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Schwab - YieldPlus Funds

Date Filed: March 18, 2008

Court: U.S. District Court

Location: Northern District of California

Ticker Symbol: SCHW

Hagens Berman Sobol Shapiro filed the first class-action lawsuit against Charles Schwab Corporation (NASDAQ:SCHW) on March 18, 2008, alleging that Schwab deceived investors about the underlying risk in its Schwab YieldPlus Funds Investor Shares (SWYPX) and Schwab YieldPlus Funds Select Shares (SWYSX).

The lawsuit claims Charles Schwab and the funds' underwriter deceived investors about the underlying risk in the funds, which were sold as cash alternatives, but were in fact highly speculative and risky mortgage-related structured debt, according to the complaint.

The complaint also states that the funds' registration statements failed to include required facts about the investments - specifically that the funds have a high vulnerability of suddenly becoming illiquid and that the net asset values were highly speculative and inflated.

Since HBSS filed the first suit, many other firms filed similar class actions, and these were consolidated by the Federal Court in the United States District Court for the Northern District of California.

On July 3, 2008, the Honorable William H. Alsup appointed five members of the YieldPlus Investor Group to the position of lead plaintiff and instructed them to interview and choose lead counsel. On August 14, 2008, the YieldPlus Investor Group submitted their decision to the court to retain Hagens Berman Sobol Shapiro LLP. On August 18, 2008, the Court approved that decision.

To participate in this lawsuit as a member of the class, investors do not need to take any action at this time.

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RECENT DEVELOPMENTS:

August 21, 2009 - Today Judge William Alsup granted our motion for class certification, certifying two classes under federal claims and a third state-specific class.

The first federal class includes all individuals and entities who acquired shares of the fund from Nov. 15, 2006 through March 17, 2008. The second federal class consists of all individuals and entities who acquired shares of the fund from May 31, 2006 through March 17, 2008.

A single state class was also certified, that consists of California resident investors who held shares in the fund on Sept. 1, 2006.

The judge partially granted our motion, dismissing claims against Kimon Daifotis, who acted as senior portfolio manager at Schwab Investments with overall responsibility for management of the fund.

We'll continue to update our Web site with case developments. In the next month, we'll have details here on form of notice and next steps for class members.

July 13, 2009 - - Plaintiffs are due to file an expert report relating to their request for class certification on July 17, 2009. Fact Discovery will close on November 27, 2009 and Expert Discovery closes on January 4, 2010. Trial is currently set for May 10, 2010.

February 5, 2009 - This week Judge Alsup ruled on the defendants' motion to dismiss denying most of the claims. This is a significant victory for plaintiffs and allows us to continue moving the case forward. You can view the complete ruling by clicking here.

In the next couple of weeks, we'll begin working on initial discovery disclosures and an amended complaint. You can check the Web site February 26, 2009 to review updated court documents. We'll continue posting updates here as the case progresses.

October 2, 2008 - Today Hagens Berman Sobol Shapiro filed an amended complaint in the case against Charles Schwab. The complaint seeks to certify two distinct classes for litigation moving forward - the Securities Class and State Law Class.

The general allegations from the original complaint remain the same. Plaintiffs allege the named defendants violated federal and state law in marketing and selling the Fund as a stable, ultra-short bond fund that was a safe alternative to cash and had a minimal risk of fluctuating share price.

December 1, 2008 - Defendants filed three motions to dismiss and a motion to strike. Lead plaintiffs opposed these motions on Nov. 26, 2008 and a hearing is currently scheduled for Jan. 8, 2009.