Schwab Launches New Government National Mortgage Association --GNMA-- Bond Fund; Firm's First Fixed Income Fund to Utilize GNMA Securities.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Feb. 18, 2003

Charles Schwab & Co., Inc. recently introduced the Schwab GNMA Fund, a new core fixed-income mutual fund that further complements the wide range of investments offered by Schwab. The new fund, which invests primarily in Government National Mortgage Association (GNMA) bonds, is designed to provide investors with a higher level of income consistent with preservation of capital.

GNMAs are bonds issued by the Government National Mortgage Association ("Ginnie Mae"), an agency of the U.S. government. Each GNMA bond, which is backed by the "full faith and credit" of the U.S. government, represents part ownership in a pool of underlying mortgage loans. The U.S. government guarantees interest and principal payments on GNMA bonds held to maturity, however, fund shares themselves are not guaranteed.

The fund is in subscription January 29, 2003 through February 28, 2003. The fund's first day of operations will be March 3, 2003. During the subscription period, Schwab clients can place orders at an offering price of $10 per share.

"GNMA bonds are one of the highest credit quality and typically highest yielding types of government securities available to investors," said Randy Merk, president of Charles Schwab Investment Management (CSIM). "Our decision to introduce this fund is in response to client demand for investments that provide strong income and credit safety."

The Schwab GNMA Fund, in general, will invest at least 80 percent of its assets in GNMAs. The remaining 20 percent may be invested in other fixed income securities or held in cash.

The fund is offered in two share classes. Investor Shares have an initial investment of $2,500, with subsequent investment minimums of $500. Select Shares, which offer a lower operating expense ratio (OER) in return for a higher investment minimum, have an initial investment of $50,000, with subsequent investment minimums of $1,000. CSIM is waiving its management fee, and along with Schwab, is paying all fund expenses through August 31, 2003. Effective September 1, 2003, the fund's operating expense ratios (0.74% Investor Shares and 0.55% Select Shares) will apply, and are guaranteed through November 15, 2004.

According to Mr. Merk, "The Schwab GNMA Fund can act as a key component of the fixed income portion of an investor's asset allocation strategy. The fund may also be appropriate for investors seeking the relative safety of the bond market or those who remain concerned about stock market volatility."

The Schwab GNMA Fund is the first fund launched under the leadership of Mr. Merk, who joined Schwab in August 2002 to manage Schwab's proprietary fund division. Mr. Merk was previously with American Century Companies, Inc., where he was president and chief investment officer of American Century Investment Management, Inc.

Portfolio Management

Mr. Kim Daifotis, vice president and senior portfolio manager of CSIM, will have overall responsibility for fund management. Mr. Daifotis, who joined Schwab in 1997, manages four Schwab bond funds, including the Schwab GNMA Fund, totaling more than $3 billion in assets. He has more than 18 years of experience in research and asset management. Prior to joining Schwab in November 1997, he was a senior portfolio strategist at Lehman Brothers as well as a senior portfolio manager at Barclays Global Investors.

About Charles Schwab Investment Management, Inc.

Founded in 1991, Charles Schwab Investment Management, Inc., an affiliate of Charles Schwab & Co., Inc., manages $144 billion and ranks as the nation's 10th-largest mutual fund family, based on assets under management. It is also the country's fourth largest money market fund manager and third-largest provider of retail index funds. Charles Schwab Investment Management also manages eight bond funds, including both taxable and tax-free funds and 14 money market funds, which include both taxable and tax-free (municipal) funds.

About Charles Schwab & Co., Inc.

The Charles Schwab Corporation (NYSE:SCH), through Charles Schwab & Co., Inc. (member SIPC/NYSE), U.S. Trust Corporation, CyberTrader, Inc. (member SIPC/NASD) and its other operating subsidiaries, is one of the nation's largest financial services firms serving 8 million active accounts with $758.4 billion in customer assets. Schwab provides a full-service investing experience to customers through 422 domestic offices, 4 regional client telephone service centers and automated telephonic and online channels. The independent, fee-based investment advisors served through its Schwab Institutional division manage about 30% of Schwab's customer assets and 15% of its customer accounts.

For more information including a prospectus that contains complete information about fees, risks and expenses, please call 800-435-4000 or visit our Web site at www.schwab.com/schwabfunds. Please read the prospectus carefully before investing or sending money. Distributor: Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA 94104 Member SIPC/NYSE.

Past performance is no guarantee of future results. Investment values will fluctuate and shares, when redeemed, may be worth more or less than original cost.

* Subscription orders must be received in good form by 4 p.m. Eastern Time on February 28, 2003. 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 February 28, 2003. If you do not have sufficient assets to meet the minimum initial investment requirements 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 February 27, 2003. Share price will fluctuate once operations commence on March 3, 2003.

(0203-8161)