Schwab Introduces Target Funds to Help Simplify Retirement Planning Failure to Regularly Adjust Long-term Portfolios is a Common Pitfall for Investors SAN FRANCISCO, May 31 /PRNewswire-FirstCall/ -- People who want to save for the future by investing in a mutual fund linked to the date they intend to retire can now do so at Charles Schwab & Co., Inc. Today, Charles Schwab Investment Management announced its new Target Funds, a diversified set of five professionally managed mutual funds designed to help investors achieve their retirement goals. Each is a "fund of funds," investing in an underlying blend of equity and bond mutual funds geared to a specific time frame. All are no-load funds, with no additional layer of management fees charged by Schwab for its services.* The Target Funds will invest in a combination of Schwab and Laudus Funds with varying allocations based on retirement dates ranging from 2010 to 2040. The Schwab Retirement Income Fund is designed for clients who are in retirement and want current income with some potential growth from equities. The new funds are in subscription through June 30, 2005, commencing operations on July 1, 2005. During the subscription period, Schwab clients can invest in the funds at an offering price of $10 per share. "Only 50% of baby boomers are estimated to be accumulating enough to be able to support their current standard of living during retirement years(1)," said Evelyn Dilsaver, president of Charles Schwab Investment Management. "Many don't have the time or expertise needed to create a sound investment portfolio and successfully nurture it over time. Our Target Funds are a one-step solution for people who want to 'set it and forget it.' You choose a fund based on your retirement date, and Schwab's fund managers oversee the portfolios and keep them on track." (See end of press release for regulation analyst certification and how to obtain important required disclosures.) Allocation Strategy Developed by Schwab Center for Investment Research Extensive research by Schwab's Center for Investment Research (SCIR) has determined the optimal diversification of funds by asset class, market capitalization and international exposure as well as further diversification through multiple management styles in each asset category. SCIR found that at retirement, a moderate portfolio with about 60 percent in stocks, 35 percent in bonds and 5 percent in cash offers the best risk-return trade-off. The funds gradually decrease their equity holdings and increase fixed-income holdings as investors approach and enter retirement. For investors in retirement, the Schwab Retirement Income Fund focuses on providing current income along with equity-growth potential. The Schwab Difference Schwab Target Funds will invest in Schwab-affiliated equity and bond funds, according to the allocation strategy developed by SCIR. Assets in each of the funds will be allocated among 10 different equity, fixed income and money funds -- a smaller universe than most target funds, which helps keep the fund focused while minimizing overlap. The majority of the portfolios' domestic equity holdings will consist of funds powered by Schwab Equity Ratings(R), the methodology behind Schwab's industry-recognized equity model portfolio. Domestic funds include the Schwab Core Equity, Dividend Equity and Small-Cap Equity Funds (all powered by Schwab Equity Ratings), as well as the Laudus Rosenberg U.S. Large Cap Growth and U.S. Discovery Funds. International equity exposure will be obtained through the Laudus Rosenberg International Small Cap Fund, as well as the Laudus MarketMasters International Fund. The cash and short-term portion of the portfolio will be largely invested in Schwab's YieldPlus Fund, recently recognized by Lipper and Morningstar in the ultrashort bond category. Investments in the YieldPlus fund will seek to provide higher yield potential for the portfolio, though with higher risk than a money market fund. Longer-term fixed-income assets will be allocated to the Schwab Total Bond Market Fund. Fees for the Target Funds will be based on the select (or institutional) share class of each underlying fund, providing investors with access to the lowest-price eligible share class available at Schwab. Fund expenses are 98 basis points for the Schwab Target 2040 Fund, gradually decreasing to 70 basis points for the Schwab Retirement Income Fund as the funds become more heavily invested in fixed-income. No additional layer of management fees will apply*. Each of the five funds is available for an initial investment minimum of $2,500 ($1,000 for retirement accounts). Complement to Schwab Managed Retirement Trust Funds for Retirement Plans The new Target Funds for retail investors follow the successful launch of the Schwab Managed Retirement Trust Funds(TM) in 2002, which are available to 401(k) participants through Schwab Corporate Services. Unlike the new Target Funds, which are comprised of Schwab Funds, these retirement plan funds are collective trust funds sub-advised by independent money managers. With the launch of the Target Funds, Schwab is making available the same type of easy-to-manage retirement solution for retirement plan and retail clients alike. Portfolio Management Jeffrey Mortimer, senior vice president and chief investment officer for equities at Charles Schwab Investment Management (CSIM), is responsible for overall management of the funds. Mortimer oversees Schwab's equity index funds and all Schwab funds and separate accounts based upon Schwab Equity Ratings. He also manages the Laudus MarketMasters group of funds. Kim Daifotis, senior vice president and chief investment officer for fixed income, is responsible for the bond and cash-equivalent assets of the Target Funds. Daifotis oversees all fixed-income funds for CSIM, including municipal, taxable and money market funds. About Schwab Equity Ratings Schwab Equity Ratings provides an objective and powerful assessment of approximately 3000 U.S. head-quartered equities, more than any other firm. Stocks are assigned grades of A, B, C, D, or F, reflecting performance potential over the next 12 months. Schwab's outlook is that "A"-rated stocks, on average, will strongly outperform, and "F"-rated stocks, on average, will strongly underperform the equities market over the next 12 months. The ratings assess four broad categories: fundamentals, valuation, momentum, and risk. They are updated each week to reflect new financial data and other information. On average, Schwab Equity Ratings A-rated stocks outperformed the Dow Jones Wilshire 5000 Composite Index in the 52-week period from May 3, 2004 through May 2, 2005. The average performance of all stocks rated A on May 3, 2004, through the 52 weeks up to May 2, 2005 was 16.36% compared to a return of 6.60% during that period for the Index. The average performance of all stocks rated F from May 3, 2004 through the 52 weeks up to May 2, 2005, was -14.15%. For more information on Schwab Equity Ratings, including performance details, how performance was calculated, comparison of performance to benchmarks and limitations of model performance, visit http://www.schwab.com/serperformance. About Charles Schwab Investment Management Founded in 1991, Charles Schwab Investment Management, Inc. (CSIM), an affiliate of Charles Schwab & Co. Inc., is one of the nation's largest mutual fund companies with $140 billion under management as of April 30, 2005. It is the country's third -largest money market fund manager and third-largest provider of retail index funds. In addition to managing Schwab proprietary funds, CSIM provides oversight for the institutional-style, sub-advised Laudus Fund family. In total, CSIM manages 62 mutual funds, including 21 actively managed. About Charles Schwab The Charles Schwab Corporation (NYSE / Nasdaq: SCH), through its operating subsidiaries, provides securities brokerage and financial services to individual investors and the independent investment advisors who work with them. With over 7 million individual investor accounts and more than $1 trillion in client assets, The Charles Schwab Corporation is one of the nation's largest financial services firms. Its subsidiary Charles Schwab & Co., Inc. (member SIPC) provides a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plans; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent fee-based investment advisors. Its subsidiary Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. The corporation's other operating subsidiaries include U.S. Trust Corporation (member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web sites can be reached at http://www.schwab.com/, http://www.schwabbank.com/, http://www.ustrust.com/, and http://www.cybertrader.com/. * Funds may incur third-party expenses (1) Source: Congressional Budget Office Subscription orders must be received in good form by 4 p.m. Eastern Time on March 18, 2005. Orders received after that time will be invested at the next determined net asset value (NAV) after receipt and acceptance of the order by Schwab. Sufficient assets must be in your account by 9 a.m. Eastern time on March 17, 2005. If you do not have sufficient assets to meet the minimum initial investment requirement by this time, your order will be canceled. You may reinstate your order by bringing a check to your local Schwab branch by 4 p.m. Eastern Time on March 18, 2005. Share price will fluctuate once operations commence on March 21, 2005. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800 435-4000. Please read the prospectus carefully before investing Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. The Schwab Center for Investment Research is a division of Charles Schwab & Co., Inc. International investing involves special risks such as currency fluctuation and political instability. Share prices of bond mutual funds fluctuate with market conditions and generally fall with rising interest rates. Schwab Equity Ratings Cohort Performance Schwab creates five cohorts (defined as those stocks that received the same A, B, C, D or F rating that week). Schwab calculates the total return for each stock in each A, B, C, D and F rating cohort assuming a 52 week holding period. All hypothetical buy and sell trades were assumed to take place at the stock's closing price. Transaction costs such as brokerage commissions, fees or other expenses have not been deducted from the total return calculations. Results would have been lower if such costs were deducted. Any dividends incurred were treated as non-interest bearing cash and not reinvested. The 52 week performance for each Cohort is calculated as the equal weighted average of all the simple total returns associated with each stock in that Cohort. The Dow Jones Wilshire 5000 Composite index is a capitalization weighted index of over 6500 stocks and treats dividends as reinvested. Performance of a single stock or group of stocks within a Schwab Equity Ratings model performance cohort can vary greatly from the performance of that cohort. Investors would not likely be able to achieve the same performance as that discussed for various reasons explained in detail on schwab.com. Limitations of Model Performance: For all model performance results, there are inherent limitations which investors should understand. Unlike an actual performance record, simulated results do not represent actual investment performance or trading. Since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any of certain market factors, such as the effect of limited trading liquidity. No representation is being made that any investor will or is likely to achieve results similar to those shown. The results presented reflect past performance and should not and cannot be viewed as an indicator of future performance. The results shown are not an indicator of the returns a Schwab client would have realized or will realize in relying on Schwab Equity Ratings or any stock list or model mentioned. Schwab Equity Ratings and the lists or models mentioned are not personal recommendations for any particular investor and do not take into account the financial, investment or other objectives and may not be suitable for any particular investor. Before buying, investors should consider whether the investment is suitable for themselves and their portfolio. Additionally, investors should consider any recent market or company news. Stocks can be volatile and entail risk and individual stocks may not be suitable for you. Indexes are unmanaged, do not incur management fees and expenses and cannot be invested in directly. (0005-8246) DATASOURCE: Charles Schwab CONTACT: Sondra Harris of Charles Schwab, +1-415-636-3292, or Web site: http://www.schwab.com/

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