, we saw a large number of SDBA accounts open in the first quarter as 401(k) investors continued to find ways to further diversify their retirement plan holdings," stated Ben Brigeman, senior vice president of Schwab Corporate Services. "Historically, more sophisticated investors have used SDBAs. But today with more people learning and understanding the importance of diversification and other investing fundamentals, we are seeing increased interest in SDBAs."

The SDBA Indicators report profiles the investment behavior of approximately 60,000 401(k) plan participants investing through Schwab's self-directed brokerage account, the Schwab Personal Choice Retirement Account(R) (PCRA). Self-directed brokerage accounts (SDBAs) are brokerage accounts within 401(k)s that provide plan participants access to investments (stocks, mutual funds, fixed income securities) outside of their plan's core holdings. 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 self-directed brokerage accounts in the country(1), Schwab administers more than 4,800 retirement plans with more than 100,000 individual accounts and $5.7 billion in total assets as of March 2002.

      SDBA Indicators key findings for the first quarter of 2002:

-- Accounts grew by 5.0%. Despite a down market, 401(k) participants
   opened 5,346 new SDBA accounts, bringing the total number of
   accounts at Schwab to 100,046.

-- SDBA participants traded conservatively. In the first quarter
   of 2002, investors:

    - Invested 29% of their assets in cash and equivalents and fixed
      income securities.

    - Held a majority of equities in market stalwarts such as
      Citigroup, General Electric, and Pfizer; only three top ten
      holdings were in technology companies -- Microsoft, Intel and
      Cisco Systems.

    - Made an average of less than three trades in the quarter.

-- Investors shifted assets to manage market fluctuations. In an
   apparent attempt to seek out high performing assets and/or
   conserve principal, investors:

    - Moved into high-performing small cap funds, which saw 22%
      of net flows.  Small cap funds comprised 20% of total assets in
      mutual funds.

    - Increased allocations in taxable bond funds, cash and
      equivalents, and individual fixed-income securities, while
      decreasing allocations in individual equities. Taxable bond
      funds and individual fixed-income securities comprised 35% of
      total net flows, slightly higher than fourth quarter 2001.

-- Investors use SDBAs to gain access to a broader array of mutual
   funds. Though 401(k) plans generally provide a selection of
   mutual funds, participants still purchased additional mutual
   funds through their SDBAs:

    - Participants hold 45% of their SBDA assets in mutual funds.

    - Top ten mutual fund holdings fell within six different mutual
      fund families: American Century, Artisan, Fidelity, Janus,
      PIMCO and Vanguard.

The report showcases data collected from all plan participants who currently have at least a $5,000 balance in an SDBA through their Schwab 401(k) 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 first quarter for 2002. The next report, second quarter 2002, will be available in August. Reports are available at www.schwab.com/sdbaindicators.

Schwab Corporate Services provides individual investing services through employers, including employee retirement and stock option plans, IRA rollovers and individual/personal accounts. Schwab Corporate Services also offers employee retirement plan services including recordkeeping services, software, trustee 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 $98 billion in March 2002.

The Charles Schwab Corporation through its subsidiary, Charles Schwab & Co., Inc. serves 8.0 million active investor accounts with $833 billion in client assets. Charles Schwab & Co. Inc. Member SIPC/NYSE.

(1) According to financial services research provider McHenry Consulting Group, June 2001.

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