Key Schwab Observation for Market Value Allocation - PCRA vs. Core Offering 3. Market Value Allocation - Asset Classes. 4

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1 The leading industry benchmark on participant investment activity within self-directed brokerage accounts for retirement plans Table of Contents: Key Schwab Observation for Market Value Allocation - PCRA vs. Core Offering 3 Market Value Allocation - Asset Classes. 4 Market Value Allocation - Equity Sectors. 5 Market Value Allocation - Mutual Funds.. 6 Net Asset Flow - Asset Classes. 7 Net Asset Flow - All Investment Categories.8 Average Monthly Trades per Account.. 9 Average Number of Positions per Account Charles Schwab & Co., Inc. Member SIPC/NYSE ( )

2 Key Schwab Observation for 2002: SDBA account holders stayed the course in 2002 despite a tough year for the markets. The majority of their asset activity was directed into mutual funds (57% of net asset flows) followed by equities (26.9% of net asset flows); however, net sector flows indicate participants remained cautious during the year: Taxable bond funds accounted for the majority of mutual fund flows (25.8%) Fixed income securities accounted for 14.1% of total net flows There was a 5 pt. increase in the cash and equivalents asset allocation PCRA participants continue to hold about twice as much of their assets in mutual funds (43%) compared to individual equities (22%), indicating a preference to keep retirement assets in mutual funds, but wanting to access funds not available through their core fund options. PCRA participants are not day trading equities in their accounts, averaging just under 5 equity trades per year and investing mainly in blue chip Fortune 500 companies (see Q402 report for top 10 equity holdings). 2

3 Market Value Allocation - PCRA vs. Core Offering* ( As of Month End) 100% 90% 80% 37% 37% 37% 38% 38% 39% 38% 38% 38% 37% 37% 37% 70% 60% 50% Core PCRA 40% 30% 63% 63% 63% 62% 62% 61% 62% 62% 62% 63% 63% 63% 20% 10% 0% *Data is based on SchwabPlan PCRA participants only (approximately 11,000 accounts). This chart illustrates the percent of participant assets in their PCRA account and their core holdings. Percentages are calculated as of each month end. Figures are based on PCRA participants with a minimum balance of $5,000 in their PCRA account. All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 3

4 Market Value Allocation - Asset Classes ( As of Month End) 100% 90% 23% 24% 23% 23% 23% 25% 27% 26% 29% 28% 27% 28% 80% 70% 60% 50% 44% 44% 44% 45% 45% 45% 44% 44% 43% 43% 43% 43% 40% 30% 20% 6% 6% 6% 6% 7% 7% 7% 7% 7% 7% 7% 7% 10% 0% 27% 26% 26% 25% 25% 23% 22% 22% 21% 22% 23% 22% Equities Fixed Income Mutual Funds Cash & Equivalents This chart illustrates the percent of PCRA participant assets in each noted asset class as a percentage of total PCRA assets. Percentages are calculated as of month end. Money market mutual funds are classified under Cash & Equivalents. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 4

5 Market Value Allocation - Equity Sectors ( As of Month End) 40% 35% 30% 25% 20% 15% 10% Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Mutual Funds Telecomm Other Utilities 5% 0% This chart illustrates the percent of PCRA participant assets in each equity sector, as classified by Standard & Poor s, as a percentage of total PCRA assets within all equity securities. Percentages are calculated as of each month end. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 5

6 Market Value Allocation - Mutual Funds ( As of Month End) 45% 40% 35% 30% 25% 20% 15% Asset Allocation Funds International Funds Large Cap Stock Funds Small Cap Stock Funds Specialized Funds Tax-Free Bond Funds Taxable Bond Funds Other 10% 5% 0% This chart illustrates the percent of PCRA participant assets in each mutual fund category, as classified by Morningstar Inc., as a percentage of total PCRA long-term mutual fund assets. Percentages are calculated as of each month end. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 6

7 Net Asset Flow - Asset Class (12 months ending December 31, 2002) Mutual Funds 57.0% Equities 26.9% Fixed Income 14.1% Money Market Funds 2.3% Options -0.4% -10% 0% 10% 20% 30% 40% 50% 60% This chart illustrates the percent of total net flows within each asset class year to date, ending December 31, Net flow percentages are calculated by adding the purchases and sales amounts within each respective asset class and dividing by the total net flows over the period. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 7

8 Net Asset Flow - Asset Class (12 months ending December 31, 2002) MF - Taxable Bond Fixed Income MF - Small Cap Stock Funds MF - Large Cap Stock Funds MF - Specialized Equities - Financials Equities - Info Technology MF - International MF - Asset Allocation Funds Equities - Industrials Equities - Health Care Equities - Consumer Discretionary Equities - Utilities Money Market Funds MF - Other Equities - Consumer Staples Equities - Telecomm Services Equities - Materials Equities - Other Equities - Mutual Funds Equities - Energy Equities - Derivatives 0.0% MF - Tax Free Bond 0.0% Options -0.4% 0.5% 0.2% 1.2% 1.1% 1.1% 0.8% 2.3% 1.8% 2.4% 3.4% 3.1% 3.1% 4.0% 3.7% 5.4% 5.1% 4.9% 4.9% 11.2% -5% 0% 5% 10% 15% 20% 25% 30% This chart illustrates the percent of total net flows within each investment category, as classified by Standard & Poor s and Morningstar, Inc., year to date, ending December 31, Net flow percentages are calculated by adding the purchases and sales amounts within each respective investment category and dividing by the total net flows over the period. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 14.1% 25.8% 8

9 Average Monthly Trades per Account (2002 Monthly) Mutual Funds Equities Fixed Income Average number of trades per account is calculated by taking all trades for the month in each respective asset class and dividing by the total number of PCRA accounts at the end of the month. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 9

10 Average Number of Positions per Account ( As of Month End) Equities Mutual Funds Fixed Income Cash & Equivalents A position is defined as a holding in one investment vehicle. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information. 10