# EDGAR Filing Document

**Accession Number:** 0000904333
**File Stem:** 0001104659-23-025396
**Filing Date:** 2023-2
**Character Count:** 3583321
**Document Hash:** 706020c1812dc5fdcdada0b8e2550420
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-025396.hdr.sgml**: 20230227

**ACCESSION NUMBER**: 0001104659-23-025396

**CONFORMED SUBMISSION TYPE**: 485BPOS

**PUBLIC DOCUMENT COUNT**: 178

**FILED AS OF DATE**: 20230227

**DATE AS OF CHANGE**: 20230224

**EFFECTIVENESS DATE**: 20230227

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SCHWAB CAPITAL TRUST
- **CENTRAL INDEX KEY:** 0000904333
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1940 Act
- **SEC FILE NUMBER:** 811-07704
- **FILM NUMBER:** 23668969

**BUSINESS ADDRESS:**
- **STREET 1:** 211 MAIN STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 1-415-667-7000

**MAIL ADDRESS:**
- **STREET 1:** 211 MAIN STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SCHWAB CAPITAL TRUST
- **CENTRAL INDEX KEY:** 0000904333
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-62470
- **FILM NUMBER:** 23668968

**BUSINESS ADDRESS:**
- **STREET 1:** 211 MAIN STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 1-415-667-7000

**MAIL ADDRESS:**
- **STREET 1:** 211 MAIN STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105

## Series and Classes Contracts Data

### Schwab Large-Cap Growth Fund (Series ID: S000005513)

| Class ID   | Class Name                   | Ticker Symbol   |
|:---|:---|:---|
| C000015012 | Schwab Large-Cap Growth Fund | SWLSX           |

### Schwab Core Equity Fund (Series ID: S000005514)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015013 | Schwab Core Equity Fund | SWANX           |

### Schwab Dividend Equity Fund (Series ID: S000005515)

| Class ID   | Class Name                  | Ticker Symbol   |
|:---|:---|:---|
| C000015015 | Schwab Dividend Equity Fund | SWDSX           |

### Schwab Small-Cap Equity Fund (Series ID: S000005516)

| Class ID   | Class Name                   | Ticker Symbol   |
|:---|:---|:---|
| C000015017 | Schwab Small-Cap Equity Fund | SWSCX           |

### Schwab Health Care Fund (Series ID: S000005519)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015021 | Schwab Health Care Fund | SWHFX           |

### Schwab Target 2010 Fund (Series ID: S000005521)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015023 | Schwab Target 2010 Fund | SWBRX           |

### Schwab Target 2020 Fund (Series ID: S000005522)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015024 | Schwab Target 2020 Fund | SWCRX           |

### Schwab Target 2030 Fund (Series ID: S000005523)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015025 | Schwab Target 2030 Fund | SWDRX           |

### Schwab Target 2040 Fund (Series ID: S000005524)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000015026 | Schwab Target 2040 Fund | SWERX           |

### Schwab S&P 500 Index Fund (Series ID: S000005911)

| Class ID   | Class Name                | Ticker Symbol   |
|:---|:---|:---|
| C000016166 | Schwab S&P 500 Index Fund | SWPPX           |

### Schwab Small-Cap Index Fund (Series ID: S000005912)

| Class ID   | Class Name                  | Ticker Symbol   |
|:---|:---|:---|
| C000016169 | Schwab Small-Cap Index Fund | SWSSX           |

### Schwab Total Stock Market Index Fund (Series ID: S000005913)

| Class ID   | Class Name                           | Ticker Symbol   |
|:---|:---|:---|
| C000016171 | Schwab Total Stock Market Index Fund | SWTSX           |

### Schwab International Index Fund (Series ID: S000005914)

| Class ID   | Class Name                      | Ticker Symbol   |
|:---|:---|:---|
| C000016173 | Schwab International Index Fund | SWISX           |

### Schwab MarketTrack All Equity Portfolio (Series ID: S000005916)

| Class ID   | Class Name                              | Ticker Symbol   |
|:---|:---|:---|
| C000016175 | Schwab MarketTrack All Equity Portfolio | SWEGX           |

### Schwab MarketTrack Growth Portfolio (Series ID: S000005917)

| Class ID   | Class Name                          | Ticker Symbol   |
|:---|:---|:---|
| C000016177 | Schwab MarketTrack Growth Portfolio | SWHGX           |

### Schwab MarketTrack Balanced Portfolio (Series ID: S000005918)

| Class ID   | Class Name                            | Ticker Symbol   |
|:---|:---|:---|
| C000016178 | Schwab MarketTrack Balanced Portfolio | SWBGX           |

### Schwab MarketTrack Conservative Portfolio (Series ID: S000005919)

| Class ID   | Class Name                                | Ticker Symbol   |
|:---|:---|:---|
| C000016180 | Schwab MarketTrack Conservative Portfolio | SWCGX           |

### Schwab Balanced Fund (Series ID: S000006549)

| Class ID   | Class Name           | Ticker Symbol   |
|:---|:---|:---|
| C000017885 | Schwab Balanced Fund | SWOBX           |

### Schwab International Opportunities Fund (Series ID: S000006551)

| Class ID   | Class Name                              | Ticker Symbol   |
|:---|:---|:---|
| C000017890 | Schwab International Opportunities Fund | SWMIX           |

### Schwab Fundamental US Large Company Index Fund (Series ID: S000016766)

| Class ID   | Class Name                                     | Ticker Symbol   |
|:---|:---|:---|
| C000046821 | Schwab Fundamental US Large Company Index Fund | SFLNX           |

### Schwab Fundamental US Small Company Index Fund (Series ID: S000016767)

| Class ID   | Class Name                                     | Ticker Symbol   |
|:---|:---|:---|
| C000046824 | Schwab Fundamental US Small Company Index Fund | SFSNX           |

### Schwab Fundamental International Large Company Index Fund (Series ID: S000016768)

| Class ID   | Class Name                                                | Ticker Symbol   |
|:---|:---|:---|
| C000046827 | Schwab Fundamental International Large Company Index Fund | SFNNX           |

### Schwab Fundamental Emerging Markets Large Company Index Fund (Series ID: S000019900)

| Class ID   | Class Name                                                   | Ticker Symbol   |
|:---|:---|:---|
| C000055852 | Schwab Fundamental Emerging Markets Large Company Index Fund | SFENX           |

### Schwab Fundamental International Small Company Index Fund (Series ID: S000019901)

| Class ID   | Class Name                                                | Ticker Symbol   |
|:---|:---|:---|
| C000055855 | Schwab Fundamental International Small Company Index Fund | SFILX           |

### Schwab Target 2015 Fund (Series ID: S000020935)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000059131 | Schwab Target 2015 Fund | SWGRX           |

### Schwab Target 2025 Fund (Series ID: S000020936)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000059132 | Schwab Target 2025 Fund | SWHRX           |

### Schwab Target 2035 Fund (Series ID: S000020937)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000059133 | Schwab Target 2035 Fund | SWIRX           |

### Schwab International Core Equity Fund (Series ID: S000022039)

| Class ID   | Class Name                            | Ticker Symbol   |
|:---|:---|:---|
| C000063316 | Schwab International Core Equity Fund | SICNX           |

### Schwab Target 2045 Fund (Series ID: S000039605)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000122183 | Schwab Target 2045 Fund | SWMRX           |

### Schwab Target 2050 Fund (Series ID: S000039606)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000122184 | Schwab Target 2050 Fund | SWNRX           |

### Schwab Target 2055 Fund (Series ID: S000039607)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000122185 | Schwab Target 2055 Fund | SWORX           |

### Schwab Target 2060 Fund (Series ID: S000054918)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000172771 | Schwab Target 2060 Fund | SWPRX           |

### Schwab U.S. Large-Cap Growth Index Fund (Series ID: S000059731)

| Class ID   | Class Name                              | Ticker Symbol   |
|:---|:---|:---|
| C000195502 | Schwab U.S. Large-Cap Growth Index Fund | SWLGX           |

### Schwab U.S. Large-Cap Value Index Fund (Series ID: S000059732)

| Class ID   | Class Name                             | Ticker Symbol   |
|:---|:---|:---|
| C000195503 | Schwab U.S. Large-Cap Value Index Fund | SWLVX           |

### Schwab U.S. Mid-Cap Index Fund (Series ID: S000059733)

| Class ID   | Class Name                     | Ticker Symbol   |
|:---|:---|:---|
| C000195504 | Schwab U.S. Mid-Cap Index Fund | SWMCX           |

### Schwab Target 2065 Fund (Series ID: S000071107)

| Class ID   | Class Name              | Ticker Symbol   |
|:---|:---|:---|
| C000225748 | Schwab Target 2065 Fund | SWQRX           |

?xml version='1.0' encoding='ASCII'? out - none - 1.324s

**As filed with the Securities and Exchange Commission on February 27, 2023

File Nos. 033-62470 811-07704

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A REGISTRATION STATEMENT

 *UNDER THE SECURITIES ACT OF 1933* 

Post-Effective Amendment No. 220

☒

and

REGISTRATION STATEMENT

 *UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 221* 

☒

## SCHWAB CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)

211 Main Street San Francisco, California 94105

(Address of Principal Executive Offices)

(800) 648-5300

(Registrant's Telephone Number, including Area Code)

Catherine M. MacGregor, Esq. 211 Main Street San Francisco, California 94105

(Name and Address of Agent for Service)

 *Copies of communications to:* 

Douglas P. Dick, Esq. Dechert LLP 1900 K Street, N.W. Washington, DC 20006 John M. Loder, Esq. Ropes & Gray LLP 800 Boylston Street Boston, MA 02199-3600

It is proposed that this filing will become effective (check appropriate box):

☒ Immediately upon filing pursuant to paragraph (b)

□ On (date) pursuant to paragraph (b)

□ 60 days after filing pursuant to paragraph (a)(1)

□ On (date) pursuant to paragraph (a)(1)

□ 75 days after filing pursuant to paragraph (a)(2)

□ On (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

□ This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

------**

[**TABLE OF CONTENTS**](#TOC)

![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab<sup>®</sup> Active Equity Funds

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Large-Cap Growth Fund | **SWLSX**  |
| Schwab<sup>®</sup> Core Equity Fund | **SWANX**  |
| Schwab<sup>®</sup> International Core Equity Fund | **SICNX**  |
| Schwab<sup>®</sup> Dividend Equity Fund | **SWDSX**  |
| Schwab<sup>®</sup> Small-Cap Equity Fund | **SWSCX**  |
| Schwab<sup>®</sup> Health Care Fund | **SWHFX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

------

[**TABLE OF CONTENTS**](#TOC)

## Schwab Active Equity Funds

---

| | |
|:---|:---|
| **Fund Summaries** | **Fund Summaries** |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Large-Cap Growth Fund.](#iddghahSLCGF)  | [1](#iddghahSLCGF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Core Equity Fund.](#iddfcbhSCEF)  | [4](#iddfcbhSCEF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab International Core Equity Fund.](#iddijcfSICEF)  | [7](#iddijcfSICEF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Dividend Equity Fund.](#idebcffSDEF)  | [11](#idebcffSDEF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Small-Cap Equity Fund](#idddjbgSSCEF)  | [15](#idddjbgSSCEF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Health Care Fund](#iddiabjSHCF)  | [18](#iddiabjSHCF) |
| **[Fund Details](#idcfaiihFD)**  | [22](#idcfaiihFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objectives and More About Principal Risks](#idbgdhagIOMAPR)  | [22](#idbgdhagIOMAPR) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Large-Cap Growth Fund.](#iddcfSLCGF)  | [22](#iddcfSLCGF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Core Equity Fund.](#iddbgSCEF)  | [24](#iddbgSCEF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab International Core Equity Fund.](#iddedSICEF)  | [26](#iddedSICEF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Dividend Equity Fund.](#iddceSDEF)  | [29](#iddceSDEF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Small-Cap Equity Fund](#iddcfSSCEF)  | [32](#iddcfSSCEF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Health Care Fund](#iddbgSHCF)  | [34](#iddbgSHCF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [More About Schwab's Research](#idhhjjMASR)  | [37](#idhhjjMASR) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbjcPH)  | [39](#idbbjcPH) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idiefgbFH)  | [40](#idiefgbFH) |
| **[Fund Management](#idjeihFM)**  | [46](#idjeihFM) |
| **[Investing in the Funds](#iddhdcdIF)**  | [48](#iddhdcdIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#ideggbITFI)  | [48](#ideggbITFI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Funds](#idbbhiIDF)  | [48](#idbbhiIDF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idchfiSP)  | [49](#idchfiSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbjhdcAPAYI)  | [49](#idbjhdcAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idhbhaDT)  | [52](#idhbhaDT) |

---

------

[**TABLE OF CONTENTS**](#TOC)

Schwab<sup>®</sup> Large-Cap Growth Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWLSX** |

---

#### Investment Objective
The fund seeks long-term capital growth.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.72  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.30  |
| *Total annual fund operating expenses* | *1.02*  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses after expense reduction<sup>(1)</sup>**  | **0.99**  |

---

<sup>(1)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.99% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $101 | $315 | $547 | $1213 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 19% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its investment objective, the fund invests primarily in U.S. common stocks.** Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in large-cap stocks of U.S. companies. The fund will notify its shareholders at least 60 days before changing this policy. Large-cap stocks generally are those with market capitalizations within the universe of the Russell 1000<sup>®</sup> Index at the time of purchase by the fund. The market capitalization range of the Russell 1000 Index was $349 million to $2,296 billion, as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. The Russell 1000<sup>®</sup> Growth Index (the Index), the fund's comparative index, includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted values. The fund invests its assets in companies it believes to have above-average growth potential. Growth may be measured by factors such as earnings or revenue. Companies with high growth potential tend to have higher than average price/earnings (P/E) or price/book (P/B) ratios. Companies with strong growth potential often have new products, technologies, or other opportunities, or have a strong industry or market position. The stocks of these companies are often called "growth" stocks.

The fund actively selects portfolio securities. To aid its stock selection, the fund uses Schwab Equity Ratings<sup>®</sup>, a model that assigns ratings to approximately 3,000 U.S.-traded stocks. In addition to using Schwab Equity Ratings, the portfolio managers utilize investment data and other analytics to help manage the fund's portfolio. Generally, when constructing the portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information on Schwab Equity Ratings, please see the "More About Schwab's Research" section in the prospectus.

When constructing the portfolio, the portfolio managers apply a research-driven, "bottom-up" approach focusing primarily on individual securities. Using both quantitative and qualitative techniques, the portfolio managers seek to identify attractive securities for equity investments. The companies are analyzed with respect to business quality, future return potential, and valuation. The portfolio managers assess the portfolio's risk through a variety of quantitative and qualitative measures, as well as relative to the Index.

The fund may use a portfolio optimization process to assist in constructing the portfolio. A portfolio optimization process seeks to provide an optimal balance between risk and expected return,

Schwab Large-Cap Growth Fund \| Fund Summary1

------

[**TABLE OF CONTENTS**](#TOC)

given parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, industry and sector diversification, and volatility considerations.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash.

The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Growth Investing Risk.** Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer's future earnings and revenues. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

2Schwab Large-Cap Growth Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#TOC)

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of an index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: j6v5b14otg7hueqli6lp5ebbdlk3.jpg]](j6v5b14otg7hueqli6lp5ebbdlk3.jpg)

#### Best Quarter: 26.15% Q2 2020
**Worst Quarter:** (19.58%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (26.99%) | 8.04% | 11.96% |
| After taxes on distributions | (27.33%) | 6.58% | 10.12% |
|  After taxes on distributions and sale <br> of shares  | (15.72%) | 6.14% | 9.39% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 1000 Growth Index | (29.14%) | 10.96% | 14.10% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Bill McMahon, CFA,** Managing Director and Chief Investment Officer of Active Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since August 2021.

**Gretchen Novak, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since August 2021.

**Holly Emerson, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2017.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab Large-Cap Growth Fund \| Fund Summary3

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[**TABLE OF CONTENTS**](#TOC)

Schwab<sup>®</sup> Core Equity Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWANX** |

---

#### Investment Objective
The fund seeks long-term capital growth.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** 

<br> ---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.47  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.26  |
| **Total annual fund operating expenses** | **0.73**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $75 | $233 | $406 | $906 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 28% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its investment objective, the fund invests primarily in U.S. stocks.** Under normal circumstances, the fund pursues its goal by investing at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities

of U.S. companies. The fund will notify its shareholders at least 60 days before changing this policy. The fund typically invests in common stocks of U.S. companies that have market capitalizations of approximately $500 million or more at the time of purchase. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the S&P 500<sup>®</sup> Index (the Index). The Index includes the common stocks of 500 leading U.S. publicly-traded companies from a broad range of industries.

The fund actively selects portfolio securities. To aid its stock selection, the fund uses Schwab Equity Ratings<sup>®</sup>, a model that assigns ratings to approximately 3,000 U.S.-traded stocks. In addition to using Schwab Equity Ratings, the portfolio managers utilize investment data and other analytics to help manage the fund's portfolio.

Generally, when constructing the portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information on Schwab Equity Ratings, please see the "More About Schwab's Research" section in the prospectus.

When constructing the portfolio, the portfolio managers apply a research-driven, "bottom-up" approach focusing primarily on individual securities. Using both quantitative and qualitative techniques, the portfolio managers seek to identify attractive securities for equity investments. The companies are analyzed with respect to business quality, future return potential, and valuation. The portfolio managers assess the portfolio's risk through a variety of quantitative and/or qualitative measures, as well as relative to the Index.

The fund may use a portfolio optimization process to assist in constructing the portfolio. A portfolio optimization process seeks to provide an optimal balance between risk and expected return, given parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, industry and sector diversification, and volatility considerations.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash.

The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

4Schwab Core Equity Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#TOC)

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of an index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Core Equity Fund \| Fund Summary5

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[**TABLE OF CONTENTS**](#TOC)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: ajb2ngd0mt6b49kakhnum2138m5g.jpg]](ajb2ngd0mt6b49kakhnum2138m5g.jpg)

#### Best Quarter: 20.88% Q2 2020

#### Worst Quarter: (21.37%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (17.95%) | 6.60% | 10.74% |
| After taxes on distributions | (20.65%) | 3.37% | 7.66% |
|  After taxes on distributions and sale <br> of shares  | (8.58%) | 4.84% | 8.16% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| S&P 500 Index | (18.11%) | 9.42% | 12.56% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Bill McMahon, CFA,** Managing Director and Chief Investment Officer of Active Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since August 2021.

**Iain Clayton, CFA, FRM,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2015.

**Brian Hillburn, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since August 2021.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat

such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

6Schwab Core Equity Fund \| Fund Summary

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Schwab<sup>®</sup> International Core Equity Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SICNX** |

---

#### Investment Objective
The fund seeks long-term capital growth.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.58  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.31  |
| *Total annual fund operating expenses*  | 0.89  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses after expense reduction<sup>(1)</sup>**  | **0.86**  |

---

<sup>(1)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.86% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $88 | $274 | $477 | $1061 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 94% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its investment objective, the fund invests primarily in the stocks of publicly traded companies located in developed market countries excluding the United States**, however, the fund may also invest in stocks issued by companies located in emerging markets**.** Developed market countries include, but are not limited to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The fund considers any country that is not a developed market country to be an emerging market country.

Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities. The fund will notify its shareholders at least 60 days before changing this policy. The fund typically invests a majority of its assets in the stocks of large-cap and mid-cap companies, but may invest a portion of its assets in small-cap companies. In addition, the portfolio managers seek to allocate the fund's investments across different countries and geographic regions in an effort to manage the economic and socio-political risks associated with investing in a single country or limited number of countries. The fund generally does not intend to hedge its exposure to foreign currencies.

The fund seeks to assemble a portfolio with long-term performance that will exceed that of the MSCI EAFE<sup>®</sup> Index (the Index). The Index includes over 900 securities listed on the stock exchanges of certain developed market countries in Europe, Australia, Asia, and the Far East. The fund approaches risk management from the perspective of the Index. The portfolio managers seek to keep the fund's volatility similar to that of the Index.

The fund uses a portfolio optimization process to assist in constructing the portfolio. The portfolio managers use the portfolio optimization process to seek to build a portfolio they believe will provide the optimal balance between risk and expected return, subject to parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, country and sector diversification, and volatility considerations.

The fund actively selects portfolio securities. To aid its stock selection, the fund uses Schwab Equity Ratings International<sup>®</sup>, a model that ranks stocks of foreign companies headquartered and trading in certain foreign countries. The stocks are ranked based on factors that Schwab believes to be indicative of stocks' performance potential. The fund may also use additional research as a component of its overall stock selection process. This research may incorporate the analysis of factors including, but not limited to, valuation, balance sheet strength, future earnings power and trading activity to identify companies expected to outperform the broader equity market. Generally, when constructing the

Schwab International Core Equity Fund \| Fund Summary7

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portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings International. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings International. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information about Schwab Equity Ratings International, please see the "More About Schwab's Research" section in the prospectus.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash. The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund may also invest in depository receipts evidencing ownership of shares of foreign issuers, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), and European Depositary Receipts (EDRs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings International may

not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Emerging Markets Risk.** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

8Schwab International Core Equity Fund \| Fund Summary

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**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of an index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: g0qg1dr2u8q6e3mq4in23v1vfhv0.jpg]](g0qg1dr2u8q6e3mq4in23v1vfhv0.jpg)

**Best Quarter:** 17.18% Q4 2022

#### Worst Quarter: (24.88%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (15.31%) | (0.85%) | 4.13% |
| After taxes on distributions | (15.94%) | (1.30%) | 3.63% |
|  After taxes on distributions and sale <br> of shares  | (8.56%) | (0.46%) | 3.40% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| MSCI EAFE Index (Net)<sup>(1)</sup> | (14.45%) | 1.54% | 4.67% |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Iain Clayton, CFA, FRM,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2015.

**Wei Li, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Schwab International Core Equity Fund \| Fund Summary9

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Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

10Schwab International Core Equity Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#TOC)

Schwab<sup>®</sup> Dividend Equity Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | SWDSX |

---

#### Investment Objective
The fund seeks current income and capital appreciation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.62  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.28  |
| *Total annual fund operating expenses*  | 0.90  |
| Less expense reduction | (0.01)  |
| **Total annual fund operating expenses<sup>(1)</sup>** | **0.89**  |

---

<sup>(1)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.89% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $91 | $284 | $493 | $1096 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 27% of the average value of its portfolio.

#### Principal Investment Strategies
**Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in dividend paying common and preferred stocks.** The fund will notify its shareholders at least 60 days before changing this policy. Dividend paying stocks are those stocks that historically have paid, or the portfolio managers anticipate will pay, a dividend. The fund seeks to assemble a portfolio that provides a higher dividend yield than the fund's comparative index, the Russell 1000<sup>®</sup> Value Index (the Index). The fund seeks to provide current income from dividends that are eligible for the reduced tax rate on qualified dividend income. The fund also seeks to provide capital appreciation. The fund may invest in companies of all sizes.

The fund primarily invests in U.S. companies, but may invest up to 20% of its net assets in the stocks of publicly traded companies located in countries other than the United States. The fund's international investments will primarily be in stocks issued by companies located in developed market countries; however, it may also invest in stocks issued by companies located in emerging markets. The fund generally does not intend to hedge its exposure to foreign currencies.

The fund actively selects portfolio securities. To aid its U.S. stock selection, the fund uses Schwab Equity Ratings<sup>®</sup>, a model that assigns ratings to approximately 3,000 U.S.-traded stocks. To aid its international stock selection, the fund uses Schwab Equity Ratings International<sup>®</sup>, a model that ranks stocks of foreign companies headquartered and trading in certain foreign countries. In addition to using Schwab Equity Ratings and Schwab Equity Ratings International, the portfolio managers utilize investment data and other analytics to help manage the fund's portfolio.

Generally, when constructing the portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings or by Schwab Equity Ratings International. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings or by Schwab Equity Ratings International. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information on Schwab Equity Ratings and Schwab Equity Ratings International, please see the "More About Schwab's Research" section in the prospectus.

When constructing the portfolio, the portfolio managers apply a research-driven, "bottom-up" approach focusing primarily on individual securities. Using both quantitative and qualitative techniques, the portfolio managers seek to identify attractive dividend paying equity securities. Companies are analyzed with respect to business quality, future return potential and valuation.

Schwab Dividend Equity Fund \| Fund Summary11

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Particular attention is paid to a company's track record of dividend payment and dividend growth, its current dividend policy and its potential to increase dividends in the future.

The fund may use a portfolio optimization process to assist in constructing the portfolio. A portfolio optimization process seeks to provide an optimal balance between risk and expected return, given parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, industry and sector diversification, and volatility considerations.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash.

The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund may also invest in depositary receipts evidencing ownership of shares of foreign issuers, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), and European Depositary Receipts (EDRs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process, Schwab Equity Ratings and Schwab Equity International Ratings may not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design

flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund primarily invests in dividend paying stocks. As a result, fund performance will correlate with the performance of the dividend paying stock segment of the stock market, and the fund may underperform funds that do not limit their investments to dividend paying stocks. If stocks held by the fund reduce or stop paying dividends, the fund's ability to generate income may be affected.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage

12Schwab Dividend Equity Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#TOC)

of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Emerging Markets Risk.** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of two indices. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: i5e7k21kqvn44289u0noe8vjg0pe.jpg]](i5e7k21kqvn44289u0noe8vjg0pe.jpg)

#### Best Quarter: 14.34% Q4 2020

#### Worst Quarter: (28.36%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (5.81%) | 4.77% | 8.66% |
| After taxes on distributions | (7.25%) | 2.71% | 6.29% |
|  After taxes on distributions and sale <br> of shares  | (2.40%) | 3.50% | 6.53% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 1000 Value Index | (7.54%) | 6.67% | 10.29% |
| S&P 500 Index | (18.11%) | 9.42% | 12.56% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Bill McMahon, CFA,** Managing Director and Chief Investment Officer of Active Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since August 2021.

Schwab Dividend Equity Fund \| Fund Summary13

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**Wei Li, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

**Jim Serhant, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since August 2021.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

14Schwab Dividend Equity Fund \| Fund Summary

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Schwab<sup>®</sup> Small-Cap Equity Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | SWSCX |

---

#### Investment Objective
The fund seeks long-term capital growth.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.81  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.28  |
| **Total annual fund operating expenses** | **1.09**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $111 | $347 | $601 | $1329 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 74% of the average value of its portfolio.

#### Principal Investment Strategies
 **Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in small-cap equity securities. The fund will notify its shareholders at least 60 days before changing this** 

policy. Small-cap equity securities generally are securities with market capitalizations within the universe of the Russell 2000<sup>®</sup> Index (the Index) at the time of purchase by the fund. The market capitalization range of the Index was $11 million to $10 billion as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the Index.

The fund approaches risk management from the perspective of the Index. The Index measures the performance of the 2,000 smallest companies (based on total market capitalization) in the Russell 3000<sup>®</sup> Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The portfolio managers seek to keep the fund's volatility similar to that of the Index.

The fund actively selects portfolio securities. To aid its stock selection, the fund uses Schwab Equity Ratings<sup>®</sup>, a model that assigns ratings to approximately 3,000 of the largest (by market cap) U.S.-traded stocks. In addition to using Schwab Equity Ratings, the portfolio managers utilize investment data and other analytics to help manage the fund's portfolio.

Generally, when constructing the portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information on Schwab Equity Ratings, please see the "More About Schwab's Research" section in the prospectus.

The fund uses a portfolio optimization process to assist in constructing the portfolio. The portfolio managers use the portfolio optimization process to seek to build a portfolio they believe will provide the optimal balance between risk and expected return, subject to parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, industry and sector diversification, and volatility considerations.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash. The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

Schwab Small-Cap Equity Fund \| Fund Summary15

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For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of an index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

16Schwab Small-Cap Equity Fund \| Fund Summary

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: npe05i1kr33c4r8b2keic0htg3l1.jpg]](npe05i1kr33c4r8b2keic0htg3l1.jpg)

#### Best Quarter: 25.89% Q4 2020

#### Worst Quarter: (33.91%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.07%) | 4.41% | 9.56% |
| After taxes on distributions | (15.91%) | 2.07% | 6.74% |
|  After taxes on distributions and sale <br> of shares  | (6.96%) | 2.99% | 7.03% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 2000 Index | (20.44%) | 4.13% | 9.01% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Iain Clayton, CFA, FRM,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2022.

**Wei Li, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

**Holly Emerson, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2022.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat

such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab Small-Cap Equity Fund \| Fund Summary17

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Schwab<sup>®</sup> Health Care Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWHFX**  |

---

#### Investment Objective
The fund seeks long-term capital growth.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.53  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.27  |
| **Total annual fund operating expenses** | **0.80**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $82 | $255 | $444 | $990 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 59% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in equity securities issued by companies in the health care sector.** The health care sector may include, for example, pharmaceutical and biotechnology companies, health care facilities operations, medical product

manufacturers and suppliers, medical providers and medical services firms. It is the fund's policy that under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these securities; typically, the actual percentage will be higher. The fund will notify its shareholders at least 60 days before changing this policy. The fund will concentrate its investments in securities of companies in the health care sector.

The fund primarily invests in U.S. companies, but may invest up to 25% of its net assets in the stocks of publicly traded companies located in countries other than the United States. The fund's international investments will primarily be in stocks issued by companies located in developed market countries; however, it may also invest in stocks issued by companies located in emerging markets. The fund generally does not intend to hedge its exposure to foreign currencies. The fund may invest in companies of all sizes.

The fund actively selects portfolio securities. To aid its U.S. stock selection, the fund uses Schwab Equity Ratings<sup>®</sup>, a model that assigns ratings to approximately 3,000 of the largest (by market cap) U.S.-traded stocks. To aid its international stock selection, the fund uses Schwab Equity Ratings International<sup>®</sup>, a model that ranks stocks of foreign companies headquartered and trading in certain foreign countries. In addition to using Schwab Equity Ratings and Schwab Equity Ratings International, the portfolio managers utilize investment data and other analytics to help manage the fund's portfolio.

Generally, when constructing the portfolio, the portfolio managers invest in stocks that are highly rated by Schwab Equity Ratings or by Schwab Equity Ratings International. As part of the portfolio construction process, the portfolio managers may also purchase lower-rated stocks or stocks that are not rated by Schwab Equity Ratings or by Schwab Equity Ratings International. This investment approach under normal conditions will result in a portfolio that maintains an overall weighting toward highly-rated stocks. For more information on Schwab Equity Ratings and Schwab Equity Ratings International, please see the "More About Schwab's Research" section in the prospectus.

The fund uses a portfolio optimization process to assist in constructing the portfolio. The portfolio managers use the portfolio optimization process to seek to build a portfolio they believe will provide the optimal balance between risk and expected return, subject to parameters such as the number of stocks desired in the portfolio, the level of portfolio turnover, industry diversification, and volatility considerations.

The fund may invest in derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets. A futures contract is a contract to buy or sell a specific financial instrument at a specified price at a specific future time. By

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using these instruments, the fund potentially can offset the impact on its performance of keeping some assets in cash. The fund may invest in exchange-traded funds (ETFs) and stocks of real estate investment trusts (REITs). The fund may also invest in depository receipts evidencing ownership of shares of foreign issuers, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), and European Depositary Receipts (EDRs). The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. The fund also may invest in these types of securities or hold cash while looking for suitable investment opportunities. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process, Schwab Equity Ratings and Schwab Equity Ratings International may not adequately take into account certain factors or may rely on inaccurate data inputs, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data inputs. As a result, the fund may have a lower return than if it were managed using another process or strategy.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Concentration Risk.** Because the fund's investments are concentrated in issuers doing business in the same sector, the companies in which the fund invests will be affected by many of the

same factors, such as legislative or regulatory changes, intense competition for market share and other competitive challenges. In addition, stocks of health care companies may underperform other segments of the equity market or stock market as a whole and are likely to have above-average volatility.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Emerging Markets Risk.** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial

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amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**ETF Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks, for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Portfolio Turnover Risk.** The fund buys and sells portfolio securities actively. This may cause the fund's portfolio turnover rate and transaction costs to rise, which may lower the fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of two indices. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: tjsgq4cb1r6re3mhs2fl05jelnu0.jpg]](tjsgq4cb1r6re3mhs2fl05jelnu0.jpg)

#### Best Quarter: 16.01% Q1 2013

#### Worst Quarter: (12.09%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (4.67%) | 10.16% | 13.15% |
| After taxes on distributions | (5.55%) | 8.05% | 10.64% |
|  After taxes on distributions and sale <br> of shares  | (2.10%) | 7.78% | 10.18% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| Dow Jones Global Health Care Index  | (8.00%) | 9.31% | 11.91% |
| S&P 500 Index | (18.11%) | 9.42% | 12.56% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Iain Clayton, CFA, FRM,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2015.

**Wei Li, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

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Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## Fund Details
There can be no assurance that the funds will achieve their objectives. Except as explicitly described otherwise, the investment strategies and policies of each fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in each fund are summarized in the fund summaries at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the funds, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, each fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies, Securities and Risks" section in the Statement of Additional Information (SAI).

Investment Objectives and More About Principal Risks

#### Schwab Large-Cap Growth Fund

#### Investment Objective
The fund seeks long-term capital growth.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings, may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not received Schwab Equity Ratings and stocks that have received lower Schwab Equity Ratings, and these stocks may underperform the fund's stocks that receive Schwab Equity Ratings and stocks that receive higher Schwab Equity Ratings, respectively.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap

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companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Growth Investing Risk.** The fund pursues a "growth style" of investing. Growth investing focuses on a company's prospects for growth of revenue and earnings. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks also can perform differently from the market as a whole and other types of stocks and can be more volatile than other types of stocks. Since growth companies usually invest a high portion of earnings in their businesses, they may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code of 1986, as amended (Internal Revenue Code), or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended (the 1940 Act). The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of

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a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Core Equity Fund

#### Investment Objective
The fund seeks long-term capital growth.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings, may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not received Schwab Equity Ratings and stocks that have received lower Schwab Equity Ratings, and these stocks may underperform the fund's stocks that receive Schwab Equity Ratings and stocks that receive higher Schwab Equity Ratings, respectively.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

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**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with

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investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab International Core Equity Fund

#### Investment Objective
The fund seeks long-term capital growth.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings International, may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process and Schwab Equity Ratings International may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings International rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not received a rating from Schwab Equity Ratings International, and these stocks may underperform the fund's stocks that receive a rating from Schwab Equity Ratings International.

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**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into

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service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**Emerging Markets Risk.** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

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**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Dividend Equity Fund

#### Investment Objective
The fund seeks current income and capital appreciation.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The investment techniques, risk analyses and portfolio optimization process the investment adviser may use in constructing the fund's portfolio do not assure successful investment outcomes. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings and Schwab Equity Ratings International, may be negatively impacted by factors or events

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not foreseen in developing the process. The portfolio optimization process, Schwab Equity Ratings and Schwab Equity Ratings International may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings and Schwab Equity Ratings International rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. The fund's investment adviser may make investment decisions using historical information that may not produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not received Schwab Equity Ratings and stocks that have received lower Schwab Equity Ratings, and these stocks may underperform the fund's stocks that receive Schwab Equity Ratings and stocks that receive higher Schwab Equity Ratings, respectively.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** In accordance with its income objective, the fund primarily invests in dividend paying stocks. As a result, fund performance will correlate directly with the performance of the dividend paying stock segment of the stock market. This may cause the fund to underperform funds that do not limit their investments to dividend paying stocks. In addition, if stocks held by the fund reduce or stop paying dividends, the fund's ability to generate income may be affected.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

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**Emerging Markets Risk.** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities

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lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Small-Cap Equity Fund

#### Investment Objective
The fund seeks long-term capital growth.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings, may be negatively impacted by factors or events not foreseen in developing the

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process. The portfolio optimization process and Schwab Equity Ratings may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not received Schwab Equity Ratings, and these stocks may underperform the fund's stocks that receive Schwab Equity Ratings.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

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**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Health Care Fund

#### Investment Objective
The fund seeks long-term capital growth.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The fund's investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future and, if market dynamics change, the effectiveness of the strategy may be limited. In addition, the portfolio optimization process used by the fund to assist in constructing the fund's portfolio does not assure successful investment. Securities selected with the assistance of the investment process, including the use of Schwab Equity Ratings and Schwab Equity Ratings International, may be negatively impacted by factors or events not foreseen in developing the process. The portfolio optimization process, Schwab Equity Ratings and Schwab Equity Ratings International may not adequately take into account certain factors, may contain design flaws or faulty assumptions, and may rely on incomplete or inaccurate data, any of which may result in a decline in the value of an investment in the fund. If Schwab Equity Ratings and Schwab Equity Ratings International rely on inaccurate data, incorrect or incomplete algorithms, or inaccurate assumptions, or if prices

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of individual rated securities are affected by factors not considered in developing the ratings, any decisions or investments made in reliance thereon expose the fund to additional risks. As a result, the fund may have a lower return than if it were managed using another process or strategy. These risks may cause the fund to underperform its comparative index or other funds with a similar investment objective. The fund may invest in stocks that have not been rated by Schwab Equity Ratings or Schwab Equity Ratings International, and these stocks may underperform the fund's stocks that receive Schwab Equity Ratings or a rating from Schwab Equity Ratings International.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Concentration Risk.** Because the fund's investments are concentrated in issuers doing business in the health care sector, your investment is exposed to that sector's risks. The companies in which the fund invests will be affected by many of the same factors, such as legislative or regulatory changes, intense competition for market share and other competitive challenges posed by joint ventures and mergers between U.S. and foreign firms. In addition, the fund is subject to the risks that stocks of health care companies may underperform other segments of the equity market or the stock market as a whole and are likely to have above-average volatility. Health care companies may be adversely affected by changes to the regulation of the health care industry and reimbursement rates, decisions by government agencies to withhold approvals for health care products and services, and patent expirations.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Emerging Markets Risk.** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with

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the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Derivatives Risk.** The principal type of derivative used by the fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, counterparty risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Counterparty risk is the risk that the counterparty to a derivatives

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transaction may not fulfill its obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**REITs Risk.** The fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, increases in property taxes and operating expenses, changes in zoning laws, overbuilding, extended vacancies of properties, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### More About Schwab's Research
The funds use either Schwab Equity Ratings<sup>®</sup> or Schwab Equity Ratings International<sup>®</sup> to aid in stock selection (or, in the case of the Schwab Dividend Equity Fund and the Schwab Health Care Fund, both are used).

Schwab Active Equity Funds \| Fund Details37

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Schwab Equity Ratings use a scale of "A," "B," "C," "D," and "F," and are assigned to approximately 3,000 U.S.-traded stocks. The Schwab Equity Ratings model universe is generally composed of the combined set of stocks in the FTSE Russell U.S. 3000 Index and the Standard & Poor's (S&P) 500 Index. Schwab's research outlook is that "A"-rated stocks, on average, will strongly outperform, and "F"-rated stocks, on average, will strongly underperform the equities market during the next 12 months.

Schwab Equity Ratings International assigns ratings to foreign companies headquartered and trading in certain foreign countries. Schwab's international stock research outlook is that highly-rated stocks, on average, will strongly outperform, and low-rated stocks, on average, will strongly underperform the foreign equities market on which the stock is traded or in which the company is headquartered during the next 12 months.

Schwab Equity Ratings and Schwab Equity Ratings International are generally updated weekly.

Schwab Equity Ratings are based upon a disciplined, systematic approach that evaluates each stock on the basis of a wide variety of investment criteria from five broad categories: Growth, Quality, Sentiment, Stability and Valuation.

The Growth component underlying the rating is based on several historical growth rates of accounting variables and the estimated growth of other items. Stocks with attributes of high profitability growth, high expected dividend growth but lower expected sales growth tend to have better Growth scores. Highly-rated stocks within this category may have the potential for price appreciation, as investors perceive that the growth potential from these companies are more favorable.

The Quality component underlying the rating is based on a number of operating performance measures derived from recent financial statement data. Stocks with attributes such as high profitability, high earnings quality, conservative investment spending and better operating efficiency tend to have better Quality scores. Highly-rated stocks within this category may have the potential for price appreciation, as investors perceive that these companies have the financial strength to potentially grow earnings faster than their peers.

The Sentiment component underlying the rating is based on several measures of both long-term and short-term changes in investors' expectations. Stocks with attributes such as recently improving analysts' outlooks, strong and consistent price performance, and optimistic trading positions and trends tend to have better Sentiment scores. Highly-rated stocks within this category may have the potential for price appreciation, as investors become more aware of these companies' improving performance prospects.

The Stability component underlying the rating is based on several performance variability measures derived from both recent financial statements and trading data. Stocks with attributes such as low sales volatilities and low trading volume turnovers tend to have better Stability scores. Highly-rated stocks within this category may have the potential for price appreciation, as investors perceive that these companies deserve a premium for their steady business outcomes.

The Valuation component underlying the rating is based upon several value-oriented investment criteria. In general, stocks with attributes such as relatively high levels of free cash flow, operating income and expected future earnings tend to have better Valuation scores. Highly-rated stocks within this category may have the potential for price appreciation, as investors perceive that the current stock prices of these companies are too low relative to measures of investment value.

Schwab Equity Ratings International is based on a disciplined methodology that evaluates each stock on the basis of investment criteria from several broad components: Fundamentals, Valuation, Momentum and Risk.

The Fundamentals grade underlying the research is based on a number of operating performance measures derived from recent financial statement data. Stocks with attributes such as high and growing cash return on investment, low capital intensity, and improving operating efficiency tend to have better Fundamentals grades. Highly-rated stocks with such grades may have the potential for price appreciation, as investors perceive that these companies have the financial strength to potentially grow earnings faster than the average stock.

The Valuation grade underlying the research is based upon several value-oriented investment criteria. From a valuation ratio perspective, stocks with attributes such as relatively high levels of operating income, net assets, and cash liquidity tend to have better Valuation grades. From an investor sentiment perspective, stocks with relatively few total shares sold short tend to have better Valuation grades. Highly-rated stocks with such grades may have the potential for price appreciation, as investors perceive that the current stock prices of these companies are too low relative to measures of investment value.

The Momentum grade underlying the research is based on several measures of short-term changes in investors' expectations. Stocks with attributes such as recently improving analysts' outlooks, strong and consistent price performance, and a comparison of conservatively measured earnings to expectations of those earnings tend to have better Momentum grades. Highly-rated stocks with such grades may have the potential for price appreciation, as investors become more aware of these companies' improving short-term performance prospects.

The Risk grade underlying the research is based upon diverse measures of investment risk. Stocks whose institutional holdings reflect a balanced view of a stock's prospects and companies whose business activities are geographically diversified tend to have better Risk grades. Highly-rated stocks with such grades may have the potential for price appreciation, as investors perceive that these companies offer an attractive risk-versus-return trade-off.

38Schwab Active Equity Funds \| Fund Details

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From time to time, Schwab may update the research methodology as well as the components underlying each broad category for both Schwab Equity Ratings and Schwab Equity Ratings International. To the extent Schwab makes changes to the methodology or the underlying grading components, the investment adviser will evaluate the impact of those changes on a fund's portfolio prior to transitioning to the revised research methodology. During this evaluation and transition period, which may last several weeks or longer, the funds may include a higher percentage of lower-rated stocks.

In addition to Schwab Equity Ratings and Schwab Equity Ratings International, the portfolio managers leverage Schwab's research and portfolio optimization expertise.

More information on Schwab's ratings methodologies and the components considered by Schwab in assigning a rating is available on schwab.com.

Portfolio Holdings

The funds may make various types of portfolio securities information available to shareholders. The funds post a detailed list of the securities held by each fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of the most recent calendar quarter-end. This list is generally updated approximately 30 days after the end of each calendar quarter and remains available online until at least the following calendar quarter. The funds also post in the fund summary section of the website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of each calendar quarter or month. The funds may exclude any portion of these portfolio holdings from publication when deemed in the best interest of a fund. Further information regarding the funds' policy and procedures on the disclosure of portfolio holdings is available in the SAI.

Schwab Active Equity Funds \| Fund Details39

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## Financial Highlights
This section provides further details about each fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the funds' prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020, October 31, 2021 and October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual report (see back cover).

#### Schwab Large-Cap Growth Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $28.96 | $20.85 | $18.07 | $18.04 | $18.65 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | (0.01) | (0.06) | 0.00(2) | 0.06 | 0.06 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (5.97) | 8.42 | 3.76 | 1.79 | 0.75 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (5.98) | 8.36 | 3.76 | 1.85 | 0.81 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  |  |  | (0.03) | (0.07) | (0.07) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (2.18) | (0.25) | (0.95) | (1.75) | (1.35) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (2.18) | (0.25) | (0.98) | (1.82) | (1.42) |
| Net asset value at end of period | $20.80 | $28.96 | $20.85 | $18.07 | $18.04 |
| Total return | (22.45%) | 40.41% | 21.60% | 12.18% | 4.46% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.99%<sup>(3)</sup> | 0.99% | 0.99% | 0.99% | 0.99% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 1.02%<sup>(3)</sup> | 1.02% | 1.02% | 1.03% | 1.02% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | (0.05%) | (0.23%) | 0.01% | 0.34% | 0.30% |
| Portfolio turnover rate | 19% | 42% | 65% | 67% | 88% |
| Net assets, end of period (x 1,000) | $218329 | $292447 | $210033 | $180809 | $242770 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Per-share amount was less than $0.005.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

40Schwab Active Equity Funds \| Financial Highlights

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#### Schwab Core Equity Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $29.22 | $22.24 | $21.87 | $22.40 | $24.36 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.26 | 0.21 | 0.20 | 0.21 | 0.26 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.16) | 7.90 | 0.82 | 1.99 | 0.41 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.90) | 8.11 | 1.02 | 2.20 | 0.67 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.26) | (0.20) | (0.20) | (0.27) | (0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (6.60) | (0.93) | (0.45) | (2.46) | (2.29) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (6.86) | (1.13) | (0.65) | (2.73) | (2.63) |
| Net asset value at end of period | $19.46 | $29.22 | $22.24 | $21.87 | $22.40 |
| Total return | (13.84%) | 37.62% | 4.65% | 12.02% | 2.71% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.73%<sup>(2)</sup> | 0.73% | 0.73% | 0.73% | 0.73% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 0.73%<sup>(2)</sup> | 0.73% | 0.73% | 0.73% | 0.73% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.18% | 0.81% | 0.91% | 1.01% | 1.12% |
| Portfolio turnover rate | 28% | 86% | 97% | 98% | 101% |
| Net assets, end of period (x 1,000,000) | $1268 | $1860 | $1957 | $2182 | $2138 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

Schwab Active Equity Funds \| Financial Highlights41

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#### Schwab International Core Equity Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $11.55 | $9.11 | $10.04 | $9.64 | $11.27 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.34 | 0.21 | 0.14 | 0.24 | 0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.86) | 2.34 | (0.71) | 0.41 | (1.58) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.52) | 2.55 | (0.57) | 0.65 | (1.34) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.32) | (0.11) | (0.36) | (0.25) | (0.26) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  |  |  |  |  | (0.03) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.32) | (0.11) | (0.36) | (0.25) | (0.29) |
| Net asset value at end of period | $8.71 | $11.55 | $9.11 | $10.04 | $9.64 |
| Total return | (22.40%) | 28.12% | (6.01%) | 7.08% | (12.18%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.86%<sup>(2)</sup> | 0.86% | 0.86% | 0.86% | 0.86% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 0.89%<sup>(2)</sup> | 0.86% | 0.88% | 0.87% | 0.89% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 3.40% | 1.93% | 1.51% | 2.44% | 2.22% |
| Portfolio turnover rate | 94% | 103% | 97% | 91% | 98% |
| Net assets, end of period (x 1,000) | $507380 | $692619 | $664487 | $975511 | $1166280 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

42Schwab Active Equity Funds \| Financial Highlights

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#### Schwab Dividend Equity Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $16.92 | $12.14 | $15.07 | $15.43 | $17.21 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.29 | 0.31 | 0.28 | 0.23 | 0.22 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (0.81) | 4.80 | (2.15) | 0.93 | (0.27) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (0.52) | 5.11 | (1.87) | 1.16 | (0.05) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.29) | (0.33) | (0.26) | (0.24) | (0.30) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (2.19) |  | (0.80) | (1.28) | (1.43) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (2.48) | (0.33) | (1.06) | (1.52) | (1.73) |
| Net asset value at end of period | $13.92 | $16.92 | $12.14 | $15.07 | $15.43 |
| Total return | (3.96%) | 42.38% | (13.30%) | 8.78% | (0.63%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.89%<sup>(2)</sup> | 0.89% | 0.89% | 0.89% | 0.88% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 0.90%<sup>(2)</sup> | 0.90% | 0.90% | 0.89% | 0.88% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.99% | 2.01% | 2.16% | 1.58% | 1.36% |
| Portfolio turnover rate | 27% | 83% | 70% | 70% | 79% |
| Net assets, end of period (x 1,000) | $524330 | $670765 | $576701 | $846955 | $1249124 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

Schwab Active Equity Funds \| Financial Highlights43

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#### Schwab Small-Cap Equity Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $23.77 | $15.02 | $16.68 | $20.87 | $23.58 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.03 | 0.02 | 0.03 | 0.02 | 0.01 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.27) | 8.76 | (1.67) | (0.35)<sup>(2)</sup> | 0.32 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.24) | 8.78 | (1.64) | (0.33) | 0.33 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.03) | (0.03) | (0.02) | (0.01) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (2.56) |  |  | (3.85) | (3.04) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (2.59) | (0.03) | (0.02) | (3.86) | (3.04) |
| Net asset value at end of period | $18.94 | $23.77 | $15.02 | $16.68 | $20.87 |
| Total return | (10.25%) | 58.55% | (9.86%) | 0.08% | 1.37% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 1.09%<sup>(3)</sup> | 1.08% | 1.09% | 1.09% | 1.09% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 1.09%<sup>(3)</sup> | 1.08% | 1.10% | 1.09% | 1.09% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 0.13% | 0.11% | 0.17% | 0.09% | 0.06% |
| Portfolio turnover rate | 74% | 84% | 113% | 117% | 111% |
| Net assets, end of period (x 1,000) | $542600 | $669489 | $491478 | $579143 | $573406 |

---

?

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

44Schwab Active Equity Funds \| Financial Highlights

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#### Schwab Health Care Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $30.58 | $26.27 | $25.08 | $25.85 | $25.44 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.20 | 0.21 | 0.26 | 0.26 | 0.23 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (1.13) | 7.09 | 2.11 | 1.27 | 1.96 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (0.93) | 7.30 | 2.37 | 1.53 | 2.19 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.23) | (0.23) | (0.29) | (0.24) | (0.24) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (3.34) | (2.76) | (0.89) | (2.06) | (1.54) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (3.57) | (2.99) | (1.18) | (2.30) | (1.78) |
| Net asset value at end of period | $26.08 | $30.58 | $26.27 | $25.08 | $25.85 |
| Total return | (3.82%) | 30.02% | 9.57% | 6.51% | 9.13% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.80%<sup>(2)</sup> | 0.80% | 0.80% | 0.80% | 0.80% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 0.80%<sup>(2)</sup> | 0.80% | 0.80% | 0.80% | 0.80% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 0.76% | 0.76% | 1.01% | 1.05% | 0.91% |
| Portfolio turnover rate | 59% | 70% | 73% | 45% | 45% |
| Net assets, end of period (x 1,000) | $829028 | $901637 | $745705 | $778753 | $825769 |

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<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

Schwab Active Equity Funds \| Financial Highlights45

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## Fund Management
The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the funds. As compensation for these services, the investment adviser receives a management fee from each fund. For the 12 months ended October 31, 2022, these fees were 0.69% for the Schwab Large-Cap Growth Fund, 0.47% for the Schwab Core Equity Fund, 0.55% for the Schwab International Core Equity Fund, 0.61% for the Schwab Dividend Equity Fund, 0.81% for the Schwab Small-Cap Equity Fund, and 0.53% for the Schwab Health Care Fund. These figures, which are expressed as a percentage of each fund's average daily net assets, represent the actual amounts paid, including the effects of reductions.

A discussion regarding the basis for the Board of Trustees' approval of each fund's investment advisory agreement is available in each fund's 2022 annual report, which covers the period of November 1, 2021 through October 31, 2022.

**Bill McMahon, CFA,** Managing Director and Chief Investment Officer of Active Equity Strategies for Schwab Asset Management. He is responsible for investment management, research, and portfolio construction for Schwab Asset Management's active equity strategies and solutions. Mr. McMahon has more than 20 years of experience in the financial services industry. Prior to his current role, Mr. McMahon was an SVP in Charles Schwab Investment Advisory, Inc. (CSIA), serving as CIO and as a member of the portfolio management team for the ThomasPartners Strategies. Mr. McMahon co-founded ThomasPartners, Inc. in 2001 and served as partner of the firm until its acquisition by the Charles Schwab Corporation in 2012 and subsequent merger with CSIA in 2018.

**Iain Clayton, CFA, FRM,** Senior Portfolio Manager and Head of Quantitative Portfolio Management for Schwab Asset Management. He is responsible for the day-to-day co-management of the Schwab Core Equity Fund, Schwab International Core Equity Fund, Schwab Small-Cap Equity Fund and Schwab Health Care Fund. Prior to joining Schwab Asset Management in 2013, Mr. Clayton spent more than five years at SSI Investment Management, where he was a portfolio manager and the director of quantitative research. In these roles, Mr. Clayton co-managed multiple investment strategies and developed quantitative models and valuation approaches. From 2004 to 2008, he worked as a portfolio manager and director at RCM Capital Management (now known as Allianz Global Investors) and helped manage various equity portfolios and developed fundamental-based stock selection models. Prior to that, he was a vice president at Eureka Investment Advisors for almost three years and also served as a senior quantitative analyst and assistant portfolio manager. He has also worked as a quantitative research analyst at RCM Capital Management.

**Brian Hillburn, CFA,** Senior Portfolio Manager and the Director of Fundamental Research for Schwab Asset Management. He is responsible for the day-to-day co-management of the Schwab Core Equity Fund. He also provides fundamental equity research coverage for the ThomasPartners Strategies and Schwab Active Equity Funds. Mr. Hillburn was a senior equity research analyst for the ThomasPartners Strategies at Schwab Asset Management. Prior to joining the ThomasPartners Strategies, Mr. Hillburn was an equity analyst at Rockland Trust, and earlier positions include equity research analysis roles on mutual fund teams at Wells Capital and Morgan Stanley Investment Management.

**Wei Li, Ph.D., CFA,** Senior Portfolio Manager for Schwab Asset Management. She is responsible for the day-to-day co-management of the Schwab International Core Equity Fund, Schwab Dividend Equity Fund, Schwab Small-Cap Equity Fund, and Schwab Health Care Fund. Prior to joining Schwab in 2012, Ms. Li spent more than ten years at Barclays Global Investors (now known as BlackRock), where she held a number of positions. From 2001 to 2009, she worked in various roles in the global advanced active group, including portfolio management and quantitative research for both U.S. and international equity markets. After 2009, she worked in the defined contribution research and product development area for almost two years.

**Gretchen Novak, CFA,** Senior Portfolio Manager for Schwab Asset Management. She is responsible for the day-to-day co-management of the Schwab Large-Cap Growth Fund. Ms. Novak also provides fundamental equity research coverage of certain industry sectors for the ThomasPartners Strategies and Schwab Active Equity Funds. Previously, Ms. Novak was a director and senior equity research analyst for the ThomasPartners Strategies at Schwab Asset Management. Prior to joining the ThomasPartners Strategies, Ms. Novak was a senior portfolio manager at Mazama Capital Management, Inc., where she oversaw the equity research and portfolio management of the firm's consumer discretionary and staples sections. Prior to Mazama Capital, Ms. Novak was an equity analyst at Cramer Rosenthal McGlynn, LLC.

**Jim Serhant, CFA,** Senior Portfolio Manager for Schwab Asset Management. He is responsible for the day-to-day co-management of the Schwab Dividend Equity Fund and ThomasPartners Balanced Strategies. Mr. Serhant also provides fundamental equity research coverage of certain industry sectors for the ThomasPartners Strategies and the Schwab Active Equity Funds. Prior to joining Schwab in 2016, Mr. Serhant was an executive vice president at Hartford Investment Management where he was the head of high yield and a senior portfolio manager, overseeing the credit research and portfolio management of the firm's high yield strategies. Previously, he was a fixed income analyst at Delaware Investments and JP Morgan.

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**Holly Emerson, CFA,** Portfolio Manager for Schwab Asset Management. She is responsible for the day-to-day co-management of the Schwab Large-Cap Growth Fund and Schwab Small-Cap Equity Fund. Prior to joining Schwab in 2014, Ms. Emerson spent nearly 10 years at Algert Coldiron Investors LLC (now known as Algert Global), a quantitative market-neutral hedge fund manager. She held a number of positions at Algert, including assistant portfolio manager and director of operations. In her various roles, she acted as the lead portfolio manager for the Canadian fund, conducted macroeconomic research and managed relationships with prime brokerage investment banks.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in each fund is available in the SAI.

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## Investing in the Funds
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the funds through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of a fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The funds generally are not registered for sale in jurisdictions outside the United States and are intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the funds, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the funds on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the funds, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The funds are not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of a fund. If your fund shares are no longer held by an authorized intermediary, a fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with a fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, each fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, each fund may take up to seven days to pay sale proceeds.

• Each fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

Investing Directly with the Funds

#### Placing Direct Orders
Investors generally may not purchase shares directly from the funds' transfer agent, BNY Mellon Investment Servicing (US) Inc. The funds reserve the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the funds at any time.

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Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The funds are open for business each day that the NYSE is open. Each fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day. A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by a fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after the fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with the fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

The funds' portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, the funds' portfolio securities are valued based on fair values developed following procedures approved by the funds' Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments.

Shareholders of funds that invest in foreign securities as part of their investment strategy, such as the Schwab International Core Equity Fund, Schwab Dividend Equity Fund and Schwab Health Care Fund, should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### Each Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive a fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. These payments or discounts are separate from, and may be in addition to, any shareholder service fees or other administrative fees the funds may pay to those intermediaries. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the funds. These payments may relate to marketing and/or fund promotion activities and presentations, educational training

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programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the funds available to their customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the funds.

Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the funds over other investment options they make available to their customers. Please see the SAI for additional information.

#### Shareholder Servicing Plan
The Board of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds.

Pursuant to the Plan, each fund's shares are subject to an annual shareholder servicing fee up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the funds (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab's written agreement with the funds), and a fund will pay no more than 0.25% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

#### Policy Regarding Short-Term or Excessive Trading
The funds are intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the funds' performance by disrupting the efficient management of the funds, increasing fund transaction costs and taxes, causing the funds to maintain higher cash balances, and diluting the value of the funds' shares.

To discourage market timing, the funds' Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. Each fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the funds' policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the funds. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of a fund.

The funds and their service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the funds have requested that service providers to the funds monitor transactional activity in amounts and frequency determined by each fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in a fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, each fund or its service providers will work with the intermediary to monitor possible market timing activity. The funds reserve the right to request that the intermediary provide certain shareholder transaction information to the funds and may require the intermediary to restrict the shareholder from future purchases or exchanges in the funds. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the funds. Each fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. A fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. Each fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The funds may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

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The funds reserve the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the funds' securities when market prices are not "readily available" or are unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of a fund's portfolio holdings and the net asset value of its shares. The Valuation Designee's policies and procedures, which govern the selection and application of methodologies for determining the fair value of fund investments, seek to ensure that the prices at which the funds' shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

The Valuation Designee makes fair value determinations in good faith and in accordance with the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security.

#### Methods to Meet Redemptions
Under normal market conditions, each fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, each fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. Each fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, each fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of each fund's overall obligation to deter money laundering under federal law. Each fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the funds reserve the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of a fund or in cases when a fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if a fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

Each fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

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Distributions and Taxes

Any investment in a fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains a fund earns. Every year, each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record, except the Schwab Dividend Equity Fund, which typically makes income distributions at the end of each calendar quarter. During the fourth quarter of the year, typically in early November, an estimate of each fund's capital gains distribution, if any, may be made available on the fund's website: **www.schwabassetmanagement.com**.

Unless you are investing through an IRA, 401(k) or other tax-advantaged retirement or savings account, your fund distributions generally have tax consequences. Each fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Dividends that are reported by the fund as qualified dividend income are eligible for a reduced maximum tax rate for individual investors. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in a fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in a fund which invests in non-U.S. securities may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions a fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, each fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, a fund will use an average cost basis method. Please consult your tax adviser to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

A fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if the shareholders fail to provide the funds with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

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Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% (unless a lower treaty rate applies) on amounts treated as ordinary dividends from the funds, as discussed in more detail in the SAI. Furthermore, the funds are required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

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**Prospectus** \| February 27, 2023

## Schwab Active Equity Funds

#### To Learn More
This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the funds' holdings and detailed financial information about the funds. Annual reports also contain information from the funds' manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the funds' last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the funds' annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG26571-26

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**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab<sup>®</sup> Balanced Fund

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| | |
|:---|:---|
| Ticker Symbol | **SWOBX**  |

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As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

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## Schwab Balanced Fund

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| | |
|:---|:---|
| **Fund Summary** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Balanced Fund](#idejiaaSBF)  | [1](#idejiaaSBF) |
| **[About the Fund](#idhgiAF)**  | [5](#idhgiAF) |
| **[Fund Details](#idjeddbFD)**  | [6](#idjeddbFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objective, Strategies and Risks](#idhgccgIOSR)  | [6](#idhgccgIOSR) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbciPH)  | [14](#idbbciPH) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idbfffaFH)  | [15](#idbfffaFH) |
| **[Fund Management](#iddiiiFM)**  | [16](#iddiiiFM) |
| **[Investing in the Fund](#iddibcbIF)**  | [17](#iddibcbIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#idegfjITFI)  | [17](#idegfjITFI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Fund](#idbbjeIDF)  | [18](#idbbjeIDF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idcgiaSP)  | [18](#idcgiaSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbijjgAPAYI)  | [18](#idbijjgAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idggigDT)  | [21](#idggigDT) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Information About the Fund's Blended Index](#idbhecAIAFBI)  | [22](#idbhecAIAFBI) |

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Schwab<sup>®</sup> Balanced Fund

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| | |
|:---|:---|
| **Ticker Symbol:**  | **SWOBX** |

---

#### Investment Objective
The fund seeks capital growth and income.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

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| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.03  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.49  |
| *Total annual fund operating expenses* | *0.52*  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.49**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $50 | $157 | $274 | $616 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in

higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 31% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund generally invests in a diversified group of other affiliated Schwab Funds (the underlying funds) in accordance with its target portfolio allocation.** The fund's target allocation is intended to allocate investments among various asset classes such as equity, fixed income and cash and cash equivalents (including money market funds). Each underlying fund invests its assets in a different segment of the equity or fixed-income market in accordance with its own investment objectives and policies. Normally, the fund invests 55-65% of its assets in equity securities (including stocks and equity funds) and 35-45% in fixed-income securities (including bonds and fixed-income funds), and cash and cash equivalents (including money market funds). This allocation is designed to provide a mix of the growth opportunities of stock investing with the income opportunities of bonds and other fixed-income securities. Under normal circumstances, the fund will invest at least 25% of its assets in equity securities and at least 25% of its assets in fixed-income securities.

Within the equity fund allocation, the portfolio manager typically allocates the fund's investments among underlying large-cap and small-cap stock funds, as well as international stock funds or other equity funds with an international component, including underlying funds with some exposure to emerging market securities.

Within the fixed-income fund allocation, the portfolio manager allocates investments among underlying bond funds based on a number of factors including total return potential and the maturities and credit quality of their holdings.

The fund intends to invest in a combination of underlying funds; however, the fund may invest a portion of its assets directly in equity and fixed-income securities, as well as exchange-traded funds (ETFs) or other unaffiliated mutual funds to maintain its asset allocations. The underlying funds may invest in derivatives, principally futures contracts.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

Schwab Balanced Fund \| Fund Summary1

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**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will select or allocate assets that could cause the fund to underperform or otherwise not meet its objective. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

&nbsp;&nbsp;&nbsp;&nbsp;

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Growth Investing Risk.*** An underlying fund's investments in growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer's future earnings and revenues. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer

2Schwab Balanced Fund \| Fund Summary

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capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

&nbsp;&nbsp;&nbsp;&nbsp;

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

• ***Mortgage-Backed and Mortgage Pass-Through Securities Risk.*** Mortgage-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar or greater risk of decline in market value during periods of rising interest rates. Certain of the mortgage-backed securities in which an underlying fund may invest are issued or guaranteed by agencies or instrumentalities of the U.S. government but are not backed by the full faith and credit of the U.S. government. There can be no assurance that the U.S. government would provide financial support to its agencies or instrumentalities where it was not obligated to do so which can cause an underlying fund to lose money or underperform. The risks of investing in mortgage-backed securities include, among others, interest rate risk, credit risk, prepayment risk and extension risk. Transactions in mortgage pass-through securities often occur through to-be-announced (TBA) transactions. An underlying fund could lose money or underperform if a TBA counterparty defaults or goes bankrupt.

• ***Mortgage Dollar Rolls Risk.*** Mortgage dollar rolls are transactions in which an underlying fund sells mortgage-backed securities to a dealer and simultaneously agrees to repurchase similar securities in the future at a predetermined price. An underlying fund's mortgage dollar rolls could lose money if the price of the mortgage-backed securities sold falls below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Balanced Fund \| Fund Summary3

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: jd5am71rtv63la704naugkl6iuhh.jpg]](jd5am71rtv63la704naugkl6iuhh.jpg)

#### Best Quarter: 14.71% Q2 2020
**Worst Quarter:** (11.79%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (18.98%) | 4.16% | 6.84% |
| After taxes on distributions | (20.90%) | 2.39% | 5.18% |
|  After taxes on distributions and sale <br> of shares  | (10.10%) | 2.92% | 5.07% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| S&P 500<sup>®</sup> Index | (18.11%) | 9.42% | 12.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Balanced Blended Index<sup>(1)</sup> | (15.26%) | 5.65% | 7.75% |

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<sup>(1)</sup>

The Balanced Blended Index is a custom blended index developed by Schwab Asset Management that, effective February 1, 2022, is composed of 41.5% S&P 500 Index, 8.5% Russell 2000<sup>®</sup> Index, 10% MSCI EAFE Index (Net), 37% Bloomberg US Aggregate Bond Index, and 3% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Fund's Blended Index" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## About the Fund
The fund seeks to achieve its investment objective by primarily investing in other affiliated Schwab Funds and to a lesser degree in unaffiliated third party mutual funds or ETFs (the underlying funds). These underlying funds will include equity, fixed income and money market funds and will be used by the fund to meet its target allocations and investment style. Because the fund primarily invests in other funds rather than in individual stocks and bonds, the fund is considered a "fund of funds." A fund of funds bears its own direct expenses in addition to bearing a proportionate share of the expenses charged by the underlying funds in which it invests.

Schwab Balanced Fund \| About the Fund5

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## Fund Details
There can be no assurance that the fund will achieve its objective. Except as explicitly described otherwise, the investment strategies and policies of the fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in the fund are summarized in the fund summary at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the fund, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, the fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies" and "Investments, Securities and Risks" sections in the Statement of Additional Information (SAI).

Investment Objective, Strategies and Risks

#### Investment Objective
The fund seeks capital growth and income.

#### Investment Strategies
 **To pursue its goal, the fund generally invests in a diversified group of other Schwab Funds (the underlying funds) in accordance with its target portfolio allocation. The fund's target allocation is intended to allocate investments among various asset classes such as equity, fixed income and cash and cash equivalents (including money market funds).** 

The fund mainly invests in equity and fixed-income funds, which the adviser chooses within the framework of an asset allocation strategy. Based on analysis of economic outlooks and market conditions, the adviser determines whether and how much to adjust the fund's allocation.

Within the underlying equity fund allocation, the portfolio managers typically allocate the fund's investments among large-cap and small-cap stock funds, as well as international stock funds or other equity funds with an international component, including funds with some exposure to emerging market securities.

Within the underlying fixed-income fund allocation, the portfolio managers allocate investments among bond funds based on a number of factors including total return potential and the maturities and credit quality of their holdings.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities, ETFs or other unaffiliated mutual funds to maintain its asset allocations. The underlying funds also may invest in derivatives, including futures contracts and short sales. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Asset Allocation and Investment Strategies
Asset allocation is a strategy of investing specific percentages of the fund in various asset classes.

Normally, the fund invests 55-65% of its assets in equity securities (including stocks and equity funds) and 35-45% in fixed-income securities (including bonds and fixed-income funds), and cash or cash equivalents (including money market funds). This allocation is designed to provide a mix of the growth opportunities of stock investing with the income opportunities of bonds and other fixed-income securities. Under normal circumstances, the fund will invest at least 25% of its assets in fixed-income securities and at least 25% of its assets in equity securities.

Each underlying fund focuses on a different segment of the equity or fixed-income market. The following are the fund's current underlying funds and each underlying fund's investment objective and strategy, listed according to their corresponding category in the fund's asset allocation. The chart provides a brief description of the investment objective and principal investment strategies of each underlying fund. Additional information about the underlying funds is provided in each underlying fund's prospectus.

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| | |
|:---|:---|
| **Asset Class & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **EQUITY FUNDS**  | **EQUITY FUNDS**  |
| **Schwab<sup>®</sup> Core Equity Fund**  | Seeks long-term capital growth. The fund invests, under normal circumstances, at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities of U.S. companies. The fund typically invests in common stocks of U.S. companies that have market capitalizations of approximately $500 million or more at the time of purchase. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the S&P 500 Index. |

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| | |
|:---|:---|
| **Asset Class & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **EQUITY FUNDS**  | **EQUITY FUNDS**  |
| **Schwab<sup>®</sup> Small-Cap Equity Fund**  | Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in small-cap equity securities. Small-cap equity securities generally are securities with market capitalizations within the universe of the Russell 2000<sup>®</sup> Index at the time of purchase by the fund. The market capitalization range of the Russell 2000 Index was $11 million to $10 billion, as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the Russell 2000 Index. |
| **Schwab<sup>®</sup> Select Large Cap Growth Fund**  | Seeks long-term capital appreciation. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities of U.S. large capitalization companies. The fund defines large capitalization companies as those with a market capitalization of at least $3 billion at the time of investment. In addition, up to 20% of the fund's net assets may be invested in foreign equity securities. Investments in equity securities include common stock and preferred stock. The fund may, but is not required to, use derivative instruments for risk management purposes or as part of the fund's investment strategies. When selecting securities for the fund, the fund's subadviser considers earnings revision trends, expected earnings growth rates, sales acceleration, price earnings multiples and positive stock price momentum. |
| **Schwab<sup>®</sup> International Opportunities Fund**  | Seeks long-term capital appreciation. To pursue its goal, the fund normally invests a substantial amount of its assets in equity securities of companies outside the United States. The fund expects to invest in companies across all market capitalization ranges. The fund typically focuses on developed markets, but may invest in companies from emerging markets as well. In determining whether a company is international, the portfolio managers will consider various factors, including where the company is headquartered, where the company's principal operations are located, where the company's revenues are derived, where the principal trading market is located and the country in which the company was legally organized. The weight given to each of these factors will vary depending on the circumstances in a given case. |
| **FIXED-INCOME FUNDS**  | **FIXED-INCOME FUNDS**  |
| **Schwab<sup>®</sup> U.S. Aggregate Bond Index Fund**  | Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" (TBA) transactions. |
| **MONEY MARKET FUNDS**  | **MONEY MARKET FUNDS**  |
| **Schwab<sup>®</sup> Variable Share Price Money Fund**  | Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. |
| **Schwab<sup>®</sup> Treasury Obligations Money Fund**  | Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). |

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| | |
|:---|:---|
| **Asset Class & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **MONEY MARKET FUNDS** | **MONEY MARKET FUNDS** |
| **Schwab<sup>®</sup> Government Money Fund**  | Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). |

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#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money. Principal risks of the fund include:

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist. For example, the investment adviser's decisions to cause the fund to purchase or redeem shares of an affiliated underlying fund could be influenced by its belief that an affiliated underlying fund may benefit from additional assets or that it is in the best interests of the affiliated underlying fund to limit purchases of shares of the underlying fund. In such cases, the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

**Underlying Fund Investment Risk.** The value of an investment in the fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance, expenses and risks of the underlying funds in which it invests. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. These risks include any combination of the risks described below, although the fund's exposure to a particular risk will depend on the fund's overall asset allocation and underlying fund allocation.

**•** ***Investment Risk.*** An investment in the underlying funds is not a bank deposit. The fund's investments in the underlying funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

**•** ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will select or allocate assets that could cause the fund to underperform or otherwise not meet its objective. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment

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decisions for the fund, but there can be no guarantee that they will produce the desired results. In addition, with respect to certain of the underlying funds, the investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, the portfolio optimization processes used by some underlying funds to assist in constructing the underlying fund's portfolio does not assure successful investments. As a result, the underlying fund may have a lower return than if it were managed using another process or strategy.

**•** ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time. Due to their fixed-income features, preferred stocks provide higher income potential than issuers' common stocks, but typically are more sensitive to interest rate changes than the underlying common stock. The rights of common stockholders are generally subordinate to the rights associated with an issuer's preferred stocks and the rights of preferred stockholders are generally subordinate to the rights associated with an issuer's debt securities on the distribution of an issuer's assets in the event of a liquidation.

**•** ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

**•** ***Large-Cap Company Risk.*** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**•** ***Mid-Cap Company Risk.*** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**•** ***Small-Cap Company Risk.*** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**•** ***Growth Investing Risk.*** Certain of the underlying funds pursue a "growth style" of investing. Growth stocks can be volatile for several reasons. Since growth companies usually invest a high portion of earnings in their businesses, they may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer's future earnings and revenues. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**•** ***Interest Rate Risk.*** Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund's yield will change over time. During periods when interest rates are low or there are negative interest rates, an underlying fund's yield (and total return) also may be low or the underlying fund may be unable to maintain positive returns. Changes in interest rates also may affect an underlying fund's share price: a rise in interest rates generally causes an underlying fund's share price to fall. This risk is greater when an underlying fund holds fixed-income securities with longer maturities. The longer an underlying fund's portfolio duration, the more sensitive to interest rate movements its share price is likely to be. For example, an underlying fund with a longer portfolio duration is more likely to experience a decrease in its share price as interest rates rise. Duration is an estimate of a security's (or portfolio of securities) sensitivity to changes in prevailing interest rates that is based on certain factors that may prove to be incorrect. It is therefore not an exact measurement and may not be able to reliably predict a particular security's price sensitivity to changes in interest rates.

Economic conditions and other factors, including a central bank's monetary policy, may result in changes in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of fixed-income securities in which an underlying fund invests. Rising interest rates may decrease liquidity in the fixed-income securities markets, making it more difficult for an

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underlying fund to sell its fixed-income securities holdings at a time when the investment adviser might wish to sell such securities. In addition, decreased market liquidity also may make it more difficult to value some or all of an underlying fund's fixed-income securities holdings. Certain countries have experienced negative interest rates on certain fixed-income securities. Negative or very low interest rates could magnify the risks associated with changes in interest rates. In general, changing interest rates, including rates that fall below zero, could have unpredictable effects on markets and may expose fixed-income and related markets to heightened volatility. To the extent that the investment adviser of an underlying fund anticipates interest rate trends imprecisely, the underlying fund could miss yield opportunities or its share price could fall. Inflation-protected securities may react differently to interest rate changes than other types of fixed-income securities and tend to react to changes in "real" interest rates.

**•** ***Credit Risk.*** A decline in the credit quality of an issuer or guarantor of a portfolio investment could cause an underlying fund to lose money or underperform. An underlying fund could lose money if, due to a decline in credit quality, the issuer or guarantor of a portfolio investment fails to make, or is perceived as being unable or unwilling to make, timely principal or interest payments or otherwise honor its obligations. The credit quality of an underlying fund's portfolio holdings can change rapidly in certain market environments and any default on the part of a single portfolio investment could cause an underlying fund's share price or yield to fall. Certain U.S. government securities that an underlying fund invests in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities an underlying fund owns do not extend to the shares of the underlying fund itself. Below investment-grade bonds (junk bonds) involve greater risks of default or downgrade and are more volatile than investment-grade bonds. Below investment-grade bonds also involve greater risk of price declines than investment-grade securities due to actual or perceived changes in an issuer's creditworthiness. In addition, issuers of below investment-grade bonds may be more susceptible than other issuers to economic downturns. Such bonds are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the bonds.

**•** ***Prepayment and Extension Risk.*** Certain fixed-income securities are subject to the risk that the securities may be paid off earlier or later than expected, especially during periods of falling or rising interest rates, respectively. Rising interest rates tend to extend the duration of certain fixed-income securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, an underlying fund could exhibit additional volatility and hold securities paying lower-than-market rates of interest. This is known as extension risk. When interest rates decline, borrowers may pay off their fixed-income securities sooner than expected. This can reduce an underlying fund's returns because the underlying fund will have to reinvest that money at the lower prevailing interest rates. In addition, prepayments and subsequent reinvestments increase the underlying fund's portfolio turnover rate. This is known as prepayment risk. Either situation could hurt an underlying fund's performance.

**•** ***Money Market Fund Risk.*** In addition to the risks discussed under "Investment Risk" above, an investment by the fund in an underlying money market fund has additional risks. The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

**•** ***U.S. Government Securities Risk.*** Some of the U.S. government securities that the underlying funds invest in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. Issuers such as the Federal Home Loan Banks (FHLB) maintain limited access to credit lines from the U.S. Treasury. Certain securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation, are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the underlying funds own do not extend to shares of the underlying funds themselves. In September 2008, the Federal Housing Finance Agency placed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) into conservatorship. The actions of the U.S. Treasury are intended to ensure that Fannie Mae and Freddie Mac maintain a positive net worth and meet their financial obligations, preventing mandatory triggering of receivership. No assurance can be given that the U.S. Treasury initiatives will be successful.

**•** ***ETF Risk.*** When an underlying fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

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**•** ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of an underlying fund's investments and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, an underlying fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. An underlying fund may also experience more rapid or extreme changes in value as compared to an underlying fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent an underlying fund's investments in a single country or a limited number of countries represent a large percentage of the underlying fund's assets, the underlying fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the underlying fund's price may be more volatile than the price of an underlying fund that is geographically diversified.

**•** ***Emerging Markets Risk.*** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**•** ***Currency Risk.*** An underlying fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the underlying fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in an underlying fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to an underlying fund if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the underlying fund's account. An underlying fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**•** ***Liquidity Risk.*** Liquidity risk exists when particular investments are difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In addition, limited dealer inventories of certain securities could potentially lead to decreased liquidity. In such cases, an underlying fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of an underlying fund to meet redemption requests within the required time period. In order to meet such redemption requests, the underlying fund may be forced to sell securities at inopportune times or prices.

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**•** ***Derivatives Risk.*** An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right, but not the obligation, to buy or sell an instrument at a specific price on or before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as credit risk, leverage risk, liquidity risk, market risk, management risk, and operational risk are discussed elsewhere in this prospectus. An underlying fund's use of derivatives is also subject to lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause an underlying fund to realize higher amounts of short-term capital gains. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility, and could cause the underlying fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) by an underlying fund could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules. An underlying fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**•** ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. In a reverse repurchase agreement, an underlying fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities which means even a small amount of leverage can have a disproportionately large impact on an underlying fund. The use of leverage may cause an underlying fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

**•** ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When an underlying fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the underlying fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. An underlying fund will also bear the risk of any decline in value of securities acquired with cash collateral. An underlying fund may pay lending fees to a party arranging the loan.

**•** ***Mortgage-Backed and Mortgage Pass-Through Securities Risk.*** Mortgage-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar or greater risk of decline in market value during periods of rising interest rates. Because of prepayment and extension risk, mortgage-backed securities react differently to changes in interest rates than other debt securities. Small movements in interest rates – both increases and decreases – may quickly and significantly affect the value of certain mortgage-backed securities. In addition, certain of the mortgage-backed securities in which an underlying fund may invest are issued or guaranteed by agencies or instrumentalities of the U.S. government but are not backed by the full faith and credit of the U.S. government and there can be no assurance that the U.S. government would provide financial support to its agencies or instrumentalities where it was not obligated to do so which can cause an underlying fund to lose money or underperform. The risks of investing in mortgage-backed securities include, among others, interest rate risk, credit risk, prepayment risk and extension risk, as well as risks associated with the nature of the underlying mortgage assets and the servicing of those assets. These securities are subject to the risk of default on the underlying mortgages, and such risk is heightened during periods of economic downturn. Transactions in mortgage pass-through securities often occur through to-be-announced (TBA) transactions. If a TBA counterparty defaults or goes bankrupt an underlying fund may experience adverse market action, expenses, or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in a TBA transaction which can cause an underlying fund to lose money or underperform.

**•** ***Investment Style Risk.*** An underlying fund's investment style may impact the performance of the fund. Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. For example, an underlying fund that follows the performance of the index during upturns as well as downturns does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. For other underlying funds the investment managers attempt to reduce the impact of the performance of any given investment style by investing in both value and growth style stocks. But whenever value stocks fall out of favor with investors, they may underperform growth stocks, and vice versa. In addition, an underlying fund may have an investment style that favors certain types of investments over others. As a result, such an underlying fund may underperform funds that do not limit their investments to the particular type of investment.

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**•** ***Index-Related Risk.*** An index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to an index. Errors relating to an index, including index data, computations and/or construction, may occur from time to time and may not be identified by an index provider for a period of time or at all. Losses resulting from index errors may be borne by an underlying fund and its shareholders.

In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule which may result in the index and, in turn, the underlying fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

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**•** ***Tracking Error Risk.*** Certain underlying funds seek to track the performance of their respective indices, although they may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, an underlying fund may not invest in certain securities in its index, match the securities' weighting to the index, or the underlying fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. An underlying fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the underlying fund may value individual securities based on fair value prices developed using methods approved by the underlying fund's board of trustees. To the extent the fund calculates its NAV based on fair value prices, the underlying fund's performance may diverge from the index. In addition, cash flows into and out of an underlying fund, operating expenses and trading costs all affect the ability of the underlying fund to match the performance of its index, because the index does not have to manage cash flows and does not incur any costs.

**•** ***High-Yield Risk.*** Underlying funds that invest in high-yield securities and unrated securities of similar credit quality (junk bonds) may be subject to greater levels of credit and liquidity risk than underlying funds that do not invest in such securities. These securities are considered predominately speculative with respect to the issuer's continuing ability to make principal and interest payments. High-yield securities may be more volatile than higher-rated securities. An economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce an underlying fund's ability to sell these securities (liquidity risk). If the issuer of a security is in default with respect to interest or principal payments, an underlying fund may lose its entire investment. Because of the risks involved in investing in high-yield securities, an investment in an underlying fund that invests in such securities should be considered speculative.

**•** ***Real Estate Investment Trusts (REITs) Risk.*** Certain of the underlying funds invest in REITs. An underlying fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate. Risks commonly associated with the direct ownership of real estate include fluctuations in the value of underlying properties, defaults by borrowers or tenants, access to capital, changes in interest rates and risks related to general or local economic conditions. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code of 1986, as amended, or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to an underlying fund that invests in that REIT. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and an underlying fund that invests in REITs will bear a proportionate share of those expenses. Additionally, dividends paid by REITs are taxed as ordinary income and generally do not qualify for the preferential rate applicable to qualified dividend income.

**•** ***Multi-Manager Risk.*** Certain underlying funds may have multiple investment managers. Although the investment adviser monitors and seeks to coordinate the overall management of an underlying fund, each investment manager makes investment decisions independently, and it is possible that the investment styles of the investment managers may not complement one another. As a result, an underlying fund's exposure to a given region, country, stock, industry or investment style could unintentionally be smaller or larger than if the underlying fund had a single manager.

**•** ***Repurchase Agreements Risk.*** When an underlying fund enters into a repurchase agreement, the underlying fund is exposed to the risk that the other party (i.e., the counterparty) will not fulfill its contractual obligation. In a repurchase agreement, there exists the risk that, when an underlying fund buys a security from a counterparty that agrees to repurchase the security at an agreed upon price (usually higher) and time, the counterparty will not repurchase the security. These risks are magnified to the extent that a repurchase agreement is secured by collateral other than cash and government securities, such as debt securities, equity securities and high-yield securities that are rated below investment grade (also referred to as junk bonds) (Alternative Collateral). High-yield securities that are used as

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Alternative Collateral are subject to greater levels of credit and liquidity risk, and are considered primarily speculative with respect to the issuer's continuing ability to make principal and interest payments. Alternative Collateral may be subject to greater price volatility and may be more volatile or less liquid than other types of collateral, increasing the risk that an underlying fund will be unable to recover fully in the event of a counterparty's default.

**•** ***Redemption Risk.*** An underlying money market fund may experience periods of heavy redemptions that could cause the underlying money market fund to liquidate its assets at inopportune times or at a loss or depressed value, particularly during periods of declining or illiquid markets. Redemptions by a few large investors in an underlying money market fund may have a significant adverse effect on the underlying fund's ability to maintain a stable $1.00 share price. In the event any money market fund fails to maintain a stable net asset value, other money market funds, including an underlying money market fund, could face a market-wide risk of increased redemption pressures, potentially jeopardizing the stability of their $1.00 share prices.

**•** ***Variable Interest Entities Risk.*** An underlying fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as an underlying fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as an underlying fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects an underlying fund to the risks associated with the underlying China-based operating company. In addition, an underlying fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of an underlying fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the underlying fund.

Portfolio Holdings

The fund may make various types of portfolio securities information available to shareholders. The fund posts a detailed list of the securities held by the fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of month end. This list is generally posted approximately 15-20 days after the end of the month and remains posted for at least six months. The fund also posts in the fund summary section of the fund's website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of the calendar quarter or month. The fund may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the fund. Further information regarding the fund's policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about the fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in the fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the fund's prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020, October 31, 2021 and October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in the fund's annual report (see back cover).

#### Schwab Balanced Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $19.74 | $16.50 | $15.99 | $15.41 | $15.60 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.21 | 0.19 | 0.20 | 0.24 | 0.23 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.62) | 3.58 | 1.13 | 1.32 | 0.08(2) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.41) | 3.77 | 1.33 | 1.56 | 0.31 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.85) | (0.19) | (0.22) | (0.37) | (0.48) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.37) | (0.34) | (0.60) | (0.61) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.22) | (0.53) | (0.82) | (0.98) | (0.50) |
| Net asset value at end of period | $15.11 | $19.74 | $16.50 | $15.99 | $15.41 |
| Total return | (18.51%) | 23.20% | 8.58% | 11.19% | 1.94% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(3)</sup>  | 0.00%<sup>(4)</sup> | 0.00% | 0.00% | 0.00% | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(3)</sup>  | 0.03%<sup>(4)</sup> | 0.02% | 0.03% | 0.04% | 0.04% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.25% | 1.01% | 1.26% | 1.55% | 1.44% |
| Portfolio turnover rate | 31% | 6% | 18% | 32% | 6% |
| Net assets, end of period (x 1,000) | $619501 | $803812 | $577427 | $526174 | $446626 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.

<sup>(3)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

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<sup>(4)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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## Fund Management
The investment adviser for the fund is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the fund. The firm currently does not receive a fee for the services it performs for the Schwab Balanced Fund. However, the firm is entitled to receive an annual management fee from each of the underlying funds.

A discussion regarding the basis for the Board of Trustees' approval of the fund's investment advisory agreement is available in the fund's 2022 annual report, which covers the period of November 1, 2021 through October 31, 2022.

**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the fund. Prior to joining Schwab in 2012, Ms. Tang was a product manager at Thomson Reuters and from 1997 to 2009 worked as a portfolio manager at Barclays Global Investors (now known as BlackRock).

**Drew Hayes, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the fund. Mr. Hayes has been with Schwab since 2006. Before becoming a portfolio manager, he spent seven years as a senior fixed income specialist for Schwab Wealth Advisory, Inc. Prior to that, he worked as a bond investment specialist for two years and as a registered representative for two years for Charles Schwab & Co., Inc.

**Patrick Kwok, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the fund. Previously, Mr. Kwok served as an associate portfolio manager from 2012 to 2016. Prior to that, he worked as a fund administration manager, where he was responsible for oversight of subadvisers, trading, cash management and fund administration supporting the Charles Schwab Trust Bank Collective Investment Trusts and multi-asset Schwab Funds. Prior to joining Schwab Asset Management in 2008, Mr. Kwok spent two years as an asset operations specialist at Charles Schwab Trust Company. He also worked for one year at State Street Bank & Trust Company as a portfolio accountant and pricing specialist.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the fund is available in the SAI.

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## Investing in the Fund
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the fund through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of the fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

The fund generally is not registered for sale in jurisdictions outside the United States and is intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the fund, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the fund on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the fund, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The fund is not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of the fund. If your fund shares are no longer held by an authorized intermediary, the fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with the fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, the fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, the fund may take up to seven days to pay sale proceeds.

• The fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

?

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

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Investing Directly with the Fund

#### Placing Direct Orders
Investors generally may not purchase shares directly from the fund's transfer agent, BNY Mellon Investment Servicing (US) Inc. The fund reserves the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the fund at any time.

Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The fund is open for business each day that the NYSE is open. The fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day. The fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by the fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after the fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with the fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

In valuing underlying fund investments, the fund uses the NAVs reported by the underlying funds. The fund's other portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, the fund's portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the fund to perform the fair value determination relating to all fund investments.

Shareholders of the fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### The Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive the fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. These payments or discounts

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are separate from, and may be in addition to, any shareholder service fees or other administrative fees the fund may pay to those intermediaries. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the fund. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the fund available to its customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the fund.

Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the fund over other investment options they make available to their customers. Please see the SAI for additional information.

#### Shareholder Servicing Plan
The Board of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund. The fund is not subject to any fee under the Plan.

#### Policy Regarding Short-Term or Excessive Trading
The fund is intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the fund's performance by disrupting the efficient management of the fund, increasing fund transaction costs and taxes, causing the fund to maintain higher cash balances, and diluting the value of the fund's shares.

To discourage market timing, the fund's Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. The fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the fund's policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the fund. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of the fund.

The fund and its service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the fund has requested that service providers to the fund monitor transactional activity in amounts and frequency determined by the fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in the fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in the fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, the fund or its service providers will work with the intermediary to monitor possible market timing activity. The fund reserves the right to request that the intermediary provide certain shareholder transaction information to the fund and may require the intermediary to restrict the shareholder from future purchases or exchanges in the fund. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the fund. The fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. The fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the fund will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. The fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The fund may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The fund reserves the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

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#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the fund's securities when market prices are not "readily available" or are unreliable. For example, the fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of the fund's portfolio holdings and the net asset value of its shares, and seeks to help ensure that the prices at which the fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

The Valuation Designee makes fair value determinations in good faith in accordance with the the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security. The respective prospectuses for the underlying funds in which the fund invests explain the circumstances in which those funds will use fair value pricing and the effects of fair value pricing.

#### Methods to Meet Redemptions
Under normal market conditions, the fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, the fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. The fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, the fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of the fund's shares. Redemptions by these shareholders of their holdings in the fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force the fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of the fund's overall obligation to deter money laundering under federal law. The fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the fund reserves the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of the fund or in cases when the fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if the fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

The fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

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Distributions and Taxes

Any investment in the fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in the fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains the fund earns. Every year, the fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of the fund's capital gains distributions, if any, may be made available on the fund's website: **www.schwabassetmanagement.com**.

Unless you are investing through an IRA, 401(k) or other tax-advantaged account, your fund distributions generally have tax consequences. The fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in the fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from the fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in the fund may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but, if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the fund provides shareholders with information detailing the tax status of any distributions the fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, the fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, the fund will use an average cost basis method. Please consult your tax advisor to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

The fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if they fail to provide the fund with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% on amounts treated as ordinary dividends from the fund, as discussed in more detail in the SAI. Furthermore, the fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the fund to enable the fund to determine whether withholding is required.

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Additional Information About the Fund's Blended Index

The Balanced Blended Index is a custom blended index developed by Schwab Asset Management that, effective February 1, 2022, is composed of 41.5% S&P 500 Index, 8.5% Russell 2000<sup>®</sup> Index, 10% MSCI EAFE Index (Net), 37% Bloomberg US Aggregate Bond Index, and 3% Bloomberg US Treasury Bills 1-3 Month Index. From January 29, 2019 through January 31, 2022, the composite was composed of 50% S&P 500 Index, 10% Russell 2000 Index, 37% Bloomberg US Aggregate Bond Index, and 3% Bloomberg US Treasury Bills 1-3 Month Index. From August 1, 2013 through January 28, 2019, the composite was composed of 50% S&P 500 Index 10% Russell 2000 Index, 25% Bloomberg US Aggregate Bond Index, 12% Bloomberg US Aggregate Intermediate Bond Index and 3% Bloomberg US Treasury Bills 1-3 Month Index. Prior to August 1, 2013 the Balanced Blended Index was composed of 60% S&P 500 Index and 40% Bloomberg US Aggregate Bond Index. Percentages listed may not total to 100% due to rounding. The components that make up the composite may vary over time.

22Schwab Balanced Fund \| Investing in the Fund

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**Prospectus** \| February 27, 2023

## Schwab Balanced Fund

#### To Learn More
This prospectus contains important information on the fund and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the fund's holdings and detailed financial information about the fund. Annual reports also contain information from the fund's manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the fund's last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the fund, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the fund's annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG34630-18

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab Equity Index Funds<sup>®</sup>

---

| | |
|:---|:---|
| Schwab<sup>®</sup> S&P 500 Index Fund | **SWPPX**  |
| Schwab 1000 Index<sup>®</sup> Fund | **SNXFX**  |
| Schwab Small-Cap Index Fund<sup>®</sup> | **SWSSX**  |
| Schwab Total Stock Market Index Fund<sup>®</sup> | **SWTSX**  |
| Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund | **SWLGX**  |
| Schwab<sup>®</sup> U.S. Large-Cap Value Index Fund | **SWLVX**  |
| Schwab<sup>®</sup> U.S. Mid-Cap Index Fund | **SWMCX**  |
| Schwab International Index Fund<sup>®</sup> | **SWISX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

------

[**TABLE OF CONTENTS**](#toc-1)

## Schwab Equity Index Funds

---

| | |
|:---|:---|
| **Fund Summaries** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab S&P 500 Index Fund](#idddfceSSP500IF)  | [1](#idddfceSSP500IF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab 1000 Index Fund](#idddgheS1000IF)  | [4](#idddgheS1000IF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Small-Cap Index Fund](#idddbecSSCIF)  | [7](#idddbecSSCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Total Stock Market Index Fund](#iddghbfSTSMIF)  | [10](#iddghbfSTSMIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Large-Cap Growth Index Fund](#iddiabdSUSLCGIF)  | [13](#iddiabdSUSLCGIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Large-Cap Value Index Fund](#iddghjhSUSLCVIF)  | [17](#iddghjhSUSLCVIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Mid-Cap Index Fund](#iddfifjSUSMCIF)  | [20](#iddfifjSUSMCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab International Index Fund](#iddfadfSIIF)  | [23](#iddfadfSIIF) |
| **[Fund Details](#idchjfdcFD)**  | [26](#idchjfdcFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objectives and More About Principal Risks](#idbgdhfhIOMAPR)  | [26](#idbgdhfhIOMAPR) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab S&P 500 Index Fund](#iddbiSSP500IF)  | [26](#iddbiSSP500IF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab 1000 Index Fund](#idcdhiI)  | [28](#idcdhiI) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Small-Cap Index Fund](#iddcdSSCIF)  | [30](#iddcdSSCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Total Stock Market Index Fund](#iddeaSTSMIF)  | [32](#iddeaSTSMIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Large-Cap Growth Index Fund](#iddedSUSLCGIF)  | [34](#iddedSUSLCGIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Large-Cap Value Index Fund](#iddebSUSLCVIF)  | [36](#iddebSUSLCVIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab U.S. Mid-Cap Index Fund](#iddcgSUSMCIF)  | [38](#iddcgSUSMCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab International Index Fund](#iddbjSIIF)  | [40](#iddbjSIIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbdcPH)  | [43](#idbbdcPH) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idbbcgcdFH)  | [44](#idbbcgcdFH) |
| **[Fund Management](#idjdjdFM)**  | [52](#idjdjdFM) |
| **[Investing in the Funds](#iddfaaeIF)**  | [54](#iddfaaeIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#ideggbitfi-0)  | [54](#ideggbitfi-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Funds](#idbbjiIDF)  | [54](#idbbjiIDF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idcgagSP)  | [55](#idcgagSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbhjdbAPAYI)  | [55](#idbhjdbAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idghieDT)  | [57](#idghieDT) |

---

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Schwab<sup>®</sup> S&P 500 Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWPPX** |

---

#### Investment Objective
The fund's goal is to track the total return of the S&P 500<sup>®</sup> Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.02  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.02**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $2 | $6 | $11 | $26 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 2% of the average value of its portfolio.

#### Principal Investment Strategies

#### To pursue its goal, the fund generally invests in stocks that are included in the S&P 500 Index <sup>†</sup> . It is the fund's policy that
under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy.

The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The S&P 500 Index includes the stocks of 500 leading U.S. publicly traded companies from a broad range of industries. Standard & Poor's, the company that maintains the index, uses a variety of measures to determine which stocks are listed in the index. Each stock is represented in the index in proportion to its float-adjusted market capitalization.

The fund may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund potentially can offset a portion of the gap attributable to its cash holdings. In addition, any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be

<sup>†</sup>

Index ownership – "Standard & Poor's<sup>®</sup>," "S&P<sup>®</sup>," and "S&P 500<sup>®</sup>" are registered trademarks of Standard & Poor's Financial Services LLC (S&P), and "Dow Jones<sup>®</sup>" is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. The "S&P 500<sup>®</sup> Index" is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by Charles Schwab Investment Management, Inc. The Schwab<sup>®</sup> S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in the fund.

Schwab S&P 500 Index Fund \| Fund Summary1

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impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial

amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: ad6nrgiv55v9te6k81r5i9s1pj53.jpg]](ad6nrgiv55v9te6k81r5i9s1pj53.jpg)

#### Best Quarter: 20.55% Q2 2020

#### Worst Quarter: (19.60%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (18.13%) | 9.40% | 12.50% |
| After taxes on distributions | (18.44%) | 8.91% | 11.95% |
|  After taxes on distributions and sale <br> of shares  | (10.50%) | 7.38% | 10.32% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| S&P 500 Index | (18.11%) | 9.42% | 12.56% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return

2Schwab S&P 500 Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a

conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab S&P 500 Index Fund \| Fund Summary3

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Schwab 1000 Index<sup>®</sup> Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SNXFX** |

---

#### Investment Objective
The fund's goal is to match the total return of the Schwab 1000 Index<sup>®</sup>.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.05  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.05**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $5 | $16 | $28 | $64 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 2% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund generally invests in stocks that are included in the Schwab 1000 Index.** It is the fund's policy that under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy.

The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Schwab 1000 Index is a float-adjusted market capitalization weighted index that includes the 1,000 largest stocks of publicly traded companies in the United States, with size being determined by market capitalization (total market value of all shares outstanding). The index is designed to be a measure of the performance of large- and mid-cap U.S. stocks.

The fund may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund potentially can offset a portion of the gap attributable to its cash holdings. In addition, any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual

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companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of two indices. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: oukru3524n5oinfbjq5v57rom93k.jpg]](oukru3524n5oinfbjq5v57rom93k.jpg)

#### Best Quarter: 21.76% Q2 2020

#### Worst Quarter: (20.24%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (19.45%) | 8.90% | 12.10% |
| After taxes on distributions | (19.75%) | 8.10% | 11.09% |
|  After taxes on distributions and sale <br> of shares  | (11.30%) | 6.91% | 9.80% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| Schwab 1000 Index | (19.41%) | 8.95% | 12.25% |
| Russell 1000<sup>®</sup> Index | (19.13%) | 9.13% | 12.37% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

Schwab 1000 Index Fund \| Fund Summary5

------

[**TABLE OF CONTENTS**](#toc-1)

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

6Schwab 1000 Index Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#toc-1)

Schwab Small-Cap Index Fund<sup>®</sup>

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWSSX** |

---

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.04  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.04**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $4 | $13 | $23 | $51 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 16% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund generally invests in stocks that are included in the Russell 2000**<sup>®</sup> **Index**<sup>†</sup>**.** It is the fund's policy that under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy.

The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity market. The Russell 2000 Index is a subset of the Russell 3000<sup>®</sup> Index, representing approximately the 2000 smallest issuers and, as of December 31, 2022, approximately 6% of the total market capitalization of the Russell 3000 Index.

The fund may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund potentially can offset a portion of the gap attributable to its cash holdings. In addition, any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

<sup>†</sup>

Index ownership – "Russell 2000<sup>®</sup>" is a registered mark of the Frank Russell Company (Russell) and has been licensed for use by the Schwab Small-Cap Index Fund. The Schwab Small-Cap Index Fund is not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the fund.

Schwab Small-Cap Index Fund \| Fund Summary7

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[**TABLE OF CONTENTS**](#toc-1)

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: np9bqpfho5fld4t0uv6q3pq5cuks.jpg]](np9bqpfho5fld4t0uv6q3pq5cuks.jpg)

#### Best Quarter: 31.42% Q4 2020

#### Worst Quarter: (30.56%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (20.42%) | 4.19% | 9.05% |
| After taxes on distributions | (20.69%) | 2.69% | 7.46% |
|  After taxes on distributions and sale <br> of shares  | (11.94%) | 3.07% | 7.03% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 2000 Index | (20.44%) | 4.13% | 9.01% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not

8Schwab Small-Cap Index Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#toc-1)

relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of

fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab Small-Cap Index Fund \| Fund Summary9

------

[**TABLE OF CONTENTS**](#toc-1)

Schwab Total Stock Market Index Fund<sup>®</sup>

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWTSX** |

---

#### Investment Objective
The fund's goal is to track the total return of the entire U.S. stock market, as measured by the Dow Jones U.S. Total Stock Market Index<sup>SM</sup>.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.03  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.03**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $3 | $10 | $17 | $39 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 2% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund generally invests in stocks that are included in the Dow Jones U.S. Total Stock Market Index**<sup>†</sup>**.** It is the fund's policy that under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy.

The fund generally gives the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Dow Jones U.S. Total Stock Market Index is designed to measure all publicly traded stocks of companies headquartered in the United States for which pricing information is readily available – the index contains 4,270 stocks as of December 31, 2022. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace.

Because it may not be possible or practical to purchase all of the stocks included in the index, the investment adviser seeks to track the total return of the index by using sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including capitalization, performance attributes, dividend yield, price/earnings ratio, risk factors, industry factors and other characteristics. The fund generally expects that its portfolio will include the largest 2,000 to 2,800 U.S. stocks (measured by the float-adjusted market capitalization), and that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

The fund may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that naturally exists between any index fund and its corresponding

<sup>†</sup>

Index ownership – "Standard & Poor's<sup>®</sup>" and "S&P<sup>®</sup>" are registered trademarks of Standard & Poor's Financial Services LLC (S&P), and "Dow Jones<sup>®</sup>" is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. The "Dow Jones U.S. Total Stock Market Index<sup>SM</sup>" is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by Charles Schwab Investment Management, Inc. The Schwab Total Stock Market Index Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in the fund.

10Schwab Total Stock Market Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund potentially can offset a portion of the gap attributable to its cash holdings. In addition, any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Sampling Index Tracking Risk.** The fund does not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and

Schwab Total Stock Market Index Fund \| Fund Summary11

------

[**TABLE OF CONTENTS**](#toc-1)

after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: dnkek3hq17nmudgenqhonlkge3dg.jpg]](dnkek3hq17nmudgenqhonlkge3dg.jpg)

#### Best Quarter: 22.07% Q2 2020

#### Worst Quarter: (20.98%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (19.53%) | 8.63% | 11.99% |
| After taxes on distributions | (19.84%) | 8.13% | 11.43% |
|  After taxes on distributions and sale <br> of shares  | (11.35%) | 6.75% | 9.86% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

12Schwab Total Stock Market Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWLGX** |

---

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.035  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.035**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $4 | $11 | $20 | $45 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 18% of the average value of its portfolio.

#### Principal Investment Strategies
 **To pursue its goal, the fund generally invests in stocks that are included in the Russell 1000<sup>®</sup> Growth Index<sup>†</sup>. The fund attempts to replicate the Russell 1000 Growth Index.** 

It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. The Russell 1000 Growth Index is a subset of the Russell 1000<sup>®</sup> Index, representing growth issuers in the Russell 1000 Index. The index is a float-adjusted market capitalization weighted index that reconstitutes annually. As of December 31, 2022, the index was composed of 512 stocks.

Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in the index. The principal types of these investments include those that the investment adviser believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the investment adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) derivatives, principally futures contracts. The fund may use futures contracts and other derivatives primarily to seek returns on the fund's otherwise uninvested cash assets to help it better track the index. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations.

The investment adviser typically seeks to track the total return of the index by replicating the index. This means that the fund generally expects that it will hold the same securities as those included in the index. However, the investment adviser may use sampling techniques if the investment adviser believes such use will best

<sup>†</sup>

Index ownership – The Russell 1000<sup>®</sup> Growth Index is a registered mark of the Frank Russell Company (Russell) and has been licensed for use by the Schwab U.S. Large-Cap Growth Index Fund. The Schwab U.S. Large-Cap Growth Index Fund is not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the fund.

Schwab U.S. Large-Cap Growth Index Fund \| Fund Summary13

------

[**TABLE OF CONTENTS**](#toc-1)

help the fund to track the index or is otherwise in the best interest of the fund. Sampling techniques involve investing in a limited number of index securities that, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, capitalization, dividend yield, price/earnings ratio, industry factors, risk factors and other characteristics. When the fund uses sampling techniques, the fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund's investment objective. The fund generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

The fund will concentrate its investments (i.e., hold more than 25% of its total assets) in a particular industry, group of industries or sector to approximately the same extent that the index is so concentrated.

The fund may become "non-diversified," as defined under the Investment Company Act of 1940, as amended, solely as a result of a change in relative market capitalization or index weighting of one or more constituents of the index that the fund is designed to track.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Growth Investing Risk.** Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer's future earnings and revenues. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Sampling Index Tracking Risk.** To the extent the fund uses sampling techniques, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund will be subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

14Schwab U.S. Large-Cap Growth Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Non-Diversification Risk.** To the extent that the fund becomes non-diversified as necessary to approximate the composition of the index, it may invest in the securities of relatively few issuers. As a result, a single adverse economic or regulatory occurrence may have a more significant effect on the fund's investments, and the fund may experience increased volatility.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: iaentrohuopuajp3qve4cf6tku7i.jpg]](iaentrohuopuajp3qve4cf6tku7i.jpg)

#### Best Quarter: 27.82% Q2 2020
**Worst Quarter:** (20.94%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (12/20/17)**  |
| Before taxes | (29.16%) | 10.90% | 10.70% |
| After taxes on distributions | (29.31%) | 10.61% | 10.41% |
|  After taxes on distributions and sale <br> of shares  | (17.15%) | 8.68% | 8.51% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 1000 Growth Index | (29.14%) | 10.96% | 10.75% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account

&nbsp;&nbsp;&nbsp;&nbsp;

(IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of

Schwab U.S. Large-Cap Growth Index Fund \| Fund Summary15

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[**TABLE OF CONTENTS**](#toc-1)

fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

16Schwab U.S. Large-Cap Growth Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

Schwab<sup>®</sup> U.S. Large-Cap Value Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWLVX** |

---

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. value stocks.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.035  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.035**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $4 | $11 | $20 | $45 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 15% of the average value of its portfolio.

#### Principal Investment Strategies
 **To pursue its goal, the fund generally invests in stocks that are included in the Russell 1000<sup>®</sup> Value Index<sup>†</sup>. The fund attempts to replicate the Russell 1000 Value Index.** 

It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. The Russell 1000 Value Index is a subset of the Russell 1000<sup>®</sup> Index, representing value issuers in the Russell 1000 Index. The index is a float-adjusted market capitalization weighted index that reconstitutes annually. As of December 31, 2022, the index was composed of 852 stocks.

Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in the index. The principal types of these investments include those that the investment adviser believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the investment adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) derivatives, principally futures contracts. The fund may use futures contracts and other derivatives primarily to seek returns on the fund's otherwise uninvested cash assets to help it better track the index. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations.

The investment adviser typically seeks to track the total return of the index by replicating the index. This means that the fund generally expects that it will hold the same securities as those included in the index. However, the investment adviser may use sampling techniques if the investment adviser believes such use will best help the fund to track the index or is otherwise in the best interest

<sup>†</sup>

Index ownership – The Russell 1000<sup>®</sup> Value Index is a registered mark of the Frank Russell Company (Russell) and has been licensed for use by the Schwab U.S. Large-Cap Value Index Fund. The Schwab U.S. Large-Cap Value Index Fund is not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the fund.

Schwab U.S. Large-Cap Value Index Fund \| Fund Summary17

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[**TABLE OF CONTENTS**](#toc-1)

of the fund. Sampling techniques involve investing in a limited number of index securities that, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, capitalization, dividend yield, price/ earnings ratio, industry factors, risk factors and other characteristics. When the fund uses sampling techniques, the fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund's investment objective. The fund generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

The fund will concentrate its investments (i.e., hold more than 25% of its total assets) in a particular industry, group of industries or sector to approximately the same extent that the index is so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Value Investing Risk.** The fund emphasizes a "value" style of investing, which targets undervalued companies with characteristics for improved valuations. This style of investing is subject to the risk that the valuations never improve or that the returns on "value" securities may not move in tandem with the returns on other styles of investing or the stock market in general.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Sampling Index Tracking Risk.** To the extent the fund uses sampling techniques, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund will be subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

18Schwab U.S. Large-Cap Value Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: njcebk8fp7klerkq8rfgqsst6i4s.jpg]](njcebk8fp7klerkq8rfgqsst6i4s.jpg)

#### Best Quarter: 16.24% Q4 2020

#### Worst Quarter: (26.79%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (12/20/17)**  |
| Before taxes | (7.59%) | 6.58% | 6.60% |
| After taxes on distributions | (8.09%) | 5.71% | 5.74% |
|  After taxes on distributions and sale <br> of shares  | (4.15%) | 4.99% | 5.01% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell 1000 Value Index | (7.54%) | 6.67% | 6.68% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab U.S. Large-Cap Value Index Fund \| Fund Summary19

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Schwab<sup>®</sup> U.S. Mid-Cap Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWMCX** |

---

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of mid capitalization U.S. stocks.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.04  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.04**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $4 | $13 | $23 | $51 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 11% of the average value of its portfolio.

#### Principal Investment Strategies
 **To pursue its goal, the fund generally invests in securities that are included in the Russell Midcap<sup>®</sup> Index<sup>†</sup>. The fund attempts to replicate the Russell Midcap Index.** 

It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund generally will seek to replicate the performance of the index by giving the same weight to a given security as the index does. However, when the investment adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a security, the investment adviser may cause the fund's weighting of a security to be more or less than the index's weighting of the security. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000<sup>®</sup> Index, representing the smallest issuers in the Russell 1000 Index. The index is a float-adjusted market capitalization weighted index that reconstitutes annually. As of December 31, 2022, the index was composed of 818 stocks.

Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in the index. The principal types of these investments include those that the investment adviser believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the investment adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) derivatives, principally futures contracts. The fund may use futures contracts and other derivatives primarily to seek returns on the fund's otherwise uninvested cash assets to help it better track the index. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations.

<sup>†</sup>

Index ownership – The Russell Midcap<sup>®</sup> Index is a registered mark of the Frank Russell Company (Russell) and has been licensed for use by the Schwab U.S. Mid-Cap Index Fund. The Schwab U.S. Mid-Cap Index Fund is not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the fund.

20Schwab U.S. Mid-Cap Index Fund \| Fund Summary

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The investment adviser typically seeks to track the total return of the index by replicating the index. This means that the fund generally expects that it will hold the same securities as those included in the index. However, the investment adviser may use sampling techniques if the investment adviser believes such use will best help the fund to track the index or is otherwise in the best interest of the fund. Sampling techniques involve investing in a limited number of index securities that, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, capitalization, dividend yield, price/earnings ratio, industry factors, risk factors and other characteristics. When the fund uses sampling techniques, the fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund's investment objective. The fund generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

The fund will concentrate its investments (i.e., hold more than 25% of its total assets) in a particular industry, group of industries or sector to approximately the same extent that the index is so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Sampling Index Tracking Risk.** To the extent the fund uses sampling techniques, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund will be subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

Schwab U.S. Mid-Cap Index Fund \| Fund Summary21

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[**TABLE OF CONTENTS**](#toc-1)

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: frlmag385dt36aec5il59gnvs1n5.jpg]](frlmag385dt36aec5il59gnvs1n5.jpg)

#### Best Quarter: 24.55% Q2 2020

#### Worst Quarter: (27.07%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (12/20/17)**  |
| Before taxes | (17.30%) | 7.05% | 7.09% |
| After taxes on distributions | (17.62%) | 6.49% | 6.53% |
|  After taxes on distributions and sale <br> of shares  | (10.04%) | 5.46% | 5.49% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| Russell Midcap Index | (17.32%) | 7.10% | 7.14% |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

22Schwab U.S. Mid-Cap Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-1)

Schwab International Index Fund<sup>®</sup>

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWISX** |

---

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.06  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.06**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $6 | $19 | $34 | $77 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 5% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund generally invests in stocks that are included in the MSCI EAFE**<sup>®</sup> **Index**<sup>†</sup>**.** It is the fund's policy that under normal circumstances it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy.

The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index. The fund does not hedge its exposure to foreign currencies. However, the fund may use forward contracts to lock in exchange rates for the portfolio securities purchased or sold, but awaiting settlement. These transactions establish a rate of exchange that can be expected to be received upon settlement of the securities.

The MSCI EAFE Index includes stocks from Europe, Australasia and the Far East, and as of December 31, 2022, it consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The fund may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund potentially can offset a portion of the gap attributable to its cash holdings. In addition, any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to the extent that the index the fund is designed to track is also so concentrated.

<sup>†</sup>

Index ownership – "MSCI EAFE<sup>®</sup>" is a registered mark of MSCI and has been licensed for use by the Schwab International Index Fund. The Schwab International Index Fund is not sponsored, endorsed, sold or promoted by MSCI and MSCI bears no liability with respect to the fund. The Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with the fund.

Schwab International Index Fund \| Fund Summary23

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[**TABLE OF CONTENTS**](#toc-1)

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or

other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and

24Schwab International Index Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#toc-1)

after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: p58mr0orcmccah2ehfis33q3el8i.jpg]](p58mr0orcmccah2ehfis33q3el8i.jpg)

**Best Quarter:** 18.19% Q4 2022

#### Worst Quarter: (23.21%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.28%) | 1.73% | 4.60% |
| After taxes on distributions | (14.65%) | 1.18% | 3.99% |
|  After taxes on distributions and sale <br> of shares  | (7.90%) | 1.44% | 3.68% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| MSCI EAFE Index (Net)<sup>(1)</sup> | (14.45%) | 1.54% | 4.67% |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Chuck Craig, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**David Rios,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab International Index Fund \| Fund Summary25

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[**TABLE OF CONTENTS**](#toc-1)

## Fund Details
There can be no assurance that the funds will achieve their objectives. Except as explicitly described otherwise, the investment strategies and policies of each fund may be changed without shareholder approval. Additionally, the investment objectives of the Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in each fund are summarized in the fund summaries at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the funds, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, each fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies, Securities and Risks" section in the Statement of Additional Information (SAI).

Investors should be aware that the investments made by the funds and the results achieved by the funds at any given time are not expected to be the same as those made by exchange-traded funds for which Charles Schwab Investment Management, Inc. serves as investment adviser, including exchange-traded funds with names, investment objectives and policies similar to the funds.

Investment Objectives and More About Principal Risks

#### Schwab S&P 500 Index Fund

#### Investment Objective
The fund's goal is to track the total return of the S&P 500 Index.

#### Index
**The S&P 500 Index includes the stocks of 500 leading U.S. publicly traded companies from a broad range of industries.** Standard & Poor's, the company that maintains the index, uses a variety of measures to determine which stocks are listed in the index. Each stock is represented in the index in proportion to its float-adjusted market capitalization.

Although the 500 companies in the index constitute only about 12% of all the publicly traded companies in the United States, they represent approximately 83% of the total value of the U.S. stock market, as of December 31, 2022. Companies of this size are generally considered large-cap stocks. Their performance is widely followed, and the index itself is popularly seen as a measure of overall U.S. stock market performance.

Because the index weights a stock according to its market capitalization, larger stocks have more influence on the performance of the index than do the index's smaller stocks.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

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**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the volatility, and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

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**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab 1000 Index Fund

#### Investment Objective
The fund's goal is to match the total return of the Schwab 1000 Index.

#### Index
 **The Schwab 1000 Index is a float-adjusted market capitalization weighted index that includes the stocks of the 1,000 largest stocks of publicly traded companies in the United States, with size being determined by market capitalization (total market value of all shares outstanding). The index is designed to be a measure of the performance of large- and mid-cap U.S. stocks.** 

Although there are currently more than 4,270 total stocks in the United States, the companies represented by the Schwab 1000 Index make up some 93% of the total value of all U.S. stocks, as of December 31, 2022. These large- and mid-cap stocks cover many industries and represent many sizes. Because large- and mid-cap stocks can perform differently from each other at times, a fund that invests in both categories of stocks may have somewhat different performance than a fund that invests only in large-cap stocks.

The Schwab 1000 Index was developed and is maintained by Schwab. Charles Schwab Investment Management, Inc., dba Schwab Asset Management, and Schwab are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Schwab receives no compensation from Schwab Asset Management or the fund for maintaining the index. In constructing the index, Schwab has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index (index calculation agent). Schwab reviews and, as necessary, revises the list of companies whose securities are included in the index, usually annually. Under normal circumstances, the index undergoes a quarterly rebalance to reflect outstanding share changes of the existing index constituents. Schwab Asset Management has entered into an agreement with Schwab pursuant to which Schwab Asset Management has been granted a license to the index which has in turn been sublicensed to the fund at no cost to the fund. For more information on the index, including information on the index calculation agent, please refer to the SAI.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

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**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

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Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Small-Cap Index Fund

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks.

#### Index
**The fund seeks to achieve its investment objective by tracking the total return of the Russell 2000 Index.** The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity market. The index is a subset of the Russell 3000 Index, representing approximately the 2,000 smallest issuers and, as of December 31, 2022, approximately 6% of the total market capitalization of the Russell 3000 Index.

Historically, the performance of small-cap stocks has not always paralleled that of large-cap stocks. For this reason, some investors use them to diversify a portfolio that invests in larger stocks.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

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**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of

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the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Total Stock Market Index Fund

#### Investment Objective
The fund's goal is to track the total return of the entire U.S. stock market, as measured by the Dow Jones U.S. Total Stock Market Index.

#### Index
 **The fund's index is designed to measure all publicly traded stocks of companies headquartered in the United States for which pricing information is readily available – the index contains 4,270 stocks, as of December 31, 2022. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace.** 

The U.S. stock market is commonly divided into three segments, based on market capitalization. Mid- and small-cap stocks are the most numerous, but make up only about one-third of the total value of the market. In contrast, large-cap stocks are relatively few in number but make up approximately two-thirds of the market's total value. In fact, the largest 1,000 of the market's listed stocks represent about 94% of its total value, as of December 31, 2022.

In terms of performance, these segments can behave somewhat differently from each other, over the short-term as well as the long-term. For that reason, the performance of the overall stock market can be seen as a blend of the performance of all three segments.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

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**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in all of the securities in the index or may invest in securities not in the index, because the manager may use a sampling technique that is designed to balance the risk of tracking error against the negative effects of transaction costs associated with certain investments. Similarly, the fund may not invest in certain securities in the index, or match the securities' weighting to the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its NAV based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

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**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab U.S. Large-Cap Growth Index Fund

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks.

#### Index
The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and

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quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Growth Investing Risk.** The fund pursues a "growth style" of investing. Growth investing focuses on a company's prospects for growth of revenue and earnings. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks also can perform differently from the market as a whole and other types of stocks and can be more volatile than other types of stocks. Since growth companies usually invest a high portion of earnings in their businesses, they may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

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The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab U.S. Large-Cap Value Index Fund

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. value stocks.

#### Index
The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

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**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of

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counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab U.S. Mid-Cap Index Fund

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of mid capitalization U.S. stocks.

#### Index
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

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A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk

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that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab International Index Fund

#### Investment Objective
The fund's goal is to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States.

#### Index
The fund seeks to achieve its investment objective by tracking the total return of the MSCI EAFE Index. The MSCI EAFE Index includes stocks from Europe, Australasia and the Far East, and as of December 31, 2022, it consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

Over the past decades, foreign stock markets have grown rapidly. The market value of the index captures approximately 24% of the world's total market capitalization, as of December 31, 2022.

For some investors, an international index fund represents an opportunity for low-cost access to a variety of world markets in one fund. Others turn to international stocks to diversify a portfolio of U.S. investments, because international stock markets historically have performed somewhat differently from the U.S. market.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

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A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. In addition, the fund may not invest in issuers located in certain countries due to these considerations. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs. Tracking error may also be impacted by timing differences in currency conversions between the fund and the index and by the fund's use of fair valuation.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather

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than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are futures and options on futures. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to

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be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

Portfolio Holdings

The funds may make various types of portfolio securities information available to shareholders. The funds post a detailed list of the securities held by each fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of month end. This list is generally posted approximately 15-20 days after the end of the month and remains posted for at least six months. The funds also post in the fund summary section of the funds' website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of the calendar quarter or month. The funds may exclude any portion of these portfolio holdings from publication when deemed in the best interest of a fund. Further information regarding the funds' policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about each fund's financial history for the past five years or, if shorter, for its period of operations. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years/periods ended October 31, 2018 and October 31, 2019 has been audited by the funds' prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020 through October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual report (see back cover).

#### Schwab S&P 500 Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $71.21 | $50.75 | $47.17 | $42.41 | $40.23 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.97 | 0.90 | 1.02 | 0.92 | 0.80 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (11.23) | 20.60 | 3.52 | 4.86 | 2.12 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (10.26) | 21.50 | 4.54 | 5.78 | 2.92 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.86) | (1.04) | (0.87) | (0.84) | (0.72) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.07) |  | (0.09) | (0.18) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.93) | (1.04) | (0.96) | (1.02) | (0.74) |
| Net asset value at end of period | $60.02 | $71.21 | $50.75 | $47.17 | $42.41 |
| Total return | (14.63%) | 42.89% | 9.69% | 14.30% | 7.29% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.02%<sup>(2)</sup> | 0.02% | 0.02% | 0.02%<sup>(3)</sup> | 0.03% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.49% | 1.42% | 2.11% | 2.11% | 1.88% |
| Portfolio turnover rate | 2% | 3% | 4% | 3% | 2% |
| Net assets, end of period (x 1,000,000) | $61068 | $67401 | $44184 | $40232 | $34410 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

?

<sup>(3)</sup>

Effective December 20, 2018, the annual operating expense ratio was reduced to 0.02%. The ratio presented for period ended 10/31/19 is a blended ratio.

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#### Schwab 1000 Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $102.69 | $73.73 | $68.68 | $64.19 | $62.61 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 1.29 | 1.24 | 1.38 | 1.38 | 1.18 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (18.14) | 30.02 | 5.81 | 6.73 | 3.05 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (16.85) | 31.26 | 7.19 | 8.11 | 4.23 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (1.23) | (1.42) | (1.29) | (1.28) | (1.10) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.58) | (0.88) | (0.85) | (2.34) | (1.55) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.81) | (2.30) | (2.14) | (3.62) | (2.65) |
| Net asset value at end of period | $84.03 | $102.69 | $73.73 | $68.68 | $64.19 |
| Total return | (16.73%) | 43.16% | 10.60% | 14.20% | 6.84% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.05%<sup>(2)</sup> | 0.05% | 0.05% | 0.05% | 0.05% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.40% | 1.36% | 1.97% | 2.15% | 1.82% |
| Portfolio turnover rate | 2%<sup>(3)</sup> | 5%<sup>(3)</sup> | 4% | 5% | 4% |
| Net assets, end of period (x 1,000,000) | $11888 | $14222 | $9774 | $9346 | $7909 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(3)</sup>

Portfolio turnover rate excludes in-kind transactions.

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#### Schwab Small-Cap Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $39.97 | $27.18 | $28.84 | $30.48 | $31.45 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.40 | 0.37 | 0.35 | 0.40 | 0.43 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (7.31) | 13.29 | (0.23) | 0.54 | 0.20 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (6.91) | 13.66 | 0.12 | 0.94 | 0.63 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.42) | (0.38) | (0.42) | (0.40) | (0.39) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (2.77) | (0.49) | (1.36) | (2.18) | (1.21) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (3.19) | (0.87) | (1.78) | (2.58) | (1.60) |
| Net asset value at end of period | $29.87 | $39.97 | $27.18 | $28.84 | $30.48 |
| Total return | (18.53%) | 50.82% | 0.00% | 4.95% | 1.93% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.04%<sup>(2)</sup> | 0.04% | 0.04% | 0.04%<sup>(3)</sup> | 0.05% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.25% | 0.98% | 1.31% | 1.43% | 1.33% |
| Portfolio turnover rate | 16%<sup>(4)</sup> | 19%<sup>(4)</sup> | 21% | 14% | 17% |
| Net assets, end of period (x 1,000,000) | $5372 | $6587 | $3988 | $4187 | $3874 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

?

<sup>(3)</sup>

Effective December 20, 2018, the annual operating expense ratio was reduced to 0.04%. The ratio presented for period ended 10/31/19 is a blended ratio.

<sup>(4)</sup>

Portfolio turnover rate excludes in-kind transactions.

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#### Schwab Total Stock Market Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $81.64 | $57.62 | $53.42 | $48.38 | $46.25 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 1.05 | 1.00 | 1.07 | 0.99 | 0.88 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (14.67) | 24.10 | 4.21 | 5.18 | 2.12 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (13.62) | 25.10 | 5.28 | 6.17 | 3.00 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.96) | (1.08) | (0.94) | (0.90) | (0.76) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.24) |  | (0.14) | (0.23) | (0.11) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.20) | (1.08) | (1.08) | (1.13) | (0.87) |
| Net asset value at end of period | $66.82 | $81.64 | $57.62 | $53.42 | $48.38 |
| Total return | (16.94%) | 44.01% | 9.94% | 13.37% | 6.51% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.03%<sup>(2)</sup> | 0.03% | 0.03% | 0.03% | 0.03% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.44% | 1.37% | 1.96% | 1.99% | 1.80% |
| Portfolio turnover rate | 2% | 3% | 4% | 3% | 4% |
| Net assets, end of period (x 1,000,000) | $16046 | $18232 | $11487 | $10220 | $8410 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

Schwab Equity Index Funds \| Financial Highlights47

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#### Schwab U.S. Large-Cap Growth Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **12/20/17<sup>(1)</sup> – <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $89.23 | $62.76 | $49.06 | $42.37 | $40.00 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(2)</sup>  | 0.64 | 0.56 | 0.55 | 0.57 | 0.46 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (22.20) | 26.39 | 13.65 | 6.52 | 1.91(3) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (21.56) | 26.95 | 14.20 | 7.09 | 2.37 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.51) | (0.48) | (0.50) | (0.40) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (1.07) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.58) | (0.48) | (0.50) | (0.40) |  |
| Net asset value at end of period | $66.09 | $89.23 | $62.76 | $49.06 | $42.37 |
| Total return | (24.63%) | 43.14% | 29.16% | 17.04% | 5.93%<sup>(4)</sup> |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.035%<sup>(5)</sup> | 0.035% | 0.035% | 0.035%<sup>(6)</sup> | 0.040%<sup>(7)(8)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | N/A | N/A | N/A | N/A | 0.02%<sup>(7)(8)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 0.86% | 0.73% | 0.97% | 1.27% | 1.23%<sup>(7)</sup> |
| Portfolio turnover rate | 18% | 18% | 41% | 46% | 23%<sup>(4)</sup> |
| Net assets, end of period (x 1,000) | $928988 | $881159 | $487205 | $165819 | $92752 |

---

<sup>(1)</sup>

Commencement of operations.

<sup>(2)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(3)</sup>

The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.

<sup>(4)</sup>

Not annualized.

?

<sup>(5)</sup>

Ratio includes less than 0.0005% of non-routine proxy expenses.

<sup>(6)</sup>

Effective December 20, 2018, the annual operating expense ratio was reduced to 0.035%. The ratio presented for period ended 10/31/19 is a blended ratio.

<sup>(7)</sup>

Annualized.

<sup>(8)</sup>

The investment adviser voluntarily agreed to waive the fund's management fees to 0.00% beginning with the fund's commencement of operations through June 30, 2018. The ratio presented for period ended 10/31/18 is a blended ratio.

48Schwab Equity Index Funds \| Financial Highlights

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#### Schwab U.S. Large-Cap Value Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **12/20/17<sup>(1)</sup> – <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $53.65 | $38.09 | $43.06 | $39.51 | $40.00 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(2)</sup>  | 1.01 | 0.97 | 1.00 | 1.13 | 0.82 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.60) | 15.47 | (4.07) | 3.10 | (1.31) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.59) | 16.44 | (3.07) | 4.23 | (0.49) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.91) | (0.88) | (1.06) | (0.62) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (1.64) |  | (0.84) | (0.06) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (2.55) | (0.88) | (1.90) | (0.68) |  |
| Net asset value at end of period | $47.51 | $53.65 | $38.09 | $43.06 | $39.51 |
| Total return | (7.04%) | 43.70% | (7.69%) | 11.08% | (1.23%)<sup>(3)</sup> |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.035%<sup>(4)</sup> | 0.035% | 0.035% | 0.035%<sup>(5)</sup> | 0.040%<sup>(6)(7)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | N/A | N/A | N/A | N/A | 0.02%<sup>(6)(7)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 2.05% | 1.97% | 2.57% | 2.79% | 2.36%<sup>(6)</sup> |
| Portfolio turnover rate | 15%<sup>(8)</sup> | 20% | 50% | 22% | 22%<sup>(3)</sup> |
| Net assets, end of period (x 1,000) | $647796 | $575972 | $331322 | $212213 | $69749 |

---

<sup>(1)</sup>

Commencement of operations.

<sup>(2)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(3)</sup>

Not annualized.

?

<sup>(4)</sup>

Ratio includes less than 0.0005% of non-routine proxy expenses.

<sup>(5)</sup>

Effective December 20, 2018, the annual operating expense ratio was reduced to 0.035%. The ratio presented for period ended 10/31/19 is a blended ratio.

<sup>(6)</sup>

Annualized.

<sup>(7)</sup>

The investment adviser voluntarily agreed to waive the fund's management fees to 0.00% beginning with the fund's commencement of operations through June 30, 2018. The ratio presented for period ended 10/31/18 is a blended ratio.

?

<sup>(8)</sup>

Portfolio turnover rate excludes in-kind transactions.

Schwab Equity Index Funds \| Financial Highlights49

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#### Schwab U.S. Mid-Cap Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **12/20/17<sup>(1)</sup> – <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $64.44 | $44.98 | $44.29 | $39.55 | $40.00 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(2)</sup>  | 0.79 | 0.69 | 0.72 | 0.70 | 0.59 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (11.54) | 19.54 | 1.09 | 4.54 | (1.04) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (10.75) | 20.23 | 1.81 | 5.24 | (0.45) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.63) | (0.77) | (0.64) | (0.42) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (1.22) |  | (0.48) | (0.08) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.85) | (0.77) | (1.12) | (0.50) |  |
| Net asset value at end of period | $51.84 | $64.44 | $44.98 | $44.29 | $39.55 |
| Total return | (17.15%) | 45.35% | 4.04% | 13.61% | (1.13%)<sup>(3)</sup> |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.04%<sup>(4)</sup> | 0.04% | 0.04% | 0.04%<sup>(5)</sup> | 0.05%<sup>(6)(7)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | N/A | N/A | N/A | N/A | 0.03%<sup>(6)(7)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.41% | 1.19% | 1.69% | 1.67% | 1.65%<sup>(6)</sup> |
| Portfolio turnover rate | 11%<sup>(8)</sup> | 14% | 29% | 21% | 15%<sup>(3)</sup> |
| Net assets, end of period (x 1,000) | $903303 | $890697 | $482977 | $356596 | $171278 |

---

<sup>(1)</sup>

Commencement of operations.

<sup>(2)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(3)</sup>

Not annualized.

?

<sup>(4)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(5)</sup>

Effective December 20, 2018, the annual operating expense ratio was reduced to 0.04%. The ratio presented for period ended 10/31/19 is a blended ratio.

<sup>(6)</sup>

Annualized.

<sup>(7)</sup>

The investment adviser voluntarily agreed to waive the fund's management fees to 0.00% beginning with the fund's commencement of operations through June 30, 2018. The ratio presented for period ended 10/31/18 is a blended ratio.

?

<sup>(8)</sup>

Portfolio turnover rate excludes in-kind transactions.

50Schwab Equity Index Funds \| Financial Highlights

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#### Schwab International Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $24.45 | $18.56 | $20.48 | $19.00 | $21.01 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.65 | 0.64 | 0.47 | 0.64 | 0.62 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (6.14) | 5.66 | (1.75) | 1.39 | (2.06) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (5.49) | 6.30 | (1.28) | 2.03 | (1.44) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.79) | (0.41) | (0.64) | (0.55) | (0.57) |
| Net asset value at end of period | $18.17 | $24.45 | $18.56 | $20.48 | $19.00 |
| Total return | (23.12%) | 34.24% | (6.56%) | 11.27% | (7.11%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.06%<sup>(2)</sup> | 0.06% | 0.06% | 0.06% | 0.06% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 3.12% | 2.76% | 2.47% | 3.32% | 2.99% |
| Portfolio turnover rate | 5% | 3% | 7% | 5% | 5% |
| Net assets, end of period (x 1,000,000) | $7127 | $8781 | $5937 | $5443 | $4314 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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## Fund Management
The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the funds. As compensation for these services, the investment adviser receives a management fee from each fund. For the 12 months ended October 31, 2022, these fees were 0.02% for the Schwab S&P 500 Index Fund, 0.05% for the Schwab 1000 Index Fund, 0.04% for the Schwab Small-Cap Index Fund, 0.03% for the Schwab Total Stock Market Index Fund, 0.035% for the Schwab U.S. Large-Cap Growth Index Fund, 0.035% for the Schwab U.S. Large-Cap Value Index Fund, 0.04% for the Schwab U.S. Mid-Cap Index Fund and 0.06% for the Schwab International Index Fund. These figures, which are expressed as a percentage of each fund's average daily net assets, represent the actual amounts paid.

Pursuant to an Amended and Restated Investment Advisory and Administration Agreement between the investment adviser and each fund, Schwab Asset Management pays the operating expenses of the funds, excluding acquired fund fees and expenses, taxes, any brokerage expenses, and extraordinary or non-routine expenses.

A discussion regarding the basis for the Board of Trustees' approval of each fund's Amended and Restated Investment Advisory and Administration Agreement is available in each fund's 2022 annual report, which covers the period November 1, 2021 through October 31, 2022.

**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies for Schwab Asset Management, leads the portfolio management team for Schwab's passive equity mutual funds and ETFs. Mr. Bliss is responsible for overseeing the investment process, portfolio management of investment strategies for passive equity Schwab Funds and Schwab ETFs, and Schwab Personalized Indexing™ separately managed accounts. Before joining Schwab in 2016, Mr. Bliss spent 12 years at BlackRock (formerly Barclays Global Investors) managing and leading institutional index teams, most recently as a managing director and the head of the Americas institutional index team. Prior to BlackRock, he worked as an equity analyst and portfolio manager for Harris Bretall and before that, as a research analyst for JP Morgan.

**Jeremy Brown, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund. Prior to joining Schwab in 2017, Mr. Brown spent six years with ALPS Advisors, Inc. in Denver, most recently as a senior analyst on the ETF portfolio management and research team where he performed portfolio management, trading and analytics/research functions for ALPS ETFs and passive funds. Additionally, Mr. Brown led a number of investment research, commentary, industry trend analysis, and sales and marketing support initiatives.

**Chuck Craig, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the oversight and day-to-day co-management of the Schwab International Index Fund. Prior to joining Schwab in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent more than five years as managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

**Ferian Juwono, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the oversight and day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund. Prior to joining Schwab in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors) where he spent more than three years as a portfolio manager, managing equity index funds for institutional clients, and two years as a senior business analyst. Prior to that, Mr. Juwono worked for more than four years as a senior financial analyst with Union Bank of California.

**David Rios,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab International Index Fund. Prior to this role, Mr. Rios was an associate portfolio manager on the equity index strategies team for four years. His first role with Schwab Asset Managment was as a trade operations specialist. Prior to joining Schwab in 2008, Mr. Rios was a senior fund accountant at Investors Bank & Trust (subsequently acquired by State Street Corporation).

**Sabya Sinha,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund. Prior to joining Schwab in 2015, Mr. Sinha spent a year at F-Squared Investments on the product development and analytics team. Prior to F-Squared, he worked at IndexIQ Advisors as a senior index portfolio manager for three years and for Bank of America's Columbia Management subsidiary as a portfolio manager for three years.

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**Agnes Zau, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund. Prior to joining Schwab in 2018, Ms. Zau was at BlackRock for three years, most recently as a multi-asset portfolio investment consultant where she advised institutional clients on asset allocation and strategy, constructed risk decomposition and portfolio optimization, and conducted scenario analyses for the core multi-asset target risk strategies. She spent the preceding three years as a derivatives specialist at Mellon Capital.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in each fund is available in the SAI.

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## Investing in the Funds
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the funds through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of a fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The funds generally are not registered for sale in jurisdictions outside the United States and are intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the funds, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the funds on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the funds, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The funds are not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of a fund. If your fund shares are no longer held by an authorized intermediary, a fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with a fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, each fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, each fund may take up to seven days to pay sale proceeds.

• Each fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

Investing Directly with the Funds

#### Placing Direct Orders
Investors generally may not purchase shares directly from the funds' transfer agent, BNY Mellon Investment Servicing (US) Inc. The funds reserve the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the funds at any time.

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Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The funds are open for business each day that the NYSE is open. Each fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day. A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by a fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after the fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with the fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

The funds' portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, a fund's portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments.

Shareholders of the Schwab International Index Fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### Each Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive a fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the funds. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the funds available to their customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the funds.

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Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the funds over other investment options they make available to their customers. Please see the SAI for additional information.

#### Policy Regarding Short-Term or Excessive Trading
The funds are intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the funds' performance by disrupting the efficient management of the funds, increasing fund transaction costs and taxes, causing the funds to maintain higher cash balances, and diluting the value of the funds' shares.

To discourage market timing, the funds' Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. Each fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the funds' policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the funds. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of a fund.

The funds and their service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the funds have requested that service providers to the funds monitor transactional activity in amounts and frequency determined by each fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in a fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, each fund or its service providers will work with the intermediary to monitor possible market timing activity. The funds reserve the right to request that the intermediary provide certain shareholder transaction information to the funds and may require the intermediary to restrict the shareholder from future purchases or exchanges in the funds. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the funds. Each fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. A fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. Each fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The funds may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The funds reserve the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the funds' securities when market prices are not "readily available" or are unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of a fund's portfolio holdings and the net asset value of its shares. The Valuation Designee's policies and procedures, which govern the selection and application of methodologies for determining the fair value of fund investments, seek to ensure that the prices at which the funds' shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

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The Valuation Designee makes fair value determinations in good faith and in accordance with the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security.

#### Methods to Meet Redemptions
Under normal market conditions, each fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, each fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. Each fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, each fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of each fund's overall obligation to deter money laundering under federal law. Each fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the funds reserve the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of a fund or in cases when a fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if a fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

Each fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

Distributions and Taxes

Any investment in a fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains a fund earns. Every year, each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of each fund's capital gains distribution, if any, may be made available on the fund's website: **www.schwabassetmanagement.com**.

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Unless you are investing through an IRA, 401(k) or other tax-advantaged retirement or savings account, your fund distributions generally have tax consequences. Each fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in a fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in a fund which invests in non-U.S. securities may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions a fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, each fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, a fund will use an average cost basis method. Please consult your tax adviser to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

A fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if the shareholders fail to provide the funds with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% (unless a lower treaty rate applies) on amounts treated as ordinary dividends from the funds, as discussed in more detail in the SAI. Furthermore, the funds are required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

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**Prospectus** \| February 27, 2023

## Schwab Equity Index Funds

#### To Learn More
This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the funds' holdings and detailed financial information about the funds. Annual reports also contain information from the funds' manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the funds' last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the funds' annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Numbers <br> Schwab Capital Trust 811-07704 <br> Schwab Investments 811-06200 REG13644-31

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab Fundamental Index\* Funds

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Fundamental US Large Company Index Fund | **SFLNX**  |
| Schwab<sup>®</sup> Fundamental US Small Company Index Fund | **SFSNX**  |
| Schwab<sup>®</sup> Fundamental International Large Company Index Fund | **SFNNX**  |
| Schwab<sup>®</sup> Fundamental International Small Company Index Fund | **SFILX**  |
| Schwab<sup>®</sup> Fundamental Emerging Markets Large Company Index Fund | **SFENX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

\*

SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC.

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## Schwab Fundamental Index Funds

---

| | |
|:---|:---|
| **Fund Summaries** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental US Large Company Index Fund](#iddhdeeSFUSLCIF)  | [1](#iddhdeeSFUSLCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental US Small Company Index Fund](#iddhdefSFUSSCIF)  | [4](#iddhdefSFUSSCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental International Large Company Index Fund](#ideadbiSFILCIF)  | [7](#ideadbiSFILCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental International Small Company Index Fund](#ideafbaSFISCIF)  | [11](#ideafbaSFISCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental Emerging Markets Large Company Index Fund](#idecaifSFEMLCIF)  | [15](#idecaifSFEMLCIF) |
| **[Fund Details](#idbjbffaFD)**  | [19](#idbjbffaFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objectives and More About Principal Risks](#idbccfhhIOMAPR)  | [19](#idbccfhhIOMAPR) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental US Large Company Index Fund](#iddfaSFUSLCIF)  | [19](#iddfaSFUSLCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental US Small Company Index Fund](#iddfaSFUSSCIF)  | [21](#iddfaSFUSSCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental International Large Company Index Fund](#iddgdSFILCIF)  | [23](#iddgdSFILCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental International Small Company Index Fund](#iddgdSFISCIF)  | [25](#iddgdSFISCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Fundamental Emerging Markets Large Company Index Fund](#iddghSFEMLCIF)  | [28](#iddghSFEMLCIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [About the Funds](#idbdcgAF)  | [31](#idbdcgAF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbdcph-0)  | [32](#idbbdcph-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idgfaacFH)  | [33](#idgfaacFH) |
| **[Fund Management](#idjbfbFM)**  | [38](#idjbfbFM) |
| **[Investing in the Funds](#iddfdcbIF)**  | [40](#iddfdcbIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#ideggbitfi-1)  | [40](#ideggbitfi-1) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Funds](#idbbjiidf-0)  | [40](#idbbjiidf-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idchfcSP)  | [41](#idchfcSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbhjdbapayi-0)  | [41](#idbhjdbapayi-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idgjffDT)  | [43](#idgjffDT) |

---

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Schwab<sup>®</sup> Fundamental US Large Company Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SFLNX** |

---

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.25  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.25**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $26 | $80 | $141 | $318 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 13% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in stocks that are included in the Russell RAFI US Large Company Index**<sup>†</sup>. The index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the U.S. companies in the FTSE Global Total Cap Index (the parent index). Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the U.S. companies within the parent index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The index is compiled and calculated by Frank Russell Company in conjunction with Research Affiliates LLC, and the method of calculating the components of the index is subject to change.

It is the fund's policy that, under normal circumstances, it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The fund uses an "indexing" investment approach, which attempts to replicate, before expenses, the performance of the index by purchasing a basket of securities that compose the index. Using this approach, the investment adviser seeks a correlation, over time, of 0.95 or better between the fund's performance and the performance of the index; a figure of 1.00 would represent perfect correlation. However, it is possible that the investment adviser may determine to utilize instead a "sampling" methodology in seeking to achieve the fund's objective. Sampling means that the investment adviser

<sup>†</sup>

Index ownership – The Schwab Fundamental US Large Company Index Fund is not in any way sponsored, endorsed, sold or promoted by Frank Russell Company (Russell), by the London Stock Exchange Group companies (LSEG), or by Research Affiliates LLC (RA) (collectively the Licensor Parties), and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell RAFI US Large Company Index (the Index) or otherwise. The Index is compiled and calculated by Russell in conjunction with RA. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "Russell<sup>®</sup>" is a trademark of Russell. The trade names "Research Affiliates<sup>®</sup>", "Fundamental Index<sup>®</sup>" and "RAFI<sup>®</sup>" are registered trademarks of RA. Charles Schwab Investment Management, Inc., has obtained full license from Russell to use the Index. For full disclaimer please see the fund's statement of additional information.

Schwab Fundamental US Large Company Index Fund \| Fund Summary1

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uses quantitative analysis to select stocks from the index universe to obtain a representative sample of stocks that resembles the index in terms of key risk factors, performance attributes and other characteristics. In certain circumstances it may not be possible or practicable for the fund to invest in all of the stocks comprising the index or in proportion to their weightings in the index.

There can be no guarantee that the performance of the fund will achieve a high degree of correlation with that of the index. A number of factors may affect the fund's ability to achieve a high correlation with the index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the fund and the index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Like many index funds, the fund also may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that exists between any index fund and its corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund can gain market exposure and potentially offset a portion of the gap attributable to its cash holdings. Any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not

take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Sampling Index Tracking Risk.** To the extent the fund uses a sampling method, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

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**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: hca64e0ffajm24i3bj453learbgf.jpg]](hca64e0ffajm24i3bj453learbgf.jpg)

#### Best Quarter: 18.47% Q2 2020

#### Worst Quarter: (26.07%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (6.87%) | 9.84% | 12.27% |
| After taxes on distributions | (7.32%) | 8.43% | 10.94% |
|  After taxes on distributions and sale <br> of shares  | (3.74%) | 7.54% | 9.84% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Russell RAFI US Large Company Index  | (6.56%) | 10.09% | 12.61%  |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

Schwab Fundamental US Large Company Index Fund \| Fund Summary3

------

[**TABLE OF CONTENTS**](#toc-2)

Schwab<sup>®</sup> Fundamental US Small Company Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SFSNX** |

---

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.25  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.25**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $26 | $80 | $141 | $318 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 35% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in stocks that are included in the Russell RAFI US Small Company Index**<sup>†</sup>**.** The index measures the performance of the small company size segment by fundamental overall company scores (scores), which are created using as the universe the U.S. companies in the FTSE Global Total Cap Index (the parent index). Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the U.S. companies within the parent index. Companies are split at the 87.5% point based on fundamental weights. Companies below this breakpoint make up the index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The index is compiled and calculated by Frank Russell Company in conjunction with Research Affiliates LLC, and the method of calculating the components of the index is subject to change.

It is the fund's policy that, under normal circumstances, it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index.

The fund uses an "indexing" investment approach, which attempts to replicate, before expenses, the performance of the index by purchasing a basket of securities that compose the index. Using this approach, the investment adviser seeks a correlation, over time, of 0.95 or better between the fund's performance and the performance of the index; a figure of 1.00 would represent perfect correlation. However, it is possible that the investment adviser may determine to utilize instead a "sampling" methodology in seeking to achieve the fund's objective. Sampling means that the investment adviser

<sup>†</sup>

Index ownership – The Schwab Fundamental US Small Company Index Fund is not in any way sponsored, endorsed, sold or promoted by Frank Russell Company (Russell), by the London Stock Exchange Group companies (LSEG), or by Research Affiliates LLC (RA) (collectively the Licensor Parties), and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell RAFI US Small Company Index (the Index) or otherwise. The Index is compiled and calculated by Russell in conjunction with RA. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "Russell<sup>®</sup>" is a trademark of Russell. The trade names "Research Affiliates<sup>®</sup>", "Fundamental Index<sup>®</sup>" and "RAFI<sup>®</sup>" are registered trademarks of RA. Charles Schwab Investment Management, Inc. has obtained full license from Russell to use the Index. For full disclaimer please see the fund's statement of additional information.

4Schwab Fundamental US Small Company Index Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#toc-2)

uses quantitative analysis to select stocks from the index universe to obtain a representative sample of stocks that resembles the index in terms of key risk factors, performance attributes and other characteristics. In certain circumstances it may not be possible or practicable for the fund to invest in all of the stocks comprising the index or in proportion to their weightings in the index.

There can be no guarantee that the performance of the fund will achieve a high degree of correlation with that of the index. A number of factors may affect the fund's ability to achieve a high correlation with the index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the fund and the index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Like many index funds, the fund also may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that exists between any index fund and the corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund can gain market exposure and potentially offset a portion of the gap attributable to its cash holdings. Any income realized through securities lending may help reduce the portion of the gap attributable to expenses.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not

take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Sampling Index Tracking Risk.** To the extent the fund uses a sampling method, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

Schwab Fundamental US Small Company Index Fund \| Fund Summary5

------

[**TABLE OF CONTENTS**](#toc-2)

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: a9ti0eahmo717pnut9mqlbq9aqlk.jpg]](a9ti0eahmo717pnut9mqlbq9aqlk.jpg)

#### Best Quarter: 30.57% Q4 2020

#### Worst Quarter: (35.51%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.73%) | 5.79% | 10.12% |
| After taxes on distributions | (16.06%) | 3.96% | 8.41% |
|  After taxes on distributions and sale <br> of shares  | (7.76%) | 4.26% | 7.91% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Russell RAFI US Small Company Index  | (14.58%) | 5.96% | 10.37%  |

---

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Jeremy Brown, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

**Ferian Juwono, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2013.

**Sabya Sinha,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Agnes Zau, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2023.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

6Schwab Fundamental US Small Company Index Fund \| Fund Summary

------

[**TABLE OF CONTENTS**](#toc-2)

Schwab<sup>®</sup> Fundamental International Large Company Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SFNNX** |

---

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.25  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.25**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $26 | $80 | $141 | $318 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 13% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in stocks that are included in the Russell RAFI Developed ex US Large Company Index**<sup>†</sup>**.** The index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the developed ex U.S. companies in the FTSE Global Total Cap Index (the parent index). Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the developed ex U.S. companies within the parent index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The index is compiled and calculated by Frank Russell Company in conjunction with Research Affiliates LLC, and the method of calculating the components of the index is subject to change.

It is the fund's policy that, under normal circumstances, it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index. The fund does not hedge its exposure to foreign currencies. However, the fund may use forward contracts to lock in exchange rates for the portfolio securities purchased or sold, but awaiting settlement. These transactions establish a rate of exchange that can be expected to be received upon settlement of the securities.

The fund uses an "indexing" investment approach, which attempts to replicate, before expenses, the performance of the index by purchasing a basket of securities that compose the index. Using this

<sup>†</sup>

Index ownership – The Schwab Fundamental International Large Company Index Fund is not in any way sponsored, endorsed, sold or promoted by Frank Russell Company (Russell), by the London Stock Exchange Group companies (LSEG), or by Research Affiliates LLC (RA) (collectively the Licensor Parties), and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell RAFI Developed ex US Large Company Index (the Index) or otherwise. The Index is compiled and calculated by Russell in conjunction with RA. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "Russell<sup>®</sup>" is a trademark of Russell. The trade names "Research Affiliates<sup>®</sup>", "Fundamental Index<sup>®</sup>" and "RAFI<sup>®</sup>" are registered trademarks of RA. Charles Schwab Investment Management, Inc. has obtained full license from Russell to use the Index. For full disclaimer please see the fund's statement of additional information.

Schwab Fundamental International Large Company Index Fund \| Fund Summary7

------

[**TABLE OF CONTENTS**](#toc-2)

approach, the investment adviser seeks a correlation, over time, of 0.95 or better between the fund's performance and the performance of the index; a figure of 1.00 would represent perfect correlation. However, it is possible that the investment adviser may determine to utilize instead a "sampling" methodology in seeking to achieve the fund's objective. Sampling means that the investment adviser uses quantitative analysis to select stocks from the index universe to obtain a representative sample of stocks that resembles the index in terms of key risk factors, performance attributes and other characteristics. In certain circumstances it may not be possible or practicable for the fund to invest in all of the stocks comprising the index or in proportion to their weightings in the index.

There can be no guarantee that the performance of the fund will achieve a high degree of correlation with that of the index. A number of factors may affect the fund's ability to achieve a high correlation with the index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the fund and the index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Like many index funds, the fund also may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that exists between any index fund and the corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund can gain market exposure and potentially offset a portion of the gap attributable to its cash holdings. Any income realized through securities lending may help reduce the portion of the gap attributable to expenses. In addition, the fund may invest in exchange-traded funds.

The fund may concentrate its investments (i.e., hold more than 25% of its total assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual

companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include

8Schwab Fundamental International Large Company Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-2)

American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Sampling Index Tracking Risk.** To the extent the fund uses a sampling method, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Exchange Traded Funds (ETFs) Risk.** The fund may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's

average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: i5jsq036s0gn3uc58ll3j21oadd1.jpg]](i5jsq036s0gn3uc58ll3j21oadd1.jpg)

#### Best Quarter: 21.62% Q4 2020

#### Worst Quarter: (27.49%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (7.93%) | 2.25% | 5.22% |
| After taxes on distributions | (8.35%) | 1.67% | 4.62% |
|  After taxes on distributions and sale <br> of shares  | (4.05%) | 1.89% | 4.25% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Russell RAFI Developed ex US Large <br> Company Index (Net)<sup>(1)</sup>  | (7.69%) | 2.27% | 5.48%  |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Chuck Craig, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**David Rios,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

Schwab Fundamental International Large Company Index Fund \| Fund Summary9

------

[**TABLE OF CONTENTS**](#toc-2)

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

10Schwab Fundamental International Large Company Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-2)

Schwab<sup>®</sup> Fundamental International Small Company Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SFILX** |

---

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.39  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.39**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $40 | $125 | $219 | $493 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 36% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in stocks that are included in the Russell RAFI Developed ex US Small Company Index**<sup>†</sup>**.** The index measures the performance of the small company size segment by fundamental overall company scores (scores), which are created using as the universe the developed ex U.S. companies in the FTSE Global Total Cap Index (the parent index). Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the developed ex U.S. companies within the parent index. Companies are split at the 87.5% point based on fundamental weights. Companies below this breakpoint make up the index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The index is compiled and calculated by Frank Russell Company in conjunction with Research Affiliates LLC, and the method of calculating the components of the index is subject to change.

It is the fund's policy that, under normal circumstances, it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the investment adviser believes it is in the best interest of the fund, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the investment adviser may cause the fund's weighting of a stock to be more or less than the index's weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index. The fund does not hedge its exposure to foreign currencies. However, the fund may use forward contracts to lock in exchange rates for the portfolio securities purchased or sold, but awaiting settlement. These transactions establish a rate of exchange that can be expected to be received upon settlement of the securities.

The fund uses an "indexing" investment approach, which attempts to replicate, before expenses, the performance of the index by purchasing a basket of securities that compose the index. Using this

<sup>†</sup>

Index ownership – The Schwab Fundamental International Small Company Index Fund is not in any way sponsored, endorsed, sold or promoted by Frank Russell Company (Russell), by the London Stock Exchange Group companies (LSEG), or by Research Affiliates LLC (RA) (collectively the Licensor Parties), and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell RAFI Developed ex US Small Company Index (the Index) or otherwise. The Index is compiled and calculated by Russell in conjunction with RA. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "Russell<sup>®</sup>" is a trademark of Russell. The trade names "Research Affiliates<sup>®</sup>", "Fundamental Index<sup>®</sup>" and "RAFI<sup>®</sup>" are registered trademarks of RA. Charles Schwab Investment Management, Inc. has obtained full license from Russell to use the Index. For full disclaimer please see the fund's statement of additional information.

Schwab Fundamental International Small Company Index Fund \| Fund Summary11

------

[**TABLE OF CONTENTS**](#toc-2)

approach, the investment adviser seeks a correlation, over time, of 0.95 or better between the fund's performance and the performance of the index; a figure of 1.00 would represent perfect correlation. However, it is possible that the investment adviser may determine to utilize instead a "sampling" methodology in seeking to achieve the fund's objective. Sampling means that the investment adviser uses quantitative analysis to select stocks from the index universe to obtain a representative sample of stocks that resembles the index in terms of key risk factors, performance attributes and other characteristics. In certain circumstances it may not be possible or practicable for the fund to invest in all of the stocks comprising the index or in proportion to their weightings in the index.

There can be no guarantee that the performance of the fund will achieve a high degree of correlation with that of the index. A number of factors may affect the fund's ability to achieve a high correlation with the index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the fund and the index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Like many index funds, the fund also may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that exists between any index fund and the corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund can gain market exposure and potentially offset a portion of the gap attributable to its cash holdings. Any income realized through securities lending may help reduce the portion of the gap attributable to expenses. In addition, the fund may invest in exchange-traded funds.

The fund may concentrate its investments (i.e., hold more than 25% of its assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual

companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include

12Schwab Fundamental International Small Company Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-2)

American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), which may be less liquid than the underlying shares in their primary trading market, and GDRs, in particular, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Sampling Index Tracking Risk.** To the extent the fund uses a sampling method, the fund will not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Exchange Traded Funds (ETFs) Risk.** The fund may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's

average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: lvfttbt4ho7areal71b08l2ig2kp.jpg]](lvfttbt4ho7areal71b08l2ig2kp.jpg)

#### Best Quarter: 18.33% Q2 2020

#### Worst Quarter: (28.91%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.87%) | (0.45%) | 5.61% |
| After taxes on distributions | (15.58%) | (1.30%) | 4.82% |
|  After taxes on distributions and sale <br> of shares  | (7.89%) | (0.22%) | 4.50% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Russell RAFI Developed ex US Small <br> Company Index (Net)<sup>(1)</sup>  | (14.50%) | (0.22%) | 6.08%  |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Chuck Craig, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

Schwab Fundamental International Small Company Index Fund \| Fund Summary13

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[**TABLE OF CONTENTS**](#toc-2)

**David Rios,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

14Schwab Fundamental International Small Company Index Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-2)

Schwab<sup>®</sup> Fundamental Emerging Markets Large Company Index Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SFENX** |

---

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.39  |
| Other expenses |  |
| **Total annual fund operating expenses** | **0.39**  |

---

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $40 | $125 | $219 | $493 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 24% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund primarily invests in stocks that are included in the Russell RAFI Emerging Markets Large Company Index**<sup>†</sup>**.** The index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the emerging markets companies in the FTSE Global Total Cap Index (the parent index). Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the emerging markets companies within the parent index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The index is compiled and calculated by Frank Russell Company in conjunction with Research Affiliates LLC, and the method of calculating the components of the index is subject to change.

It is the fund's policy that, under normal circumstances, it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). The fund will notify its shareholders at least 60 days before changing this policy. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index. The fund does not hedge its exposure to foreign currencies. However, the fund may use forward contracts to lock in exchange rates for the portfolio securities purchased or sold, but awaiting settlement. These transactions establish a rate of exchange that can be expected to be received upon settlement of the securities.

Because it may not be possible or practicable to purchase all of the stocks in the index, the investment adviser seeks to track the total return of the index by using sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations,

<sup>†</sup>

Index ownership – The Schwab Fundamental Emerging Markets Large Company Index Fund is not in any way sponsored, endorsed, sold or promoted by Frank Russell Company (Russell), by the London Stock Exchange Group companies (LSEG), or by Research Affiliates LLC (RA) (collectively the Licensor Parties), and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell RAFI Emerging Markets Large Company Index (the Index) or otherwise. The Index is compiled and calculated by Russell in conjunction with RA. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. "Russell<sup>®</sup>" is a trademark of Russell. The trade names "Research Affiliates<sup>®</sup>", "Fundamental Index<sup>®</sup>" and "RAFI<sup>®</sup>" are registered trademarks of RA. Charles Schwab Investment Management, Inc. has obtained full license from Russell to use the Index. For full disclaimer please see the fund's statement of additional information.

Schwab Fundamental Emerging Markets Large Company Index Fund \| Fund Summary15

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[**TABLE OF CONTENTS**](#toc-2)

capitalization, dividend yield, price/earnings ratio, industry factors, risk factors and other characteristics. The fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund's investment objective. The fund generally expects its portfolio characteristics to be similar to those of the index.

The investment adviser seeks to achieve a correlation, over time, of 0.95 or better between the fund's performance and the performance of the index; a figure of 1.00 would represent perfect correlation. However, there can be no guarantee that the performance of the fund will achieve a high degree of correlation with that of the index. A number of factors may affect the fund's ability to achieve a high correlation with the index, including the number of index securities held by the fund as part of the sampling technique. The correlation between the performance of the fund and the index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Like many index funds, the fund also may invest in derivatives, principally futures contracts, and lend its securities to minimize the gap in performance that exists between any index fund and the corresponding index. This gap occurs mainly because, unlike the index, the fund incurs expenses and must keep a small portion of its assets in cash for business operations. By using futures, the fund can gain market exposure and potentially offset a portion of the gap attributable to its cash holdings. Any income realized through securities lending may help reduce the portion of the gap attributable to expenses. The fund may also use futures contracts and other derivatives to obtain exposure substantially similar to that provided by certain securities included in the index which the fund may not be able to purchase or hold directly due to restrictions and/or regulations on investments in the applicable local market. In addition, the fund may invest in exchange-traded funds.

The fund may concentrate its investments (i.e., hold more than 25% of its assets) in an industry or group of industries to approximately the extent that the index the fund is designed to track is also so concentrated.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund's performance may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant.

**Concentration Risk.** To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or

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**Emerging Markets Risk.** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Sampling Index Tracking Risk.** The fund may not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because the fund utilizes a sampling approach it may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Exchange Traded Funds (ETFs) Risk.** The fund may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of the index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: rg5plkd0j4edg1q9c5e5al71cugh.jpg]](rg5plkd0j4edg1q9c5e5al71cugh.jpg)

#### Best Quarter: 21.76% Q4 2020

#### Worst Quarter: (30.98%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (15.52%) | 0.09% | 1.49% |
| After taxes on distributions | (16.55%) | (0.67%) | 0.90% |
|  After taxes on distributions and sale <br> of shares  | (8.43%) | 0.24% | 1.28% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
|  Russell RAFI Emerging Markets Large <br> Company Index (Net)<sup>(1)</sup>  | (15.93%) | 0.46% | 2.20%  |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on

Schwab Fundamental Emerging Markets Large Company Index Fund \| Fund Summary17

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your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**Chuck Craig, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

**David Rios,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2017.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## Fund Details
There can be no assurance that the funds will achieve their objectives. Except as explicitly described otherwise, the investment objectives, strategies and policies of each fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in each fund are summarized in the fund summaries at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the funds, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, each fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies, Securities and Risks" section in the Statement of Additional Information (SAI).

Investment Objectives and More About Principal Risks

#### Schwab Fundamental US Large Company Index Fund

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI US Large Company Index. The fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. The index does not weigh securities on the basis of investor protection, limitations or differences in the quality of financial reporting or other oversight mechanisms. Therefore, the fund will follow the securities in the index without consideration of these factors. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

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In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. The fund's use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities

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lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Fundamental US Small Company Index Fund

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI US Small Company Index. The fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. The index does not weigh securities on the basis of investor protection, limitations or differences in the quality of financial reporting or other oversight mechanisms. Therefore, the fund will follow the securities in the index without consideration of these factors. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap

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companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value individual securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. The fund's use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

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**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Fundamental International Large Company Index Fund

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI Developed ex US Large Company Index. The fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. The index does not weigh securities on the basis of investor protection, limitations or differences in the quality of financial reporting or other oversight mechanisms. Therefore, the fund will follow the securities in the index without consideration of these factors. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

Schwab Fundamental Index Funds \| Fund Details23

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[**TABLE OF CONTENTS**](#toc-2)

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. In addition, the fund may not invest in issuers located in certain countries due to these considerations. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs. Tracking error may also be impacted by timing differences in currency conversions between the fund and the index and by the fund's use of fair valuation.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

24Schwab Fundamental Index Funds \| Fund Details

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[**TABLE OF CONTENTS**](#toc-2)

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. The fund's use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Fundamental International Small Company Index Fund

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI Developed ex US Small Company Index. The fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

Schwab Fundamental Index Funds \| Fund Details25

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[**TABLE OF CONTENTS**](#toc-2)

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. The index does not weigh securities on the basis of investor protection, limitations or differences in the quality of financial reporting or other oversight mechanisms. Therefore, the fund will follow the securities in the index without consideration of these factors. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. In addition, the fund may not invest in issuers located in certain countries due to these considerations. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be

26Schwab Fundamental Index Funds \| Fund Details

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[**TABLE OF CONTENTS**](#toc-2)

successful. In certain circumstances, the fund may value securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs. Tracking error may also be impacted by timing differences in currency conversions between the fund and the index and by the fund's use of fair valuation.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

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[**TABLE OF CONTENTS**](#toc-2)

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. The fund's use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

#### Schwab Fundamental Emerging Markets Large Company Index Fund

#### Investment Objective
The fund seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI Emerging Markets Large Company Index. The fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and

28Schwab Fundamental Index Funds \| Fund Details

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[**TABLE OF CONTENTS**](#toc-2)

quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Investment Style Risk.** The fund is an index fund. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market, even though these stocks may go in and out of favor based on market and economic conditions. The index does not weigh securities on the basis of investor protection, limitations or differences in the quality of financial reporting or other oversight mechanisms. Therefore, the fund will follow the securities in the index without consideration of these factors. In addition, because of the fund's expenses, the fund's performance may be below that of the index.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Tracking Error Risk.** As an index fund, the fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of the fund and the index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, the fund may not invest in certain securities in the index, match the securities' weighting to the index, or the fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. In addition, the fund may not invest in issuers located in certain countries due to these considerations. The fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the fund may value securities based on fair value prices developed using methods approved by the fund's Board of Trustees. To the extent the fund calculates its net asset value (NAV) based on fair value prices, the fund's performance may diverge from the index. In addition, cash flows into and out of the fund, operating expenses and trading costs all affect the ability of the fund to match the performance of the index, because the index does not have to manage cash flows and does not incur any costs. Tracking error may also be impacted by timing differences in currency conversions between the fund and the index and by the fund's use of fair valuation.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures;

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and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Depositary Receipt Risk.** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**Emerging Markets Risk.** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency

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or monies in settlement of obligations. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. The fund's use of derivatives that are subject to regulation by the CFTC could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and operational risk, are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments may be difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

About the Funds

The funds in this prospectus are index funds and share the same basic investment strategy: each of the funds tracks a Russell RAFI™ Index which is based on the "Fundamental Index" methodology. In contrast to most equity indices, which generally are based on market capitalization, the Russell RAFI™ Index Series selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks.

This strategy distinguishes a Fundamental Index fund from an "actively managed" mutual fund. Instead of choosing investments for a fund based on portfolio management's judgment, an index is used to determine which securities the fund should own.

Because the composition of an index tends to be comparatively stable, index funds historically have shown low portfolio turnover compared to actively managed funds.

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The funds are designed for long-term investors. Their performance will fluctuate over time and, as with all investments, future performance may differ from past performance.

Portfolio Holdings

The funds may make various types of portfolio securities information available to shareholders. The funds post a detailed list of the securities held by each fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of month end. This list is generally posted approximately 15-20 days after the end of the month and remains posted for at least six months. The funds also post in the fund summary section of the funds' website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of the calendar quarter or month. The funds may exclude any portion of these portfolio holdings from publication when deemed in the best interest of a fund. Further information regarding the funds' policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about each fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the funds' prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020 through October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual report (see back cover).

#### Schwab Fundamental US Large Company Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $23.19 | $16.28 | $17.56 | $17.47 | $16.89 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.43 | 0.39 | 0.42 | 0.42 | 0.38 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (1.33) | 7.64 | (0.75) | 1.08 | 0.76 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (0.90) | 8.03 | (0.33) | 1.50 | 1.14 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.40) | (0.44) | (0.43) | (0.42) | (0.36) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.70) | (0.68) | (0.52) | (0.99) | (0.20) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.10) | (1.12) | (0.95) | (1.41) | (0.56) |
| Net asset value at end of period | $21.19 | $23.19 | $16.28 | $17.56 | $17.47 |
| Total return | (4.18%) | 51.33% | (2.33%) | 10.56% | 6.83% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.25%<sup>(2)</sup> | 0.25% | 0.25% | 0.25% | 0.25% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.95% | 1.87% | 2.57% | 2.53% | 2.17% |
| Portfolio turnover rate | 13%<sup>(3)</sup> | 16%<sup>(3)</sup> | 13% | 20% | 10% |
| Net assets, end of period (x 1,000,000) | $6460 | $6821 | $4547 | $5237 | $4887 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(3)</sup>

Portfolio turnover rate excludes in-kind transactions.

Schwab Fundamental Index Funds \| Financial Highlights33

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#### Schwab Fundamental US Small Company Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $19.32 | $11.97 | $13.85 | $14.68 | $15.32 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.22 | 0.18 | 0.17 | 0.20 | 0.22 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.17) | 7.38 | (1.53) | 0.32 | 0.17 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (1.95) | 7.56 | (1.36) | 0.52 | 0.39 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.24) | (0.21) | (0.20) | (0.22) | (0.21) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (1.91) |  | (0.32) | (1.13) | (0.82) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (2.15) | (0.21) | (0.52) | (1.35) | (1.03) |
| Net asset value at end of period | $15.22 | $19.32 | $11.97 | $13.85 | $14.68 |
| Total return | (11.37%) | 63.73% | (10.42%) | 5.61% | 2.40% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.25%<sup>(2)</sup> | 0.25% | 0.25% | 0.25% | 0.25% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.35% | 1.02% | 1.43% | 1.50% | 1.42% |
| Portfolio turnover rate | 35%<sup>(3)</sup> | 36%<sup>(3)</sup> | 28% | 34% | 30% |
| Net assets, end of period (x 1,000,000) | $1631 | $1945 | $1394 | $1908 | $1782 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(3)</sup>

Portfolio turnover rate excludes in-kind transactions.

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#### Schwab Fundamental International Large Company Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $10.56 | $7.51 | $8.98 | $8.69 | $9.55 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.34 | 0.31 | 0.21 | 0.30 | 0.29 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.10) | 2.96 | (1.35) | 0.27 | (0.89) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (1.76) | 3.27 | (1.14) | 0.57 | (0.60) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.39) | (0.22) | (0.33) | (0.28) | (0.26) |
| Net asset value at end of period | $8.41 | $10.56 | $7.51 | $8.98 | $8.69 |
| Total return | (17.25%) | 44.03% | (13.29%) | 7.04% | (6.53%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.25%<sup>(2)</sup> | 0.25% | 0.25% | 0.25% | 0.25% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 3.56% | 3.10% | 2.60% | 3.51% | 3.10% |
| Portfolio turnover rate | 13% | 21% | 14% | 28% | 13% |
| Net assets, end of period (x 1,000,000) | $1565 | $1406 | $966 | $1327 | $1349 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab Fundamental International Small Company Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $15.42 | $11.46 | $12.57 | $12.67 | $14.58 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.30 | 0.27 | 0.22 | 0.29 | 0.33 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.21) | 3.96 | (0.97) | 0.25 | (1.70) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.91) | 4.23 | (0.75) | 0.54 | (1.37) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.41) | (0.27) | (0.36) | (0.30) | (0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.44) |  |  | (0.34) | (0.20) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.85) | (0.27) | (0.36) | (0.64) | (0.54) |
| Net asset value at end of period | $10.66 | $15.42 | $11.46 | $12.57 | $12.67 |
| Total return | (26.61%) | 37.25% | (6.28%) | 5.13% | (9.79%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.39%<sup>(2)</sup> | 0.39% | 0.39% | 0.39% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 2.37% | 1.84% | 1.89% | 2.44% | 2.30% |
| Portfolio turnover rate | 36% | 35% | 25% | 38% | 26% |
| Net assets, end of period (x 1,000) | $530184 | $708349 | $576948 | $775258 | $762630 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab Fundamental Emerging Markets Large Company Index Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $10.24 | $7.51 | $9.25 | $8.60 | $9.38 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.52 | 0.36 | 0.27 | 0.35 | 0.27 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.96) | 2.63 | (1.65) | 0.54 | (0.83) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.44) | 2.99 | (1.38) | 0.89 | (0.56) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.45) | (0.26) | (0.36) | (0.24) | (0.22) |
| Net asset value at end of period | $7.35 | $10.24 | $7.51 | $9.25 | $8.60 |
| Total return | (24.86%) | 40.39% | (15.68%) | 10.73% | (6.09%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total expenses  | 0.39%<sup>(2)</sup> | 0.39% | 0.39% | 0.39% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 5.83% | 3.75% | 3.32% | 3.93% | 2.92% |
| Portfolio turnover rate | 24% | 32% | 32% | 38% | 19% |
| Net assets, end of period (x 1,000) | $604159 | $707652 | $550134 | $670910 | $547985 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

?

<sup>(2)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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## Fund Management
The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the funds. As compensation for these services, the investment adviser receives a management fee from each fund. For the 12 months ended October 31, 2022, these fees were 0.25% for the Schwab Fundamental US Large Company Index Fund, 0.25% for the Schwab Fundamental US Small Company Index Fund, 0.25% for the Schwab Fundamental International Large Company Index Fund, 0.39% for the Schwab Fundamental International Small Company Index Fund and 0.39% for the Schwab Fundamental Emerging Markets Large Company Index Fund. These figures, which are expressed as a percentage of each fund's average daily net assets, represent the actual amounts paid.

Pursuant to an Amended and Restated Investment Advisory and Administration Agreement (Amended and Restated Investment Advisory Agreement) between the investment adviser and each fund, the investment adviser pays the operating expenses of each fund, excluding acquired fund fees and expenses, taxes, any brokerage expenses, and extraordinary or non-routine expenses.

A discussion regarding the basis for the Board of Trustees' approval of each fund's Amended and Restated Investment Advisory Agreement is available in each fund's 2022 annual report which covers the period November 1, 2021 through October 31, 2022.

**Christopher Bliss, CFA,** Managing Director and Head of Passive Equity Strategies for Schwab Asset Management, leads the portfolio management team for Schwab's passive equity mutual funds and ETFs. Mr. Bliss is responsible for overseeing the investment process, portfolio management of investment strategies for passive equity Schwab Funds and Schwab ETFs, and Schwab Personalized Indexing™ separately managed accounts. Before joining Schwab in 2016, Mr. Bliss spent 12 years at BlackRock (formerly Barclays Global Investors) managing and leading institutional index teams, most recently as a managing director and the head of the Americas institutional index team. Prior to BlackRock, he worked as an equity analyst and portfolio manager for Harris Bretall and before that, as a research analyst for JP Morgan.

**Jeremy Brown, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund. Prior to joining Schwab 2017, Mr. Brown spent six years with ALPS Advisors, Inc. in Denver, most recently as a senior analyst on the ETF portfolio management and research team where he performed portfolio management, trading and analytics/research functions for ALPS ETFs and passive funds. Additionally, Mr. Brown led a number of investment research, commentary, industry trend analysis, and sales and marketing support initiatives.

**Chuck Craig, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the oversight and day-to-day co-management of the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund. Prior to joining Schwab in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent more than five years as managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

**Ferian Juwono, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the oversight and day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund. Prior to joining Schwab in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors) where he spent more than three years as a portfolio manager, managing equity index funds for institutional clients, and two years as a senior business analyst. Prior to that, Mr. Juwono worked for more than four years as a senior financial analyst with Union Bank of California.

**David Rios,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund. Prior to this role, Mr. Rios was an associate portfolio manager on the equity index strategies team for four years. His first role with Schwab Asset Management was as a trade operations specialist. Prior to joining Schwab in 2008, Mr. Rios was a senior fund accountant at Investors Bank & Trust (subsequently acquired by State Street Corporation).

**Sabya Sinha,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund. Prior to joining Schwab in 2015, Mr. Sinha spent a year at F-Squared Investments on the product development and analytics team. Prior to F-Squared, he worked at IndexIQ Advisors as a senior index portfolio manager for three years and for Bank of America's Columbia Management subsidiary as a portfolio manager for three years.

**Agnes Zau, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund. Prior to joining Schwab in 2018, Ms. Zau was at BlackRock for three years, most recently as a multi-asset portfolio investment consultant where she advised institutional

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clients on asset allocation and strategy, constructed risk decomposition and portfolio optimization, and conducted scenario analyses for the core multi-asset target risk strategies. She spent the preceding three years as a derivatives specialist at Mellon Capital.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in each fund is available in the SAI.

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## Investing in the Funds
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the funds through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of a fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The funds generally are not registered for sale in jurisdictions outside the United States and are intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the funds, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the funds on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the funds, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The funds are not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of a fund. If your fund shares are no longer held by an authorized intermediary, a fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with a fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, each fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, each fund may take up to seven days to pay sale proceeds.

• Each fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

Investing Directly with the Funds

#### Placing Direct Orders
Investors generally may not purchase shares directly from the funds' transfer agent, BNY Mellon Investment Servicing (US) Inc. The funds reserve the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the funds at any time.

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Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The funds are open for business each day that the NYSE is open. Each fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day. A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by a fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after the fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with the fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

The funds' portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, a fund's portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments.

Shareholders of Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### Each Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive a fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the funds. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the funds available to their customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the funds.

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Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the funds over other investment options they make available to their customers. Please see the SAI for additional information.

#### Policy Regarding Short-Term or Excessive Trading
The funds are intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the funds' performance by disrupting the efficient management of the funds, increasing fund transaction costs and taxes, causing the funds to maintain higher cash balances, and diluting the value of the funds' shares.

To discourage market timing, the funds' Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. Each fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the funds' policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the funds. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of a fund.

The funds and their service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the funds have requested that service providers to the funds monitor transactional activity in amounts and frequency determined by each fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in a fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, each fund or its service providers will work with the intermediary to monitor possible market timing activity. The funds reserve the right to request that the intermediary provide certain shareholder transaction information to the funds and may require the intermediary to restrict the shareholder from future purchases or exchanges in the funds. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the funds. Each fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. A fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. Each fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The funds may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The funds reserve the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the funds' securities when market prices are not "readily available" or are unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of a fund's portfolio holdings and the net asset value of its shares. The Valuation Designee's policies and procedures, which govern the selection and application of methodologies for determining the fair value of fund investments, seek to ensure that the prices at which the funds' shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

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The Valuation Designee makes fair value determinations in good faith and in accordance with the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security.

#### Methods to Meet Redemptions
Under normal market conditions, each fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, each fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. Each fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, each fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of each fund's overall obligation to deter money laundering under federal law. Each fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the funds reserve the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of a fund or in cases when a fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if a fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

Each fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

Distributions and Taxes

Any investment in a fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov.**

As a shareholder, you are entitled to your share of the dividends and gains a fund earns. Every year, each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of each fund's capital gains distribution, if any, may be made available on the fund's website: **www.schwabassetmanagement.com.**

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Unless you are investing through an IRA, 401(k) or other tax-advantaged retirement or savings account, your fund distributions generally have tax consequences. Each fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in a fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund may have additional tax considerations as a result of foreign tax payments made by the funds. Typically, these payments will reduce the funds' dividends but if eligible, the funds may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions a fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, each fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, a fund will use an average cost basis method. Please consult your tax adviser to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

A fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if the shareholders fail to provide the funds with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% (unless a lower treaty rate applies) on amounts treated as ordinary dividends from the funds, as discussed in more detail in the SAI. Furthermore, each fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

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**Prospectus** \| February 27, 2023

## Schwab Fundamental Index Funds

#### To Learn More
This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the funds' holdings and detailed financial information about the funds. Annual reports also contain information from the funds' manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the funds' last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the funds' annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG37409-19

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab<sup>®</sup> International Opportunities Fund

---

| | |
|:---|:---|
| Ticker Symbol | **SWMIX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

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## Schwab International Opportunities Fund

---

| | |
|:---|:---|
| **Fund Summary** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab International Opportunities Fund](#ideeegeSIOF)  | [1](#ideeegeSIOF) |
| **[Fund Details](#idefhgjIOSR)**  | [5](#idefhgjIOSR) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objective, Strategies and Risks](#idefhgjIOSR)  | [5](#idefhgjIOSR) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbcdcPH)  | [9](#idbcdcPH) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idbfidiFH)  | [11](#idbfidiFH) |
| **[Fund Management](#idbiiahFM)**  | [12](#idbiiahFM) |
| **[Investing in the Fund](#idegfjitfi-0)**  | [15](#idegfjitfi-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#idegfjitfi-0)  | [15](#idegfjitfi-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Fund](#idbbjeidf-0)  | [15](#idbbjeidf-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idcfhhSP)  | [16](#idcfhhSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbjfggAPAYI)  | [16](#idbjfggAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idbabfeDT)  | [19](#idbabfeDT) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Information](#idbgbiAI)  | [21](#idbgbiAI) |

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Schwab<sup>®</sup> International Opportunities Fund

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| | |
|:---|:---|
| **Ticker Symbol:**  | **SWMIX** |

---

#### Investment Objective
The fund seeks long-term capital appreciation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)<sup>(1)</sup>  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)<sup>(1)</sup>  |
| Management fees | 0.63  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.21  |
| **Total annual fund operating expenses** | **0.84**  |

---

<sup>(1)</sup>

The information in the table has been restated to reflect current fees and expenses.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $86 | $268 | $466 | $1037 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 81% of the average value of its portfolio.

#### Principal Investment Strategies
To pursue its goal, the fund normally invests a substantial amount of its assets in equity securities of companies outside the United States. The fund expects to invest in companies across all market capitalization ranges. The fund typically focuses on developed markets, but may invest in companies from emerging markets as well. In determining whether a company is international, the portfolio managers will consider various factors, including where the company is headquartered, where the company's principal operations are located, where the company's revenues are derived, where the principal trading market is located and the country in which the company was legally organized. The weight given to each of these factors will vary depending on the circumstances in a given case.

Charles Schwab Investment Management, Inc., dba Schwab Asset Management, manages a portion of the fund by primarily investing in stocks that are included in the FTSE Developed ex US Quality Factor Index<sup>†</sup>. The index is comprised of securities within the FTSE Developed ex US Index and is designed to reflect the performance of the Quality equity risk premia factor. The index applies a consistent and transparent methodology to select and weight constituents by applying the Quality factor together with industry and country constraints to the market capitalization weight of index constituents. Because it may not be possible or practical to purchase all of the stocks included in the index, Schwab Asset Management seeks to track the total return of the index by using sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including capitalization, performance attributes, dividend yield, price/earnings ratio, risk factors, industry factors and other characteristics.

Schwab Asset Management can allocate a portion of the fund to particular market sectors, such as emerging markets, utilizing securities, exchange-traded funds (ETFs) and/or other registered investment companies. Schwab Asset Management also manages the cash portion of the fund and may also directly manage additional portions of the fund during transitions between investment managers.

Schwab Asset Management allocates portions of the fund's assets to other investment managers, who then manage their respective portions under the general supervision of Schwab Asset Management. In choosing the investment managers and their allocations, Schwab Asset Management considers a number of

<sup>†</sup>

The Schwab International Opportunities Fund has been developed solely by Schwab Asset Management. The fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the LSE Group). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the FTSE Developed ex US Quality Factor Index (the Index) vest in the relevant LSE Group company which owns the Index. "FTSE<sup>®</sup>" is a trade mark of the relevant LSE Group company and is used by any other LSE Group company under license.

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factors, including global economic trends, its own outlook for a given market capitalization or investment style category and regions and countries that offer the greatest potential for growth, and the investment managers' performance in various market conditions.

Each investment manager uses its own securities selection process and has discretion to select portfolio securities for its allocation of the fund's assets. At the same time, each investment manager invests within a specific market capitalization range and investment style under the general supervision of Schwab Asset Management. Schwab Asset Management has developed parameters for each investment manager based on Schwab Asset Management's assessment of the investment manager's investment style and expertise. By assigning more specific parameters to each investment manager, Schwab Asset Management attempts to capitalize on the strengths of each investment manager and to combine their investment activities in a complementary fashion.

Schwab Asset Management may use derivatives, primarily futures contracts, to seek returns on the fund's otherwise uninvested cash assets. In addition, the investment managers may use futures contracts as a substitute for investing directly in an underlying asset or to increase returns. The fund may invest in forward foreign currency contracts to hedge currency risks associated with the purchase of individual securities denominated in a particular currency.

The fund may buy and sell portfolio securities actively. In addition, one investment manager may purchase portfolio securities at the same time that another investment manager sells the same securities. As a result, the fund's portfolio turnover rate and transaction costs may rise, which may lower fund performance and increase the likelihood of capital gains distributions.

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective. The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Investment Style Risk.** Schwab Asset Management may attempt to reduce the impact of the performance of any given investment

style by allocating to investment managers who invest in both value and growth style stocks. But whenever value stocks fall out of favor with investors, they may underperform growth stocks, and vice versa.

The portion of the fund that is invested in accordance with a particular index follows the securities included in that index during upturns as well as downturns. The fund does not take steps to reduce market exposure or to lessen the effects of a declining market with respect to this portion. In addition, because of the fund's expenses, the fund's performance with respect to this portion may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

**Multi-Manager Risk.** Schwab Asset Management and each investment manager makes investment decisions independently, and it is possible that the investment styles of Schwab Asset Management and the investment managers may not complement one another. As a result, the fund's exposure to a given stock, industry or investment style could unintentionally be smaller or larger than if the fund had a single manager.

**Management Risk.** The portion of the fund that is actively managed is subject to the risk that its investment adviser and investment managers will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its investment objective. Poor stock selection or a focus on securities in a particular sector may cause the fund to underperform its benchmark or other funds with a similar investment objective.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

**Small-Cap Company Risk.** Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

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**Emerging Markets Risk.** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Sampling Index Tracking Risk.** The portion of the fund that is invested in accordance with a particular index may not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that Schwab Asset Management's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because Schwab Asset Management utilizes a sampling approach the portion of the fund it manages may not track the return of the index as well as it would if the fund purchased all of the securities in the index.

**Derivatives Risk.** The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

The fund's use of derivatives could reduce the fund's performance, increase its volatility and cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

**Liquidity Risk.** The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of an index. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see

**www.schwabassetmanagement.com/schwabfunds_prospectus**.

On February 26, 2019, the Investor Shares and Select Shares share classes were combined into a single class of shares of the fund, and the fund no longer offers multiple classes of shares. The performance history of the fund, prior to February 26, 2019, is that of the fund's former Select Shares.

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: tr817rqld70r9jk1sb6ic9m2e657.jpg]](tr817rqld70r9jk1sb6ic9m2e657.jpg)

#### Best Quarter: 26.69% Q2 2020

#### Worst Quarter: (25.85%) Q1 2020
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---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (25.35%) | (0.04%) | 4.55% |
| After taxes on distributions | (25.94%) | (1.75%) | 3.34% |
|  After taxes on distributions and sale <br> of shares  | (14.54%) | 0.13% | 3.72% |
|  **Comparative Index** (reflects no deduction for expenses or taxes)  |  |  |  |
| MSCI EAFE Index (Net)<sup>(1)</sup> | (14.45%) | 1.54% | 4.67% |

---

<sup>(1)</sup>

The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Fund Management
The fund's investment adviser is Charles Schwab Investment Management, Inc., dba Schwab Asset Management<sup>TM</sup>.

#### Portfolio Managers
**John Greves, CFA,** Managing Director and Head of Multi-Asset Strategies, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2022.

**Tony Creasy, CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2022.

**Daniel Piquet, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2022.

**Chuck Craig, CFA,** Senior Portfolio Manager, is responsible for the day-to-day management of the portion of the fund that is invested in accordance with a particular index. He has managed the portion of the fund since 2022.

**David Rios,** Portfolio Manager, is responsible for the day-to-day co-management of the portion of the fund that is invested in accordance with a particular index. He has managed the portion of the fund since 2022.

#### Investment Managers
The fund has four investment managers: American Century Investment Management, Inc., Baillie Gifford Overseas Limited, Harris Associates L.P. and Mondrian Investment Partners Limited. As of the date of this prospectus, none of the investment managers managed more than 30% of the fund's net assets nor are any expected to manage more than 30% of the fund's assets. In addition, an investment manager may, at certain times, be approved but unfunded. For information on the fund's investment managers, please see the "Fund Details" and "Fund Management" sections in the prospectus.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## Fund Details
There can be no assurance that the fund will achieve its objective. Except as explicitly described otherwise, the investment strategies and policies of the fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in the fund are summarized in the fund summary at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the fund, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, the fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies, Securities and Risks" section in the Statement of Additional Information (SAI).

Investment Objective, Strategies and Risks

#### Investment Objective
The fund seeks long-term capital appreciation.

#### More About the Fund's Investment Managers and Principal Risks
The fund's investment adviser, Charles Schwab Investment Management, Inc., dba Schwab Asset Management, acts as investment adviser for a portion of the fund and "manager of managers" for the fund. In its manager of managers role, Schwab Asset Management, subject to approval by the fund's Board of Trustees, hires investment managers to manage portions of the fund's assets.

The following table identifies the fund's investment adviser and investment managers as of the date of this prospectus, their areas of focus, and approximate asset allocation.

---

| | | |
|:---|:---|:---|
| **Investment Adviser/Manager**  | **Investment Style**  | **Approximate <br> Allocation of <br> Net Assets (%)<sup>(1)</sup>**  |
| **American Century Investment Management, Inc.**  | International small-cap growth | 25% |
| **Baillie Gifford Overseas Limited**  | International growth | 8% |
| **Harris Associates L.P.**  | International large-cap value | 24% |
| **Mondrian Investment Partners Limited**  | International small-cap value | 17% |
| **Schwab Asset Management**  | International large-cap developed | 21% |
| **Cash and other assets**  |  | 5% |

---

<sup>(1)</sup>

Allocations may not add to 100% due to rounding.

**American Century Investment Management, Inc.'s (American Century)** portfolio managers look for stocks of companies they believe will increase in value over time, using an investment strategy developed by American Century. In implementing this strategy, the portfolio managers use a bottom-up approach to stock selection. This means that they make their investment decisions based primarily on their analysis of individual companies, rather than on broad economic forecasts. Management of the fund is based on the belief that, over the long term, stock price movements follow growth in earnings, revenues and/or cash flow.

Using a variety of analytical research tools, the portfolio managers track financial information for individual companies to identify and evaluate trends in earnings, revenues and other business fundamentals. Under normal market conditions, the fund's portfolio managers seek securities of companies whose earnings, revenues or key business fundamentals are not only growing, but growing at an accelerating pace. This includes companies whose growth rates, although still negative, are less negative than prior periods, and companies whose growth rates are expected to accelerate. Other analytical techniques help identify additional signs of business improvement, such as increasing cash flows, or other indications of the relative strength of a company's business. These techniques help the portfolio managers buy or hold the stocks of companies they believe have favorable growth prospects and sell the stocks of companies whose characteristics no longer meet their criteria.

The portion of the fund's assets managed by American Century are invested primarily in equity securities of companies that are small-sized at the time of purchase and are located in developed foreign countries or emerging market countries. The portfolio managers generally consider small-sized companies to include those with a market capitalization within the range of the MSCI ACWI ex-US Small-Cap Growth Index; however the portfolio managers do not eliminate companies from consideration based solely on market capitalization. If the companies in which the fund invests are successful, these companies may grow into medium- and large-sized companies. In addition, if the portfolio managers determine that the availability of small-sized companies in which to invest is not adequate to meet the fund's investment needs, the portfolio managers may invest in medium- and large-sized companies.

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In addition to locating strong companies with earnings, revenue and/or cash flow growth, the portfolio managers believe that it is important to diversify the fund's holdings across different countries and geographical regions in an effort to manage the risks of an international portfolio. For this reason, the portfolio managers also consider the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations when making investments.

The portfolio managers do not attempt to time the market. Instead, under normal market conditions, they intend to keep the fund essentially fully invested in stocks regardless of the movement of stock prices generally.

**Baillie Gifford Overseas Limited (Baillie Gifford)** Baillie Gifford's portfolio managers use a fundamental, bottom-up approach to find investment opportunities in companies with exceptional growth prospects. A concentrated strategy ensures research efforts are focused on companies that are believed to be truly exceptional. Timescales of analysis are not typically aligned with the quarterly focus of traditional finance given a focus on thinking about what the world may look like in ten years' time. The ability to invest in a genuinely long-term manner is important in realizing the asymmetric returns that are available from a small number of companies. A company's value is rarely determined by what will happen in the next few quarters but instead what will happen in many years. It is over much longer time-periods that deep changes in industries and behavior occur and that competitive advantage and management excellence are recognized. Baillie Gifford uses a proprietary fundamental research framework which focuses analysis on a company's transformational growth prospects, sustainability of its competitive advantage, stewardship and financial strength. The research process considers both the scale and the sustainability of the opportunity. This is used to construct a probability-weighted valuation which looks at long-term scenarios for the value of the company and the likelihood of success. Investment decisions are based purely on the merits of the underlying business where it is believed the potential for outsize returns is not reflected in its current valuation. The segment of the fund's assets managed by Baillie Gifford are invested in equity securities of companies of all sizes.

**Harris Associates L.P. (Harris)** uses a value investment philosophy in selecting equity securities. This value investment philosophy is based upon the belief that, over time, a company's stock price converges with Harris' estimate of the company's intrinsic value. By "intrinsic value," Harris means their estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris believes that investing in securities priced significantly below what they believe is a company's intrinsic value presents the best opportunity to achieve the fund's investment objective. A company trading below its estimated intrinsic value is sometimes referred to as trading at a discount. Harris uses this value investment philosophy to identify companies that have discounted stock prices compared to what Harris believes are the companies' intrinsic values. In assessing such companies, Harris looks for the following characteristics, although the companies selected may not have all of these attributes: (1) free cash flows; (2) earnings that are growing and are reasonably predictable; and (3) high level of company management alignment with shareholders.

In making its investment decisions, Harris uses a "bottom-up" approach focused on individual companies, rather than focusing on specific economic factors or specific industries. To facilitate its selection of investments that meet the criteria described above, Harris uses independent, in-house research to analyze each company. As part of this selection process, Harris' analysts typically visit companies and conduct other research on the companies and their industries. Once Harris identifies a stock that it believes is selling at a significant discount to Harris' estimated intrinsic value and that the company has the additional qualities mentioned above, Harris may consider buying that stock for the fund. Harris usually sells a stock when the price approaches its estimated intrinsic value. This means Harris sets specific "buy" and "sell" targets for each stock held by the fund. Harris monitors each portfolio holding and adjusts these price targets as warranted to reflect changes in a company's fundamentals.

**Mondrian Investment Partners Limited (Mondrian)** In managing its segment of the fund's assets, Mondrian conducts research on a global basis in an effort to identify securities that have the potential for long term total return. The center of the research effort is a value-oriented dividend discount methodology toward individual securities and market analysis that identifies value across country boundaries. This approach focuses on future anticipated dividends and discounts the value of those dividends back to what they would be worth if they were being paid today. Comparisons of the values of different possible investments are then made. In an international portfolio, currency returns can be an integral component of an investment's total return. Mondrian uses a purchasing power parity approach to assess the value of individual currencies. Purchasing power parity attempts to identify the amount of goods and services that a dollar will buy in the United States and compares that to the amount of a foreign currency required to buy the same amount of goods and services in another country.

#### More Information About Principal Investment Risks
The fund is subject to risks, any of which could cause an investor to lose money.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with

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a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and the fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Management Risk.** The portion of the fund that is actively managed is subject to the risk that its investment adviser and investment managers will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its investment objective. The fund's investment managers apply their own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. These risks may cause the fund to underperform its benchmark or other funds with a similar investment objective.

**Investment Style Risk.** Schwab Asset Management may attempt to reduce the impact of the performance of any given investment style by allocating to investment managers who invest in both value and growth style stocks. But whenever value stocks fall out of favor with investors, they may underperform growth stocks, and vice versa.

The portion of the fund that is invested in accordance with a particular index follows the securities included in that index during upturns as well as downturns and therefore does not take steps to reduce market exposure or to lessen the effects of a declining market with respect to this portion. In addition, because of the fund's expenses, the fund's performance with respect to this portion may be below that of the index. Errors relating to the index may occur from time to time and may not be identified by the index provider for a period of time. In addition, market disruptions could cause delays in the index's rebalancing schedule. Such errors and/or market disruptions may result in losses for the fund.

At times the segment of the markets represented by the index may underperform other market segments. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. Because of the way the index is composed, the index may perform differently or worse than an index that is based solely on market capitalization.

**Index-Related Risk.** The index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to the index. Errors relating to the index, including index data, computations and/or construction, may occur from time to time and may not be identified by the index provider for a period of time or at all. Losses resulting from index errors may be borne by the fund and its shareholders.

In addition, market disruptions could cause delays in the index's rebalancing schedule which may result in the index and, in turn, the portion of the fund that is invested in accordance with the index experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**Equity Risk.** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities markets as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

**Market Capitalization Risk.** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, the fund's performance could be impacted.

**Large-Cap Company Risk.** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**Mid-Cap Company Risk.** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**Small-Cap Company Risk.** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply,

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especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**Foreign Investment Risk.** The fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of the fund's investments and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent the fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund's price may be more volatile than the price of a fund that is geographically diversified.

**Currency Risk.** The fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund's account. The fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**Emerging Markets Risk.** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with the fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**Variable Interest Entities Risk.** The fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as the fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects the fund to the risks associated with the underlying China-based operating company. In addition, the fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties,

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revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of the fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the fund.

**ETF Risk.** When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Derivatives Risk.** The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right, but not the obligation, to buy or sell an instrument at a specific price on or before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

The fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk, management risk, and operational risk are discussed elsewhere in this prospectus. The fund's use of derivatives is also subject to credit risk, leverage risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund's use of derivatives could reduce the fund's performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules. The fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that the fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**Liquidity Risk.** Liquidity risk exists when particular investments are difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In addition, limited dealer inventories of certain securities could potentially lead to decreased liquidity. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of the fund to meet redemption requests within the required time period. In order to meet such redemption requests, the fund may be forced to sell securities at inopportune times or prices.

**Securities Lending Risk.** The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

**Operational Risk.** The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. The fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

Portfolio Holdings

The fund may make various types of portfolio securities information available to shareholders. The fund posts a detailed list of the securities held by the fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of the most

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recent calendar quarter-end. This list is generally updated approximately 15-20 days after the end of each calendar quarter and remains available online until at least the following calendar quarter. The fund also posts in the fund summary section of the website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of each calendar quarter or month. The fund may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the fund. Further information regarding the fund's policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about the fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in the fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the fund's prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020, October 31, 2021 and October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in the fund's annual report (see back cover).

#### Schwab International Opportunities Fund

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19<sup>(1)</sup>**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $30.60 | $24.37 | $22.89 | $22.89 | $26.96 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(2)</sup>  | 0.26 | 0.01 | 0.00(3) | 0.31 | 0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (9.58) | 7.94 | 1.95 | 1.74 | (3.09) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (9.32) | 7.95 | 1.95 | 2.05 | (2.85) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.28) |  | (0.43) | (0.29) | (0.36) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (4.10) | (1.72) | (0.04) | (1.76) | (0.86) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (4.38) | (1.72) | (0.47) | (2.05) | (1.22) |
| Net asset value at end of period | $16.90 | $30.60 | $24.37 | $22.89 | $22.89 |
| Total return | (34.79%) | 33.50% | 8.56% | 10.50% | (11.09%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses  | 0.99%<sup>(4)(5)</sup> | 1.25% | 1.25% | 1.25% | 1.25% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses  | 1.08%<sup>(5)</sup> | 1.47% | 1.51% | 1.50% | 1.51% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.24% | 0.05% | 0.00%<sup>(6)</sup> | 1.43% | 0.92% |
| Portfolio turnover rate | 81% | 59% | 65% | 54% | 69% |
| Net assets, end of period (x 1,000,000) | $982 | $1495 | $1243 | $1413 | $1127 |

---

<sup>(1)</sup>

Effective February 26, 2019, the Investor Share class, and the Select Share class were consolidated into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Select Shares.

<sup>(2)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(3)</sup>

Per-share amount was less than $0.005.

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<sup>(4)</sup>

Effective February 25, 2022, the net operating expense limitation was lowered from 1.25% to 0.86%. The ratio presented for the period ended October 31, 2022 is a blended ratio.

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<sup>(5)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(6)</sup>

Less than 0.005%.

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## Fund Management
The investment adviser for the fund is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

Subject to oversight by the fund's Board of Trustees, Schwab Asset Management acts as the "manager of managers" for the fund, manages a portion of the fund and has overall responsibility for the management of the fund. Schwab Asset Management may recommend the appointment of additional or replacement investment managers to the fund's Board of Trustees. The fund and Schwab Asset Management have received exemptive relief from the SEC to permit the investment adviser and the fund to hire or terminate investment managers without shareholder approval, subject to certain conditions. One of the conditions requires approval by the Board of Trustees before any such hiring is implemented. In addition, the exemptive order currently prohibits the investment adviser from entering into sub-advisory agreements with affiliates of the investment adviser without shareholder approval. Within 90 days of the hiring of any new investment manager, the investment adviser will furnish shareholders of the fund with the required information about the new investment manager.

The investment adviser oversees the asset management and administration of the fund. As compensation for these services, the investment adviser receives a management fee from the fund. For the 12 months ended October 31, 2022, the management fee was 0.78%. This figure, which is expressed as a percentage of the fund's average daily net assets, represents the actual amount paid, including the effects of reductions, and are based on the fees that applied for that period. Schwab Asset Management pays the investment managers out of the management fee it receives from the fund.

A discussion regarding the basis for the Board of Trustees' approval of the fund's investment advisory agreement with the investment adviser and each sub-advisory agreement is available in the fund's 2022 annual report, which covers the period of November 1, 2021 through October 31, 2022.

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, and certain non-routine expenses) of the fund to 0.86% so long as the investment adviser serves as the adviser to the fund. The agreement may only be amended or terminated with approval of the fund's Board of Trustees.

**John Greves, CFA,** Managing Director and Head of Multi-Asset Strategies for Schwab Asset Management, is responsible for the day-to-day co-management of the fund. Prior to joining Schwab in 2016, Mr. Greves worked at Russell Investment Management Company (Russell Investments) for 13 years, most recently as a portfolio manager for multi-asset solutions where he managed multiple target date funds, chaired the multi-asset advisory team, and co-authored papers on glide path methodology and benchmarking. Prior to that, he served in several roles for Russell Investments including associate portfolio manager for multi-asset solutions and senior portfolio analyst for multi-asset solutions.

**Tony Creasy, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the fund. Mr. Creasy has over 15 years of both equity and fixed income investment experience. Prior to his current role, he was a portfolio manager on the Multi-Asset Strategies Team, responsible for the daily management of several multi-asset portfolios. He also spent several years as lead analyst on the Schwab Asset Management Investment Manager Research Team. Prior to that, Mr. Creasy was an institutional investment analyst for Schwab's retirement investment services group, providing mutual fund analysis to support the Schwab Focus List™.

**Daniel Piquet, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the fund. Prior to joining Schwab, Mr. Piquet spent two years as an analyst at Santander Asset Management providing subadviser oversight in the firm's global multi-asset solutions team. Before that, he was a portfolio analyst with Natixis Global Asset Management, performing portfolio risk analysis as well as equity, fixed income and alternative mutual fund research. He also spent six years at The Vanguard Group, including two years as an investment analyst.

**Chuck Craig, CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day management of the portion of the fund that is invested in acordance with a particular index. Prior to joining Schwab in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent more than five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

**David Rios,** Portfolio Manager for Schwab Asset Management, is responsible for the day-to-day co-management of the portion of the fund that is invested in accordance with a particular index. Prior to this role, Mr. Rios was an associate portfolio manager on the Schwab equity index strategies team for four years. His first role with Schwab Asset Management was as a trade operations specialist. Prior to joining Schwab Asset Management in 2008, Mr. Rios was a senior fund accountant at Investors Bank & Trust (subsequently acquired by State Street Corporation).

#### The Fund's Investment Managers
The table below shows the fund's current investment managers and the individuals who serve as portfolio managers for each investment manager's portion of fund assets.

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| | | | |
|:---|:---|:---|:---|
| **Investment Manager <br> and Address** | **Year Founded/ <br> Assets Under <br> Management <br> (as of 12/31/2022)** | **Portfolio Manager(s)**  | **Employment Experience**  |
| **American Century <br> Investment <br> Management, Inc. <br> 4500 Main Street <br> Kansas City, MO 64111**  | **Founded:** 1958 <br> $201.8 billion | Trevor Gurwich, <br> Vice President and Senior Portfolio Manager | Rejoined the team that manages International Small Cap Strategy in 2005. He previously was a member of the team from 2001 until 2002. He joined American Century Investments in 1998 and became a portfolio manager in 2001. |
|  |  | Federico Laffan, <br> Vice President and Portfolio Manager | Has been a member of the team that manages International Small Cap strategy since 2014 after previously being on the team from 2001 to 2008. He joined American Century Investments in 2001 and became a portfolio manager in 2004. |
|  |  | Pratik Patel, <br> Portfolio Manager | Has been a member of the team that manages International Small Cap strategy since 2009. He joined American Century Investments in 2009 as an investment analyst and became a portfolio manager in 2014. |
| **Baillie Gifford Overseas <br> Limited** <br> Calton Square, <br> 1 Greenside Row, <br> Edinburgh EH1 3AN, <br> Scotland | **Founded:** 1983 <br> $268.7 billion | Spencer Adair, <br> Partner and Investment Manager | Mr Adair is co-manager of the International Concentrated Growth Strategy. He is also an Investment Manager in the Global Alpha Team and Monks Investment Trust. He joined Baillie Gifford in 2000 and became a Partner in 2013. He has also spent time working in the Fixed Income, Japanese, European, Emerging Markets and UK Equity Teams. He graduated BSc in Medicine from the University of St Andrews in 1997, followed by two years of clinical training in Edinburgh. |
|  |  | Lawrence Burns, <br> Partner and Investment Manager | Mr. Burns is co-manager of the International Concentrated Growth Strategy. He is also an Investment Manager in the International Growth Research Team. He has been a member of the International Growth Portfolio Construction Group since October 2012 and took over as Deputy Chair in July 2019. He joined Baillie Gifford in 2009 and became a Partner in 2020. He graduated BA in Geography from the University of Cambridge in 2009. |
|  |  | Paulina Sliwinska, CFA, <br> Investment Manager | Ms. Sliwinska is co-manager of International Concentrated Growth. She is also an analyst in the International Growth Team and has spent time working with regional and global equity teams. She joined Baillie Gifford in 2013 and graduated MA (Hons) Arabic and Politics from the University of Edinburgh in 2013. |
| **Harris Associates L.P.** <br> 111 S. Wacker Drive <br> Suite 4600 <br> Chicago, IL 60606 | **Founded:** 1976 <br> $94 billion | David G. Herro, CFA, <br> Deputy Chairman, Chief Investment Officer, International Equities and Portfolio Manager | Began his investment career in 1986. Joined Harris Associates in 1992. Mr. Herro holds a BS from the University of Wisconsin-Platteville and a MA from the University of Wisconsin-Milwaukee. |
|  |  | Mike L. Manelli, CFA, <br> Vice President, Portfolio Manager and International Investment Analyst | Mr. Manelli joined Harris Associates L.P. in 2005. Mr. Manelli has 16 years investment experience and holds a BBA from the University of Iowa. |

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| | | | |
|:---|:---|:---|:---|
| **Investment Manager <br> and Address** | **Year Founded/ <br> Assets Under <br> Management <br> (as of 12/31/2022)** | **Portfolio Manager(s)**  | **Employment Experience**  |
| **Mondrian Investment <br> Partners Limited** <br> 60 London Wall <br> Floor 10 <br> London EC2M 5TQ <br> United Kingdom | **Founded:** 1990 <br> $43 billion | Ormala Krishnan, PhD, <br> CIO – Small Cap Equities, Managing Partner | Dr. Krishnan is the CIO of Mondrian's small cap strategies including developed International Small Cap, Emerging Markets Small Cap and US Small Cap. Dr. Krishnan started her investment career in 1993 with Singapore based Koeneman Capital Management. Prior to joining Mondrian in 2000 as a portfolio manager, Dr. Krishnan was an investment consultant with William M Mercer. Upon completion of her BSc in Pure and Applied Mathematics from the National University of Singapore, Dr. Krishnan achieved her MSc in Actuarial Science from City University, London. In 2006, Dr. Krishnan completed her Doctoral program in Investment and Finance from Sir John Cass Business School, City of London. Her doctoral thesis was on 'Value versus Growth in the Asian Equity Markets.' |
|  |  | Aidan Nicholson, CFA, <br> Senior Portfolio Manager, Partner | Mr. Nicholson graduated from Pembroke College, Oxford with a Masters in Engineering, Economics & Management. He started his career at Cazenove & Co. in the UK Smaller Companies Team, before moving to Mondrian in 2003 to work on the International Small Capitalization Team. Mr. Nicholson is a CFA Charterholder and a member of the CFA Institute and the CFA Society of the UK. |

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Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the fund is available in the SAI.

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## Investing in the Fund
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the fund through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of the fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The fund generally is not registered for sale in jurisdictions outside the United States and is intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the fund, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the fund on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the fund, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The fund is not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of the fund. If your fund shares are no longer held by an authorized intermediary, the fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with the fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, the fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, the fund may take up to seven days to pay sale proceeds.

• The fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

?

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

Investing Directly with the Fund

#### Placing Direct Orders
Investors generally may not purchase shares directly from the fund's transfer agent, BNY Mellon Investment Servicing (US) Inc. The fund reserves the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the fund at any time.

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Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The fund is open for business each day that the NYSE is open. The fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day. The fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by the fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after the fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with the fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

The fund's portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, the fund's portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the fund to perform the fair value determination relating to all fund investments.

Shareholders of the fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### The Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive the fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. These payments or discounts are separate from, and may be in addition to, any shareholder service fees or other administrative fees the fund may pay to those intermediaries. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the fund. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the fund available to its customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the fund.

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Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the fund over other investment options they make available to their customers. Please see the SAI for additional information.

#### Shareholder Servicing Plan
The Board of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund.

Pursuant to the Plan, the fund's shares are subject to an annual shareholder servicing fee up to 0.20%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the fund (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab's written agreement with the fund), and the fund will pay no more than 0.20% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

#### Policy Regarding Short-Term or Excessive Trading
The fund is intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the fund's performance by disrupting the efficient management of the fund, increasing fund transaction costs and taxes, causing the fund to maintain higher cash balances, and diluting the value of the fund's shares.

To discourage market timing, the fund's Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. The fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the fund's policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the fund. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of the fund.

The fund and its service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the fund has requested that service providers to the fund monitor transactional activity in amounts and frequency determined by the fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in the fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in the fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, the fund or its service providers will work with the intermediary to monitor possible market timing activity. The fund reserves the right to request that the intermediary provide certain shareholder transaction information to the fund and may require the intermediary to restrict the shareholder from future purchases or exchanges in the fund. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the fund. The fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. The fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the fund will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. The fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The fund may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The fund reserves the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

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#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the fund's securities when market prices are not "readily available" or are unreliable. For example, the fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of the fund's portfolio holdings and the net asset value of its shares, and seeks to help ensure that the prices at which the fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

The Valuation Designee makes fair value determinations in good faith in accordance with the the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security.

#### Methods to Meet Redemptions
Under normal market conditions, the fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, the fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. The fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, the fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of the fund's shares. Redemptions by these shareholders of their holdings in the fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force the fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of the fund's overall obligation to deter money laundering under federal law. The fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the fund reserves the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of the fund or in cases when the fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if the fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

The fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

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Distributions and Taxes

Any investment in the fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in the fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains the fund earns. Every year, the fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of the fund's capital gains distributions, if any, may be made available on the fund's website: **www.schwabassetmanagement.com**.

Unless you are investing through an IRA, 401(k) or other tax-advantaged retirement or savings account, your fund distributions generally have tax consequences. The fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in the fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short-term if you held the shares for one-year or less, long-term if you held the shares longer. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

If the fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution will not be taxable to the extent of a shareholder's adjusted basis but will reduce such basis and result in a higher capital gain or lower capital loss when those shares on which the distribution was received are sold. To the extent of a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from the fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in the fund may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but, if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the fund provides shareholders with information detailing the tax status of any distributions the fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, the fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, the fund will use an average cost basis method. Please consult your tax advisor to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

The fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if they fail to provide the fund with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

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Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% (unless a lower treaty rate applies) on amounts treated as ordinary dividends from the fund, as discussed in more detail in the SAI. Furthermore, the fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the fund to enable the fund to determine whether withholding is required.

The fund's investments in foreign securities may be subject to foreign withholding taxes. In that case, the fund's return on those securities would be decreased. In addition, the fund's investments in foreign securities or foreign currencies may increase or accelerate the fund's recognition of ordinary income and may affect the timing or amount of the fund's distributions. If more than 50% of the fund's assets at fiscal year-end is represented by debt and equity securities of foreign corporations, the fund intends to elect to permit shareholders who are U.S. citizens, resident aliens or U.S. corporations to claim a foreign tax credit or deduction (but not both) on their U.S. income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Internal Revenue Code of 1986, as amended (Internal Revenue Code). For the purposes of the foreign tax credit, each such shareholder would include in gross income from foreign sources its pro rata share of such taxes. Certain limitations imposed by the Internal Revenue Code may prevent shareholders from receiving a full foreign tax credit or deduction for their allocable amount of such taxes.

To the extent such investments are permissible for the fund, the fund's transactions in options, futures contracts, hedging transactions, forward contracts, equity swap contracts and straddles will be subject to special tax rules (including mark-to-market, constructive sale, straddle, and wash sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term gains or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund's use of such transactions may result in the fund realizing more short-term capital gains (subject to tax at ordinary income tax rates) and ordinary income subject to tax at ordinary income tax rates than it would if it did not engage in such transactions.

The foregoing is a general summary of the federal income tax consequences of investing in the fund to shareholders who are U.S. citizens or U.S. corporations. Shareholders should consult their own tax advisors about the tax consequences of an investment in the fund in light of each shareholder's particular tax situation. Shareholders should also consult their own tax advisors about consequences under foreign, state, local or other applicable tax laws.

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## Additional Information
Disclaimers

The Schwab International Opportunities Fund has been developed solely by Schwab Asset Management. The fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the LSE Group). FTSE Russell is a trading name of certain of the LSE Group companies.

All rights in the FTSE Developed ex US Quality Factor Index (the Index) vest in the relevant LSE Group company which owns the Index. "FTSE®" is a trade mark of the relevant LSE Group company and is used by any other LSE Group company under license.

The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the fund. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the fund or the suitability of the Index for the purpose to which it is being put by Schwab Asset Management.

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**Prospectus** \| February 27, 2023

## Schwab International Opportunities Fund

#### To Learn More
This prospectus contains important information on the fund and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the fund's holdings and detailed financial information about the fund. Annual reports also contain information from the fund's manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the fund's last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the fund, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the fund's annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG23308-35

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab MarketTrack Portfolios<sup>®</sup>

---

| | |
|:---|:---|
| Schwab MarketTrack All Equity Portfolio™ | **SWEGX**  |
| Schwab MarketTrack Growth Portfolio™ | **SWHGX**  |
| Schwab MarketTrack Balanced Portfolio™ | **SWBGX**  |
| Schwab MarketTrack Conservative Portfolio™ | **SWCGX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

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## Schwab MarketTrack Portfolios

---

| | |
|:---|:---|
| **Fund Summaries** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab MarketTrack All Equity Portfolio](#idehibjSMTAEP)  | [1](#idehibjSMTAEP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab MarketTrack Growth Portfolio](#ideiegdSMTGP)  | [5](#ideiegdSMTGP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab MarketTrack Balanced Portfolio](#ideiehjSMTBP)  | [9](#ideiehjSMTBP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab MarketTrack Conservative Portfolio](#ideifjjSMTCP)  | [13](#ideifjjSMTCP) |
| **[Fund Details](#idbeebdaFD)**  | [17](#idbeebdaFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objectives, Strategies and Risks](#ididbigIOSR)  | [17](#ididbigIOSR) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbdcph-1)  | [25](#idbbdcph-1) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idfidheFH)  | [26](#idfidheFH) |
| **[Fund Management](#idegfiFM)**  | [30](#idegfiFM) |
| **[Investing in the Funds](#idejcagIF)**  | [31](#idejcagIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#ideggbitfi-2)  | [31](#ideggbitfi-2) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Funds](#idbbjiidf-1)  | [32](#idbbjiidf-1) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idcghiSP)  | [32](#idcghiSP) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbjgafAPAYI)  | [32](#idbjgafAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idgiahDT)  | [35](#idgiahDT) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Information About the Funds' Composite Indices](#idbcaifAIAFCI)  | [36](#idbcaifAIAFCI) |

---

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Schwab MarketTrack All Equity Portfolio™

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWEGX** |

---

#### Investment Objective
The fund seeks high capital growth through an all-stock portfolio.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.13  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.26  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.12  |
| **Total annual fund operating expenses (including AFFE)** | **0.51**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $52 | $164 | $285 | $640 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 7% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund maintains a defined asset allocation.** The fund's target allocation is 100% in stock investments, with certain percentages for different segments of the stock market. It is the fund's policy that, under normal circumstances, it will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stock investments; typically the actual percentage is considerably higher.

The fund seeks to remain close to the target equity allocations of approximately 50% for U.S. large-cap, 15% for U.S. small-cap, 20% for developed international large-cap, 5% for developed international small-cap, and 5% for emerging markets. In addition, the fund seeks to maintain a target allocation to real estate securities of 5%. Because the fund keeps a small portion of its assets in cash for business operations, the fund's actual investments will typically be slightly less than 100% in stock funds.

The fund invests mainly in other affiliated Schwab Funds, including Schwab index funds and exchange-traded funds (ETFs) (underlying funds), which use a variety of indexing strategies. These underlying funds seek to track or replicate the total returns of various stock market indices. They typically invest in the stocks included in the index they are tracking or replicating, and generally give each stock the same weight as the index does. However, in certain circumstances it may not be possible or practicable for the underlying fund to invest in all of the stocks comprising an index or in proportion to their weightings in an index and it is possible that the investment adviser may utilize instead a "sampling" methodology in seeking to achieve the underlying fund's objective.

Within the equity allocation, the portfolio managers may allocate the fund's investments among underlying funds that track indices based on market capitalization as well as funds that track Russell RAFI™ Indexes based on the "Fundamental Index" methodology. The Russell RAFI™ Index Series selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks.

The underlying funds may invest in derivatives and lend their securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. Each underlying fund focuses on a different segment of the stock market.

The portfolio managers monitor the fund's holdings and cash flow and manage them as needed in order to maintain the fund's target allocation. The manager will permit modest deviations from the target allocation for certain periods of time, in order to reduce transaction costs.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in individual securities consistent with the fund's investment strategy. For temporary

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defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective. The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• ***Investment Style Risk.*** Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. Errors relating to an index may occur from time to time and may not be identified by the underlying fund's index provider for a period of time. In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule. Such errors and/or market disruptions may result in losses for an underlying fund.

• ***Tracking Error Risk.*** Each underlying index fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. If an underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Real Estate Investment Risk.*** An underlying fund that has a policy of concentrating its investments in real estate companies and companies related to the real estate industry is subject to risks associated with the direct ownership of real estate securities. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

2Schwab MarketTrack All Equity Portfolio \| Fund Summary

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***Concentration Risk.*** To the extent that an underlying fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the underlying fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

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• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to that of a broad-based index and a composite index based on the fund's target allocation. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab MarketTrack All Equity Portfolio \| Fund Summary3

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: lqk6v40a19e0ejnkl87c2i53fcfd.jpg]](lqk6v40a19e0ejnkl87c2i53fcfd.jpg)

#### Best Quarter: 19.08% Q2 2020

#### Worst Quarter: (24.96%) Q1 2020

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| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (16.32%) | 5.32% | 8.85% |
| After taxes on distributions | (17.18%) | 4.05% | 7.62% |
|  After taxes on distributions and sale <br> of shares  | (8.92%) | 4.10% | 7.03% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| S&P 500<sup>®</sup> Index | (18.11%) | 9.42% | 12.56% |
| All Equity Composite Index<sup>(1)</sup> | (15.93%) | 5.77% | 9.42% |

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<sup>(1)</sup>

The All Equity Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective July 1, 2020, the index is composed of 31.33% S&P 500 Index, 5.0% Russell 1000<sup>®</sup> Growth Index, 13.5% Russell RAFI US Large Company Index, 10.33% Russell 2000<sup>®</sup> Index, 4.5% Russell RAFI US Small Company Index, 13.83% MSCI EAFE Index (Net), 6.0% Russell RAFI Developed ex-US Large Company Index (Net), 5.0% Russell RAFI Developed ex-US Small Company Index (Net), 5.0% Russell RAFI Emerging Markets Large Company Index (Net), 5.0% Dow Jones Equity All REIT Capped Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. Prior to July 1, 2020, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

4Schwab MarketTrack All Equity Portfolio \| Fund Summary

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Schwab MarketTrack Growth Portfolio™

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| | |
|:---|:---|
| **Ticker Symbol:**  | **SWHGX** |

---

#### Investment Objective
The fund seeks high capital growth with less volatility than an all-stock portfolio.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

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| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.13  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.26  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.11  |
| **Total annual fund operating expenses (including AFFE)** | **0.50**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

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| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $51 | $160 | $280 | $628 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 8% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund maintains a defined asset allocation.** The fund's target allocation includes stock, bond and cash investments.

The fund's allocation focuses on stock investments, while including some bonds and cash investments in seeking to reduce the fund's volatility. The fund seeks to remain close to the target allocations of approximately 80% equity, 16% fixed income and 4% cash and cash equivalents (including money market funds).

The equity allocation is further divided into six segments: approximately 43% of assets for U.S. large-cap, 13% for U.S. small-cap, 13% for developed international large-cap, 4% for real estate, 3% for developed international small-cap and 3% for emerging markets.

The fund invests mainly in other affiliated Schwab Funds, including Schwab index funds and exchange-traded funds (ETFs) (underlying funds), which use a variety of indexing strategies. These underlying funds seek to track or replicate the total returns of various market indices. They typically invest in the securities included in the index they are tracking or replicating, and generally give each security the same weight as the index does. However, in certain circumstances it may not be possible or practicable for the underlying fund to invest in all of the securities comprising an index or in proportion to their weightings in an index and it is possible that the investment adviser may utilize instead a "sampling" methodology in seeking to achieve the underlying fund's objective.

Within the equity allocation, the portfolio managers may allocate the fund's investments among underlying funds that track indices based on market capitalization as well as funds that track Russell RAFI™ Indexes based on the "Fundamental Index" methodology. The Russell RAFI™ Index Series selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks.

The underlying funds may invest in derivatives and lend their securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. Each underlying fund focuses on a different market segment.

The portfolio managers monitor the fund's holdings and cash flow and manage them as needed in order to maintain the fund's target allocation. The manager will permit modest deviations from the target allocation for certain periods of time, in order to reduce transaction costs.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or

Schwab MarketTrack Growth Portfolio \| Fund Summary5

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for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective. The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• ***Investment Style Risk.*** Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. Errors relating to an index may occur from time to time and may not be identified by the underlying fund's index provider for a period of time. In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule. Such errors and/or market disruptions may result in losses for an underlying fund.

• ***Tracking Error Risk.*** Each underlying index fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. If an underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to

6Schwab MarketTrack Growth Portfolio \| Fund Summary

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make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***Concentration Risk.*** To the extent that an underlying fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the underlying fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. These risks may be heightened in connection with investments in emerging markets or securities of issuers that conduct their business in emerging markets.

• ***Real Estate Investment Risk.*** An underlying fund that has a policy of concentrating its investments in real estate companies and companies related to the real estate industry is subject to

risks associated with the direct ownership of real estate securities. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocation. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab MarketTrack Growth Portfolio \| Fund Summary7

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: bq4a5r27h8gcdqlbge06ojrr0g0p.jpg]](bq4a5r27h8gcdqlbge06ojrr0g0p.jpg)

#### Best Quarter: 15.83% Q2 2020

#### Worst Quarter: (19.95%) Q1 2020

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| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (15.11%) | 4.77% | 7.63% |
| After taxes on distributions | (15.97%) | 3.37% | 6.23% |
|  After taxes on distributions and sale <br> of shares  | (8.31%) | 3.64% | 5.96% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| S&P 500<sup>®</sup> Index | (18.11%) | 9.42% | 12.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Growth Composite Index<sup>(1)</sup> | (14.69%) | 5.24% | 8.16% |

---

<sup>(1)</sup>

The Growth Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective July 1, 2020, the index is composed of 28.0% S&P 500 Index, 3.3% Russell 1000<sup>®</sup> Growth Index, 12.0% Russell RAFI US Large Company Index, 8.9% Russell 2000<sup>®</sup> Index, 3.8% Russell RAFI US Small Company Index, 9.33% MSCI EAFE Index (Net), 4.0% Russell RAFI Developed ex-US Large Company Index (Net), 3.33% Russell RAFI Developed ex-US Small Company Index (Net), 3.33% Russell RAFI Emerging Markets Large Company Index (Net), 4.0% Dow Jones Equity All REIT Capped Index, 16.0% Bloomberg US Aggregate Bond Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to July 1, 2020, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

8Schwab MarketTrack Growth Portfolio \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-4)

Schwab MarketTrack Balanced Portfolio™

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWBGX** |

---

#### Investment Objective
The fund seeks both capital growth and income.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.13  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.27  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.09  |
| **Total annual fund operating expenses (including AFFE)** | **0.49**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $50 | $157 | $274 | $616 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 11% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund maintains a defined asset allocation.** The fund's target allocation includes bond, stock and cash investments.

The fund's allocation is weighted toward stock investments, while including substantial bond investments in seeking to add income and reduce the fund's volatility. The fund seeks to remain close to the target allocations of approximately 60% equity, 36% fixed income and 4% cash and cash equivalents (including money market funds).

The equity allocation is further divided into six segments: approximately 33% of assets for U.S. large-cap, 9% for U.S. small-cap, 10% for developed international large-cap, 3% for real estate, 2.5% for developed international small-cap and 2.5% for emerging markets.

The fund invests mainly in other affiliated Schwab Funds, including Schwab index funds and exchange-traded funds (ETFs) (underlying funds), which use a variety of indexing strategies. These underlying funds seek to track or replicate the total returns of various market indices. They typically invest in the securities included in the index they are tracking or replicating, and generally give each security the same weight as the index does. However, in certain circumstances it may not be possible or practicable for the underlying fund to invest in all of the securities comprising an index or in proportion to their weightings in an index and it is possible that the investment adviser may utilize instead a "sampling" methodology in seeking to achieve the underlying fund's objective.

Within the equity allocation, the portfolio managers may allocate the fund's investments among underlying funds that track indices based on market capitalization as well as funds that track Russell RAFI™ Indexes based on the "Fundamental Index" methodology. The Russell RAFI™ Index Series selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks.

The underlying funds may invest in derivatives and lend their securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. Each underlying fund focuses on a different market segment.

The portfolio managers monitor the fund's holdings and cash flow and manage them as needed in order to maintain the fund's target allocation. The manager will permit modest deviations from the target allocation for certain periods of time, in order to reduce transaction costs.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or

Schwab MarketTrack Balanced Portfolio \| Fund Summary9

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[**TABLE OF CONTENTS**](#toc-4)

for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective. The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• ***Investment Style Risk.*** Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. Errors relating to an index may occur from time to time and may not be identified by the underlying fund's index provider for a period of time. In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule. Such errors and/or market disruptions may result in losses for an underlying fund.

• ***Tracking Error Risk.*** Each underlying index fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. If an underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Real Estate Investment Risk.*** An underlying fund that has a policy of concentrating its investments in real estate companies and companies related to the real estate industry is subject to risks associated with the direct ownership of real estate securities. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

10Schwab MarketTrack Balanced Portfolio \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-4)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***Concentration Risk.*** To the extent that an underlying fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the underlying fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its

investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. These risks may be heightened in connection with investments in emerging markets or securities of issuers that conduct their business in emerging markets.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocation. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab MarketTrack Balanced Portfolio \| Fund Summary11

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[**TABLE OF CONTENTS**](#toc-4)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: a8f4cur55hhb5k3f9vqhnnldh3kl.jpg]](a8f4cur55hhb5k3f9vqhnnldh3kl.jpg)

#### Best Quarter: 12.36% Q2 2020

#### Worst Quarter: (14.35%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.39%) | 3.66% | 5.95% |
| After taxes on distributions | (15.26%) | 2.27% | 4.51% |
|  After taxes on distributions and sale <br> of shares  | (8.01%) | 2.69% | 4.48% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| S&P 500<sup>®</sup> Index | (18.11%) | 9.42% | 12.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Balanced Composite Index<sup>(1)</sup> | (13.99%) | 4.14% | 6.48% |

---

<sup>(1)</sup>

The Balanced Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective July 1, 2020, the index is composed of 21.0% S&P 500 Index, 3.0% Russell 1000<sup>®</sup> Growth Index, 9.0% Russell RAFI US Large Company Index, 6.3% Russell 2000<sup>®</sup> Index, 2.7% Russell RAFI US Small Company Index, 7.0% MSCI EAFE Index (Net), 3.0% Russell RAFI Developed ex-US Large Company Index (Net), 2.5% Russell RAFI Developed ex-US Small Company Index (Net), 2.5% Russell RAFI Emerging Markets Large Company Index (Net), 3.0% Dow Jones Equity All REIT Capped Index, 35.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to July 1, 2020, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

12Schwab MarketTrack Balanced Portfolio \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-4)

Schwab MarketTrack Conservative Portfolio™

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWCGX** |

---

#### Investment Objective
The fund seeks income and more growth potential than an all-bond portfolio.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees | 0.13  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.29  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.08  |
| **Total annual fund operating expenses (including AFFE)** | **0.50**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $51 | $160 | $280 | $628 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 11% of the average value of its portfolio.

#### Principal Investment Strategies
**To pursue its goal, the fund maintains a defined asset allocation.** The fund's target allocation includes bond, stock and cash investments.

The fund's allocation is weighted toward bond investments, while including substantial stock investments in seeking to obtain long-term growth. The fund seeks to remain close to the target allocations of approximately 56% fixed income, 40% equity and 4% cash and cash equivalents (including money market funds).

The equity allocation is further divided into six segments: approximately 22% of assets for U.S. large-cap, 6% for U.S. small-cap, 7% for developed international large-cap, 2% for real estate, 2% for developed international small-cap and 2% for emerging markets.

The fund invests mainly in other affiliated Schwab Funds, including Schwab index funds and exchange-traded funds (ETFs) (underlying funds), which use a variety of indexing strategies. These underlying funds seek to track or replicate the total returns of various market indices. They typically invest in the securities included in the index they are tracking or replicating, and generally give each security the same weight as the index does. However, in certain circumstances it may not be possible or practicable for the underlying fund to invest in all of the securities comprising an index or in proportion to their weightings in an index and it is possible that the investment adviser may utilize instead a "sampling" methodology in seeking to achieve the underlying fund's objective.

Within the equity allocation, the portfolio managers may allocate the fund's investments among underlying funds that track indices based on market capitalization as well as funds that track Russell RAFI™ Indexes based on the "Fundamental Index" methodology. The Russell RAFI™ Index Series selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks.

The underlying funds may invest in derivatives and lend their securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. Each underlying fund focuses on a different market segment.

The portfolio managers monitor the fund's holdings and cash flow and manage them as needed in order to maintain the fund's target allocation. The manager will permit modest deviations from the target allocation for certain periods of time, in order to reduce transaction costs.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or

Schwab MarketTrack Conservative Portfolio \| Fund Summary13

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[**TABLE OF CONTENTS**](#toc-4)

for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective. The fund also may lend portfolio securities to earn additional income. Any income realized through securities lending may help fund performance.

#### Principal Risks
The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Securities Lending Risk.** Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• ***Investment Style Risk.*** Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. Errors relating to an index may occur from time to time and may not be identified by the underlying fund's index provider for a period of time. In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule. Such errors and/or market disruptions may result in losses for an underlying fund.

• ***Tracking Error Risk.*** Each underlying index fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. If an underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Real Estate Investment Risk.*** An underlying fund that has a policy of concentrating its investments in real estate companies and companies related to the real estate industry is subject to risks associated with the direct ownership of real estate securities. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***Concentration Risk.*** To the extent that an underlying fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country or asset class, the underlying fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, country or asset class.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's

investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. These risks may be heightened in connection with investments in emerging markets or securities of issuers that conduct their business in emerging markets.

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• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocation. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: pod2m1uu17agim9v9515nocif65r.jpg]](pod2m1uu17agim9v9515nocif65r.jpg)

#### Best Quarter: 9.06% Q2 2020

#### Worst Quarter: (8.84%) Q1 2020

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| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (13.79%) | 2.36% | 4.14% |
| After taxes on distributions | (14.74%) | 1.20% | 3.04% |
|  After taxes on distributions and sale <br> of shares  | (7.73%) | 1.62% | 3.00% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
| S&P 500<sup>®</sup> Index | (18.11%) | 9.42% | 12.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Conservative Composite Index<sup>(1)</sup> | (13.36%) | 2.90% | 4.73% |

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<sup>(1)</sup>

The Conservative Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective July 1, 2020, the index is composed of 14.0% S&P 500 Index, 2.0% Russell 1000<sup>®</sup> Growth Index, 6.0% Russell RAFI US Large Company Index, 4.67% MSCI EAFE Index (Net), 4.2% Russell 2000<sup>®</sup> Index, 1.8% Russell RAFI US Small Company Index, 2.0% Russell RAFI Developed ex-US Large Company Index (Net), 1.67% Russell RAFI Developed ex-US Small Company Index (Net), 1.67% Russell RAFI Emerging Markets Large Company Index (Net), 2.0% Dow Jones Equity All REIT Capped Index, 55.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to July 1, 2020, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2019.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## Fund Details
There can be no assurance that the funds will achieve their objectives. Except as explicitly described otherwise, the investment strategies and policies of each fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in each fund are summarized in the fund summaries at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the funds, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, each fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies" and "Investments, Securities and Risks" sections in the Statement of Additional Information (SAI).

Investment Objectives, Strategies and Risks

#### Investment Objectives
The **Schwab MarketTrack All Equity Portfolio** seeks high capital growth through an all-stock portfolio.

The **Schwab MarketTrack Growth Portfolio** seeks high capital growth with less volatility than an all-stock portfolio.

The **Schwab MarketTrack Balanced Portfolio** seeks both capital growth and income.

The **Schwab MarketTrack Conservative Portfolio** seeks income and more growth potential than an all-bond portfolio.

#### Investment Strategies
The funds seek to achieve their investment objectives by primarily investing in other Schwab Funds and Schwab ETFs and to a lesser degree in unaffiliated third party mutual funds (the underlying funds). These underlying funds may include equity, fixed income and money market funds and will be used by the funds to meet their asset allocations and investment styles, consistent with a fund's investment strategy. Because the funds primarily invest in other funds rather than in individual stocks and bonds, each fund is considered a "fund of funds." A fund of funds bears its own direct expenses in addition to bearing a proportionate share of the expenses charged by the underlying funds in which it invests.

Each fund intends to invest in a combination of underlying funds; however, a fund may invest directly in equity and fixed-income securities and money market securities, consistent with the fund's investment strategy. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, a fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When a fund engages in such activities, it may not achieve its investment objective.

#### Asset Allocation
The following are each fund's current underlying funds and each underlying fund's investment objective and strategy, listed according to their corresponding category in each fund's asset allocation. The chart provides a brief description of the investment objective and principal investment strategies of each underlying fund. Additional information about the underlying funds is provided in each underlying fund's prospectus.

#### Schwab MarketTrack Portfolios

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| | | | | |
|:---|:---|:---|:---|:---|
| **Allocation and Underlying Fund**  | **All Equity <br> Portfolio**  | **Growth <br> Portfolio**  | **Balanced <br> Portfolio**  | **Conservative <br> Portfolio**  |
| **U.S. Large-Cap**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab<sup>®</sup> S&P 500 Index Fund. Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index.* | *Schwab<sup>®</sup> S&P 500 Index Fund. Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index.* | *Schwab<sup>®</sup> S&P 500 Index Fund. Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index.* | *Schwab<sup>®</sup> S&P 500 Index Fund. Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index.* | *Schwab<sup>®</sup> S&P 500 Index Fund. Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index.* |
| *Schwab Fundamental US Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. |
| *Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund. Seeks to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index.* | *Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund. Seeks to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index.* | *Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund. Seeks to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index.* | *Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund. Seeks to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index.* | *Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund. Seeks to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index.* |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Allocation and Underlying Fund**  | **All Equity <br> Portfolio**  | **Growth <br> Portfolio**  | **Balanced <br> Portfolio**  | **Conservative <br> Portfolio**  |
| **U.S. Small-Cap**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab Small-Cap Index Fund<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher.* | *Schwab Small-Cap Index Fund<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher.* | *Schwab Small-Cap Index Fund<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher.* | *Schwab Small-Cap Index Fund<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher.* | *Schwab Small-Cap Index Fund<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks; typically, the actual percentage is considerably higher.* |
| *Schwab Fundamental US Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental US Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. |
| **International Large-Cap**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab International Index Fund*<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. The fund generally invests in stocks that are included in the MSCI EAFE<sup>®</sup> Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investments purposes) in these stocks; typically, the actual percentage is considerably higher. | *Schwab International Index Fund*<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. The fund generally invests in stocks that are included in the MSCI EAFE<sup>®</sup> Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investments purposes) in these stocks; typically, the actual percentage is considerably higher. | *Schwab International Index Fund*<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. The fund generally invests in stocks that are included in the MSCI EAFE<sup>®</sup> Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investments purposes) in these stocks; typically, the actual percentage is considerably higher. | *Schwab International Index Fund*<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. The fund generally invests in stocks that are included in the MSCI EAFE<sup>®</sup> Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investments purposes) in these stocks; typically, the actual percentage is considerably higher. | *Schwab International Index Fund*<sup>®</sup>. Seeks to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. The fund generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does. The fund generally invests in stocks that are included in the MSCI EAFE<sup>®</sup> Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investments purposes) in these stocks; typically, the actual percentage is considerably higher. |
| *Schwab Fundamental International Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. |
| **International Small-Cap**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab Fundamental International Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. | *Schwab Fundamental International Small Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index. |
| **Emerging Markets**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab Fundamental Emerging Markets Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs). | *Schwab Fundamental Emerging Markets Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs). | *Schwab Fundamental Emerging Markets Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs). | *Schwab Fundamental Emerging Markets Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs). | *Schwab Fundamental Emerging Markets Large Company Index Fund*. Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the index, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs). |
| **Fixed Income**  |  | ✓ | ✓ | ✓ |
| *Schwab*<sup>®</sup> *U.S. Aggregate Bond Index Fund*. Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" or "TBA" transactions. | *Schwab*<sup>®</sup> *U.S. Aggregate Bond Index Fund*. Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" or "TBA" transactions. | *Schwab*<sup>®</sup> *U.S. Aggregate Bond Index Fund*. Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" or "TBA" transactions. | *Schwab*<sup>®</sup> *U.S. Aggregate Bond Index Fund*. Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" or "TBA" transactions. | *Schwab*<sup>®</sup> *U.S. Aggregate Bond Index Fund*. Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including "to-be-announced" or "TBA" transactions. |
| *Schwab*<sup>®</sup> *Short-Term Bond Index Fund.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. | *Schwab*<sup>®</sup> *Short-Term Bond Index Fund.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. | *Schwab*<sup>®</sup> *Short-Term Bond Index Fund.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. | *Schwab*<sup>®</sup> *Short-Term Bond Index Fund.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. | *Schwab*<sup>®</sup> *Short-Term Bond Index Fund.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. |
| **Real Estate**  | ✓ | ✓ | ✓ | ✓ |
| *Schwab*<sup>®</sup> *U.S. REIT ETF.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. real estate investment trusts classified as equities. The fund invests, under normal circumstances, at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. | *Schwab*<sup>®</sup> *U.S. REIT ETF.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. real estate investment trusts classified as equities. The fund invests, under normal circumstances, at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. | *Schwab*<sup>®</sup> *U.S. REIT ETF.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. real estate investment trusts classified as equities. The fund invests, under normal circumstances, at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. | *Schwab*<sup>®</sup> *U.S. REIT ETF.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. real estate investment trusts classified as equities. The fund invests, under normal circumstances, at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. | *Schwab*<sup>®</sup> *U.S. REIT ETF.* Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. real estate investment trusts classified as equities. The fund invests, under normal circumstances, at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Allocation and Underlying Fund**  | **All Equity <br> Portfolio**  | **Growth <br> Portfolio**  | **Balanced <br> Portfolio**  | **Conservative <br> Portfolio**  |
| **Money Market Funds**  |  | ✓ | ✓ | ✓ |
| *Schwab*<sup>®</sup> *Government Money Fund*. Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). | *Schwab*<sup>®</sup> *Government Money Fund*. Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). | *Schwab*<sup>®</sup> *Government Money Fund*. Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). | *Schwab*<sup>®</sup> *Government Money Fund*. Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). | *Schwab*<sup>®</sup> *Government Money Fund*. Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). |
| *Schwab*<sup>®</sup> *Treasury Obligations Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). | *Schwab*<sup>®</sup> *Treasury Obligations Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). | *Schwab*<sup>®</sup> *Treasury Obligations Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). | *Schwab*<sup>®</sup> *Treasury Obligations Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). | *Schwab*<sup>®</sup> *Treasury Obligations Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). |
| *Schwab*<sup>®</sup> *Variable Share Price Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. | *Schwab*<sup>®</sup> *Variable Share Price Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. | *Schwab*<sup>®</sup> *Variable Share Price Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. | *Schwab*<sup>®</sup> *Variable Share Price Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. | *Schwab*<sup>®</sup> *Variable Share Price Money Fund.* Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. |

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The underlying funds may invest in derivatives and lend their securities to minimize the gap in performance that naturally exists between any index fund and its corresponding index. In addition, each fund may purchase individual securities to maintain its allocations.

The following chart provides a list of the asset classes and sub-asset classes and the target allocation in which each fund expects to be invested as of the date of this prospectus.

The allocations may not add to 100% due to rounding.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Major Asset Class**  | **Sub-Asset Class**  | **Schwab <br> MarketTrack <br> All Equity <br> Portfolio <br> Allocation <br> Target**  | **Schwab <br> MarketTrack <br> Growth <br> Portfolio <br> Allocation <br> Target**  | **Schwab <br> MarketTrack <br> Balanced <br> Portfolio <br> Allocation <br> Target**  | **Schwab <br> MarketTrack <br> Conservative <br> Portfolio <br> Allocation <br> Target**  |
| **U.S. Stocks**  | Large-Cap | 49.83%  | 43.30%  | 33.00%  | 22.00%  |
|  | Small-Cap | 14.83%  | 12.70%  | 9.00%  | 6.00%  |
| **International Stocks**  | Developed Large-Cap | 19.83%  | 13.33%  | 10.00%  | 6.67%  |
|  | Developed Small-Cap | 5.00%  | 3.33%  | 2.50%  | 1.67%  |
|  | Emerging Markets | 5.00%  | 3.33%  | 2.50%  | 1.67%  |
| **Real Estate**  | U.S. REITs | 5.00%  | 4.00%  | 3.00%  | 2.00%  |
| **Fixed Income**  | Intermediate-Term Bonds | 0.00%  | 16.00%  | 35.00%  | 55.00%  |
|  | Short-Term Bonds | 0.00%  | 0.00%  | 1.00%  | 1.00%  |
| **Cash and Cash Equivalents (including Money Market Funds)**  |  | 0.50%  | 4.00%  | 4.00%  | 4.00%  |
|  |  | 100%  | 100%  | 100%  | 100%  |

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For more detailed information, including portfolio holdings for each of the funds, please visit the funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**.

#### More Information About Principal Investment Risks
Each fund is subject to risks, any of which could cause an investor to lose money. Principal risks of the funds include:

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist. For example, the investment adviser's decisions to cause a fund to purchase or redeem shares of an affiliated underlying fund could be influenced by its belief that an affiliated underlying fund may benefit from additional assets or that it is in the best interests of the affiliated underlying fund to limit purchases of shares of the underlying fund. In such cases, the best interests of the

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affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to each fund and is legally obligated to act in each fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and a fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in a fund will fluctuate, which means that an investor could lose money over short or long periods.

**Operational Risk.** Each fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate processes and technology or system failures. Each fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

**Underlying Fund Investment Risk.** The value of an investment in a fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance, expenses and risks of the underlying funds in which it invests. Before investing in a fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. These risks include any combination of the risks described below, although the fund's exposure to a particular risk will depend on the fund's overall asset allocation and underlying fund allocation.

**•** ***Equity Risk.*** The prices of equity securities in which the underlying funds invest rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time. Due to their fixed-income features, preferred stocks provide higher income potential than issuers' common stocks, but typically are more sensitive to interest rate changes than the underlying common stock. The rights of common stockholders are generally subordinate to the rights associated with an issuer's preferred stocks and the rights of preferred stockholders are generally subordinate to the rights associated with an issuer's debt securities on the distribution of an issuer's assets in the event of a liquidation.

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**•** ***Tracking Error Risk.*** Each underlying index fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, an underlying fund may not invest in certain securities in its index, match the securities' weighting to the index, or the underlying fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. An underlying fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In certain circumstances, the underlying fund may value individual securities based on fair value prices developed using methods approved by the underlying fund's board of trustees. To the extent the fund calculates its NAV based on fair value prices, the underlying fund's performance may diverge from the index. In addition, cash flows into and out of an underlying fund, operating expenses and trading costs all affect the ability of the underlying fund to match the performance of its index, because the index does not have to manage cash flows and does not incur any costs.

**•** ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

**•** ***Large-Cap Company Risk.*** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**•** ***Small-Cap Company Risk.*** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**•** ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of an underlying fund's investments and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. In addition, an underlying fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. An underlying fund may also experience more rapid or extreme changes in value as compared to an underlying fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent an underlying fund's investments in a single country or a limited number of countries represent a large percentage of the underlying fund's assets, the underlying fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the underlying fund's price may be more volatile than the price of an underlying fund that is geographically diversified.

**•** ***Depositary Receipt Risk.*** Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities include EDRs, which are similar to GDRs, but are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank's home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

**•** ***Variable Interest Entities Risk.*** An underlying fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as an underlying fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as an underlying fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects an underlying fund to the risks associated with the underlying China-based operating company. In addition, an underlying fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts; and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of an underlying fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the underlying fund.

**•** ***Emerging Markets Risk.*** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation,

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government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**•** ***Currency Risk.*** An underlying fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the underlying fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in an underlying fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to an underlying fund if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the underlying fund's account. An underlying fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**•** ***Real Estate Investment Risk.*** Certain of the underlying funds have a policy of concentrating their investments in real estate companies and companies related to the real estate industry. Such an underlying fund is subject to risks associated with the direct ownership of real estate securities and a fund's investment in such an underlying fund will be closely linked to the performance of the real estate markets. An investment by a fund in an underlying fund that invests, but does not concentrate, in real estate companies and companies related to the real estate industry will subject the fund to the risks associated with the direct ownership of real estate securities to a lesser extent. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties or defaults by borrowers or tenants, particularly during an economic downturn; increasing competition; increases in property taxes and operating expenses; changes in zoning laws; losses due to costs resulting from the clean-up of environmental problems; liability to third parties for damages resulting from environmental problems; casualty or condemnation losses; limitations on rents; changes in market and sub-market values and the appeal of properties to tenants; and changes in interest rates.

**•** ***Real Estate Investment Trusts (REITs) Risk.*** Certain of the underlying funds invest in REITs. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code of 1986, as amended, or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to an underlying fund that invests in that REIT. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and an underlying fund that invests in REITs will bear a proportionate share of those expenses.

**•** ***Derivatives Risk.*** An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right, but not the obligation, to buy or sell an instrument at a specific price on or before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as credit risk, leverage risk, liquidity risk, market risk, management risk, and operational risk are discussed elsewhere in this prospectus. An underlying fund's use of derivatives is also subject to lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause an underlying fund to

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realize higher amounts of short-term capital gains. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility, and could cause the underlying fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) by an underlying fund could cause a fund to become a commodity pool, which would require the fund to comply with certain CFTC rules. An underlying fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that a fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**•** ***ETF Risk.*** When an underlying fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

**•** ***Liquidity Risk.*** Liquidity risk exists when particular investments are difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In addition, limited dealer inventories of certain securities could potentially lead to decreased liquidity. In such cases, an underlying fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of an underlying fund to meet redemption requests within the required time period. In order to meet such redemption requests, the underlying fund may be forced to sell securities at inopportune times or prices.

**•** ***Sampling Index Tracking Risk.*** If an underlying fund uses a sampling method, the underlying fund will not fully replicate its comparative index and may hold securities not included in the index. As a result, the underlying fund is subject to the risk that the investment adviser's investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If the underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

**•** ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When an underlying fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the underlying fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. An underlying fund will also bear the risk of any decline in value of securities acquired with cash collateral. An underlying fund may pay lending fees to a party arranging the loan.

**•** ***Investment Style Risk.*** Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund's expenses, the underlying fund's performance is normally below that of the index. A significant percentage of an index may be composed of securities in a single industry or sector of the economy. If an underlying fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

**•** ***Index-Related Risk.*** An index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to an index. Errors relating to an index, including index data, computations and/or construction, may occur from time to time and may not be identified by an index provider for a period of time or at all. Losses resulting from index errors may be borne by an underlying fund and its shareholders.

In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule which may result in the index and, in turn, the underlying fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**•** ***Credit Risk.*** A decline in the credit quality of an issuer or guarantor of a portfolio investment could cause an underlying fund to lose money or underperform. An underlying fund could lose money if, due to a decline in credit quality, the issuer or guarantor of a portfolio investment fails to make, or is perceived as being unable or unwilling to make, timely principal or interest payments or otherwise honor its obligations. The credit quality of an underlying fund's portfolio holdings can change rapidly in certain market environments and any default on the part of a single portfolio investment could cause an underlying fund's share price or yield to fall. Certain U.S. government securities that an underlying fund invests in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities

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an underlying fund owns do not extend to the shares of the underlying fund itself. Below investment-grade bonds (junk bonds) involve greater risks of default or downgrade and are more volatile than investment-grade bonds. Below investment-grade bonds also involve greater risk of price declines than investment-grade securities due to actual or perceived changes in an issuer's creditworthiness. In addition, issuers of below investment-grade bonds may be more susceptible than other issuers to economic downturns. Such bonds are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the bonds.

**•** ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities. The use of leverage may cause an underlying fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

**•** ***Mortgage-Backed and Mortgage Pass-Through Securities Risk.*** Mortgage-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar or greater risk of decline in market value during periods of rising interest rates. Because of prepayment and extension risk, mortgage-backed securities react differently to changes in interest rates than other debt securities. Small movements in interest rates – both increases and decreases – may quickly and significantly affect the value of certain mortgage-backed securities. In addition, certain of the mortgage-backed securities in which an underlying fund may invest are issued or guaranteed by agencies or instrumentalities of the U.S. government but are not backed by the full faith and credit of the U.S. government and there can be no assurance that the U.S. government would provide financial support to its agencies or instrumentalities where it was not obligated to do so which can cause an underlying fund to lose money or underperform. The risks of investing in mortgage-backed securities include, among others, interest rate risk, credit risk, prepayment risk and extension risk, as well as risks associated with the nature of the underlying mortgage assets and the servicing of those assets. These securities are subject to the risk of default on the underlying mortgages, and such risk is heightened during periods of economic downturn. Transactions in mortgage pass-through securities often occur through to-be-announced (TBA) transactions. If a TBA counterparty defaults or goes bankrupt an underlying fund may experience adverse market action, expenses, or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in a TBA transaction which can cause an underlying fund to lose money or underperform.

**•** ***Mortgage Dollar Rolls Risk.*** Mortgage dollar rolls are transactions in which an underlying fund sells mortgage-backed securities to a dealer and simultaneously agrees to repurchase similar securities in the future at a predetermined price. An underlying fund's mortgage dollar rolls could lose money if the price of the mortgage-backed securities sold falls below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

**•** ***Interest Rate Risk.*** Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund's yield will change over time. During periods when interest rates are low or there are negative interest rates, an underlying fund's yield (and total return) also may be low or the underlying fund may be unable to maintain positive returns. Changes in interest rates also may affect an underlying fund's share price: a rise in interest rates generally causes an underlying fund's share price to fall. This risk is greater when an underlying fund holds fixed-income securities with longer maturities. The longer an underlying fund's portfolio duration, the more sensitive to interest rate movements its share price is likely to be. For example, an underlying fund with a longer portfolio duration is more likely to experience a decrease in its share price as interest rates rise. Duration is an estimate of a security's (or portfolio of securities) sensitivity to changes in prevailing interest rates that is based on certain factors that may prove to be incorrect. It is therefore not an exact measurement and may not be able to reliably predict a particular security's price sensitivity to changes in interest rates.

Economic conditions and other factors, including a central bank's monetary policy, may result in changes in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of fixed-income securities in which an underlying fund invests. Rising interest rates may decrease liquidity in the fixed-income securities markets, making it more difficult for an underlying fund to sell its fixed-income securities holdings at a time when the investment adviser might wish to sell such securities. In addition, decreased market liquidity also may make it more difficult to value some or all of an underlying fund's fixed-income securities holdings. Certain countries have experienced negative interest rates on certain fixed-income securities. Negative or very low interest rates could magnify the risks associated with changes in interest rates. In general, changing interest rates, including rates that fall below zero, could have unpredictable effects on markets and may expose fixed-income and related markets to heightened volatility. To the extent that the investment adviser of an underlying fund anticipates interest rate trends imprecisely, the underlying fund could miss yield opportunities or its share price could fall. Inflation-protected securities may react differently to interest rate changes than other types of fixed-income securities and tend to react to changes in "real" interest rates.

**•** ***Prepayment and Extension Risk.*** Certain fixed-income securities are subject to the risk that the securities may be paid off earlier or later than expected, especially during periods of falling or rising interest rates, respectively. Rising interest rates tend to extend the duration of certain fixed-income securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, an underlying fund could exhibit additional volatility and hold securities paying lower-than-market rates of interest.

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This is known as extension risk. When interest rates decline, borrowers may pay off their fixed-income securities sooner than expected. This can reduce an underlying fund's returns because the underlying fund will have to reinvest that money at the lower prevailing interest rates. In addition, prepayments and subsequent reinvestments increase the underlying fund's portfolio turnover rate. This is known as prepayment risk. Either situation could hurt an underlying fund's performance.

**•** ***Money Market Fund Risk.*** In addition to the risks discussed under "Investment Risk" above, an investment by a fund in an underlying money market fund has additional risks. A fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when a fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

Portfolio Holdings

The funds may make various types of portfolio securities information available to shareholders. The funds post a detailed list of the securities held by each fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of month end. This list is generally posted approximately 15-20 days after the end of the month and remains posted for at least six months. The funds also post in the fund summary section of the funds' website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of the calendar quarter or month. The funds may exclude any portion of these portfolio holdings from publication when deemed in the best interest of a fund. Further information regarding the funds' policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about each fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the funds' prior independent registered public accounting firm. The information for the fiscal years ended October 31, 2020, October 31, 2021 and October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual report (see back cover).

#### Schwab MarketTrack All Equity Portfolio

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $23.89 | $17.73 | $19.15 | $18.33 | $18.76 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.37 | 0.29 | 0.37 | 0.31 | 0.28 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.23) | 7.21 | (0.54) | 1.30 | (0.05) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.86) | 7.50 | (0.17) | 1.61 | 0.23 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.45) | (0.21) | (0.53) | (0.36) | (0.33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.47) | (1.13) | (0.72) | (0.43) | (0.33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.92) | (1.34) | (1.25) | (0.79) | (0.66) |
| Net asset value at end of period | $19.11 | $23.89 | $17.73 | $19.15 | $18.33 |
| Total return | (16.89%) | 43.90% | (1.35%) | 9.58% | 1.10% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.39%<sup>(3)</sup> | 0.38% | 0.40% | 0.40% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.39%<sup>(3)</sup> | 0.38% | 0.40% | 0.40% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.75% | 1.33% | 2.08% | 1.72% | 1.46% |
| Portfolio turnover rate | 7% | 6% | 18% | 6% | 5% |
| Net assets, end of period (x 1,000) | $698899 | $861267 | $623095 | $690801 | $659883 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab MarketTrack Growth Portfolio

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $27.84 | $22.42 | $23.54 | $22.67 | $23.47 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.40 | 0.35 | 0.43 | 0.41 | 0.37 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.49) | 7.03 | (0.20) | 1.62 | (0.04) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (4.09) | 7.38 | 0.23 | 2.03 | 0.33 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.44) | (0.39) | (0.47) | (0.45) | (0.40) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.92) | (1.57) | (0.88) | (0.71) | (0.73) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.36) | (1.96) | (1.35) | (1.16) | (1.13) |
| Net asset value at end of period | $22.39 | $27.84 | $22.42 | $23.54 | $22.67 |
| Total return | (15.52%) | 34.32% | 0.74% | 9.86% | 1.28% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.39%<sup>(3)</sup> | 0.39% | 0.39% | 0.40% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.39%<sup>(3)</sup> | 0.39% | 0.40% | 0.40% | 0.39% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.63% | 1.33% | 1.92% | 1.82% | 1.59% |
| Portfolio turnover rate | 8% | 8% | 19% | 7% | 7% |
| Net assets, end of period (x 1,000) | $801906 | $982246 | $748492 | $816532 | $782843 |

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<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab MarketTrack Balanced Portfolio

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $21.53 | $18.38 | $18.75 | $18.24 | $19.12 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.32 | 0.28 | 0.35 | 0.36 | 0.34 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.45) | 4.11 | 0.10 | 1.32 | (0.24) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.13) | 4.39 | 0.45 | 1.68 | 0.10 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.33) | (0.32) | (0.39) | (0.39) | (0.33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.71) | (0.92) | (0.43) | (0.78) | (0.65) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.04) | (1.24) | (0.82) | (1.17) | (0.98) |
| Net asset value at end of period | $17.36 | $21.53 | $18.38 | $18.75 | $18.24 |
| Total return | (15.32%) | 24.66% | 2.37% | 10.14% | 0.44% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.40%<sup>(3)</sup> | 0.39% | 0.40% | 0.40% | 0.40% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.40%<sup>(3)</sup> | 0.39% | 0.40% | 0.40% | 0.40% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.67% | 1.39% | 1.91% | 1.99% | 1.79% |
| Portfolio turnover rate | 11% | 10% | 22% | 11% | 8% |
| Net assets, end of period (x 1,000) | $519474 | $654876 | $517619 | $544554 | $514701 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab MarketTrack Conservative Portfolio

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $18.47 | $16.50 | $16.43 | $15.63 | $16.27 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.29 | 0.26 | 0.30 | 0.35 | 0.31 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.97) | 2.27 | 0.27 | 1.18 | (0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.68) | 2.53 | 0.57 | 1.53 | (0.07) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.30) | (0.27) | (0.31) | (0.36) | (0.32) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.59) | (0.29) | (0.19) | (0.37) | (0.25) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.89) | (0.56) | (0.50) | (0.73) | (0.57) |
| Net asset value at end of period | $14.90 | $18.47 | $16.50 | $16.43 | $15.63 |
| Total return | (15.23%) | 15.50% | 3.57% | 10.31% | (0.49%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.42%<sup>(3)</sup> | 0.41% | 0.42% | 0.43% | 0.41% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.42%<sup>(3)</sup> | 0.41% | 0.42% | 0.43% | 0.41% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.73% | 1.45% | 1.84% | 2.19% | 1.93% |
| Portfolio turnover rate | 11% | 13% | 35% | 26% | 9% |
| Net assets, end of period (x 1,000) | $227991 | $335110 | $278883 | $263373 | $239068 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

Schwab MarketTrack Portfolios \| Financial Highlights29

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## Fund Management
The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the funds. As compensation for these services, the investment adviser receives a management fee from each fund. For the 12 months ended October 31, 2022, these fees were 0.13% for the Schwab MarketTrack All Equity Portfolio, 0.13% for the Schwab MarketTrack Growth Portfolio, 0.13% for the Schwab MarketTrack Balanced Portfolio and 0.13% for the Schwab MarketTrack Conservative Portfolio. These figures, which are expressed as a percentage of each fund's average daily net assets, represent the actual amounts paid.

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of each fund to 0.50% for so long as the investment adviser serves as the adviser to a fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to a fund's direct operating expenses and does not apply to AFFE.

A discussion regarding the basis for the Board of Trustees' approval of each fund's investment advisory agreement is available in each fund's 2022 annual report, which covers the period of November 1, 2021 through October 31, 2022.

**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Prior to joining Schwab in 2012, Ms. Tang was a product manager at Thomson Reuters and from 1997 to 2009 worked as a portfolio manager at Barclays Global Investors (now known as BlackRock).

**Drew Hayes, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Mr. Hayes has been with Schwab since 2006. Before becoming a portfolio manager, he spent seven years as a senior fixed income specialist for Schwab Wealth Advisory, Inc. Prior to that, he worked as a bond investment specialist for two years and as a registered representative for two years for Charles Schwab & Co., Inc.

**Patrick Kwok, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Previously, Mr. Kwok served as an associate portfolio manager from 2012 to 2016. Prior to that, he worked as a fund administration manager, where he was responsible for oversight of subadvisers, trading, cash management and fund administration supporting the Charles Schwab Trust Bank Collective Investment Trusts and multi-asset Schwab Funds. Prior to joining Schwab Asset Management in 2008, Mr. Kwok spent two years as an asset operations specialist at Charles Schwab Trust Company. He also worked for one year at State Street Bank & Trust Company as a portfolio accountant and pricing specialist.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in each fund is available in the SAI.

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## Investing in the Funds
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the funds through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of a fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The funds are not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether a fund is an appropriate investment in light of their current financial position and retirement needs.

The funds generally are not registered for sale in jurisdictions outside the United States and are intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the funds, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the funds on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the funds, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The funds are not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of a fund. If your fund shares are no longer held by an authorized intermediary, a fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with a fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, each fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, each fund may take up to seven days to pay sale proceeds.

• Each fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

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Investing Directly with the Funds

#### Placing Direct Orders
Investors generally may not purchase shares directly from the funds' transfer agent, BNY Mellon Investment Servicing (US) Inc. The funds reserve the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the funds at any time.

Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The funds are open for business each day that the NYSE is open. Each fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day. A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by a fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after a fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with a fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

In valuing underlying fund investments, the funds use the NAVs reported by the underlying funds. The funds' other portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, the funds' portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments.

Shareholders of a fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### Each Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive a fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. These payments or discounts

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are separate from, and may be in addition to, any shareholder service fees or other administrative fees the funds may pay to those intermediaries. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the funds. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the funds available to their customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the funds.

Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the funds over other investment options they make available to their customers. Please see the SAI for additional information.

#### Shareholder Servicing Plan
The Board of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds.

Pursuant to the Plan, each fund's shares are subject to an annual shareholder servicing fee of up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the funds (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab's written agreement with the funds). Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

#### Policy Regarding Short-Term or Excessive Trading
The funds are intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the funds' performance by disrupting the efficient management of the funds, increasing fund transaction costs and taxes, causing the funds to maintain higher cash balances, and diluting the value of the funds' shares.

To discourage market timing, the funds' Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. Each fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the funds' policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the funds. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of a fund.

The funds and their service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the funds have requested that service providers to the funds monitor transactional activity in amounts and frequency determined by each fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in a fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, each fund or its service providers will work with the intermediary to monitor possible market timing activity. The funds reserve the right to request that the intermediary provide certain shareholder transaction information to the funds and may require the intermediary to restrict the shareholder from future purchases or exchanges in the funds. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the funds. Each fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. A fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their

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application. Each fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The funds may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The funds reserve the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the funds' securities when market prices are not "readily available" or are unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of a fund's portfolio holdings and the net asset value of its shares, and seeks to help ensure that the prices at which the fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

The Valuation Designee makes fair value determinations in good faith in accordance with the the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The respective prospectuses for the underlying funds in which the funds invest explain the circumstances in which those funds will use fair value pricing and the effect of fair value pricing.

#### Methods to Meet Redemptions
Under normal market conditions, each fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, each fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. Each fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, each fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of each fund's overall obligation to deter money laundering under federal law. Each fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the funds reserve the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of a fund or in cases when a fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if a fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

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Each fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

Distributions and Taxes

Any investment in a fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains a fund earns. Every year, each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record, except for the Schwab MarketTrack Conservative Portfolio, which typically makes income distributions at the end of each calendar quarter. During the fourth quarter of the year, typically in early November, an estimate of each fund's capital gains distributions, if any, may be made available on the funds' website: **www.schwabassetmanagement.com**.

Unless you are investing through an IRA, 401(k) or other tax-advantaged account, your fund distributions generally have tax consequences. Each fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in a fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in a fund may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but, if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions a fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, each fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, a fund will use an average cost basis method. Please consult your tax advisor to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

A fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if they fail to provide the fund with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

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Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% on amounts treated as ordinary dividends from a fund, as discussed in more detail in the SAI. Furthermore, each fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to a fund to enable the fund to determine whether withholding is required.

Additional Information About the Funds' Composite Indices

The All Equity Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation of the MarketTrack All Equity Portfolio. Effective July 1, 2020, the index is composed of 31.33% S&P 500 Index, 5.0% Russell 1000<sup>®</sup> Growth Index, 13.5% Russell RAFI US Large Company Index, 10.33% Russell 2000<sup>®</sup> Index, 4.5% Russell RAFI US Small Company Index, 13.83% MSCI EAFE Index (Net), 6.0% Russell RAFI Developed ex-US Large Company Index (Net), 5.0% Russell RAFI Developed ex-US Small Company Index (Net), 5.0% Russell RAFI Emerging Markets Large Company Index (Net), 5.0% Dow Jones Equity All REIT Capped Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. From February 28, 2020 through June 30, 2020 the index was composed of 31.33% S&P 500 Index, 5.0% Russell 1000 Growth Index, 13.5% Russell RAFI US Large Company Index, 10.33% Russell 2000 Index, 4.5% Russell RAFI US Small Company Index, 13.83% MSCI EAFE Index (Net), 6.0% Russell RAFI Developed ex-US Large Company Index (Net), 5.0% Russell RAFI Developed ex-US Small Company Index (Net), 5.0% Russell RAFI Emerging Markets Large Company Index (Net), 5.0% Dow Jones U.S. Select REIT Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. From December 1, 2014 through February 27, 2020 the index was composed of 31.33% S&P 500 Index, 17.33% Russell 2000 Index, 13.50% Russell RAFI US Large Company Index, 7.50% Russell RAFI US Small Company Index, 13.83% MSCI EAFE Index (Net), 6.0% Russell RAFI Developed ex-US Large Company Index (Net), 5.0% Russell RAFI Developed ex-US Small Company Index (Net), 5.0% Russell RAFI Emerging Markets Large Company Index (Net) and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. From March 1, 2014 through November 30, 2014, the index was composed of 45.0% S&P 500 Index, 25.0% Russell 2000 Index and 30.0% MSCI EAFE Index (Net). On March 1, 2014, the combination of the S&P 500 Index and Russell 2000 Index replaced the Dow Jones U.S. Total Stock Market Index in the custom index. Prior to March 1, 2014, the index was composed of 70.0% Dow Jones U.S. Total Stock Market Index and 30.0% MSCI EAFE Index (Net). Percentages listed may not total to 100% due to rounding. The components that make up the composite may vary over time.

The Growth Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation of the Schwab MarketTrack Growth Portfolio. Effective July 1, 2020, the index is composed of 28.0% S&P 500 Index, 3.3% Russell 1000<sup>®</sup> Growth Index, 12.0% Russell RAFI US Large Company Index, 8.9% Russell 2000<sup>®</sup> Index, 3.8% Russell RAFI US Small Company Index, 9.33% MSCI EAFE Index (Net), 4.0% Russell RAFI Developed ex-US Large Company Index (Net), 3.33% Russell RAFI Developed ex-US Small Company Index (Net), 3.33% Russell RAFI Emerging Markets Large Company Index (Net), 4.0% Dow Jones Equity All REIT Capped Index, 16.0% Bloomberg US Aggregate Bond Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From February 28, 2020 through June 30, 2020 the index was composed of 28.0% S&P 500 Index, 3.3% Russell 1000 Growth Index, 12.0% Russell RAFI US Large Company Index, 8.9% Russell 2000 Index, 3.8% Russell RAFI US Small Company Index, 9.33% MSCI EAFE Index (Net), 4.0% Russell RAFI Developed ex-US Large Company Index (Net), 3.33% Russell RAFI Developed ex-US Small Company Index (Net), 3.33% Russell RAFI Emerging Markets Large Company Index (Net), 4.0% Dow Jones U.S. Select REIT Index, 16.0% Bloomberg US Aggregate Bond Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From December 1, 2014 through February 27, 2020 the index was composed of 28.0% S&P 500 Index, 14.0% Russell 2000 Index, 12.0% Russell RAFI US Large Company Index, 6.0% Russell RAFI US Small Company Index, 9.33% MSCI EAFE Index (Net), 4.0% Russell RAFI Developed ex-US Large Company Index (Net), 3.33% Russell RAFI Developed ex-US Small Company Index (Net), 3.33% Russell RAFI Emerging Markets Large Company Index (Net), 15.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. From March 1, 2014 through November 30, 2014 the index was composed of 40.0% S&P 500 Index, 20.0% Russell 2000 Index, 20.0% MSCI EAFE Index (Net), 15.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. On March 1, 2014, the combination of the S&P 500 Index and Russell 2000 Index replaced the Dow Jones U.S. Total Stock Market Index in the custom index. Prior to March 1, 2014, the index was composed of 60.0% Dow Jones U.S. Total Stock Market Index, 20.0% MSCI EAFE Index (Net), 15.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. Percentages listed may not total to 100% due to rounding. The components that make up the composite may vary over time.

The Balanced Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation of the Schwab MarketTrack Balanced Portfolio. Effective July 1, 2020, the index is composed of 21.0% S&P 500 Index, 3.0% Russell 1000<sup>®</sup> Growth Index, 9.0% Russell RAFI US Large Company Index, 6.3% Russell 2000<sup>®</sup> Index, 2.7% Russell RAFI US Small Company Index, 7.0% MSCI EAFE Index (Net), 3.0% Russell RAFI Developed ex-US Large Company Index (Net), 2.5% Russell RAFI Developed ex-US Small Company Index (Net), 2.5% Russell RAFI Emerging Markets Large Company Index (Net), 3.0% Dow Jones Equity All REIT Capped Index, 35.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From February 28, 2020 through June 30, 2020 the index was composed of 21.0% S&P 500 Index, 3.0% Russell 1000 Growth Index, 9.0% Russell RAFI US Large Company Index, 6.3% Russell 2000 Index, 2.7% Russell RAFI US Small Company Index, 7.0% MSCI EAFE Index (Net), 3.0% Russell RAFI Developed ex-US Large Company Index (Net), 2.5% Russell RAFI Developed ex-US Small Company

36Schwab MarketTrack Portfolios \| Investing in the Funds

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Index (Net), 2.5% Russell RAFI Emerging Markets Large Company Index (Net), 3.0% Dow Jones U.S. Select REIT Index, 35.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From December 1, 2014 through February 27, 2020 the index was composed of 21.0% S&P 500 Index, 10.5% Russell 2000 Index, 9.0% Russell RAFI US Large Company Index, 4.5% Russell RAFI US Small Company Index, 7.0% MSCI EAFE Index (Net), 3.0% Russell RAFI Developed ex-US Large Company Index (Net), 2.5% Russell RAFI Developed ex-US Small Company Index (Net), 2.5% Russell RAFI Emerging Markets Large Company Index (Net), 35.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. From March 1, 2014 through November 30, 2014, the index was composed of 30.0% S&P 500 Index, 15.0% Russell 2000 Index, 15.0% MSCI EAFE Index (Net), 35.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. On March 1, 2014, the combination of the S&P 500 Index and Russell 2000 Index replaced the Dow Jones U.S. Total Stock Market Index in the custom index. Prior to March 1, 2014, the index was composed of 45.0% Dow Jones U.S. Total Stock Market Index, 15.0% MSCI EAFE Index (Net), 35.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. Percentages listed may not total to 100% due to rounding. The components that make up the composite may vary over time.

The Conservative Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation of the Schwab MarketTrack Conservative Portfolio. Effective July 1, 2020, the index is composed of 14.0% S&P 500 Index, 2.0% Russell 1000<sup>®</sup> Growth Index, 6.0% Russell RAFI US Large Company Index, 4.67% MSCI EAFE Index (Net), 4.2% Russell 2000<sup>®</sup> Index, 1.8% Russell RAFI US Small Company Index, 2.0% Russell RAFI Developed ex-US Large Company Index (Net), 1.67% Russell RAFI Developed ex-US Small Company Index (Net), 1.67% Russell RAFI Emerging Markets Large Company Index (Net), 2.0% Dow Jones Equity All REIT Capped Index, 55.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From February 28, 2020 through June 30, 2020 the index was composed of 14.0% S&P 500 Index, 2.0% Russell 1000 Growth Index, 6.0% Russell RAFI US Large Company Index, 4.67% MSCI EAFE Index (Net), 4.2% Russell 2000 Index, 1.8% Russell RAFI US Small Company Index, 2.0% Russell RAFI Developed ex-US Large Company Index (Net), 1.67% Russell RAFI Developed ex-US Small Company Index (Net), 1.67% Russell RAFI Emerging Markets Large Company Index (Net), 2.0% Dow Jones U.S. Select REIT Index, 55.0% Bloomberg US Aggregate Bond Index, 1.0% Bloomberg US Government/Credit 1-5 Year Index and 4.0% Bloomberg US Treasury Bills 1-3 Month Index. From December 1, 2014 through February 27, 2020 the index was composed of 14.0% S&P 500 Index, 7.0% Russell 2000 Index, 6.0% Russell RAFI US Large Company Index, 3.0% Russell RAFI US Small Company Index, 4.67% MSCI EAFE Index (Net), 2.0% Russell RAFI Developed ex-US Large Company Index (Net), 1.67% Russell RAFI Developed ex-US Small Company Index (Net), 1.67% Russell RAFI Emerging Markets Large Company Index (Net), 55.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. From March 1, 2014 through November 30, 2014, the index was composed of 20.0% S&P 500 Index, 10.0% Russell 2000 Index, 10.0% MSCI EAFE Index (Net), 55.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. On March 1, 2014, the combination of the S&P 500 Index and Russell 2000 Index replaced the Dow Jones U.S. Total Stock Market Index in the custom index. Prior to March 1, 2014, the index was composed of 30.0% Dow Jones U.S. Total Stock Market Index, 10.0% MSCI EAFE Index (Net), 55.0% Bloomberg US Aggregate Bond Index and 5.0% Bloomberg US Treasury Bills 1-3 Month Index. Percentages listed may not total to 100% due to rounding. The components that make up the composite may vary over time.

Schwab MarketTrack Portfolios \| Investing in the Funds37

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**Prospectus** \| February 27, 2023

## Schwab MarketTrack Portfolios

#### To Learn More
This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the funds' holdings and detailed financial information about the funds. Annual reports also contain information from the funds' manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the funds' last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the funds' annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG13757-31

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

**Prospectus** \| February 27, 2023

Schwab Funds<sup>®</sup>

Schwab<sup>®</sup> Target Funds

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Target 2010 Fund | **SWBRX**  |
| Schwab<sup>®</sup> Target 2015 Fund | **SWGRX**  |
| Schwab<sup>®</sup> Target 2020 Fund | **SWCRX**  |
| Schwab<sup>®</sup> Target 2025 Fund | **SWHRX**  |
| Schwab<sup>®</sup> Target 2030 Fund | **SWDRX**  |
| Schwab<sup>®</sup> Target 2035 Fund | **SWIRX**  |
| Schwab<sup>®</sup> Target 2040 Fund | **SWERX**  |
| Schwab<sup>®</sup> Target 2045 Fund | **SWMRX**  |
| Schwab<sup>®</sup> Target 2050 Fund | **SWNRX**  |
| Schwab<sup>®</sup> Target 2055 Fund | **SWORX**  |
| Schwab<sup>®</sup> Target 2060 Fund | **SWPRX**  |
| Schwab<sup>®</sup> Target 2065 Fund | **SWQRX**  |

---

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

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[**TABLE OF CONTENTS**](#toc-5)

## Schwab Target Funds

---

| | |
|:---|:---|
| **Fund Summaries** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2010 Fund](#idejaagST2010F)  | [1](#idejaagST2010F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2015 Fund](#idejaggST2015F)  | [5](#idejaggST2015F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2020 Fund](#idejafeST2020F)  | [9](#idejafeST2020F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2025 Fund](#idejcgfST2025F)  | [13](#idejcgfST2025F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2030 Fund](#idejcgfST2030F)  | [17](#idejcgfST2030F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2035 Fund](#idejceiST2035F)  | [21](#idejceiST2035F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2040 Fund](#idejceiST2040F)  | [25](#idejceiST2040F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2045 Fund](#idejcafST2045F)  | [29](#idejcafST2045F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2050 Fund](#idejcciST2050F)  | [33](#idejcciST2050F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2055 Fund](#idejbfcST2055F)  | [37](#idejbfcST2055F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2060 Fund](#idejcgdST2060F)  | [41](#idejcgdST2060F) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target 2065 Fund](#ideigdbST2065F)  | [45](#ideigdbST2065F) |
| **[About the Funds](#idehfdAF)**  | [49](#idehfdAF) |
| **[Fund Details](#iddbgeafFD)**  | [50](#iddbgeafFD) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investment Objectives, Strategies and Risks](#idifbgaIOSR)  | [50](#idifbgaIOSR) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Schwab Target Funds](#iddbeSTF)  | [50](#iddbeSTF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Portfolio Holdings](#idbbdcph-2)  | [59](#idbbdcph-2) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Financial Highlights](#idbhcdiaFH)  | [60](#idbhcdiaFH) |
| &nbsp;&nbsp;&nbsp;&nbsp; [The Funds' Investments in Asset Classes and Sub-Asset Classes](#idcfadbTFIACSAC)  | [72](#idcfadbTFIACSAC) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Description of Underlying Funds](#iddbaffDUF)  | [74](#iddbaffDUF) |
| **[Fund Management](#idecbgFM)**  | [80](#idecbgFM) |
| **[Investing in the Funds](#idffiaiIF)**  | [81](#idffiaiIF) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Through a Financial Intermediary](#ideggbitfi-3)  | [81](#ideggbitfi-3) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Investing Directly with the Funds](#idbbjiidf-2)  | [82](#idbbjiidf-2) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Share Price](#idcghisp-0)  | [82](#idcghisp-0) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Policies Affecting Your Investment](#idbjabaAPAYI)  | [82](#idbjabaAPAYI) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Distributions and Taxes](#idgggjDT)  | [85](#idgggjDT) |
| &nbsp;&nbsp;&nbsp;&nbsp; [Additional Information About the Funds' Composite Indices](#idbjecaAIAFCI)  | [86](#idbjecaAIAFCI) |

---

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Schwab<sup>®</sup> Target 2010 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWBRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.14  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.26  |
| *Total annual fund operating expenses*  | 0.40  |
| Less expense reduction | (0.14)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.26**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $27 | $84 | $146 | $331 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 24% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who retired at or about the year 2010 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities decreased and its allocation to fixed-income securities increased as the fund approached its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 36.5% equity securities, 58.8% fixed-income securities, and 4.6% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or

Schwab Target 2010 Fund \| Fund Summary1

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decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment

whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

2Schwab Target 2010 Fund \| Fund Summary

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2010 Fund \| Fund Summary3

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: umm6a3266ijob2fpobfih97nl8pt.jpg]](umm6a3266ijob2fpobfih97nl8pt.jpg)

#### Best Quarter: 9.36% Q2 2020

#### Worst Quarter: (8.62%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.25%) | 2.44% | 4.14% |
| After taxes on distributions | (15.40%) | 1.05% | 3.06% |
|  After taxes on distributions and sale <br> of shares  | (8.05%) | 1.57% | 2.94% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2010 Composite Index<sup>(1)</sup> | (12.93%) | 2.83% | 4.43% |

---

<sup>(1)</sup>

The Target 2010 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2010 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 22.6% S&P 500 Index, 0.7% Russell Midcap<sup>®</sup> Index, 1.9% Russell 2000 Index, 9.6% MSCI EAFE Index (Net), 38.7% Bloomberg US Aggregate Bond Index, 2.6% FTSE EPRA/NAREIT Global Index (Net), 6.6% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.1% Bloomberg Global Aggregate ex-US Hedged Index, 0.9% Bloomberg US Government/Credit Index, 9.8% Bloomberg US Government/Credit 1-5 Year Index and 4.5% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

4Schwab Target 2010 Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-5)

Schwab<sup>®</sup> Target 2015 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWGRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

**Shareholder Fees** (fees paid directly from your investment) <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.11  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.28  |
| *Total annual fund operating expenses*  | 0.39  |
| Less expense reduction | (0.11)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.28**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $29 | $90 | $157 | $356 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 19% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who retired at or about the year 2015 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities decreased and its allocation to fixed-income securities increased as the fund approached its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 40.3% equity securities, 55.5% fixed-income securities, and 4.2% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or

Schwab Target 2015 Fund \| Fund Summary5

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[**TABLE OF CONTENTS**](#toc-5)

decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment

whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

6Schwab Target 2015 Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-5)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2015 Fund \| Fund Summary7

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: ek53gampiqdbcu7dme6s268c2pre.jpg]](ek53gampiqdbcu7dme6s268c2pre.jpg)

#### Best Quarter: 9.91% Q2 2020

#### Worst Quarter: (9.18%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.61%) | 2.52% | 4.47% |
| After taxes on distributions | (16.10%) | 0.91% | 2.87% |
|  After taxes on distributions and sale <br> of shares  | (8.02%) | 1.66% | 3.14% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2015 Composite Index<sup>(1)</sup> | (13.17%) | 2.98% | 4.79% |

---

<sup>(1)</sup>

The Target 2015 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2015 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 24.4% S&P 500 Index, 0.8% Russell Midcap<sup>®</sup> Index, 2.0% Russell 2000 Index, 10.8% MSCI EAFE Index (Net), 36.4% Bloomberg US Aggregate Bond Index, 2.9% FTSE EPRA/NAREIT Global Index (Net), 6.3% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.1% Bloomberg US Government/Credit Index, 9.0% Bloomberg US Government/Credit 1-5 Year Index and 4.1% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

8Schwab Target 2015 Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-5)

Schwab<sup>®</sup> Target 2020 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWCRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.03  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.29  |
| *Total annual fund operating expenses*  | 0.32  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.29**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $30 | $93 | $163 | $368 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 17% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who retired at or about the year 2020 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities decreased and its allocation to fixed-income securities increased as the fund approached its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 42.9% equity securities, 53.3% fixed-income securities, and 3.8% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or

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decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment

whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: a2n7tl399roect66ef4e4425tt39.jpg]](a2n7tl399roect66ef4e4425tt39.jpg)

#### Best Quarter: 10.27% Q2 2020

#### Worst Quarter: (9.40%) Q2 2022

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (14.81%) | 2.60% | 5.17% |
| After taxes on distributions | (16.22%) | 0.96% | 3.70% |
|  After taxes on distributions and sale <br> of shares  | (8.17%) | 1.73% | 3.77% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2020 Composite Index<sup>(1)</sup> | (13.34%) | 3.13% | 5.53% |

---

<sup>(1)</sup>

The Target 2020 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2020 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 25.5% S&P 500 Index, 0.8% Russell Midcap<sup>®</sup> Index, 2.1% Russell 2000 Index, 11.8% MSCI EAFE Index (Net), 34.8% Bloomberg US Aggregate Bond Index, 3.0% FTSE EPRA/NAREIT Global Index (Net), 6.1% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.3% Bloomberg US Government/Credit Index, 8.5% Bloomberg US Government/Credit 1-5 Year Index and 3.8% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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Schwab<sup>®</sup> Target 2025 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWHRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| ther expenses | 0.03  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.35  |
| *Total annual fund operating expenses*  | 0.38  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.35**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $36 | $113 | $197 | $443 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 19% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2025 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 50.5% equity securities, 46.2% fixed-income securities, and 3.3% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2025 Fund \| Fund Summary15

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: eo9v7fe0r5nh4nkcnr9gf32l7sfa.jpg]](eo9v7fe0r5nh4nkcnr9gf32l7sfa.jpg)

#### Best Quarter: 13.11% Q2 2020

#### Worst Quarter: (12.51%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (15.96%) | 3.08% | 6.02% |
| After taxes on distributions | (17.21%) | 1.62% | 4.58% |
|  After taxes on distributions and sale <br> of shares  | (8.85%) | 2.15% | 4.47% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2025 Composite Index<sup>(1)</sup> | (14.10%) | 3.80% | 6.48% |

---

<sup>(1)</sup>

The Target 2025 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2025 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 30.6% S&P 500 Index, 1.0% Russell Midcap<sup>®</sup> Index, 2.9% Russell 2000 Index, 14.8% MSCI EAFE Index (Net), 27.9% Bloomberg US Aggregate Bond Index, 3.7% FTSE EPRA/NAREIT Global Index (Net), 0.4% MSCI Emerging Markets Index (Net), 3.5% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 3.5% Bloomberg Global Aggregate ex-US Hedged Index, 2.0% Bloomberg US Government/Credit Index, 6.6% Bloomberg US Government/Credit 1-5 Year Index and 3.1% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

16Schwab Target 2025 Fund \| Fund Summary

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Schwab<sup>®</sup> Target 2030 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWDRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.02  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.42  |
| *Total annual fund operating expenses*  | 0.44  |
| Less expense reduction | (0.02)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.42**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $43 | $135 | $235 | $530 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 16% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2030 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 63.5% equity securities, 34.0% fixed-income securities, and 2.5% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

Schwab Target 2030 Fund \| Fund Summary17

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

18Schwab Target 2030 Fund \| Fund Summary

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2030 Fund \| Fund Summary19

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: mo45qmk299iq2oe0dh4shn31g9qm.jpg]](mo45qmk299iq2oe0dh4shn31g9qm.jpg)

#### Best Quarter: 15.14% Q2 2020

#### Worst Quarter: (15.18%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (17.07%) | 3.43% | 6.66% |
| After taxes on distributions | (18.43%) | 1.82% | 5.11% |
|  After taxes on distributions and sale <br> of shares  | (9.32%) | 2.45% | 5.01% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2030 Composite Index<sup>(1)</sup> | (14.94%) | 4.27% | 7.18% |

---

<sup>(1)</sup>

The Target 2030 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2030 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 36.4% S&P 500 Index, 1.2% Russell Midcap<sup>®</sup> Index, 4.0% Russell 2000 Index, 18.2% MSCI EAFE Index (Net), 19.6% Bloomberg US Aggregate Bond Index, 4.6% FTSE EPRA/NAREIT Global Index (Net), 1.3% MSCI Emerging Markets Index (Net), 1.1% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 4.1% Bloomberg Global Aggregate ex-US Hedged Index, 2.7% Bloomberg US Government/Credit Index, 4.5% Bloomberg US Government/Credit 1-5 Year Index and 2.3% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

20Schwab Target 2030 Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-5)

Schwab<sup>®</sup> Target 2035 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWIRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.03  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.47  |
| *Total annual fund operating expenses*  | 0.50  |
| Less expense reduction | (0.03)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.47**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $48 | $151 | $263 | $591 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 13% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2035 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 73.1% equity securities, 25.0% fixed-income securities, and 1.9% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

Schwab Target 2035 Fund \| Fund Summary21

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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[**TABLE OF CONTENTS**](#toc-5)

whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2035 Fund \| Fund Summary23

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: a8oupo0ds74gi3alpjj8i0oc87lu.jpg]](a8oupo0ds74gi3alpjj8i0oc87lu.jpg)

#### Best Quarter: 16.68% Q2 2020

#### Worst Quarter: (17.23%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (18.00%) | 3.62% | 7.15% |
| After taxes on distributions | (19.40%) | 2.08% | 5.64% |
|  After taxes on distributions and sale <br> of shares  | (9.76%) | 2.62% | 5.43% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2035 Composite Index<sup>(1)</sup> | (15.61%) | 4.61% | 7.74% |

---

<sup>(1)</sup>

The Target 2035 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2035 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 40.5% S&P 500 Index, 1.3% Russell Midcap<sup>®</sup> Index, 4.9% Russell 2000 Index, 20.7% MSCI EAFE Index (Net), 13.9% Bloomberg US Aggregate Bond Index, 5.2% FTSE EPRA/NAREIT Global Index (Net), 2.2% MSCI Emerging Markets Index (Net), 3.6% Bloomberg Global Aggregate ex-US Hedged Index, 2.9% Bloomberg US Government/Credit Index, 3.1% Bloomberg US Government/Credit 1-5 Year Index and 1.8% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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Schwab<sup>®</sup> Target 2040 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWERX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.02  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.50  |
| *Total annual fund operating expenses*  | 0.52  |
| Less expense reduction | (0.02)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.50**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $51 | $160 | $280 | $628 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 10% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2040 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 80.9% equity securities, 17.7% fixed-income securities, and 1.4% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2040 Fund \| Fund Summary27

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: ot3id21au83il2udej2io7akrqi3.jpg]](ot3id21au83il2udej2io7akrqi3.jpg)

#### Best Quarter: 17.97% Q2 2020

#### Worst Quarter: (18.95%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **10 Years**  |
| Before taxes | (18.68%) | 3.78% | 7.54% |
| After taxes on distributions | (20.19%) | 2.04% | 5.88% |
|  After taxes on distributions and sale <br> of shares  | (10.03%) | 2.76% | 5.77% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 12.03% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.06% |
| Target 2040 Composite Index<sup>(1)</sup> | (16.18%) | 4.87% | 8.20% |

---

<sup>(1)</sup>

The Target 2040 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2040 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 43.7% S&P 500 Index, 1.5% Russell Midcap<sup>®</sup> Index, 5.7% Russell 2000 Index, 22.7% MSCI EAFE Index (Net), 9.0% Bloomberg US Aggregate Bond Index, 5.8% FTSE EPRA/NAREIT Global Index (Net), 3.0% MSCI Emerging Markets Index (Net), 2.6% Bloomberg Global Aggregate ex-US Hedged Index, 2.8% Bloomberg US Government/Credit Index, 2.1% Bloomberg US Government/Credit 1-5 Year Index and 1.3% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2012.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

28Schwab Target 2040 Fund \| Fund Summary

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Schwab<sup>®</sup> Target 2045 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWMRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.05  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.54  |
| *Total annual fund operating expenses*  | 0.59  |
| Less expense reduction | (0.05)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.54**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $55 | $173 | $302 | $677 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 7% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2045 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 87.4% equity securities, 11.7% fixed-income securities, and 0.9% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

Schwab Target 2045 Fund \| Fund Summary29

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

30Schwab Target 2045 Fund \| Fund Summary

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[**TABLE OF CONTENTS**](#toc-5)

whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2045 Fund \| Fund Summary31

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[**TABLE OF CONTENTS**](#toc-5)

#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: a8smghtn385k8luded6g47g6fvfg.jpg]](a8smghtn385k8luded6g47g6fvfg.jpg)

#### Best Quarter: 19.22% Q2 2020

#### Worst Quarter: (20.48%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (1/23/13)**  |
| Before taxes | (19.35%) | 3.90% | 7.41% |
| After taxes on distributions | (20.75%) | 2.51% | 6.13% |
|  After taxes on distributions and sale <br> of shares  | (10.46%) | 2.89% | 5.73% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 11.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.08% |
| Target 2045 Composite Index<sup>(1)</sup> | (16.67%) | 5.11% | 8.13% |

---

<sup>(1)</sup>

The Target 2045 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2045 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 45.8% S&P 500 Index, 1.6 % Russell Midcap<sup>®</sup> Index, 6.5% Russell 2000 Index, 24.3% MSCI EAFE Index (Net), 5.4% Bloomberg US Aggregate Bond Index, 6.2% FTSE EPRA/NAREIT Global Index (Net), 4.0% MSCI Emerging Markets Index (Net), 1.7% Bloomberg Global Aggregate ex-US Hedged Index, 2.3% Bloomberg US Government/Credit Index, 1.3% Bloomberg US Government/Credit 1-5 Year Index and 0.9% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

32Schwab Target 2045 Fund \| Fund Summary

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Schwab<sup>®</sup> Target 2050 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWNRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.05  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.56  |
| *Total annual fund operating expenses*  | 0.61  |
| Less expense reduction | (0.05)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.56**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $57 | $179 | $313 | $701 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 6% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2050 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 91.5% equity securities, 7.8% fixed-income securities, and 0.7% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: kq5co6lc1krev8igq7jm6s07jdt5.jpg]](kq5co6lc1krev8igq7jm6s07jdt5.jpg)

#### Best Quarter: 19.89% Q2 2020

#### Worst Quarter: (21.26%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (1/23/13)**  |
| Before taxes | (19.72%) | 4.02% | 7.60% |
| After taxes on distributions | (21.16%) | 2.61% | 6.32% |
|  After taxes on distributions and sale <br> of shares  | (10.62%) | 2.99% | 5.91% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 11.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.08% |
| Target 2050 Composite Index<sup>(1)</sup> | (16.97%) | 5.23% | 8.32% |

---

<sup>(1)</sup>

The Target 2050 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2050 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 46.9% S&P 500 Index, 1.6% Russell Midcap<sup>®</sup> Index, 7.0% Russell 2000 Index, 25.3% MSCI EAFE Index (Net), 3.4% Bloomberg US Aggregate Bond Index, 6.4% FTSE EPRA/NAREIT Global Index (Net), 4.7% MSCI Emerging Markets Index (Net), 1.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.9% Bloomberg US Government/Credit Index, 0.8% Bloomberg US Government/Credit 1-5 Year Index and 0.6% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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Schwab<sup>®</sup> Target 2055 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWORX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.07  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.58  |
| *Total annual fund operating expenses*  | 0.65  |
| Less expense reduction | (0.07)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.58**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $59 | $186 | $324 | $726 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 4% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2055 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 93.8% equity securities, 5.7% fixed-income securities, and 0.5% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2055 Fund \| Fund Summary39

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: s8t9kdtn04l4bl3jkke324t04rge.jpg]](s8t9kdtn04l4bl3jkke324t04rge.jpg)

#### Best Quarter: 20.32% Q2 2020

#### Worst Quarter: (21.86%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (1/23/13)**  |
| Before taxes | (19.99%) | 4.03% | 7.69% |
| After taxes on distributions | (21.45%) | 2.66% | 6.43% |
|  After taxes on distributions and sale <br> of shares  | (10.76%) | 3.01% | 5.99% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 11.56% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 1.08% |
| Target 2055 Composite Index<sup>(1)</sup> | (17.15%) | 5.31% | 8.45% |

---

<sup>(1)</sup>

The Target 2055 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2055 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 47.5% S&P 500 Index, 1.7% Russell Midcap<sup>®</sup> Index, 7.4% Russell 2000 Index, 25.9% MSCI EAFE Index (Net), 2.3% Bloomberg US Aggregate Bond Index, 6.6% FTSE EPRA/NAREIT Global Index (Net), 5.2% MSCI Emerging Markets Index (Net), 0.9% Bloomberg Global Aggregate ex-US Hedged Index, 1.5% Bloomberg US Government/Credit Index, 0.6% Bloomberg US Government/Credit 1-5 Year Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2013.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

40Schwab Target 2055 Fund \| Fund Summary

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Schwab<sup>®</sup> Target 2060 Fund

---

| | |
|:---|:---|
| **Ticker Symbol:**  | **SWPRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 0.20  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.59  |
| *Total annual fund operating expenses*  | 0.79  |
| Less expense reduction | (0.20)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.59**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $60 | $189 | $329 | $738 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 15% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2060 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 95.8% equity securities, 3.7% fixed-income securities, and 0.5% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

42Schwab Target 2060 Fund \| Fund Summary

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows how the fund's investment results have varied from year to year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target 2060 Fund \| Fund Summary43

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: uvjekfu4lcg653sibs85k8fodusd.jpg]](uvjekfu4lcg653sibs85k8fodusd.jpg)

#### Best Quarter: 20.90% Q2 2020

#### Worst Quarter: (22.45%) Q1 2020

---

| | | | |
|:---|:---|:---|:---|
| **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  | **Average Annual Total Returns** as of 12/31/22  |
|  | **1 Year**  | **5 Years**  | **Since <br> Inception <br> (8/25/16)**  |
| Before taxes | (20.33%) | 4.07% | 6.94% |
| After taxes on distributions | (21.39%) | 2.95% | 5.85% |
|  After taxes on distributions and sale <br> of shares  | (11.24%) | 3.05% | 5.34% |
|  **Comparative Indices** (reflect no deduction for expenses or taxes)  |  |  |  |
|  Dow Jones U.S. Total Stock Market Index  | (19.53%) | 8.65% | 10.76% |
| Bloomberg US Aggregate Bond Index  | (13.01%) | 0.02% | 0.09% |
| Target 2060 Composite Index<sup>(1)</sup> | (17.30%) | 5.39% | 7.79% |

---

<sup>(1)</sup>

The Target 2060 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2060 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 48.0% S&P 500<sup>®</sup> Index, 1.7% Russell Midcap<sup>®</sup> Index, 7.7% Russell 2000<sup>®</sup> Index, 26.4% MSCI EAFE Index (Net), 1.1% Bloomberg US Aggregate Bond Index, 6.7% FTSE EPRA/NAREIT Global Index (Net), 5.7% MSCI Emerging Markets Index (Net), 0.6% Bloomberg Global Aggregate ex-US Hedged Index, 1.1% Bloomberg US Government/Credit Index, 0.5% Bloomberg US Government/Credit 1-5 Year Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. Prior to February 1, 2022, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2016.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2018.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

44Schwab Target 2060 Fund \| Fund Summary

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Schwab<sup>®</sup> Target 2065 Fund

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| | |
|:---|:---|
| **Ticker Symbol:**  | **SWQRX** |

---

#### Investment Objective
The fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Fund Fees and Expenses
 **This table describes the fees and expenses you may pay if you buy, hold and sell shares of the fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** 

 **Shareholder Fees (fees paid directly from your investment)** <br>

---

| | |
|:---|:---|
|  **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  | **Annual Fund Operating Expenses** (expenses that you pay each year as a % <br> of the value of your investment)  |
| Management fees |  |
| Distribution (12b-1) fees |  |
| Other expenses | 1.10  |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.59  |
| *Total annual fund operating expenses*  | 1.69  |
| Less expense reduction | (1.10)  |
|  **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(2)</sup>**  | **0.59**  |

---

<sup>(1)</sup>

AFFE reflect fees and expenses incurred indirectly by the fund through its investments in the underlying funds. The total annual fund operating expenses in the fee table may differ from the expense ratios in the fund's "Financial Highlights" that include only the fund's direct operating expenses and not AFFE.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (excluding interest, taxes and certain non-routine expenses) of the fund to 0.00% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. This agreement is limited to the fund's direct operating expenses and does not apply to AFFE.

#### Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those time periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. The figures are based on total annual fund operating expenses (including AFFE) after any expense reduction. Your actual costs may be higher or lower.

---

| | | | |
|:---|:---|:---|:---|
| **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  | **Expenses on a $10,000 Investment**  |
| **1 Year**  | **3 Years**  | **5 Years**  | **10 Years**  |
| $60 | $189 | $329 | $738 |

---

#### Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio

turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in the annual fund operating expenses or in the example, affect the fund's performance. During the most recent fiscal year, the fund's portfolio turnover rate was 26% of the average value of its portfolio.

#### Principal Investment Strategies
The fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. The fund may also invest in affiliated Schwab ETFs and in unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). The fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund is managed based on the specific retirement date (target date) included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in the fund would plan to retire and likely would stop making new investments in the fund. The fund is designed for an investor who anticipates retiring at or about the year 2065 and plans to withdraw the value of the investor's account in the fund gradually after retirement. As described below, the adviser will continue to modify the fund's target asset allocation for 20 years beyond the target date.

The fund's target asset allocation will be adjusted annually based on the adviser's asset allocation strategy; however, the adviser reserves the right to modify the fund's target asset allocations from time to time should circumstances warrant a change. In general, the fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target date. The fund's asset allocation, as of February 1, 2023 (the most recent annual adjustment of the fund's target asset allocations), was approximately 97.0% equity securities, 2.5% fixed-income securities, and 0.5% cash and cash equivalents (including money market funds). At the stated target date, the fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). The fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. At such time, the fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of the fund's target asset allocation, the adviser may adjust the fund's underlying fund allocations within a particular asset class based on the following considerations, including, but not limited to, market trends, its

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outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, the fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, the fund will have exposure to one or more "style classes." For example, the style classes include domestic large-cap equity, domestic small-cap equity, and international equity. The adviser may adjust the fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes' performance in various market conditions. Accordingly, the fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed-income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When the fund engages in such activities, it may not achieve its investment objective.

#### Principal Risks
You may experience losses in the fund, including losses before, at, or after the target date. There is no guarantee that the fund will be able to achieve its objective or provide adequate income at and through your retirement.

The fund is subject to risks, any of which could cause an investor to lose money. The fund's principal risks include:

**Asset Allocation Risk.** The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund's assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective. The fund is not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether the fund is an appropriate investment in light of their current financial position and retirement needs.

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions.

In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk.** When the fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

**Direct Investment Risk.** The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund's direct investment in these securities is subject to the same or similar risks as an underlying fund's investment in the same securities.

**Underlying Fund Investment Risk.** Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• ***Investment Risk.*** The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

?

• ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• ***Fixed-Income Risk.*** Interest rates rise and fall over time, which will affect an underlying fund's yield and share price. A change in a central bank's monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund's share price to fall. The credit quality of a portfolio investment could also cause an underlying fund's share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund's yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• ***Equity Risk.*** The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a

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whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

• ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

• ***Money Market Fund Risk.*** The fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

• ***ETF Risk.*** When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF's expenses. In addition, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio of securities.

• ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund's investments, and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• ***Emerging Markets Risk.*** Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated

with an underlying fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

?

• ***Derivatives Risk.*** An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility and cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund. However, these risks are less severe when the underlying fund uses derivatives for hedging rather than to enhance the underlying fund's returns or as a substitute for a position or security.

• ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Liquidity Risk.*** An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.

• ***Portfolio Turnover Risk.*** Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund's performance and may increase the likelihood of capital gains distributions.

• ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

For more information on the risks of investing in the fund and the underlying funds, please see the "Fund Details" section in the prospectus.

#### Performance
The bar chart below shows the fund's investment results for the prior calendar year, and the following table shows how the fund's average annual total returns for various periods compared to those of two broad-based indices and a composite index based on the fund's target allocations. This information provides some indication of the risks of investing in the fund. All figures assume distributions were reinvested. Keep in mind that future performance (both before and after taxes) may differ from past performance. For current performance information, please see **www.schwabassetmanagement.com/schwabfunds_prospectus**.

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#### Annual Total Returns (%) as of 12/31
![[MISSING IMAGE: aug 794erjog4nbt2i95miq0gkvs7.jpg]](aug 794erjog4nbt2i95miq0gkvs7.jpg)

#### Best Quarter: 9.64% Q4 2022

#### Worst Quarter: (15.41%) Q2 2022

---

| | | |
|:---|:---|:---|
| **Average Annual Total Returns as of 12/31/22**  | **Average Annual Total Returns as of 12/31/22**  | **Average Annual Total Returns as of 12/31/22**  |
|  | **1 Year**  | **Since <br> Inception <br> (2/25/21)**  |
| Before taxes | (20.30%) | (4.74%) |
| After taxes on distributions | (21.22%) | (5.79%) |
| After taxes on distributions and sale of shares  | (11.39%) | (3.68%) |
|  **Comparative Indices** (reflect no deduction for <br> expenses or taxes)  |  |  |
| Dow Jones U.S. Total Stock Market Index | (19.53%) | (1.09%) |
| Bloomberg US Aggregate Bond Index | (13.01%) | (6.54%) |
| Target 2065 Composite Index<sup>(1)</sup> | (17.34%) | (2.84%) |

---

<sup>(1)</sup>

The Target 2065 Composite Index is a custom blended index developed by Schwab Asset Management based on the Target 2065 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 48.2% S&P 500<sup>®</sup> Index, 1.7% Russell Midcap<sup>®</sup> Index, 7.8% Russell 2000<sup>®</sup> Index, 26.6% MSCI EAFE Index (Net), 0.5% Bloomberg US Aggregate Bond Index, 6.8% FTSE EPRA/NAREIT Global Index (Net), 5.8% MSCI Emerging Markets Index (Net), 0.5% Bloomberg Global Aggregate ex-US Hedged Index, 1.0% Bloomberg US Government/Credit Index, 0.5% Bloomberg US Government/Credit 1-5 Year Index, and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. See "Additional Information About the Funds' Composite Indices" for additional detail.

The after-tax figures reflect the highest individual federal income tax rates in effect during the period and do not reflect the impact of state and local taxes. Your actual after-tax returns depend on your individual tax situation. In addition, after-tax returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, an individual retirement account (IRA) or other tax-advantaged account. In some cases, the return after taxes on distributions and sale of shares may exceed the fund's other returns due to an assumed benefit from any losses on a sale of shares at the end of the measurement period.

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management™

#### Portfolio Managers
**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. She has managed the fund since 2021.

**Drew Hayes, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2023.

**Patrick Kwok, CFA,** Portfolio Manager, is responsible for the day-to-day co-management of the fund. He has managed the fund since 2021.

#### Purchase and Sale of Fund Shares
The fund is open for business each day that the New York Stock Exchange (NYSE) is open. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

Investors may only invest in the fund through an account at Charles Schwab & Co., Inc. (Schwab) or another financial intermediary. When you place orders to purchase, exchange or redeem fund shares through an account at Schwab or another financial intermediary, you must follow Schwab's or the other financial intermediary's transaction procedures.

There is no minimum initial investment for the fund.

#### Tax Information
Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains, unless you are investing through an IRA, 401(k) or other tax-advantaged account (in which case you may be taxed later, upon withdrawal of your investment from such account).

#### Payments to Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and its related companies may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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## About the Funds
The Schwab Target Funds (the funds) are designed to provide investors with investment management, asset allocation and ongoing reallocation over time. Because the funds invest in other mutual funds or ETFs (the underlying funds), each fund is considered a "fund of funds." A fund of funds bears its own direct expenses in addition to bearing a proportionate share of expenses charged to the underlying funds in which it invests.

Each fund is designed for an investor who anticipates retiring at or about the specific retirement date (target date) included in its name and plans to withdraw the value of the investor's account in the fund gradually after retirement. These funds gradually decrease their equity holdings and increase fixed-income holdings as the target date approaches and beyond, becoming more conservative over time. This rebalancing over time is often referred to as the glide path of the fund. The glide path is a pre-set investment schedule that reallocates risk based on an investor's target date. Please see the fund's glide path in the "Fund details" section.

Each fund is managed based on the target date included in its name and assumes a retirement age of 65. The target date refers to the approximate year an investor in a fund would plan to retire and likely would stop making new investments in the fund. The target date included in a fund's name does not necessarily represent the specific year you expect to need your assets. It is intended only as a general guide.

The funds are designed for long-term investors. Their performance will fluctuate over time and, as with all investments, future performance may differ from past performance.

#### Investor Profile
The funds are designed to offer investors a professionally managed investment plan that simplifies the investment management of an investor's assets prior to, and continuing after, the investor's retirement. The main component of the investment program is the funds' ongoing reallocation of the investor's assets among various asset classes, including equities, fixed-income securities and cash and cash equivalents (including money market funds). In particular, the funds are designed for investors who are saving for retirement.

#### Who may want to invest in the funds?
The funds may be a suitable investment for investors:

• seeking an investment whose asset allocation mix becomes more conservative over time

• seeking funds that combine the potential for capital appreciation and income

• seeking the convenience of funds that allocate their assets among both equity and fixed-income investments

#### Who may not want to invest in the funds?
The funds may not be suitable for investors:

• seeking to invest for a short period of time

• uncomfortable with fluctuations in the value of their investment

• seeking to use the funds for educational savings accounts

The funds are designed to be an integral part of an investor's overall retirement investment strategy. However, they are not designed to provide investors with a complete solution to their retirement needs. Investors must consider many factors when choosing an investment strategy for their retirement. For example, factors such as an appropriate retirement date, your expected retirement needs and your sources of income all should be considered when you choose your overall retirement strategy.

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## Fund Details
There can be no assurance that the funds will achieve their objectives. Except as explicitly described otherwise, the investment strategies and policies of each fund may be changed without shareholder approval.

The principal investment strategies and the main risks associated with investing in each fund are summarized in the fund summaries at the front of this prospectus. This section takes a more detailed look at some of the types of securities, the associated risks, and the various investment strategies that may be used in the day-to-day portfolio management of the funds, as described below. In addition to the particular types of securities and strategies that are described in this prospectus, each fund may use strategies that are not described herein in support of its overall investment goal. These additional strategies and the risks associated with them are described in the "Investment Strategies" and "Investments, Securities and Risks" sections in the Statement of Additional Information (SAI).

Investment Objectives, Strategies and Risks

#### Schwab Target Funds

#### Investment Objective
Each fund seeks to provide capital appreciation and income consistent with its current asset allocation.

#### Principal Investment Strategies of the Funds
Each fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. Each fund may also invest in affiliated Schwab ETFs and unaffiliated third party mutual funds and ETFs (referred to herein as unaffiliated funds and, together with Schwab Funds and Schwab ETFs, the underlying funds). Each fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, money market and other securities in accordance with their own investment objectives and policies. For each of the funds, the target asset allocation will be adjusted annually based on the adviser's asset allocation strategy, in accordance with a predetermined "glide path" illustrated below under the "Asset Allocation and Investment Strategies" section. However, the investment adviser reserves the right to modify a fund's target asset allocations from time to time should, in the investment adviser's discretion, circumstances warrant a change. In general, each fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target retirement date. At the stated target date, each fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). Each fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date at which time each fund's asset allocation will remain fixed at approximately 28.0% equity securities, 66.0% fixed-income securities, and 6.0% cash and cash equivalents (including money market funds).

In addition to the strategic annual adjustment of each fund's target asset allocation, the adviser may adjust each fund's underlying fund allocations within a particular asset class based on the following considerations: market trends, its outlook for a given market capitalization, and the underlying funds' performance in various market conditions. Accordingly, a fund's allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, each fund will have exposure to one or more "style classes." The style classes include domestic large-cap equity, domestic mid-cap equity, domestic small-cap equity, global real estate and international equity. The adviser may adjust a fund's allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class and the style classes' performance in various market conditions. Accordingly, a fund's allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

Each fund intends to invest in a combination of underlying funds; however, each fund may invest directly in equity and fixed-income securities, cash and cash equivalents (including money market securities).

For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, each fund may invest up to 100% of its assets directly in cash, money market instruments, repurchase agreements and other short-term obligations. When a fund engages in such activities, it may not achieve its investment objective.

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#### Asset Allocation and Investment Strategies
Each fund invests in a combination of underlying funds. Each fund's target allocation is intended to allocate investments among various asset classes such as equity, fixed income, and cash and cash equivalents (including money market securities). As set forth below, each fund has its own distinct target portfolio allocation and is designed to accommodate different investment goals and risk tolerances.

The following chart shows each fund's target asset allocation among the various asset classes as of February 1, 2023. The allocations may not add to 100% due to rounding.

#### Target Asset Allocation\*

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Asset Class**  | **Schwab Target <br> 2010 Fund**  | **Schwab Target <br> 2015 Fund**  | **Schwab Target <br> 2020 Fund**  | **Schwab Target <br> 2025 Fund**  | **Schwab Target <br> 2030 Fund**  | **Schwab Target <br> 2035 Fund**  |
| Equity Securities | 36.5%  | 40.3%  | 42.9%  | 50.5%  | 63.5%  | 73.1%  |
| Fixed-Income Securities | 58.8%  | 55.5%  | 53.3%  | 46.2%  | 34.0%  | 25.0%  |
| Cash and Cash Equivalents (Including Money Market Funds) | 4.6%  | 4.2%  | 3.8%  | 3.3%  | 2.5%  | 1.9%  |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Asset Class**  | **Schwab Target <br> 2040 Fund**  | **Schwab Target <br> 2045 Fund**  | **Schwab Target <br> 2050 Fund**  | **Schwab Target <br> 2055 Fund**  | **Schwab Target <br> 2060 Fund**  | **Schwab Target <br> 2065 Fund**  |
| Equity Securities | 80.9%  | 87.4%  | 91.5%  | 93.8%  | 95.8%  | 97.0%  |
| Fixed-Income Securities | 17.7%  | 11.7%  | 7.8%  | 5.7%  | 3.7%  | 2.5%  |
| Cash and Cash Equivalents (Including Money Market Funds) | 1.4%  | 0.9%  | 0.7%  | 0.5%  | 0.5%  | 0.5%  |

---

<sup>\*</sup>

Market appreciation or depreciation may cause a fund's actual asset allocation to vary temporarily from the fund's target asset allocation.

As shown above, the portfolios of the funds with an earlier target retirement date are more heavily allocated to fixed-income securities and money market funds; therefore these funds represent a more conservative approach. Funds with later target retirement dates take a more aggressive approach by allocating a greater amount of their assets to equity securities.

The target asset allocations of the funds have been developed with two general rules of investing in mind:

• Higher investment returns are generally accompanied by a higher risk of losing money. Put another way, the greater an investment's potential return, the greater its potential loss. For example, equity securities generally provide long-term returns that are superior to fixed-income securities, although their returns have tended to be more volatile in the short-term.

• Because their investments have more time to recover from losses, investors with longer time horizons generally have a higher risk tolerance.

For these reasons, the target asset allocations of the funds are expected to vary over time as your investment horizon changes.

Over time, the target allocation to asset classes will change according to a predetermined "glide path," as illustrated in the following graph. As the glide path shows, each fund's asset mix becomes more conservative as time elapses – both prior to and after the target retirement date. This reflects the need for reduced investment risk as retirement approaches and the need for greater certainty of income after retiring. The funds' actual asset allocations may differ from the allocations shown in the illustration. Once a fund reaches its most conservative planned allocation, approximately 20 years after its target date, its allocation to equity securities will remain fixed at approximately 28.0% in equity securities, 66.0% in fixed-income securities, and 6.0% in cash and cash equivalents (including money market securities). The adviser reserves the right to modify the glide path from time to time should circumstances warrant.

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#### Target Glide Path
Differences in the performance of underlying funds and the size and frequency of purchase and redemption orders may affect a fund's actual allocations.

#### More Information About Principal Investment Risks
The funds are intended for investors seeking an investment option whose asset mix becomes more conservative over time, and who are willing to accept the risks associated with the funds' asset allocation strategies. In general, a fund with a later target date is expected to be more volatile than a fund with an earlier target date.

Each fund is subject to risks, any of which could cause an investor to lose money. Principal risks of the funds include:

**Conflicts of Interest Risk.** The investment adviser's authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist. For example, the investment adviser's decisions to cause a fund to purchase or redeem shares of an affiliated underlying fund could be influenced by its belief that an affiliated underlying fund may benefit from additional assets or that it is in the best interests of the affiliated underlying fund to limit purchases of shares of the underlying fund. In such cases, the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to each fund and is legally obligated to act in each fund's best interests when selecting underlying funds.

**Market Risk.** Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. These events could reduce consumer demand or economic output; result in market closures, changes in interest rates, inflation/deflation, travel restrictions or quarantines; and significantly adversely impact the economy. Governmental and quasi-governmental authorities and regulators throughout the world have in the past often responded to serious economic disruptions with a variety of significant fiscal and monetary policy changes which could have an unexpected impact on financial markets and a fund's investments. As with any investment whose performance is tied to these markets, the value of an investment in a fund will fluctuate, which means that an investor could lose money over short or long periods.

**ETF Risk.** ETFs generally are investment companies whose shares are bought and sold on a securities exchange. A fund may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When a fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

**Operational Risk.** Each fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund's service providers, counterparties or other third parties, failed or inadequate

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processes and technology or system failures. Each fund seeks to reduce these operational risks through controls and procedures believed to be reasonably designed to address these risks. However, these controls and procedures cannot address every possible risk and may not fully mitigate the risks that they are intended to address.

**Underlying Fund Investment Risk.** The value of an investment in a fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance, expenses and risks of the underlying funds in which it invests. Before investing in a fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. These risks include any combination of the risks described below, although the fund's exposure to a particular risk will depend on the fund's overall asset allocation and underlying fund allocation.

**•** ***Investment Risk.*** An investment in the underlying funds is not a bank deposit. The funds' investments in the underlying funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. A fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

**•** ***Market Segment Risk.*** The underlying funds invest their assets in accordance with their own distinct investment objectives. As a result, the performance of an underlying fund will correlate directly with the performance of the particular segment of the stock or bond market that the fund invests in (e.g., large-cap securities, small-cap securities, foreign securities, fixed-income securities or dividend-paying common stocks). This may cause the underlying fund to underperform funds that do not similarly restrict their investments to a particular market segment.

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**•** ***Management Risk.*** Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser) will make poor security selections. An underlying fund's adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. In addition, with respect to certain of the underlying funds, the investment adviser makes investment decisions for the fund using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, if market dynamics change, the effectiveness of this strategy may be limited. Either of these risks may cause these underlying funds to underperform other funds with a similar investment objective.

**•** ***Equity Risk.*** The prices of equity securities in which the underlying funds invest rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. Governmental action, including the imposition of trade embargoes or tariffs, may also impact individual companies or markets as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time. Due to their fixed-income features, preferred stocks provide higher income potential than issuers' common stocks, but typically are more sensitive to interest rate changes than the underlying common stock. The rights of common stockholders are generally subordinate to the rights associated with an issuer's preferred stocks and the rights of preferred stockholders are generally subordinate to the rights associated with an issuer's debt securities on the distribution of an issuer's assets in the event of a liquidation.

**•** ***Market Capitalization Risk.*** Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. In addition, there may be less trading volume in securities issued by mid- and small-cap companies than those issued by larger companies and, as a result, trading volatility may have a greater impact on the value of securities of mid- and small-cap companies. Securities issued by large-cap companies, on the other hand, may not be able to attain the high growth rates of some mid- and small-cap companies. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund's performance could be impacted.

**•** ***Large-Cap Company Risk.*** Large-cap companies are generally more mature than smaller companies. They also may have fewer new market opportunities for their products or services, may focus resources on maintaining their market share, and may be unable to respond quickly to new competitive challenges. As a result, the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

**•** ***Mid-Cap Company Risk.*** Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by large-cap companies. The value of securities issued by mid-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may move sharply, especially during market upturns and downturns.

**•** ***Small-Cap Company Risk.*** Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and their securities may be riskier than those issued by larger companies. The value of securities issued by small-cap companies may be based in substantial part on future expectations rather than current achievements and their prices may

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move sharply, especially during market upturns and downturns. In addition, small-cap companies may have limited financial resources, management experience, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies. Further, small-cap companies may have less publicly available information and such information may be inaccurate or incomplete.

**•** ***ETF Risk.*** When an underlying fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a proportionate share of the ETF's expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF holds, lack of liquidity in the market for an ETF's shares can result in its value being more volatile than the underlying portfolio securities.

**•** ***Convertible Securities Risk.*** Certain of the underlying funds may invest in convertible securities. Convertible securities have the potential for a higher dividend or interest yield and lower price volatility compared to common stock. The value of a convertible security is influenced by the credit standing of the issuer and changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The price of a convertible security is also subject to the same types of market and issuer risks as the underlying common stock because of the conversion or exercise feature.

**•** ***Growth Investing Risk.*** Certain of the underlying funds pursue a "growth style" of investing. Growth investing focuses on a company's prospects for growth of revenue and earnings. If a company's earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks also can perform differently from the market as a whole and other types of stocks and can be more volatile than other types of stocks. Since growth companies usually invest a high portion of earnings in their business, they may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

**•** ***Value Investing Risk.*** Certain of the underlying funds may pursue a "value style" of investing. Value investing focuses on companies whose stocks appear undervalued in light of factors such as the company's earnings, book value, revenues or cash flow. If an underlying fund's investment adviser's (or sub-adviser's) assessment of a company's value or prospects for exceeding earnings expectations or market conditions is wrong, the underlying fund could suffer losses or produce poor performance relative to other funds. In addition, "value stocks" can continue to be undervalued by the market for long periods of time.

**•** ***Interest Rate Risk.*** Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund's yield will change over time. During periods when interest rates are low or there are negative interest rates, an underlying fund's yield (and total return) also may be low or the underlying fund may be unable to maintain positive returns. Changes in interest rates also may affect an underlying fund's share price: a rise in interest rates generally causes an underlying fund's share price to fall. This risk is greater when an underlying fund holds fixed-income securities with longer maturities. The longer an underlying fund's portfolio duration, the more sensitive to interest rate movements its share price is likely to be. For example, an underlying fund with a longer portfolio duration is more likely to experience a decrease in its share price as interest rates rise. Duration is an estimate of a security's (or portfolio of securities) sensitivity to changes in prevailing interest rates that is based on certain factors that may prove to be incorrect. It is therefore not an exact measurement and may not be able to reliably predict a particular security's price sensitivity to changes in interest rates.

Economic conditions and other factors, including a central bank's monetary policy, may result in changes in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of fixed-income securities in which an underlying fund invests. Rising interest rates may decrease liquidity in the fixed-income securities markets, making it more difficult for an underlying fund to sell its fixed-income securities holdings at a time when the investment adviser might wish to sell such securities. In addition, decreased market liquidity also may make it more difficult to value some or all of an underlying fund's fixed-income securities holdings. Certain countries have experienced negative interest rates on certain fixed-income securities. Negative or very low interest rates could magnify the risks associated with changes in interest rates. In general, changing interest rates, including rates that fall below zero, could have unpredictable effects on markets and may expose fixed-income and related markets to heightened volatility. To the extent that the investment adviser of an underlying fund anticipates interest rate trends imprecisely, the underlying fund could miss yield opportunities or its share price could fall. Inflation-protected securities may react differently to interest rate changes than other types of fixed-income securities and tend to react to changes in "real" interest rates.

**•** ***Credit Risk.*** A decline in the credit quality of an issuer or guarantor of a portfolio investment could cause an underlying fund to lose money or underperform. An underlying fund could lose money if, due to a decline in credit quality, the issuer or guarantor of a portfolio investment fails to make, or is perceived as being unable or unwilling to make, timely principal or interest payments or otherwise honor its obligations. The credit quality of an underlying fund's portfolio holdings can change rapidly in certain market environments and any default on the part of a single portfolio investment could cause an underlying fund's share price or yield to fall. Certain U.S. government securities that an underlying fund invests in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities

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an underlying fund owns do not extend to the shares of the underlying fund itself. Below investment-grade bonds (junk bonds) involve greater risks of default or downgrade and are more volatile than investment-grade bonds. Below investment-grade bonds also involve greater risk of price declines than investment-grade securities due to actual or perceived changes in an issuer's creditworthiness. In addition, issuers of below investment-grade bonds may be more susceptible than other issuers to economic downturns. Such bonds are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the bonds.

**•** ***Prepayment and Extension Risk.*** Certain fixed-income securities are subject to the risk that the securities may be paid off earlier or later than expected, especially during periods of falling or rising interest rates, respectively. Rising interest rates tend to extend the duration of certain fixed-income securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, an underlying fund could exhibit additional volatility and hold securities paying lower-than-market rates of interest. This is known as extension risk. When interest rates decline, borrowers may pay off their fixed-income securities sooner than expected. This can reduce an underlying fund's returns because the underlying fund will have to reinvest that money at the lower prevailing interest rates. In addition, prepayments and subsequent reinvestments increase the underlying fund's portfolio turnover rate. This is known as prepayment risk. Either situation could hurt an underlying fund's performance.

**•** ***U.S. Government Securities Risk.*** Some of the U.S. government securities that the underlying funds invest in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. Issuers such as the Federal Home Loan Banks (FHLB) maintain limited access to credit lines from the U.S. Treasury. Certain securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation, are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the underlying funds own do not extend to shares of the underlying funds themselves. In September 2008, the Federal Housing Finance Agency placed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) into conservatorship. The actions of the U.S. Treasury are intended to ensure that Fannie Mae and Freddie Mac maintain a positive net worth and meet their financial obligations, preventing mandatory triggering of receivership. No assurance can be given that the U.S. Treasury initiatives will be successful.

**•** ***Inflation-Protected Security Risk.*** The value of inflation-protected securities, including Treasury Inflation-Protected Securities (TIPS), generally will fluctuate in response to changes in "real" interest rates. Real interest rates represent nominal (or stated) interest rates reduced by the expected impact of inflation. The value of an inflation-protected security generally decreases when real interest rates rise and generally increase when real interest rates fall. In addition, the principal value of an inflation-protected security is periodically adjusted up or down along with the rate of inflation. If the measure of inflation falls, the principal value of the inflation-protected security will be adjusted downwards, and consequently, the interest payable on the security will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed by the United States Treasury in the case of TIPS. For securities that do not provide a similar guarantee, the adjusted principal value of the security to be repaid at maturity is subject to credit risk.

**•** ***Mortgage Dollar Rolls Risk.*** Mortgage dollar rolls are transactions in which an underlying fund sells mortgage-backed securities to a dealer and simultaneously agrees to repurchase similar securities in the future at a predetermined price. An underlying fund's mortgage dollar rolls could lose money if the price of the mortgage-backed securities sold falls below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

**•** ***Money Market Fund Risk.*** In addition to the risks discussed under "Investment Risk" above, an investment by a fund in an underlying money market fund has additional risks. A fund may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value ("stable share price money market funds") or that have a share price that fluctuates ("variable share price money market funds"). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when a fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums.

**•** ***Foreign Investment Risk.*** An underlying fund's investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. These risks may negatively impact the value or liquidity of an underlying fund's investments and could impair the underlying fund's ability to meet its investment objective or invest in accordance with its investment

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strategy. In addition, an underlying fund's investments in foreign securities may be subject to economic sanctions or other government restrictions, including trade tariffs, embargoes or limitations on trade which could have a significant impact on a country's markets overall as well as global economies or markets. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. An underlying fund may also experience more rapid or extreme changes in value as compared to an underlying fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. To the extent an underlying fund's investments in a single country or a limited number of countries represent a large percentage of the underlying fund's assets, the underlying fund's performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the underlying fund's price may be more volatile than the price of an underlying fund that is geographically diversified.

**•** ***Emerging Markets Risk.*** The risks of foreign investments apply to, and may be heightened in connection with, investments in emerging market countries or securities of issuers that conduct their business in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and recordkeeping requirements and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries. Material information about a company in an emerging market country may be unavailable or unreliable, and U.S. regulators may be unable to enforce a company's regulatory obligations. There is often a greater potential for nationalization, expropriation, confiscatory taxation, government regulation, social instability or diplomatic developments (including war) in emerging market countries, which could adversely affect the economies of, or investments in securities of issuers located in, such countries. In addition, emerging markets are substantially smaller than developed markets, and the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there will tend to be an increased risk of illiquidity and price volatility associated with an underlying fund's investments in emerging market countries which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

**•** ***Currency Risk.*** An underlying fund's investments in securities denominated in, and/or receiving revenues in, foreign currencies, will subject the underlying fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in an underlying fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country's economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates; intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund; or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to an underlying fund if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the underlying fund's account. An underlying fund is subject to the risk of a counterparty's failure, inability or refusal to perform with respect to such contracts.

**•** ***Real Estate Investment Risk.*** Certain of the underlying funds have a policy of concentrating their investments in real estate companies and companies related to the real estate industry. Such an underlying fund is subject to risks associated with the direct ownership of real estate securities and a fund's investment in such an underlying fund will be closely linked to the performance of the real estate markets. An investment by a fund in an underlying fund that invests, but does not concentrate, in real estate companies and companies related to the real estate industry will subject the fund to the risks associated with the direct ownership of real estate securities to a lesser extent. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties or defaults by borrowers or tenants, particularly during periods of disruptions to business operations or an economic downturn; increasing competition; increases in property taxes and operating expenses; changes in zoning laws; losses due to costs resulting from the clean-up of environmental problems; liability to third parties for damages resulting from environmental problems; casualty or condemnation losses; limitations on rents; changes in market and sub-market values and the appeal of properties to tenants; and changes in interest rates.

**•** ***Real Estate Investment Trusts (REITs) Risk.*** Certain of the underlying funds invest in REITs. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code of 1986, as amended, or to maintain their exemptions from registration under the Investment Company Act

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of 1940, as amended. The failure of a company to qualify as a REIT under federal tax law may have adverse consequences to an underlying fund that invests in that REIT. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, REITs have their own expenses, and an underlying fund that invests in REITs will bear a proportionate share of those expenses.

**•** ***Short Sales Risk.*** Certain underlying funds may engage in short sales, which are transactions in which the underlying fund sells a security it does not own. To complete a short sale, an underlying fund must borrow the security to deliver to the buyer. The underlying fund is then obligated to replace the borrowed security by purchasing the security at the market price at the time of replacement. This price may be more or less than the price at which the security was sold by the underlying fund and the underlying fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the underlying fund replaces the borrowed security.

**•** ***Derivatives Risk.*** An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right, but not the obligation, to buy or sell an instrument at a specific price on or before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as credit risk, leverage risk, liquidity risk, market risk, management risk, and operational risk are discussed elsewhere in this prospectus. An underlying fund's use of derivatives is also subject to lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause an underlying fund to realize higher amounts of short-term capital gains. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase its volatility, and could cause the underlying fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) by an underlying fund could cause a fund to become a commodity pool, which would require the fund to comply with certain CFTC rules. An underlying fund's use of derivatives also could create a risk of counterparty default under certain transactions, risks that a fund would need to liquidate portfolio positions when it may not be advantageous to do so in order to meet margin and payment obligations, and legal risks relating to insufficient documentation, insufficient capacity or authority of a counterparty, or legality or enforceability of a contract.

**•** ***Leverage Risk.*** Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. In a reverse repurchase agreement, an underlying fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund's portfolio securities which means even a small amount of leverage can have a disproportionately large impact on an underlying fund. The use of leverage may cause an underlying fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

**•** ***Non-Diversification Risk.*** Certain of the underlying funds are non-diversified and, as such, may invest a greater percentage of their assets in the securities in a single issuer than an underlying fund that is diversified. A non-diversified underlying fund is more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified underlying fund.

**•** ***Securities Lending Risk.*** An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When an underlying fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the underlying fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. An underlying fund will also bear the risk of any decline in value of securities acquired with cash collateral. An underlying fund may pay lending fees to a party arranging the loan.

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**•** ***Tracking Error Risk.*** Certain underlying funds seek to track the performance of their respective indices, although they may not be successful in doing so. The divergence between the performance of an underlying fund and its index, positive or negative, is called "tracking error." Tracking error can be caused by many factors and it may be significant. For example, an underlying fund may not invest in certain securities in its index, match the securities' weighting to the index, or the underlying fund may invest in securities not in the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. An underlying fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts may not be successful. In

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certain circumstances, the underlying fund may value individual securities based on fair value prices developed using methods approved by the underlying fund's board of trustees. To the extent the fund calculates its NAV based on fair value prices, the underlying fund's performance may diverge from the index. In addition, cash flows into and out of an underlying fund, operating expenses and trading costs all affect the ability of the underlying fund to match the performance of its index, because the index does not have to manage cash flows and does not incur any costs.

**•** ***Investment Style Risk.*** An underlying fund's investment style may impact the performance of a fund. For example, an underlying fund may invest in accordance with an indexing investment style, causing the underlying fund to follow the performance of an index during upturns as well as downturns. In addition, an underlying fund may have an investment style that favors certain types of investments over others. As a result, such an underlying fund may underperform funds that do not limit their investments to the particular type of investment.

**•** ***Index-Related Risk.*** An index provider does not provide any warranty as to the timeliness, accuracy or completeness of any data relating to an index. Errors relating to an index, including index data, computations and/or construction, may occur from time to time and may not be identified by an index provider for a period of time or at all. Losses resulting from index errors may be borne by an underlying fund and its shareholders.

In addition, market disruptions could cause delays in an underlying fund's index's rebalancing schedule which may result in the index and, in turn, the underlying fund experiencing returns different than those that would have been achieved under a normal rebalancing schedule.

**•** ***Multi-Manager Risk.*** Certain of the underlying funds utilize a multi-manager approach to investing. Although the investment adviser monitors and seeks to coordinate the overall management of these underlying funds, each investment manager makes investment decisions independently, and it is possible that the investment styles of the investment managers may not complement one another. As a result, the exposure of these underlying funds to a given region, country, stock, industry or investment style could unintentionally be smaller or larger than if the underlying funds had a single manager.

**•** ***Liquidity Risk.*** Liquidity risk exists when particular investments are difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In addition, limited dealer inventories of certain securities could potentially lead to decreased liquidity. In such cases, an underlying fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Liquidity risk also includes the risk that market conditions or large shareholder redemptions, which may occur rapidly or unexpectedly, may impact the ability of an underlying fund to meet redemption requests within the required time period. In order to meet such redemption requests, the underlying fund may be forced to sell securities at inopportune times or prices.

**•** ***High-Yield Risk.*** Underlying funds that invest in high-yield securities and unrated securities of similar credit quality (junk bonds) may be subject to greater levels of credit and liquidity risk than underlying funds that do not invest in such securities. These securities are considered predominately speculative with respect to the issuer's continuing ability to make principal and interest payments. High-yield securities may be more volatile than higher-rated securities. An economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce an underlying fund's ability to sell these securities (liquidity risk). If the issuer of a security is in default with respect to interest or principal payments, an underlying fund may lose its entire investment. Because of the risks involved in investing in high-yield securities, an investment in an underlying fund that invests in such securities should be considered speculative.

**•** ***Variable Interest Entities Risk.*** An underlying fund may gain exposure to certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as an underlying fund) is prohibited. To facilitate indirect non-Chinese investment, many China-based operating companies have created VIE structures. In a VIE structure, a China-based operating company will establish an entity outside of China that will enter into service and other contracts with the China-based operating company. Shares of the entities established outside of China are often listed and traded on an exchange. Non-Chinese investors (such as an underlying fund) hold equity interests in the entities established outside of China rather than directly in the China-based operating companies. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. An investment in a VIE structure subjects an underlying fund to the risks associated with the underlying China-based operating company. In addition, an underlying fund may be exposed to certain associated risks, including the risks that: the Chinese government could subject the China-based operating company to penalties, revocation of business and operating licenses or forfeiture of ownership interests; the Chinese government may outlaw the VIE structure, which could cause an uncertain negative impact to existing investors in the VIE structure; the contracts underlying the VIE structure may not be enforced by Chinese courts;

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and shareholders of the China-based operating company may leverage the VIE structure to their benefit and to the detriment of the investors in the VIE structure. If these actions were to occur, the market value of an underlying fund's investments in the VIE structure would likely fall, causing investment losses, which could be substantial, for the underlying fund.

#### Risk Spectrum
Each fund has a different level of risk and the amount of risk is relative to the time horizon included in its name. Funds with earlier target retirement dates will tend to be less risky and have lower expected returns than the funds with later target retirement dates. The following risk spectrum is designed to provide investors with a general overview of the relative risk characteristics of each fund.

![[MISSING IMAGE: usutj8p7j4pliucr76u785k6rmlv.jpg]](usutj8p7j4pliucr76u785k6rmlv.jpg)

Portfolio Holdings

The funds may make various types of portfolio securities information available to shareholders. The funds post a detailed list of the securities held by each fund at **www.schwabassetmanagement.com/schwabfunds_prospectus** (under "Portfolio Holdings") as of month end. This list is generally posted approximately 15-20 days after the end of the month and remains posted for at least six months. The funds also post in the fund summary section of the funds' website and on fund fact sheets certain summary portfolio attributes, including top ten holdings, approximately 5-25 days after the end of the calendar quarter or month. The funds may exclude any portion of these portfolio holdings from publication when deemed in the best interest of a fund. Further information regarding the funds' policy and procedures on the disclosure of portfolio holdings is available in the SAI.

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## Financial Highlights
This section provides further details about each fund's financial history for the past five years or, if shorter, for its period of operations. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested. The information for fiscal years ended October 31, 2018 and October 31, 2019 has been audited by the funds' prior independent registered public accounting firm. The information for the fiscal years/periods ended October 31, 2020, October 31, 2021 and October 31, 2022 has been audited by Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual report (see back cover).

#### Schwab Target 2010 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18- <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $15.21 | $13.76 | $13.57 | $13.06 | $13.42 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.28 | 0.22 | 0.27 | 0.30 | 0.29 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.55) | 1.61 | 0.57 | 0.97 | (0.35) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.27) | 1.83 | 0.84 | 1.27 | (0.06) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.30) | (0.27) | (0.34) | (0.34) | (0.30) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.41) | (0.11) | (0.31) | (0.42) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.71) | (0.38) | (0.65) | (0.76) | (0.30) |
| Net asset value at end of period | $12.23 | $15.21 | $13.76 | $13.57 | $13.06 |
| Total return | (15.69%) | 13.46% | 6.38% | 10.42% | (0.52%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.14%<sup>(3)</sup> | 0.12% | 0.14% | 0.17% | 0.12% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 2.04% | 1.50% | 2.03% | 2.33% | 2.15% |
| Portfolio turnover rate | 24% | 21% | 27% | 13% | 16% |
| Net assets, end of period (x 1,000) | $46359 | $65477 | $55507 | $51106 | $51996 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

?

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

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#### Schwab Target 2015 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $13.36 | $12.18 | $12.07 | $11.49 | $12.21 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.23 | 0.19 | 0.25 | 0.27 | 0.25 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.24) | 1.54 | 0.50 | 0.86 | (0.30) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.01) | 1.73 | 0.75 | 1.13 | (0.05) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.28) | (0.24) | (0.31) | (0.30) | (0.27) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.59) | (0.31) | (0.33) | (0.25) | (0.40) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.87) | (0.55) | (0.64) | (0.55) | (0.67) |
| Net asset value at end of period | $10.48 | $13.36 | $12.18 | $12.07 | $11.49 |
| Total return | (16.15%) | 14.54% | 6.41% | 10.48% | (0.57%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.11%<sup>(3)</sup> | 0.08% | 0.10% | 0.11% | 0.07% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.97% | 1.47% | 2.07% | 2.35% | 2.12% |
| Portfolio turnover rate | 19% | 14% | 15% | 10% | 14% |
| Net assets, end of period (x 1,000) | $57879 | $81399 | $77274 | $81139 | $90292 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

?

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

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#### Schwab Target 2020 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $16.14 | $14.55 | $14.46 | $13.87 | $14.71 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.28 | 0.23 | 0.30 | 0.32 | 0.30 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.72) | 1.94 | 0.58 | 1.04 | (0.33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.44) | 2.17 | 0.88 | 1.36 | (0.03) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.35) | (0.29) | (0.36) | (0.35) | (0.33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.80) | (0.29) | (0.43) | (0.42) | (0.48) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.15) | (0.58) | (0.79) | (0.77) | (0.81) |
| Net asset value at end of period | $12.55 | $16.14 | $14.55 | $14.46 | $13.87 |
| Total return | (16.35%) | 15.27% | 6.33% | 10.58% | (0.32%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.03%<sup>(3)</sup> | 0.02% | 0.02% | 0.03% | 0.02% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.97% | 1.47% | 2.13% | 2.28% | 2.07% |
| Portfolio turnover rate | 17% | 10% | 17% | 14% | 18% |
| Net assets, end of period (x 1,000) | $383963 | $531012 | $525444 | $548690 | $541856 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab Target 2025 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $17.30 | $14.81 | $14.74 | $14.10 | $14.71 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.27 | 0.22 | 0.31 | 0.30 | 0.28 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.09) | 2.74 | 0.55 | 1.10 | (0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.82) | 2.96 | 0.86 | 1.40 | (0.06) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.39) | (0.28) | (0.35) | (0.34) | (0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.66) | (0.19) | (0.44) | (0.42) | (0.21) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.05) | (0.47) | (0.79) | (0.76) | (0.55) |
| Net asset value at end of period | $13.43 | $17.30 | $14.81 | $14.74 | $14.10 |
| Total return | (17.39%) | 20.25% | 5.98% | 10.79% | (0.53%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.03%<sup>(3)</sup> | 0.02% | 0.02% | 0.03% | 0.02% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.82% | 1.33% | 2.14% | 2.10% | 1.88% |
| Portfolio turnover rate | 19% | 16% | 16% | 15% | 13% |
| Net assets, end of period (x 1,000) | $494852 | $662236 | $571738 | $577095 | $530596 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab Target 2030 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $18.88 | $15.67 | $15.79 | $15.24 | $16.10 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.27 | 0.22 | 0.33 | 0.30 | 0.29 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.53) | 3.54 | 0.57 | 1.21 | (0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.26) | 3.76 | 0.90 | 1.51 | (0.09) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.45) | (0.27) | (0.37) | (0.37) | (0.39) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.78) | (0.28) | (0.65) | (0.59) | (0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.23) | (0.55) | (1.02) | (0.96) | (0.77) |
| Net asset value at end of period | $14.39 | $18.88 | $15.67 | $15.79 | $15.24 |
| Total return | (18.51%) | 24.38% | 5.81% | 10.94% | (0.75%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.02%<sup>(3)</sup> | 0.01% | 0.02% | 0.02% | 0.02% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.65% | 1.21% | 2.15% | 2.00% | 1.79% |
| Portfolio turnover rate | 16% | 14% | 13% | 17% | 14% |
| Net assets, end of period (x 1,000) | $901007 | $1166390 | $965288 | $998681 | $957756 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

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#### Schwab Target 2035 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $19.05 | $15.34 | $15.46 | $14.94 | $15.58 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.25 | 0.20 | 0.31 | 0.28 | 0.27 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.73) | 3.99 | 0.53 | 1.19 | (0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.48) | 4.19 | 0.84 | 1.47 | (0.11) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.48) | (0.24) | (0.34) | (0.36) | (0.39) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.58) | (0.24) | (0.62) | (0.59) | (0.14) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.06) | (0.48) | (0.96) | (0.95) | (0.53) |
| Net asset value at end of period | $14.51 | $19.05 | $15.34 | $15.46 | $14.94 |
| Total return | (19.41%) | 27.76% | 5.51% | 10.90% | (0.88%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.03%<sup>(3)</sup> | 0.02% | 0.03% | 0.03% | 0.03% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.55% | 1.11% | 2.06% | 1.87% | 1.70% |
| Portfolio turnover rate | 13% | 14% | 12% | 15% | 14% |
| Net assets, end of period (x 1,000) | $482594 | $612195 | $476911 | $483191 | $446711 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

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#### Schwab Target 2040 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $20.52 | $16.24 | $16.61 | $16.27 | $17.14 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.26 | 0.20 | 0.32 | 0.28 | 0.28 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.10) | 4.68 | 0.56 | 1.28 | (0.45) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.84) | 4.88 | 0.88 | 1.56 | (0.17) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.54) | (0.24) | (0.35) | (0.39) | (0.44) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.81) | (0.36) | (0.90) | (0.83) | (0.26) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.35) | (0.60) | (1.25) | (1.22) | (0.70) |
| Net asset value at end of period | $15.33 | $20.52 | $16.24 | $16.61 | $16.27 |
| Total return | (20.10%) | 30.57% | 5.31% | 10.90% | (1.17%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.02%<sup>(3)</sup> | 0.01% | 0.02% | 0.02% | 0.02% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.49% | 1.05% | 2.01% | 1.78% | 1.65% |
| Portfolio turnover rate | 10% | 14% | 10% | 15% | 17% |
| Net assets, end of period (x 1,000) | $959722 | $1235538 | $985325 | $1011558 | $961899 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

66Schwab Target Funds \| Financial Highlights

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[**TABLE OF CONTENTS**](#toc-5)

#### Schwab Target 2045 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $17.97 | $13.83 | $13.88 | $13.35 | $13.92 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.22 | 0.16 | 0.25 | 0.22 | 0.21 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.76) | 4.36 | 0.46 | 1.09 | (0.39) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.54) | 4.52 | 0.71 | 1.31 | (0.18) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.49) | (0.18) | (0.28) | (0.31) | (0.36) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.40) | (0.20) | (0.48) | (0.47) | (0.03) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.89) | (0.38) | (0.76) | (0.78) | (0.39) |
| Net asset value at end of period | $13.54 | $17.97 | $13.83 | $13.88 | $13.35 |
| Total return | (20.76%) | 33.13% | 5.10% | 10.91% | (1.43%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.05%<sup>(3)</sup> | 0.04% | 0.05% | 0.08% | 0.06% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.46% | 0.96% | 1.87% | 1.65% | 1.52% |
| Portfolio turnover rate | 7% | 12% | 6% | 8% | 12% |
| Net assets, end of period (x 1,000) | $206203 | $252294 | $177992 | $162017 | $138813 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

Schwab Target Funds \| Financial Highlights67

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[**TABLE OF CONTENTS**](#toc-5)

#### Schwab Target 2050 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $18.48 | $14.03 | $14.03 | $13.49 | $14.07 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.22 | 0.16 | 0.25 | 0.21 | 0.21 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.90) | 4.66 | 0.45 | 1.11 | (0.41) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.68) | 4.82 | 0.70 | 1.32 | (0.20) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.53) | (0.17) | (0.27) | (0.31) | (0.36) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.53) | (0.20) | (0.43) | (0.47) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (1.06) | (0.37) | (0.70) | (0.78) | (0.38) |
| Net asset value at end of period | $13.74 | $18.48 | $14.03 | $14.03 | $13.49 |
| Total return | (21.22%) | 34.83% | 4.96% | 10.87% | (1.50%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.05%<sup>(3)</sup> | 0.04% | 0.06% | 0.08% | 0.07% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.44% | 0.93% | 1.83% | 1.54% | 1.45% |
| Portfolio turnover rate | 6% | 19% | 5% | 7% | 10% |
| Net assets, end of period (x 1,000) | $203896 | $245059 | $181391 | $161003 | $122459 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

68Schwab Target Funds \| Financial Highlights

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[**TABLE OF CONTENTS**](#toc-5)

#### Schwab Target 2055 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $18.74 | $14.11 | $14.15 | $13.60 | $14.18 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.23 | 0.15 | 0.24 | 0.21 | 0.20 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (4.05) | 4.83 | 0.45 | 1.10 | (0.39) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.82) | 4.98 | 0.69 | 1.31 | (0.19) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.54) | (0.16) | (0.27) | (0.31) | (0.37) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.41) | (0.19) | (0.46) | (0.45) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.95) | (0.35) | (0.73) | (0.76) | (0.39) |
| Net asset value at end of period | $13.97 | $18.74 | $14.11 | $14.15 | $13.60 |
| Total return | (21.54%) | 35.79% | 4.86% | 10.73% | (1.49%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(4)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.07%<sup>(3)</sup> | 0.06% | 0.09% | 0.13% | 0.11% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.43% | 0.88% | 1.78% | 1.53% | 1.41% |
| Portfolio turnover rate | 4% | 11% | 6% | 6% | 10% |
| Net assets, end of period (x 1,000) | $135741 | $158223 | $107401 | $93743 | $73259 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(4)</sup>

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses had not been incurred.

Schwab Target Funds \| Financial Highlights69

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[**TABLE OF CONTENTS**](#toc-5)

#### Schwab Target 2060 Fund

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **11/1/20– <br> 10/31/21**  | **11/1/19– <br> 10/31/20**  | **11/1/18– <br> 10/31/19**  | **11/1/17– <br> 10/31/18**  |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $16.42 | $12.21 | $12.16 | $11.53 | $12.02 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(1)</sup>  | 0.19 | 0.12 | 0.20 | 0.16 | 0.14 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (3.61) | 4.34 | 0.38 | 0.99 | (0.32) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (3.42) | 4.46 | 0.58 | 1.15 | (0.18) |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.47) | (0.13) | (0.22) | (0.26) | (0.29) |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net realized gains  | (0.27) | (0.12) | (0.31) | (0.26) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | (0.74) | (0.25) | (0.53) | (0.52) | (0.31) |
| Net asset value at end of period | $12.26 | $16.42 | $12.21 | $12.16 | $11.53 |
| Total return | (21.88%) | 36.89% | 4.73% | 10.85% | (1.64%) |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(2)</sup>  | 0.00%<sup>(3)</sup> | 0.00% | 0.00% | 0.00% | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(2)</sup>  | 0.20%<sup>(3)</sup> | 0.22% | 0.41% | 0.67% | 0.73% |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)  | 1.35% | 0.80% | 1.67% | 1.42% | 1.18% |
| Portfolio turnover rate | 15% | 11% | 8% | 13% | 22% |
| Net assets, end of period (x 1,000) | $39741 | $40077 | $21509 | $15765 | $10479 |

---

<sup>(1)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(2)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(3)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

70Schwab Target Funds \| Financial Highlights

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[**TABLE OF CONTENTS**](#toc-5)

#### Schwab Target 2065 Fund

---

| | | |
|:---|:---|:---|
|  | **11/1/21– <br> 10/31/22**  | **2/26/21<sup>(1)</sup>– <br> 10/31/21**  |
| **Per-Share Data** |  |  |
| Net asset value at beginning of period | $11.33 | $10.00 |
| Income (loss) from investment operations: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(2)</sup>  | 0.11 | 0.03 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized gains (losses)  | (2.51) | 1.30 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total from investment operations  | (2.40) | 1.33 |
| Less distributions: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Distributions from net investment income  | (0.30) |  |
| Net asset value at end of period | $8.63 | $11.33 |
| Total return | (21.78%) | 13.30%<sup>(3)</sup> |
| **Ratios/Supplemental Data** |  |  |
| Ratios to average net assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net operating expenses<sup>(4)</sup>  | 0.00%<sup>(5)</sup> | 0.00%<sup>(6)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Gross operating expenses<sup>(4)</sup>  | 1.10%<sup>(5)</sup> | 1.90%<sup>(6)</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss)<sup>(4)</sup>  | 1.17% | 0.35%<sup>(6)</sup> |
| Portfolio turnover rate | 26% | 34%<sup>(3)</sup> |
| Net assets, end of period (x 1,000) | $6611 | $4489 |

---

<sup>(1)</sup>

Commencement of operations.

<sup>(2)</sup>

Calculated based on the average shares outstanding during the period.

<sup>(3)</sup>

Not annualized.

<sup>(4)</sup>

Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.

?

<sup>(5)</sup>

Ratio includes less than 0.005% of non-routine proxy expenses.

<sup>(6)</sup>

Annualized.

Schwab Target Funds \| Financial Highlights71

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[**TABLE OF CONTENTS**](#toc-5)

## The Funds' Investments in Asset Classes and Sub-Asset Classes
Through each fund's investments in its underlying funds, each fund aims to provide diversification across major asset classes as well as diversification across a range of sub-asset classes within the major asset classes. Each fund's allocation to an asset or sub-asset class will change over time. The investment adviser may add or remove asset classes and sub-asset classes at any time without prior notice. For additional details regarding how the adviser determines the funds' underlying fund and asset class allocations, please refer back to the "Principal Investment Strategies" section in the Fund Summary sections and the section "Fund Details: Investment Objectives, Strategies and Risks" in this prospectus.

The following chart provides a list of the asset classes and sub-asset classes and the target asset allocation as of February 1, 2023 (the most recent annual adjustment of the funds' target asset allocations).

The allocations may not add to 100% due to rounding.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Major Asset Class**  | **Sub-Asset Class**  | **Schwab Target <br> 2010 Fund**  | **Schwab Target <br> 2015 Fund**  | **Schwab Target <br> 2020 Fund**  | **Schwab Target <br> 2025 Fund**  |
| **U.S. Stocks**  | Large-Cap | 23.02%  | 25.09%  | 26.38%  | 29.84%  |
|  | Mid-Cap | 1.24%  | 1.38%  | 1.47%  | 1.42%  |
|  | Small-Cap | 1.82%  | 1.99%  | 2.10%  | 2.64%  |
| **International Stocks**  | Developed | 7.86%  | 9.01%  | 9.93%  | 12.76%  |
|  | Emerging Markets | 0.00%  | 0.00%  | 0.00%  | 0.28%  |
| **Global Real Estate**  |  | 2.56%  | 2.82%  | 3.00%  | 3.53%  |
| **Fixed Income**  | Intermediate-Term Bonds | 42.09%  | 39.61%  | 37.92%  | 33.04%  |
|  | Short-Term Bonds | 7.97%  | 7.41%  | 7.05%  | 5.82%  |
|  | Inflation-Protected Bonds | 6.70%  | 6.35%  | 6.11%  | 4.21%  |
|  | International Bonds | 2.08%  | 2.17%  | 2.21%  | 3.15%  |
| **Cash and Cash Equivalents (including Money Market Funds)**  |  | 4.65%  | 4.17%  | 3.84%  | 3.30%  |
|  |  | 100%  | 100%  | 100%  | 100%  |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Major Asset Class**  | **Sub-Asset Class**  | **Schwab Target <br> 2030 Fund**  | **Schwab Target <br> 2035 Fund**  | **Schwab Target <br> 2040 Fund**  | **Schwab Target <br> 2045 Fund**  |
| **U.S. Stocks**  | Large-Cap | 36.11%  | 40.36%  | 43.62%  | 46.01%  |
|  | Mid-Cap | 1.59%  | 1.70%  | 1.79%  | 1.88%  |
|  | Small-Cap | 3.79%  | 4.73%  | 5.56%  | 6.36%  |
| **International Stocks**  | Developed | 16.49%  | 19.23%  | 21.43%  | 23.22%  |
|  | Emerging Markets | 1.11%  | 1.99%  | 2.87%  | 3.82%  |
| **Global Real Estate**  |  | 4.45%  | 5.12%  | 5.67%  | 6.12%  |
| **Fixed Income**  | Intermediate-Term Bonds | 24.57%  | 18.50%  | 13.17%  | 8.68%  |
|  | Short-Term Bonds | 3.90%  | 2.67%  | 1.78%  | 1.13%  |
|  | Inflation-Protected Bonds | 1.44%  | 0.00%  | 0.00%  | 0.00%  |
|  | International Bonds | 4.08%  | 3.82%  | 2.76%  | 1.84%  |
| **Cash and Cash Equivalents (including Money Market Funds)**  |  | 2.47%  | 1.86%  | 1.36%  | 0.94%  |
|  |  | 100%  | 100%  | 100%  | 100%  |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Major Asset Class**  | **Sub-Asset Class**  | **Schwab Target <br> 2050 Fund**  | **Schwab Target <br> 2055 Fund**  | **Schwab Target <br> 2060 Fund**  | **Schwab Target <br> 2065 Fund**  |
| **U.S. Stocks**  | Large-Cap | 47.22%  | 47.87%  | 48.41%  | 48.72%  |
|  | Mid-Cap | 1.96%  | 2.00%  | 2.04%  | 2.07%  |
|  | Small-Cap | 6.96%  | 7.31%  | 7.62%  | 7.80%  |
| **International Stocks**  | Developed | 24.32%  | 24.93%  | 25.46%  | 25.78%  |

---

72Schwab Target Funds \| The Funds' Investments in Asset Classes and Sub-Asset Classes

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[**TABLE OF CONTENTS**](#toc-5)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Major Asset Class**  | **Sub-Asset Class**  | **Schwab Target <br> 2050 Fund**  | **Schwab Target <br> 2055 Fund**  | **Schwab Target <br> 2060 Fund**  | **Schwab Target <br> 2065 Fund**  |
|  | Emerging Markets | 4.62%  | 5.11%  | 5.56%  | 5.84%  |
| **Global Real Estate**  |  | 6.40%  | 6.57%  | 6.71%  | 6.79%  |
| **Fixed Income**  | Intermediate-Term Bonds | 5.84%  | 4.21%  | 2.57%  | 1.50%  |
|  | Short-Term Bonds | 0.75%  | 0.55%  | 0.50%  | 0.50%  |
|  | Inflation-Protected Bonds | 0.00%  | 0.00%  | 0.00%  | 0.00%  |
|  | International Bonds | 1.26%  | 0.92%  | 0.63%  | 0.50%  |
| **Cash and Cash Equivalents (including Money Market Funds)**  |  | 0.67%  | 0.52%  | 0.50%  | 0.50%  |
|  |  | 100%  | 100%  | 100%  | 100%  |

---

For more detailed information, including portfolio holdings for each of the funds, please visit the funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**.

Schwab Target Funds \| The Funds' Investments in Asset Classes and Sub-Asset Classes73

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Description of Underlying Funds

The funds invest primarily in the underlying funds. Therefore, each fund's investment performance is directly related to the investment performance of these underlying funds. The adviser may exclude one or more underlying funds from a fund's asset allocation strategy at any given time. The adviser reserves the right to substitute other underlying funds and add additional underlying funds from time to time should circumstances warrant a change. The following chart provides a brief description of the investment objective and principal investment strategies of the funds' current underlying funds. Additional information about the underlying funds is provided in each underlying fund's prospectus.

---

| | |
|:---|:---|
| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **EQUITY FUNDS – DOMESTIC LARGE-CAP**  | **EQUITY FUNDS – DOMESTIC LARGE-CAP**  |
| **Schwab<sup>®</sup> Core Equity Fund**  | Seeks long-term capital growth. The fund invests, under normal circumstances, at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities of U.S. companies. The fund typically invests in common stocks of U.S. companies that have market capitalizations of approximately $500 million or more at the time of purchase. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the S&P 500<sup>®</sup> Index. |
| **Schwab<sup>®</sup> S&P 500 Index Fund**  | Seeks to track the total return of the S&P 500 Index. Under normal circumstances, the fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks that are included in the S&P 500 Index. |
| **Schwab<sup>®</sup> Fundamental US Large Company Index Fund**  | Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the Russell RAFI US Large Company Index. |
| **Schwab<sup>®</sup> Select Large Cap Growth Fund**  | Seeks long-term capital appreciation. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities of U.S. large capitalization companies. The fund defines large capitalization companies as those with a market capitalization of at least $3 billion at the time of investment. In addition, up to 20% of the fund's net assets may be invested in foreign equity securities. Investments in equity securities include common stock and preferred stock. The fund may, but is not required to, use derivative instruments for risk management purposes or as part of the fund's investment strategies. When selecting securities for the fund, the fund's subadviser considers earnings revision trends, expected earnings growth rates, sales acceleration, price earnings multiples and positive stock price momentum. |
| **ClearBridge Large Cap Growth Fund**  | Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets, plus borrowings for investment purposes, if any, in equity securities or other instruments with similar economic characteristics of U.S. companies with large market capitalizations. The core holdings of the fund are large capitalization companies that the portfolio managers believe to be dominant in their industries due to product, distribution or service strength. The portfolio managers emphasize individual security selection while diversifying the fund's investments across industries, which may help to reduce risk. The portfolio managers attempt to identify established large capitalization companies with the highest growth potential. The portfolio managers then analyze each company in detail, ranking its management, strategy and competitive market position. Finally, the portfolio managers attempt to identify the best values available among the growth companies identified. The portfolio managers may sell a security if it no longer meets the fund's investment criteria or for other reasons, including to meet redemptions or to redeploy assets to better investment opportunities. |

---

74Schwab Target Funds \| The Funds' Investments in Asset Classes and Sub-Asset Classes

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[**TABLE OF CONTENTS**](#toc-5)

---

| | |
|:---|:---|
| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **Dodge & Cox Stock Fund**  | Seeks long-term growth of principal and income. A secondary objective is to achieve a reasonable current income. The fund invests primarily in a diversified portfolio of equity securities. Under normal circumstances, the fund will invest at least 80% of its total assets in equity securities, including common stocks, depositary receipts evidencing ownership of common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks. The fund may invest up to 20% of its total assets in U.S. dollar-denominated securities of non-U.S. issuers traded in the United States that are not in the S&P 500 Index. The fund typically invests in medium-to-large well-established companies based on standards of the applicable market. In selecting investments, the fund typically invests in companies that, in the fund advisor's opinion, appear to be temporarily undervalued by the stock market but have a favorable outlook for long-term growth. |
| **EQUITY FUNDS – DOMESTIC MID-CAP**  | **EQUITY FUNDS – DOMESTIC MID-CAP**  |
| **Schwab<sup>®</sup> U.S. Mid-Cap Index Fund**  | Seeks to track the performance of a benchmark index that measures the total return of mid capitalization U.S. stocks. To pursue its goal, the fund generally invests in securities that are included in the Russell Midcap<sup>®</sup> Index. The fund attempts to replicate the Russell Midcap Index. It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. The fund generally will seek to replicate the performance of the index by giving the same weight to a given security as the index does. However, when the investment adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a security, the investment adviser may cause the fund's weighting of a security to be more or less than the index's weighting of the security. The fund may sell securities that are represented in the index in anticipation of their removal from the index, or buy securities that are not yet represented in the index in anticipation of their addition to the index. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000<sup>®</sup> Index, representing the smallest issuers in the Russell 1000 Index. The index is a float-adjusted market capitalization weighted index that reconstitutes annually. As of December 31, 2021, the index was composed of 832 stocks. |
| **EQUITY FUNDS – DOMESTIC SMALL-CAP**  | **EQUITY FUNDS – DOMESTIC SMALL-CAP**  |
| **Schwab<sup>®</sup> Small-Cap Equity Fund**  | Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in small-cap equity securities. Small-cap equity securities generally are securities with market capitalizations within the universe of the Russell 2000<sup>®</sup> Index at the time of purchase by the fund. The market capitalization range of the Russell 2000 Index was $11 million to $10 billion, as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the Russell 2000 Index. |
| **ClearBridge Small Cap Growth Fund**  | The fund seeks long-term growth of capital. Under normal circumstances, the fund invests at least 80% of its assets in equity securities of companies with small market capitalizations and related investments. The fund's portfolio managers use a growth-oriented investment style that emphasizes small U.S. companies. |
| **EQUITY FUNDS – GLOBAL REAL ESTATE**  | **EQUITY FUNDS – GLOBAL REAL ESTATE**  |
| **Schwab<sup>®</sup> Global Real Estate Fund**  | Seeks capital growth and income consistent with prudent investment management. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities of real estate companies and companies related to the real estate industry. The fund may invest a significant portion of its total assets in real estate investment trusts (REITs) and other similar REIT-like structures. The fund does not invest directly in real estate. |

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|:---|:---|
| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **EQUITY FUNDS – INTERNATIONAL**  | **EQUITY FUNDS – INTERNATIONAL**  |
| **Schwab<sup>®</sup>International Opportunities Fund**  | Seeks long-term capital appreciation. The fund normally invests a substantial amount of its assets in equity securities of companies outside the United States and typically focuses on developed markets, but may invest in companies from emerging markets as well. The fund expects to invest in companies across all market capitalization ranges. |
| **Schwab<sup>®</sup> International Core Equity Fund**  | Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in equity securities. The fund invests primarily in the stocks of publicly traded companies located in developed market countries excluding the United States, however, the fund may also invest in stocks issued by companies located in emerging markets. Developed market countries include, but are not limited to Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The fund considers any country that is not a developed market country to be an emerging market country. The fund typically invests a majority of its assets in the stocks of large-cap and mid-cap companies, but may invest a portion of its assets in small-cap companies. In addition, the portfolio managers seek to allocate the fund's investments across different countries and geographic regions in an effort to manage the economic and socio-political risks associated with investing in a single country or limited number of countries. The fund seeks to assemble a portfolio with long-term performance that will exceed that of the MSCI EAFE<sup>®</sup> Index. |
| **Goldman Sachs Emerging Markets Equity Insights Fund**  | Seeks long-term growth of capital. The fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) in a diversified portfolio of equity investments in emerging country issuers. Currently, emerging countries include, among others, Central and South American, African, Asian and Eastern European countries. Under normal circumstances, the fund maintains investments in at least six emerging countries. The portfolio management team uses two distinct strategies – a bottom-up stock selection strategy and a top-down country/currency selection strategy – to manage the fund. The fund uses a quantitative style of management, in combination with a qualitative overlay, that emphasizes fundamentally-based stock and country/currency selection, careful portfolio construction and efficient implementation. The fund's benchmark index is the MSCI Emerging Markets Standard Index (Net, USD, Unhedged). |
| **Schwab<sup>®</sup> Fundamental International Large Company Index Fund**  | Seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI<sup>TM</sup> Developed ex US Large Company Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in stocks included in the Russell RAFI Developed ex US Large Company Index. |
| **FIXED-INCOME FUNDS – INTERMEDIATE-TERM BOND**  | **FIXED-INCOME FUNDS – INTERMEDIATE-TERM BOND**  |
| **Schwab<sup>®</sup> U.S. Aggregate Bond Index Fund**  | Seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the broad U.S. investment-grade bond market. The fund generally invests in securities that are included in the Bloomberg US Aggregate Bond Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index, including to-be-announced or TBA transactions. |

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|:---|:---|
| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **Loomis Sayles Investment Grade Bond Fund**  | Seeks high total investment return through a combination of current income and capital appreciation. Under normal market conditions, the fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in investment grade fixed-income securities. The fund may invest up to 15% of its assets in below investment grade fixed-income securities and may invest in fixed-income securities of any maturity. In connection with its principal investment strategies, the fund may invest up to 30% of its assets in U.S. dollar-denominated foreign securities, including emerging markets securities. The fund may also invest in U.S. dollar-denominated obligations of supranational entities without limit (e.g., the World Bank). The fund may also invest in corporate securities, U.S. government securities, commercial paper, zero-coupon securities, collateralized loan obligations, mortgage-backed securities, including mortgage dollar rolls, stripped mortgage-backed securities and collateralized mortgage obligations and other asset-backed securities, when-issued securities, convertible securities, Rule 144A securities and structured notes. The fund may also invest in futures, forward contracts and swaps (including credit default swaps) for hedging or investment purposes. |
| **Baird Aggregate Bond Fund**  | Seeks an annual rate of total return, before fund expenses, greater than the annual rate of total return of the Bloomberg U.S. Aggregate Bond Index. The fund normally invests at least 80% of its net assets in obligations of U.S. government and other public-sector entities, asset-backed and mortgage-backed obligations of U.S. and foreign issuers and corporate debt of U.S. and foreign issuers. The fund only invests in investment-grade debt obligations, rated at the time of purchase by at least one major rating agency or, if unrated, determined by the fund's advisor to be investment grade. After purchase, a debt obligation may cease to be rated or may have its rating reduced below the minimum rating required by the fund for purchase. In such cases, the advisor will consider whether to continue to hold the debt obligation. The fund may hold debt obligations with a "D" or similar credit rating indicating at least a partial payment default. |
| **Western Asset Core Plus Bond Fund**  | Seeks to maximize total return, consistent with prudent investment management and liquidity needs, by investing in a portfolio of fixed income securities of various maturities and, under normal market conditions, investing at least 80% of its net assets, including the amount of borrowing for investment purposes, if any, in debt and fixed income securities. Although the fund may invest in securities of any maturity, the fund will normally maintain a dollar-weighted average effective duration within 30% of the average duration of the domestic bond market as a whole is estimated by the fund's subadvisers. Effective duration seeks to measure the expected sensitivity of market price to changes in interest rates, taking into account the anticipated effects of structural complexities (for example, some bonds can be prepaid by the issuer). The fund may invest up to 20% of its total assets in non-U.S. dollar denominated securities. Up to 20% of the fund's net assets may be invested in debt securities that are not rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations ("NRSROs") or, if unrated, securities of comparable quality at the time of purchase (as determined by the subadvisers). Securities rated in the Baa or BBB categories or above by one or more NRSROs or unrated securities of comparable quality are known as "investment grade securities." Securities rated below investment grade are commonly known as "junk bonds" or "high yield securities." The fund may invest up to 25% of its total assets in the securities of non-U.S. issuers. The fund may invest a substantial portion of its assets in mortgage-backed and asset-backed securities. |
| **FIXED-INCOME FUNDS – SHORT-TERM BOND**  | **FIXED-INCOME FUNDS – SHORT-TERM BOND**  |
| **Schwab<sup>®</sup> Short-Term Bond Index Fund**  | Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of U.S. investment grade government related and corporate bonds with maturities between 1-5 years. The fund generally invests in securities that are included in the Bloomberg US Government/Credit 1-5 Year Index. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. |

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|:---|:---|
| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **FIXED-INCOME FUNDS – INFLATION-PROTECTED BOND**  | **FIXED-INCOME FUNDS – INFLATION-PROTECTED BOND**  |
| **Schwab<sup>®</sup> Treasury Inflation Protected Securities Index Fund**  | Seeks to track as closely as possible, before fees and expenses, the total return of an index composed of inflation-protected U.S. Treasury securities. The fund generally invests in securities that are included in the Bloomberg US Treasury Inflation-Linked Bond Index (Series-L)<sup>SM</sup>. The Index includes all publicly-issued treasury inflation-protected securities (TIPS) that have at least one year remaining to maturity, are rated investment grade and have $500 million or more of outstanding face value. Under normal circumstances, the fund will invest at least 90% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities included in the index. The fund will generally seek to replicate the performance of the index by giving the same weight to a given security as the index does. |
| **FIXED-INCOME FUNDS – INTERNATIONAL BOND**  | **FIXED-INCOME FUNDS – INTERNATIONAL BOND**  |
| **PIMCO International Bond Fund (U.S. Dollar-Hedged)**  | Seeks maximum total return, consistent with preservation of capital and prudent investment management. The fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in Fixed Income Instruments. The fund will invest under normal circumstances in Fixed Income Instruments that are economically tied to at least three non-U.S. countries. The fund's investments in Fixed Income Instruments may be represented by forwards or derivatives such as options, futures contracts or swap agreements. "Fixed Income Instruments" include bonds, debt securities and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. The fund will normally limit its foreign currency exposure (from non-U.S. dollar-denominated securities or currencies) to 20% of its total assets. The fund's adviser selects the fund's foreign country and currency compositions based on an evaluation of various factors, including, but not limited to relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. The fund may invest, without limitation, in securities and instruments that are economically tied to emerging market countries. The average portfolio duration of this fund normally varies within three years (plus or minus) of the portfolio duration of the securities comprising the Bloomberg Global Aggregate ex-USD (USD Hedged) Index, as calculated by the fund's adviser, which as of May 31, 2022 was 7.61 years. <br> None of Pacific Investment Management Company LLC, PIMCO Investments LLC, PIMCO Funds, or the PIMCO International Bond Fund (U.S. Dollar-Hedged) make any representations regarding advisability of investing in the PIMCO International Bond Fund (U.S. Dollar-Hedged).  |
| **MONEY MARKET FUNDS**  | **MONEY MARKET FUNDS**  |
| **Schwab<sup>®</sup> Variable Share Price Money Fund**  | Seeks current income consistent with stability of capital and liquidity. The fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains. |
| **Schwab<sup>®</sup> Treasury Obligations Money Fund**  | Seeks current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are collateralized fully by cash and/or government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. Treasury obligations or repurchase agreements backed by such obligations (excluding cash). |

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| **Asset Class, Style Class (if Applicable) & Underlying Fund**  | **Investment Objective and Principal Investment Strategy**  |
| **Schwab<sup>®</sup> Government Money Fund**  | Seeks the highest current income consistent with stability of capital and liquidity. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets (including, for this purpose, any borrowings for investment purposes) will be invested solely in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). |

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## Fund Management
The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 211 Main Street, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of December 31, 2022, managed approximately $757.6 billion in assets.

The investment adviser oversees the asset management and administration of the funds. The firm does not receive a fee for the services it performs for the funds. However, the firm is entitled to receive an annual management fee from each of the Schwab Funds that serve as underlying funds.

A discussion regarding the basis for the Board of Trustees' approval of each fund's investment advisory agreement is available in each fund's 2022 annual report, which covers the period of November 1, 2021 through October 31, 2022.

Schwab Asset Management or its affiliates may invest "seed" capital in a fund. These investments are generally intended to enable a fund to commence investment operations and achieve sufficient economic scale. Schwab Asset Management or its affiliates may hedge the exposure resulting from seed investments.

**Zifan Tang, Ph.D., CFA,** Senior Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Prior to joining Schwab in 2012, Ms. Tang was a product manager at Thomson Reuters and from 1997 to 2009 worked as a portfolio manager at Barclays Global Investors (now known as BlackRock).

**Drew Hayes, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Mr. Hayes has been with Schwab since 2006. Before becoming a portfolio manager, he spent seven years as a senior fixed income specialist for Schwab Wealth Advisory, Inc. Prior to that, he worked as a bond investment specialist for two years and as a registered representative for two years for Charles Schwab & Co., Inc.

**Patrick Kwok, CFA,** Portfolio Manager for Schwab Asset Management, is responsible for the co-management of the funds. Previously, Mr. Kwok served as an associate portfolio manager from 2012 to 2016. Prior to that, he worked as a fund administration manager, where he was responsible for oversight of subadvisers, trading, cash management and fund administration supporting the Charles Schwab Trust Bank Collective Investment Trusts and multi-asset Schwab Funds. Prior to joining Schwab Asset Management in 2008, Mr. Kwok spent two years as an asset operations specialist at Charles Schwab Trust Company. He also worked for one year at State Street Bank & Trust Company as a portfolio accountant and pricing specialist.

Additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in each fund is available in the SAI.

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## Investing in the Funds
In this section, you will find information on buying, selling and exchanging shares. Investors may only invest in the funds through an intermediary by placing orders through your brokerage account at Schwab or an account with another broker/dealer, investment adviser, 401(k) plan, employee benefit plan, administrator, bank, or other financial intermediary (intermediary) that is authorized to accept orders on behalf of a fund (intermediary orders). You also will see how to choose a distribution option for your investment. Helpful information on taxes is included as well.

The funds are not managed to maximize tax efficiency for taxable shareholder accounts. Investors should consider whether a fund is an appropriate investment in light of their current financial position and retirement needs.

The funds generally are not registered for sale in jurisdictions outside the United States and are intended for purchase by persons residing in the United States. A person is considered resident in the United States if at the time of the investment (i) the account has an address of record in the United States or a U.S. territory (including APO/FPO/DPO) and (ii) all account owners are resident in the United States or a U.S. territory and have a valid U.S. taxpayer identification number. If an existing account is updated to reflect a non-U.S. address, the account may be restricted from making additional investments.

Investing Through a Financial Intermediary

#### Placing Orders Through Your Intermediary
When you place orders through Schwab or another intermediary, you are not placing your orders directly with the funds, and you must follow Schwab's or the other intermediary's transaction procedures. Your intermediary may impose different or additional conditions than the funds on purchases, redemptions and exchanges of fund shares. These differences may include initial, subsequent and maintenance investment requirements, exchange policies, fund choices, cut-off times for investment and trading restrictions. Your intermediary may independently establish and charge its customers transaction fees, account fees and other fees in addition to the fees charged by the funds, and the intermediary may require its customers to pay a commission when transacting in fund shares. These additional fees will vary between intermediaries and may vary over time and would increase the cost of your investment and lower investment returns. You should consult your intermediary directly for information regarding these conditions and fees. The funds are not responsible for the failure of your intermediary to carry out its responsibilities.

Only certain intermediaries are authorized to accept orders on behalf of a fund. If your fund shares are no longer held by an authorized intermediary, a fund may impose restrictions on your ability to manage or maintain your shares. For example, you will not be able to place orders to purchase additional shares. To remove these restrictions, you may move your shares to Schwab or another intermediary that is authorized to accept fund orders.

#### Buying, Selling and Exchanging Shares Through an Intermediary
To purchase, redeem or exchange shares held in your Schwab account or in your account at another intermediary, you must place your orders with the intermediary that holds your shares. You may not purchase, redeem or exchange shares held in your intermediary account directly with a fund.

When selling or exchanging shares, you should be aware of the following fund policies:

• For accounts held through a financial intermediary, each fund typically expects to pay sale proceeds to the financial intermediary for payment to redeeming shareholders within two business days following receipt of a shareholder redemption order; however, each fund may take up to seven days to pay sale proceeds.

• Each fund reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may incur transaction expenses and taxable gains in converting these securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

• Exchange orders are limited to Schwab Funds (that are not Sweep Investments<sup>®</sup>) and must meet the minimum investment and other requirements for the fund and share class, if applicable, into which you are exchanging.

• You should obtain and read the prospectus for the fund into which you are exchanging prior to placing your order.

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Investing Directly with the Funds

#### Placing Direct Orders
Investors generally may not purchase shares directly from the funds' transfer agent, BNY Mellon Investment Servicing (US) Inc. The funds reserve the right to accept direct purchases from certain eligible shareholders (Eligible Shareholders) and to suspend the privilege of directly purchasing additional shares of the funds at any time.

Financial intermediaries and Eligible Shareholders may contact the transfer agent by telephone at 1-877-332-2371.

Share Price

The funds are open for business each day that the NYSE is open. Each fund calculates its share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern Time). If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day. A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. Orders received by a fund in good order at or prior to the close of the fund (generally 4:00 p.m. Eastern Time) will be executed at the next share price calculated that day.

If you place an order through your Schwab account or an account at another intermediary, please consult with your intermediary to determine when your order will be executed. Generally, you will receive the share price next calculated after a fund receives your order from your intermediary. However, some intermediaries, such as Schwab, may arrange with a fund for you to receive the share price next calculated after your intermediary has received your order. Some intermediaries may require that they receive orders prior to a specified cut-off time.

In valuing underlying fund investments, the funds use the NAVs reported by the underlying funds. The funds' other portfolio securities are valued using market quotations or official closing prices if they are readily available. In cases where market quotations are not readily available or the investment adviser deems them unreliable, the funds' portfolio securities are valued based on fair values developed following procedures approved by the fund's Board of Trustees. The Board of Trustees has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments.

Shareholders of a fund should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of the fund's portfolio may change on days when it is not possible to buy or sell shares of the fund.

Additional Policies Affecting Your Investment

#### Each Fund Reserves Certain Rights, Including the Following:
• To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

• To change or waive a fund's investment minimums.

• To suspend the right to sell shares back to the fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC.

• To withdraw or suspend any part of the offering made by this prospectus.

#### Minimum Investment
None

#### Options for Fund Distributions
**Choose an option for fund distributions.** When placing orders through an intermediary, you will select from the options for fund distributions provided by your intermediary. You should consult with your financial intermediary to discuss available options.

#### Payments by the Investment Adviser or its Affiliates
The investment adviser or its affiliates make payments out of their own resources, or provide products and services at a discount, to certain brokerage firms, banks, insurance companies, retirement plan service providers and other financial intermediaries that perform shareholder, recordkeeping, sub-accounting and other administrative services in connection with investments in fund shares. These payments or discounts

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are separate from, and may be in addition to, any shareholder service fees or other administrative fees the funds may pay to those intermediaries. The investment adviser or its affiliates also make payments out of their own resources, or provide products and services at a discount, to certain financial intermediaries in connection with certain activities or services which may facilitate, directly or indirectly, investment in the funds. These payments may relate to marketing and/or fund promotion activities and presentations, educational training programs, conferences, the development and support of technology platforms and/or reporting systems, data analytics and support, or making shares of the funds available to their customers. These payments, which may be significant, are paid by the investment adviser or its affiliates out of their own resources and not from the assets of the funds.

Payments to a financial intermediary may create potential conflicts of interest between the intermediary and its clients as the payments may provide such intermediary with an incentive to favor sales of shares of the funds over other investment options they make available to their customers. Please see the SAI for additional information.

#### Shareholder Servicing Plan
The Board of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds. The funds are not subject to any fee under the Plan.

#### Policy Regarding Short-Term or Excessive Trading
The funds are intended for long-term investment and not for short-term or excessive trading (collectively market timing). Market timing may adversely impact the funds' performance by disrupting the efficient management of the funds, increasing fund transaction costs and taxes, causing the funds to maintain higher cash balances, and diluting the value of the funds' shares.

To discourage market timing, the funds' Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by fund shareholders. Each fund seeks to deter market timing through several methods. These methods may include fair value pricing and trade activity monitoring. Fair value pricing is discussed more thoroughly in the subsequent pages of this prospectus and is considered an element of the funds' policy regarding short-term or excessive trading. Trade activity monitoring is risk based and seeks to identify patterns of activity in amounts that might be detrimental to the funds. Certain trading activity will not be treated as short-term or excessive trading, such as transactions involving in-kind purchases or redemptions of shares of a fund.

The funds and their service providers maintain risk-based surveillance procedures designed to detect market timing in fund shares in amounts that might be detrimental to the fund. Under these procedures, the funds have requested that service providers to the funds monitor transactional activity in amounts and frequency determined by each fund to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Generally, excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account. A roundtrip transaction occurs when a shareholder completes a purchase of shares and then sells the same fund's shares (including exchanges). If an investor engages in multiple roundtrips in a fund within a 60-day period or the fund, in its sole discretion based on these or other factors, determines that a shareholder has engaged in market timing, it may refuse to process future purchases or exchanges into such fund by that shareholder for a period of 90 days. Subsequent violations within a 12-month period will be evaluated to determine whether a permanent block is appropriate. These procedures may be modified from time to time as appropriate to improve the detection of market timing and to comply with applicable laws.

If trades are effected through a financial intermediary, each fund or its service providers will work with the intermediary to monitor possible market timing activity. The funds reserve the right to request that the intermediary provide certain shareholder transaction information to the funds and may require the intermediary to restrict the shareholder from future purchases or exchanges in the funds. Transactions by fund shareholders investing through intermediaries may also be subject to the restrictions of the intermediary's own frequent trading policies, which may differ from those of the funds. Each fund may defer to an intermediary's frequent trading policies with respect to those shareholders who invest in the fund through such intermediary if the fund determines that the intermediary's frequent trading policies are reasonably designed to deter transactional activity in amounts and frequency that are deemed to be significant to the fund and in a pattern of activity that potentially could be detrimental to the fund. Shareholders should consult with their intermediary to determine if additional frequent trading restrictions apply to their fund transactions. A fund's ability to impose restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems' capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries.

Although these methods are designed to discourage market timing, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities. In addition, some of these methods are inherently subjective and involve judgment in their application. Each fund and its service providers seek to make these judgments and applications uniformly and in a manner that they believe is consistent with interests of the fund's long-term shareholders. The funds may amend these policies and procedures without prior notice in response to changing regulatory requirements or to enhance the effectiveness of the program.

The funds reserve the right to restrict, reject or cancel within a reasonable time, without prior notice, any purchase or exchange order for any reason.

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#### Fair Value Pricing
The Board of Trustees has approved procedures to fair value the funds' securities when market prices are not "readily available" or are unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter "arbitrage" market timers, who seek to exploit delays between the change in the value of a fund's portfolio holdings and the net asset value of its shares, and seeks to help ensure that the prices at which the fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders.

The Valuation Designee makes fair value determinations in good faith in accordance with the the fair value procedures approved by the Board of Trustees. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The respective prospectuses for the underlying funds in which the funds invest explain the circumstances in which those funds will use fair value pricing and the effect of fair value pricing.

#### Methods to Meet Redemptions
Under normal market conditions, each fund expects to meet redemption orders by using holdings of cash/cash equivalents or by the sale of portfolio investments. In unusual or stressed market conditions or as the investment adviser determines appropriate, each fund may borrow through the fund's bank lines of credit or through the fund's interfund lending facility to meet redemption requests. Each fund may also utilize its custodian overdraft facility to meet redemptions, if necessary. As noted above, each fund also reserves the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of the fund's assets, whichever is less. You may be subject to market risk and you may incur transaction expenses and taxable gains in converting the securities to cash. In addition, a redemption in liquid portfolio securities would be treated as a taxable event for you and may result in the recognition of gain or loss for federal income tax purposes.

#### Large Shareholder Redemptions
Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities, which may negatively impact the fund's brokerage costs and accelerate the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan).

#### Customer Identification and Verification and Anti-Money Laundering Program
Customer identification and verification is part of each fund's overall obligation to deter money laundering under federal law. Each fund has adopted an Anti-Money Laundering Compliance Program designed to prevent the fund from being used for money laundering or the financing of terrorist activities. In this regard, the funds reserve the right to (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of fund management, they are deemed to be in the best interest of a fund or in cases when a fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if a fund is required to withhold such proceeds.

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open your account, you will have to provide your name, address, date of birth, identification number and other information that will allow your financial intermediary to identify you. This information is subject to verification to ensure the identity of all persons opening an account.

Your financial intermediary is required by law to reject your new account application if the required identifying information is not provided. Your financial intermediary may contact you in an attempt to collect any missing information required on the application, and your application may be rejected if they are unable to obtain this information. In certain instances, your financial intermediary is required to collect documents that will be used solely to establish and verify your identity.

Each fund reserves the right to close and/or liquidate your account at the then-current day's price if the fund or your financial intermediary is unable to verify your identity. As a result, you may be subject to a gain or loss on fund shares and will be subject to corresponding tax consequences.

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Distributions and Taxes

Any investment in a fund typically involves several tax considerations. The information below is meant as a general summary for U.S. citizens and residents. Please see the SAI for additional information. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) website at **www.irs.gov**.

As a shareholder, you are entitled to your share of the dividends and gains a fund earns. Every year, each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any. To receive a dividend distribution, you must be a registered shareholder on the date that dividends are declared. Dividend distributions are paid to shareholders on the payable date. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of each fund's capital gains distributions, if any, may be made available on the funds' website: **www.schwabassetmanagement.com**.

Unless you are investing through an IRA, 401(k) or other tax-advantaged account, your fund distributions generally have tax consequences. Each fund's net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gains distributions are taxable as long-term capital gains, regardless of how long you have held your shares in a fund. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale or exchange of your shares is a taxable event. For tax purposes, an exchange of your shares for shares of another Schwab Fund is treated the same as a sale. A sale may result in a capital gain or loss for you. The gain or loss generally will be treated as short term if you held the shares for one year or less, long term if you held the shares longer. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gains distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

Shareholders in a fund may have additional tax considerations as a result of foreign tax payments made by the fund. Typically, these payments will reduce the fund's dividends but, if eligible, the fund may elect for these payments to be included in your taxable income. In such event, you may be able to claim a tax credit or deduction for your portion of foreign taxes paid by the fund.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions a fund paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

Prior to January 1, 2012, when shareholders sold fund shares from a taxable account, they typically received information on their tax forms that calculated their gain or loss using the average cost method. This information was not previously reported to the IRS, and shareholders had the option of calculating gains or losses using an alternative IRS permitted method. However, in accordance with legislation passed by Congress in 2008, each fund reports cost basis information to the IRS for shares purchased on or after January 1, 2012 and sold thereafter. Shareholders elect their preferred cost basis method; however, in the absence of an election, a fund will use an average cost basis method. Please consult your tax advisor to determine the appropriate cost basis method for your particular tax situation and to learn more about how the new cost basis reporting laws apply to you and your investments, including investments made prior to January 1, 2012 and sold thereafter.

A fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to shareholders if they fail to provide the fund with their correct taxpayer identification number or to make required certifications, or if they have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against U.S. federal income tax liability.

Foreign shareholders may be subject to different U.S. federal income tax treatment, including withholding tax at the rate of 30% on amounts treated as ordinary dividends from a fund, as discussed in more detail in the SAI. Furthermore, each fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to a fund to enable the fund to determine whether withholding is required.

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Additional Information About the Funds' Composite Indices

The Target 2010 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2010 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 22.6% S&P 500 Index, 0.7% Russell Midcap® Index, 1.9% Russell 2000 Index, 9.6% MSCI EAFE Index (Net), 38.7% Bloomberg US Aggregate Bond Index, 2.6% FTSE EPRA/NAREIT Global Index (Net), 6.6% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.1% Bloomberg Global Aggregate ex-US Hedged Index, 0.9% Bloomberg US Government/Credit Index, 9.8% Bloomberg US Government/Credit 1-5 Year Index and 4.5% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2015 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2015 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 24.4% S&P 500 Index, 0.8% Russell Midcap® Index, 2.0% Russell 2000 Index, 10.8% MSCI EAFE Index (Net), 36.4% Bloomberg US Aggregate Bond Index, 2.9% FTSE EPRA/NAREIT Global Index (Net), 6.3% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.1% Bloomberg US Government/Credit Index, 9.0% Bloomberg US Government/Credit 1-5 Year Index and 4.1% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2020 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2020 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 25.5% S&P 500 Index, 0.8% Russell Midcap® Index, 2.1% Russell 2000 Index, 11.8% MSCI EAFE Index (Net), 34.8% Bloomberg US Aggregate Bond Index, 3.0% FTSE EPRA/NAREIT Global Index (Net), 6.1% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 2.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.3% Bloomberg US Government/Credit Index, 8.5% Bloomberg US Government/Credit 1-5 Year Index and 3.8% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2025 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2025 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000® Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 30.6% S&P 500 Index, 1.0% Russell Midcap® Index, 2.9% Russell 2000 Index, 14.8% MSCI EAFE Index (Net), 27.9% Bloomberg US Aggregate Bond Index, 3.7% FTSE EPRA/NAREIT Global Index (Net), 0.4% MSCI Emerging Markets Index (Net), 3.5% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 3.5% Bloomberg Global Aggregate ex-US Hedged Index, 2.0% Bloomberg US Government/Credit Index, 6.6% Bloomberg US Government/Credit 1-5 Year Index and 3.1% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2030 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2030 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-US Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 36.4% S&P 500 Index, 1.2% Russell Midcap® Index, 4.0% Russell 2000 Index, 18.2% MSCI EAFE Index (Net), 19.6% Bloomberg US Aggregate Bond Index, 4.6% FTSE EPRA/NAREIT Global Index (Net), 1.3% MSCI Emerging Markets Index (Net), 1.1% Bloomberg US Treasury Inflation-Linked Bond Index (Series-L), 4.1% Bloomberg Global Aggregate ex-US Hedged Index, 2.7% Bloomberg US Government/Credit Index, 4.5% Bloomberg US Government/Credit 1-5 Year Index and 2.3% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2035 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2035 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the

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FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 40.5% S&P 500 Index, 1.3% Russell Midcap® Index, 4.9% Russell 2000 Index, 20.7% MSCI EAFE Index (Net), 13.9% Bloomberg US Aggregate Bond Index, 5.2% FTSE EPRA/NAREIT Global Index (Net), 2.2% MSCI Emerging Markets Index (Net), 3.6% Bloomberg Global Aggregate ex-US Hedged Index, 2.9% Bloomberg US Government/Credit Index, 3.1% Bloomberg US Government/Credit 1-5 Year Index and 1.8% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2040 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2040 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 43.7% S&P 500 Index, 1.5% Russell Midcap® Index, 5.7% Russell 2000 Index, 22.7% MSCI EAFE Index (Net), 9.0% Bloomberg US Aggregate Bond Index, 5.8% FTSE EPRA/NAREIT Global Index (Net), 3.0% MSCI Emerging Markets Index (Net), 2.6% Bloomberg Global Aggregate ex-US Hedged Index, 2.8% Bloomberg US Government/Credit Index, 2.1% Bloomberg US Government/Credit 1-5 Year Index and 1.3% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2045 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2045 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 45.8% S&P 500 Index, 1.6 % Russell Midcap® Index, 6.5% Russell 2000 Index, 24.3% MSCI EAFE Index (Net), 5.4% Bloomberg US Aggregate Bond Index, 6.2% FTSE EPRA/NAREIT Global Index (Net), 4.0% MSCI Emerging Markets Index (Net), 1.7% Bloomberg Global Aggregate ex-US Hedged Index, 2.3% Bloomberg US Government/Credit Index, 1.3% Bloomberg US Government/Credit 1-5 Year Index and 0.9% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2050 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2050 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 46.9% S&P 500 Index, 1.6% Russell Midcap® Index, 7.0% Russell 2000 Index, 25.3% MSCI EAFE Index (Net), 3.4% Bloomberg US Aggregate Bond Index, 6.4% FTSE EPRA/NAREIT Global Index (Net), 4.7% MSCI Emerging Markets Index (Net), 1.2% Bloomberg Global Aggregate ex-US Hedged Index, 1.9% Bloomberg US Government/Credit Index, 0.8% Bloomberg US Government/Credit 1-5 Year Index and 0.6% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2055 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2055 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market Index was replaced by a combination of the S&P 500<sup>®</sup> Index and the Russell 2000<sup>®</sup> Index. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 47.5% S&P 500 Index, 1.7% Russell Midcap® Index, 7.4% Russell 2000 Index, 25.9% MSCI EAFE Index (Net), 2.3% Bloomberg US Aggregate Bond Index, 6.6% FTSE EPRA/NAREIT Global Index (Net), 5.2% MSCI Emerging Markets Index (Net), 0.9% Bloomberg Global Aggregate ex-US Hedged Index, 1.5% Bloomberg US Government/Credit Index, 0.6% Bloomberg US Government/Credit 1-5 Year Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

The Target 2060 Composite Index is a custom blended index developed by Schwab Asset Management based on the Schwab Target 2060 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective August 24, 2018, the FTSE Non-U.S. Dollar World Government Bond Index was replaced by the Bloomberg Global Aggregate ex-US Hedged Index. Effective February 1, 2022, the composite is derived using the following portion allocations: 48.0% S&P 500<sup>®</sup> Index, 1.7% Russell Midcap<sup>®</sup> Index, 7.7% Russell 2000<sup>®</sup> Index, 26.4% MSCI EAFE Index (Net), 1.1% Bloomberg US Aggregate Bond Index, 6.7% FTSE EPRA/NAREIT Global Index (Net), 5.7% MSCI Emerging Markets Index (Net), 0.6% Bloomberg Global Aggregate ex-US Hedged Index, 1.1% Bloomberg US Government/Credit Index, 0.5% Bloomberg US Government/Credit 1-5 Year Index and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

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The Target 2065 Composite Index is a custom blended index developed by Schwab Asset Management based on the Target 2065 Fund's asset allocation glide schedule and will become more conservative as time elapses. Effective February 1, 2022, the composite is derived using the following portion allocations: 48.2% S&P 500<sup>®</sup> Index, 1.7% Russell Midcap<sup>®</sup> Index, 7.8% Russell 2000<sup>®</sup> Index, 26.6% MSCI EAFE Index (Net), 0.5% Bloomberg US Aggregate Bond Index, 6.8% FTSE EPRA/NAREIT Global Index (Net), 5.8% MSCI Emerging Markets Index (Net), 0.5% Bloomberg Global Aggregate ex-US Hedged Index, 1.0% Bloomberg US Government/Credit Index, 0.5% Bloomberg US Government/Credit 1-5 Year Index, and 0.5% Bloomberg US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2022. Percentages listed may not total to 100% due to rounding.

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**Prospectus** \| February 27, 2023

## Schwab Target Funds

#### To Learn More
This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources:

**Annual and semiannual reports,** which are sent to current fund investors, contain more information about the funds' holdings and detailed financial information about the funds. Annual reports also contain information from the funds' manager(s) about strategies, recent market conditions and trends and their impact on fund performance during the funds' last fiscal period.

The **Statement of Additional Information (SAI)** includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The SAI, the funds' annual and semiannual reports and other related materials are available from the EDGAR Database on the SEC's website (**www.sec.gov**). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov.

SEC File Number <br> Schwab Capital Trust 811-07704 REG32636-22

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

Schwab Funds<sup>®</sup>

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Large-Cap Growth Fund | **SWLSX**  |
| Schwab<sup>®</sup> Core Equity Fund | **SWANX**  |
| Schwab<sup>®</sup> International Core Equity Fund | **SICNX**  |
| Schwab<sup>®</sup> Dividend Equity Fund | **SWDSX**  |
| Schwab<sup>®</sup> Small-Cap Equity Fund | **SWSCX**  |
| Schwab<sup>®</sup> Health Care Fund | **SWHFX**  |

---

#### STATEMENT OF ADDITIONAL INFORMATION

#### February 27, 2023
The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with each fund's prospectus dated February 27, 2023 (as amended from time to time).

The funds' audited financial statements and the report of the independent registered public accounting firm thereon from the funds' [annual report](https://www.sec.gov/Archives/edgar/data/904333/000119312523000566/d401383dncsr.htm) for the fiscal year ended October 31, 2022, are incorporated by reference into this SAI.

For a free copy of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

Each fund is a series of Schwab Capital Trust (the Trust). The funds are part of the Schwab complex of funds (Schwab Funds). Charles Schwab Investment Management, Inc., dba Schwab Asset Management™, is the investment adviser to the funds (investment adviser).

REG72270-10

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#### **TABLE OF CONTENTS**

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| | |
|:---|:---|
|  | **<u>Page</u>**  |
| [INVESTMENT OBJECTIVES](#idfaifINVESTMENTO)  | [1](#idfaifINVESTMENTO) |
| [INVESTMENT STRATEGIES, SECURITIES AND RISKS](#idbdfgebINVESTMENTS)  | [1](#idbdfgebINVESTMENTS) |
| [INVESTMENT LIMITATIONS AND RESTRICTIONS](#idbfhheINVESTMENTL)  | [17](#idbfhheINVESTMENTL) |
| [MANAGEMENT OF THE FUNDS](#idgfgieMANAGEMENTO)  | [19](#idgfgieMANAGEMENTO) |
| [CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES](#idfgbfCONTROLPERS)  | [27](#idfgbfCONTROLPERS) |
| [INVESTMENT ADVISORY AND OTHER SERVICES](#iddicbjINVESTMENTA)  | [27](#iddicbjINVESTMENTA) |
| [PORTFOLIO MANAGERS](#idcfbbfPORTFOLIOMA)  | [31](#idcfbbfPORTFOLIOMA) |
| [BROKERAGE ALLOCATION AND OTHER PRACTICES](#idcaiiaBROKERAGEAL)  | [33](#idcaiiaBROKERAGEAL) |
| [PROXY VOTING](#idiaaPROXYVOTING)  | [35](#idiaaPROXYVOTING) |
| [PORTFOLIO HOLDINGS DISCLOSURE](#idiedbPORTFOLIOHO)  | [36](#idiedbPORTFOLIOHO) |
| [DESCRIPTION OF THE TRUST](#idegjcDESCRIPTION)  | [37](#idegjcDESCRIPTION) |
| [PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES](#idbeagbPURCHASERED)  | [38](#idbeagbPURCHASERED) |
| [TAXATION](#idcdhcdTAXATION)  | [39](#idcdhcdTAXATION) |
| APPENDIX — PROXY VOTING POLICY |  |

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#### INVESTMENT OBJECTIVES
The **Schwab Large-Cap Growth Fund** seeks long-term capital growth.

The **Schwab Core Equity Fund** seeks long-term capital growth.

The **Schwab International Core Equity Fund** seeks long-term capital growth.

The **Schwab Dividend Equity Fund** seeks current income and capital appreciation.

The **Schwab Small-Cap Equity Fund** seeks long-term capital growth.

The **Schwab Health Care Fund** seeks long-term capital growth.

#### Change of Investment Objective
The investment objective for each fund may be changed only by vote of a majority of its outstanding voting shares. A majority of the outstanding voting shares of a fund means the affirmative vote of the lesser of: (a) 67% or more of the voting shares represented at the meeting, if more than 50% of the outstanding voting shares of the fund are represented at the meeting or (b) more than 50% of the outstanding voting shares of a fund. There is no guarantee that a fund will achieve its investment objective.

#### Change to Investment Policy of Certain Funds
The **Schwab Large-Cap Growth Fund** will, under normal circumstances, invest at least 80% of its net assets in large-cap stocks of U.S. companies. The fund will notify its shareholders at least 60 days before changing this policy. Large-cap stocks generally are those with market capitalization within the universe of the Russell 1000<sup>®</sup> Index at the time of purchase by the fund. The market capitalization range of the Russell 1000 Index was $349 million to $2,296 billion, as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The **Schwab Core Equity Fund** will, under normal circumstances, invest at least 80% of its net assets in equity securities of U.S. companies. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The **Schwab International Core Equity Fund** will, under normal circumstances, invest at least 80% of its net assets in equity securities. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The **Schwab Dividend Equity Fund** will, under normal circumstances, invest at least 80% of its net assets in dividend paying common and preferred stocks. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes. Dividend paying stocks are those stocks that historically have paid, or the manager anticipates will pay, a dividend.

The **Schwab Small-Cap Equity Fund** will, under normal circumstances, invest at least 80% of its net assets in small-cap equity securities. The fund will notify its shareholders at least 60 days before changing this policy. Small-cap equity securities generally are securities with market capitalizations within the universe of the Russell 2000<sup>®</sup> Index at the time of purchase by the fund. The market capitalization range of the Russell 2000 Index was $11 million to $10 billion, as of June 27, 2022 (the most recent index reconstitution date), and will change as market conditions change. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The **Schwab Health Care Fund** will, under normal circumstances, invest at least 80% of its net assets in equity securities issued by companies in the health care sector. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes. The investments may include, for example, pharmaceutical and biotechnology companies, health care facilities operations, medical product manufacturers and suppliers, medical providers and medical services firms.

#### INVESTMENT STRATEGIES, SECURITIES AND RISKS
The different types of investments that the funds typically may invest in, the investment techniques they may use and the risks normally associated with these investments are discussed below. The following investment strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval, unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately after and as a result of a fund's acquisition of such security or asset unless otherwise noted. Thus, any subsequent change in values, net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment. Not all investment securities or techniques discussed below are eligible investments for each fund.

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From time to time a fund may hold certain securities not otherwise discussed in this SAI as a permissible investment for the fund. To the extent an investment becomes part of a fund's principal or non-principal investment strategy, the fund will take the necessary steps to identify them as permissible investments. In addition, a fund may receive (i.e., not actively invest) such securities as a result of a corporate action, such as securities dividends, spin-offs or rights issues. In such cases, the fund will not actively add to its position and generally will dispose the securities as soon as reasonably practicable.

**Borrowing.** A fund may borrow for temporary or emergency purposes; for example, a fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. A fund's borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of a fund's shares and in its portfolio yield. A fund is required to comply with the asset coverage requirements under the Investment Company Act of 1940, as amended (the 1940 Act) when it engages in borrowing activities. If assets used to secure a borrowing decrease in value, a fund may be required to pledge additional collateral to avoid liquidation of those assets.

A fund may establish lines-of-credit (lines) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by a fund within 60 days and is not extended or renewed. Each fund may use the lines to meet large or unexpected redemptions that would otherwise force a fund to liquidate securities under circumstances which are unfavorable to a fund's remaining shareholders. Each fund will pay fees to the banks for using its lines.

**Concentration** means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry's securities. The Schwab Health Care Fund will, under normal conditions, invest 25% or more of its total assets in the industry or group of industries representing the health care sector. The Schwab Core Equity Fund will not concentrate its investments in a particular industry or group of industries, unless the S&P 500<sup>®</sup> Index, the fund's comparative index, is so concentrated. Each of the Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund and Schwab International Core Equity Fund will not concentrate its investments in a particular industry or group of industries. The Schwab Small-Cap Equity Fund will not concentrate its investments in a particular industry or group of industries, unless the Russell 2000 Index, its comparative index, is so concentrated.

**Cyber Security Risk.** As the funds increasingly rely on technology and information systems to operate, the funds become susceptible to operational risks linked to security breaches in those information systems. Both calculated attacks and unintentional events can cause failures in the funds' information systems. Cyber attacks can include acquiring unauthorized access to information systems, usually through hacking or the use of malicious software, for purposes of stealing assets or confidential information, corrupting data, or disrupting a fund's operations. Cyber attacks can also occur without direct access to information systems, for example by making network services unavailable to intended users. Cyber security failures by, or breaches of the information systems of, the investment adviser, distributors, broker-dealers, other service providers (including, but not limited to, index providers, a fund's accountants, custodians, transfer agents and administrators), or the issuers of securities the funds invest in may also cause disruptions and impact the funds' business operations. Breaches in information security may result in financial losses, interference with the funds' ability to calculate net asset value (NAV), impediments to trading, inability of fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The funds have business continuity plans in the event of, and risk management systems to help prevent, such cyber attacks, but these plans and systems have limitations including the possibility that certain risks have not been identified. Moreover, the funds do not control the cyber security plans and systems of their service providers and other third party business partners. The funds and their shareholders could be negatively impacted as a result.

**Debt Securities** are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically "IOUs," but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed-, variable- or floating-rate of interest on the amount of money borrowed (the principal) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Conversely, when interest rates rise, the prices of debt securities generally fall. Certain debt securities have call features that allow issuers to redeem their outstanding debts prior to final maturity. Depending on the call feature, an issuer may pre-pay its outstanding debts and issue new ones paying lower interest rates. This is especially true for bonds with sinking fund provisions, which commit the issuer to set aside a certain amount of money to cover timely repayment of principal and typically allow the issuer to annually repurchase certain of its outstanding bonds from the open market or at a pre-set call price. Prepayments are more likely to occur in a falling interest rate environment. When borrowers pay off their debt securities sooner than expected, a fund would have to reinvest that money at the lower prevailing interest rate, which may reduce the returns of a fund. In a rising interest rate environment, prepayment on outstanding debt securities is less likely to occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term securities (all things being equal), but generally offer greater rates of interest. If an issuer redeems the debt securities prior to final maturity, a fund may have to replace these securities with lower yielding securities, which could result in a lower return.

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A change in a central bank's monetary policy or economic conditions may lead to a change in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of debt securities in which a fund invests. Some debt securities, such as bonds with longer durations, are more sensitive to interest rate changes than others and may experience an immediate and considerable reduction in value if interest rates rise. Longer duration securities tend to be more volatile than shorter duration securities. As the values of debt securities in a fund's portfolio adjust to a rise in interest rates, a fund's share price may fall. In the event that a fund holds a large portion of its portfolio in longer duration securities when interest rates increase, the share price of the fund may fall significantly.

Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Corporate debt securities (bonds) tend to have higher credit risk generally than U.S. government debt securities. Debt securities also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- and/or high-quality securities, although some still possess varying degrees of speculative characteristics and risks. Debt securities rated below investment-grade are riskier, but may offer higher yields. These securities are sometimes referred to as high yield securities or "junk bonds." The market for these securities has historically been less liquid and more volatile than for investment-grade securities.

Corporate bonds are debt securities issued by corporations. Although a higher return is expected from corporate bonds, these securities, while subject to the same general risks as U.S. government securities, are subject to greater credit risk than U.S. government securities. Their prices may be affected by the perceived credit quality of their issuer.

**Depositary Receipts** include American Depositary Receipts (ADRs) as well as other "hybrid" forms of ADRs, including European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), and are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject a fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments; withholding taxes on income, or possible imposition of withholding taxes on income; possible seizure, nationalization or expropriation of foreign deposits; possible establishment of exchange controls; or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States. Please see the section titled "Foreign Securities" for more detail.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder's rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer's request.

**Derivative Instruments** are commonly defined to include instruments or contracts whose values depend on (or "derive" from) the value of one or more other assets such as securities, currencies, or commodities. These "other assets" are commonly referred to as "underlying assets." The funds may use derivatives, principally futures contracts, primarily to seek returns on a fund's otherwise uninvested cash assets.

A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, as well as exchange-traded futures. Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on forward and swap contracts) and exchange-traded options on futures. Diverse types of derivatives may be created

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by combining options or forward contracts in different ways, and applying these structures to a wide range of underlying assets. Risk management strategies include investment techniques designed to facilitate the sale of portfolio securities, manage the average duration of the portfolio or create or alter exposure to certain asset classes, such as equity, other debt or foreign securities.

In addition to the derivative instruments and strategies described in this SAI, the investment adviser expects to discover additional derivative instruments and other investment, hedging or risk management techniques. The investment adviser may utilize these new derivative instruments and techniques to the extent that they are consistent with a fund's investment objective and permitted by a fund's investment limitations, operating policies and applicable regulatory authorities.

A fund's derivatives instruments can create (i) leverage risk, which generally refers to the risk that derivatives transactions can magnify a fund's gains and losses, (ii) market risk, which generally refers to the risk from potential adverse market movements in relation to a fund's derivatives positions, or the risk that markets could experience a change in volatility that adversely impacts fund returns and a fund's obligations and exposures, (iii) counterparty risk, which generally refers to the risk that a counterparty on a derivatives transaction may not be willing or able to perform its obligations under the derivatives contract, and the related risks of having concentrated exposure to such a counterparty, (iv) liquidity risk, which generally refers to the risk involving the liquidity demands that derivatives transactions can create to make payments of margin, collateral, or settlement payments to counterparties, (v) operational risk, which generally refers to the risk related to potential operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error and (vi) legal risk, which generally refers to insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract. Certain of these risks are described in more detail as they apply to specific derivatives instruments in the following sub-sections of this SAI.

*<u>Futures Contracts</u>* are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. A fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the Commodity Futures Trading Commission (CFTC) licenses and regulates on foreign exchanges. Although positions are usually marked-to-market on a daily basis with an intermediary (executing broker), there remains a credit risk with the futures exchange.

A fund must maintain a small portion of its assets in cash to process shareholder transactions and to pay its expenses. To reduce the effect this otherwise uninvested cash would have on its performance, a fund may purchase futures contracts. Such transactions allow a fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, a fund may purchase or sell futures contracts on a specified foreign currency to "fix" the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. A fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, a fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as "initial margin" and must be in the form of liquid assets, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as "variation margin," may be made daily, if necessary, as the value of the futures contracts fluctuates. This process is known as "marking-to-market." The initial margin amount will be returned to a fund upon termination of the futures contracts assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage.

While a fund may purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause a fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if a fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, a fund incurs transaction costs (e.g., brokerage fees) when engaging in futures trading. To the extent a fund also invests in futures in order to simulate full investment, these same risks apply.

When interest rates are rising or securities prices are falling, a fund may seek, through the sale of futures contracts, to offset a decline in the value of its current portfolio securities. When interest rates are falling or prices are rising, a fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when they effect anticipated purchases. Similarly, a fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and its portfolio securities that are denominated in that currency. A fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that a fund has acquired or expects to acquire.

Futures contracts may require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time a fund seeks to close out a futures position. If a fund is unable to close out its position and prices move adversely, a fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a

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disadvantageous time or incur extra costs by borrowing the cash. Also, a fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

**Derivatives Regulatory Matters.** In October 2020, the SEC adopted a final rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies that rescinded and withdrew the guidance of the SEC and its staff regarding asset segregation and cover transactions previously applicable to a fund's use of such transactions. The rule requires a fund to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management program and reporting requirements. Generally, these requirements apply unless a fund satisfies a "limited derivatives users" exception that is included in the rule. Under the rule, when a fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating a fund's asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance in connection with the rule regarding the use of securities lending collateral that may limit a fund's securities lending activities. In addition, under the rule, a fund will be permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). A fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the fund treats any such transaction as a "derivatives transaction" for purposes of compliance with the rule. Furthermore, under the rule, a fund will be permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of a fund to use derivatives, and reverse repurchase agreements and similar financing transactions, when-issued, delayed delivery and forward commitment transactions, and unfunded commitment agreements as part of its investment strategies. These requirements may increase the cost of a fund's investments and cost of doing business, which could adversely affect investors. The investment adviser cannot predict the effects of these regulations on a fund. The investment adviser intends to monitor developments and seeks to manage the funds in a manner consistent with achieving the funds' investment objectives, but there can be no assurance that it will be successful in doing so.

The CFTC regulates the trading of commodity interests, including certain futures contracts, options, and swaps in which a fund may invest. A fund that invests in commodity interests will generally be subject to certain CFTC regulatory requirements if it is considered a "commodity pool." A notice of eligibility for exclusion from the definition of the term "commodity pool operator" (CPO) under the Commodity Exchange Act, as amended (CEA) has been filed, by the funds' investment adviser, with respect to each fund's operation. Therefore, each fund and its investment adviser are not subject to registration or regulation as a CPO under the CEA. If a fund's investment adviser were no longer able to claim the exclusion, the fund's investment adviser may be required to register as a CPO and the fund and its investment adviser would be subject to regulation as a CPO under the CEA. If a fund or its investment adviser is subject to CFTC regulation, it may incur additional expenses and/or may choose to make changes to its investment strategies.

**Diversification** involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. Each fund is a series of an open-end investment management company. Each fund is a diversified mutual fund. When formed, the Schwab Health Care Fund was sub-classified as a "non-diversified" fund, as defined in the Investment Company Act of 1940, as amended (the 1940 Act). However, due to the fund's principal investment strategy and investment process, it has historically operated as a "diversified" fund. Therefore, the fund will not operate in the future as a "non-diversified" fund without first obtaining shareholder approval, except as allowed pursuant to the 1940 Act and rules or interpretations thereof.

**Emerging or Developing Markets** exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries.

A fund's investments in emerging markets can be considered speculative, and therefore may offer higher potential for gains and losses than investments in developed markets of the world. With respect to an emerging market country, there may be a greater potential for nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or investments in such countries. The economies of developing countries generally

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are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

In addition to the risks of investing in emerging market country debt securities, a fund's investment in government or government-related securities of emerging market countries and restructured debt instruments in emerging markets are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt, and requests to extend additional loan amounts. A fund may have limited recourse in the event of default on such debt instruments.

*<u>Investing in China</u>* involves certain additional risks and considerations not typically associated with investing in other more established economies or securities markets. China based companies that incorporate in the People's Republic of China (PRC) can issue different classes of shares depending on where they are listed and which investors are allowed to own them. These are referred to as Class A Shares, Class B shares, and Class H shares, which are all renminbi-denominated shares that trade in different currencies depending on what stock exchange they are listed on. Class H Shares trade on the Hong Kong Stock Exchange, are quoted and traded in Hong Kong dollars, and have no restrictions on who can trade them. Class B Shares trade on either the Shanghai or Shenzhen stock exchanges and can only be traded by non-residents of the PRC or residents with appropriate foreign currency dealing accounts. They trade in U.S. dollars on the Shanghai exchange and in Hong Kong dollars on the Shenzhen exchange. Class A Shares trade on either the Shanghai or Shenzhen exchanges and are quoted in renminbi. Class A Shares may only be traded by residents of the PRC, or under the Qualified Foreign Institutional Investor (QFII) rules, or through the Stock Connect programs (Shanghai-Hong Kong or Shenzhen-Hong Kong). Finally, China based companies that are controlled by PRC residents or PRC state entities and have a majority of their revenue or assets in the PRC may incorporate outside the PRC and trade on an exchange outside the PRC in the currency of the exchange. These are referred to as "Red Chip" (Hong Kong), "P Chip" (Hong Kong), "S Chip" (Singapore), or "N Shares" (United States). The multiplicity of share classes and various restrictions on ownership, in addition to the ability of Chinese regulatory authorities and Chinese issuers to suspend trading and their willingness to exercise this option in response to market volatility and other events, can significantly impact liquidity and volatility of the Chinese market and the markets for Chinese securities. In addition, to the extent that a fund invests in China A Shares, there may be legal restrictions imposed by the PRC on the repatriation of assets or proceeds from the sale of China A Shares. Further, there are quotas on the amount China A Shares available either to QFIIs or through the Stock Connect programs. These quotas are applicable to the entire market, not to a specific fund, but they impact the ability of a fund to implement its investment strategy.

Certain funds may invest a portion of their assets in certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the funds) is prohibited. To facilitate indirect foreign investment in these businesses, many Chinese companies have created VIE structures. In such an arrangement, a China-based operating company typically establishes a shell entity in another jurisdiction, such as the Cayman Islands. The shell company enters into service and other contracts with the China-based operating company, and then issues shares on an exchange (such as the New York Stock Exchange or the Hong Kong Stock Exchange). Non-Chinese investors hold stock in the shell entity rather than directly in the China-based operating company. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. The contractual arrangements also permit the VIE to consolidate the China-based operating company into its financial statements.

Although VIE structures are a longstanding industry practice and well known to officials and regulators in China, VIE structures are not formally recognized under Chinese law. As a result, investors face the risk that future actions by the Chinese government could significantly affect the China-based operating company's financial performance and the enforceability of the VIE structure's contractual arrangements. It is uncertain whether Chinese officials or regulators will withdraw their implicit acceptance of the VIE structure, or whether any new laws, rules or regulations relating to this structure will be adopted (in each case either generally or with respect to specific industries, sectors or companies) and, if adopted, what impact they would have on the interests of shareholders in the VIE structure. Under extreme circumstances, China could prohibit the existence of VIE structures or limit a VIE structure's ability to pass through economic and governance rights to non-Chinese individuals and entities. If the Chinese government takes action affecting VIE structures, the market value of a fund's associated portfolio holdings in VIE structures would likely suffer significant, detrimental, and possibly permanent negative effects, which could result in substantial investment losses to the fund.

In addition, Chinese companies, including China-based operating companies listed on U.S. exchanges through a VIE structure, are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies based in more developed countries. As a result, information about the Chinese securities and securities in the VIE structure in which a fund invests may be less reliable or complete than investments in other securities. Foreign companies listed on U.S. exchanges, including China-based operating companies that utilize a VIE structure, also could face delisting or other ramifications for failure to meet the requirements of the SEC, the Public Company Accounting Oversight Board or other U.S. regulators. Delisting would significantly decrease the liquidity and value of the securities, decrease the ability of a fund to transact in such securities and may increase the transaction costs of a fund if the fund is required to seek other markets in which to transact in those securities.

Investments involving a VIE structure may also pose additional risks because such investments are made through a company whose interests in the underlying China-based operating company are established through contract rather than through equity ownership. For example, in the event of a dispute, the contractual claims with respect to the China-based operating company may be deemed unenforceable in the PRC, thus

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limiting (or eliminating) the remedies and rights available to the VIE and its investors. Such legal uncertainty may also be exploited against the interests of the investors in the VIE structure. Further, the interests of the direct equity owners of the China-based operating company may conflict with the interests of the investors in the VIE structure, and the fiduciary duties of the officers and directors of the China-based operating company may differ from, or conflict with, the fiduciary duties of the officers and directors of the shell entity in which a fund invests.

**Equity Securities** represent ownership interests in a company, and are commonly called "stocks." Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company's financial condition, market conditions and political, economic or even company-specific news. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

Types of equity securities include common stocks, preferred stocks, convertible securities, rights and warrants, depositary receipts, and interests in real estate investment trusts and business development companies. (For more information on depositary receipts, see the section titled "Depositary Receipts").

*<u>Common Stocks,</u>* which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the election of the corporation's directors and any other matters submitted to the corporation's shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer's earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners. Common stocks are typically categorized by their market capitalization as large-, mid- or small-cap.

*<u>Small-Cap Stocks</u>* include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small-cap company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Most small-cap company stocks pay low or no dividends.

These factors and others may cause sharp changes in the value of a small-cap company's stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a fund's positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for a fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of a fund's investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

*<u>Convertible Securities</u>* are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer's common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company's common stock. The actual return on a convertible bond may exceed its stated yield if the company's common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. Convertible securities are also rated below investment grade (high yield) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and a fund's ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer's creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a conversion feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer's common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company's liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

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Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer's convertible securities will tend not to fall as much because the convertible security's income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because its conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

*<u>Preferred Stocks</u>* represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation's assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, a fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

*<u>Real Estate Investment Trusts</u>* (REITs) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long-term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 90% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

Like any investment in real estate, a REIT's performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental income could decline because of extended vacancies, increased competition from nearby properties, tenants' failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT's performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than – and at times will perform differently from – large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through a fund, a shareholder will bear indirectly a proportionate share of the REIT's expenses in addition to their proportionate share of a fund's expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Internal Revenue Code or to maintain their exemptions from registration under the 1940 Act and CFTC regulations.

*<u>Rights and Warrants</u>* are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company's stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

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*<u>Initial Public Offering</u>* (IPO). A fund may purchase shares issued as part of, or a short period after, a company's initial public offering (IPOs), and may at times dispose of those shares shortly after their acquisition. A fund's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

*<u>Master Limited Partnerships</u>* (MLPs) are limited partnerships in which the common units are publicly traded. MLP common units are freely traded on a securities exchange or in the over-the-counter market and are generally registered with the SEC. MLPs often own several properties or businesses (or own interests) that are related to real estate development and oil and gas industries, but they also may finance motion pictures, research and development and other projects. MLPs generally have two classes of owners, the general partner and limited partners. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership, through ownership of common units, and have a limited role, if any, in the partnership's operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (minimum quarterly distributions). Common and general partner interests also accrue arrearages in distributions to the extent the minimum quarterly distribution is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the minimum quarterly distribution; however, subordinated units do not accrue arrearages. Distributable cash in excess of the minimum quarterly distribution paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions are intended to encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results are intended to benefit all security holders of the MLP, however, such incentive distribution payments give rise to potential conflicts of interest between the common unit holders and the general partner.

MLP common units represent a limited partnership interest in the MLP. Common units are listed and traded on U.S. securities exchanges or over-the-counter, with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The funds may purchase common units in market transactions as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions. Common units along with general partner units have first priority to receive quarterly cash distributions up to the minimum quarterly distribution and have arrearage rights. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

MLP subordinated units are typically issued by MLPs to their original sponsors, such as their founders, corporate general partners of MLPs, entities that sell assets to the MLP, and investors. Subordinated units may be purchased directly from these persons as well as newly-issued subordinated units from MLPs themselves. Subordinated units have similar voting rights as common units and are generally not publicly traded. Once the minimum quarterly distribution on the common units, including any arrearages, has been paid, subordinated units receive cash distributions up to the minimum quarterly distribution prior to any incentive payments to the MLP's general partner. Unlike common units, subordinated units do not have arrearage rights. In the event of liquidation, common units and general partner interests have priority over subordinated units. Subordinated units are typically converted into common units on a one-to-one basis after certain time periods and/or performance targets have been satisfied. The purchase or sale price of subordinated units is generally tied to the common unit price less a discount. The size of the discount varies depending on the likelihood of conversion, the length of time remaining to conversion, the size of the block purchased relative to trading volumes, and other factors, including smaller capitalization partnerships or companies potentially having limited product lines, markets or financial resources, lacking management depth or experience, and being more vulnerable to adverse general market or economic development than larger more established companies.

General partner interests of MLPs are typically retained by an MLP's original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder's investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP's aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights, which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

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Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Certain MLPs are dependent on their parent companies or sponsors for a majority of their revenues. Any failure by an MLP's parents or sponsors to satisfy their payments or obligations would impact the MLP's revenues and cash flows and ability to make distributions.

*<u>Business Development Companies</u>* (BDCs) are closed-end investment companies that have elected to be BDCs under the 1940 Act and are taxed as regulated investment companies (RICs) under the Internal Revenue Code. BDCs operate as venture capital companies and typically invest in, lend capital to, and provide significant managerial assistance to developing private companies or thinly-traded public companies. Under the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of privately-held U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, a BDC may only incur indebtedness in amounts such that the BDC's coverage ratio of total assets to total senior securities equals 150% or 200%, as applicable.

BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (junk bonds). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that investors may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC's net asset value (for more information on BDCs, see the section titled "Securities of Other Investment Companies").

**Exchange-Traded Funds** (ETFs) are investment companies that typically are registered under the 1940 Act as open-end funds or unit investment trusts (UITs). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold throughout the day at market prices, which may be higher or lower than the shares' net asset value. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's net asset value, the value of ETF holdings, and supply of and demand for ETF shares. Although the creation/redemption feature of ETFs generally makes it more likely that ETF shares will trade close to their net asset value, market volatility, lack of an active trading market for ETF shares, disruptions at market participants (such as Authorized Participants or market makers) and any disruptions in the ordinary functioning of the creation/redemption process may result in ETF shares trading significantly above (at a "premium") or below (at a "discount") their net asset value. An ETF's investment results are based on the ETF's daily net asset value. Investors transacting in ETF shares in the secondary market, where market prices may differ from net asset value, may experience investment results that differ from results based on the ETF's daily net asset value. An "index-based ETF" seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of securities, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

**Foreign Currency Transactions.** A fund may invest in foreign currency-denominated securities, purchase and sell foreign currency options and foreign currency futures contracts and related options and engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts (forwards) with terms generally of less than one year. A fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.

A fund may use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

A forward involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect a fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, a fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for fund securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when a fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, a fund could sustain a loss.

A fund may engage in forward foreign currency exchange options and contracts to protect the value of specific portfolio positions, which is called "position hedging." When engaging in position hedging, a fund may enter into forward foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which portfolio securities are denominated (or against an increase in the value of currency for securities that a fund expects to purchase).

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Buying and selling foreign currency exchange options and contracts involves costs and may result in losses. The ability of a fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for a fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a fund's holdings of securities denominated in a particular currency and forward contracts into which a fund enters. Such imperfect correlation may cause a fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss. A fund's transactions in foreign currency exchange contracts may cause a portion of the fund's distributions to constitute returns of capital for tax purposes. To the extent a foreign currency transaction involves a derivatives instrument, the risks discussed under "Derivatives Instruments," above, also will apply.

Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant foreign currencies.

Forwards will be used primarily to adjust the foreign exchange exposure of a fund and a fund might be expected to enter into such contracts under the following circumstances:

*<u>Lock In.</u>* When the investment adviser desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency.

*<u>Cross Hedge.</u>* If a particular currency is expected to decrease against another currency, a fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of a fund's portfolio holdings denominated in the currency sold.

*<u>Direct Hedge.</u>* If the investment adviser wants to eliminate substantially all of the risk of owning a particular currency, and/or if the investment adviser thinks that a fund can benefit from price appreciation in a given country's bonds but does not want to hold the currency, it may employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but a fund would benefit from an increase in value of the bond.

*<u>Proxy Hedge.</u>* The investment adviser might choose to use a proxy hedge, which may be less costly than a direct hedge. In this case, a fund, having purchased a security, will sell a currency whose value is believed to be closely linked to the currency in which the security is denominated. Interest rates prevailing in the country whose currency was sold would be expected to be closer to those in the U.S. and lower than those of securities denominated in the currency of the original holding. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies and the relationships can be very unstable at times.

*<u>Costs of Hedging.</u>* When a fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially reduced or lost if a fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead such costs will, over time, be reflected in a fund's net asset value per share.

*<u>Tax Consequences of Hedging.</u>* Under applicable tax law, a fund may be required to limit its gains from hedging in foreign currency forwards, futures, and options. Although a fund is expected to comply with such limits, the extent to which these limits apply is subject to tax regulations as yet unissued. Hedging may also result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. Those provisions could result in an increase (or decrease) in the amount of taxable dividends paid by a fund and could affect whether dividends paid by a fund are classified as capital gains or ordinary income.

**Foreign Securities.** Investments in foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which a fund may invest include those issued by foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments, a compromise in public health and safety, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, currency blockage, the imposition of sanctions and other similar measures, change of government or war could affect the value of foreign investments. Additionally, a country could experience a public health threat such as an infectious illness which could reduce consumer demand or economic output and/or result in market closures, travel restrictions or quarantines, all of which could affect the value of that country's securities and impact global markets. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

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Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. Bankruptcy laws in some foreign countries are sometimes biased to the borrowers and against the creditors. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

In addition, a fund's investments in foreign securities may be subject to economic sanctions or other government restrictions. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to ascertain. These types of measures may include, but are not limited to, banning a sanctioned country or certain persons or entities associated with such country from global payment systems that facilitate cross-border payments, restricting the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities or persons. The imposition of sanctions and other similar measures could, among other things, result in a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings of the sanctioned country's securities or those of companies located in or economically tied to the sanctioned country, currency devaluation or volatility, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could directly or indirectly limit or prevent a fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and adversely impact a fund's liquidity and performance. As a result, such restrictions may limit a fund's ability to meet a large number of shareholder redemption requests.

International trade tensions may arise from time to time which could result in trade tariffs, embargos or other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, an oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies or industries which could have a negative impact on a fund's performance. Events such as these are difficult to predict and may or may not occur in the future.

Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a fund to miss attractive investment opportunities. Losses to a fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for a fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, a fund may hold cash investments in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause a fund to incur costs in connection with conversions between various currencies. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by a fund.

During the 2008-2009 global financial crisis, financial markets in Europe experienced significant volatility due, in part, to concerns about rising levels of government debt and the prevalence of increased budget deficits. As a result, many economies in the region suffered through prolonged economic downturns. Due to the economic integration of the region, another economic downturn in one European country may have a negative impact on the economies of other European countries.

The risk of investing in Europe may be heightened due to steps taken by the United Kingdom (UK) to exit the European Union (EU). On January 31, 2020, the UK officially withdrew from the EU. On December 30, 2020, the EU and UK signed the EU-UK Trade and Cooperation Agreement (TCA) which governs certain aspects of the EU's and the UK's relationship, many of which are still to be determined, including those related to financial services. Notwithstanding the TCA, significant uncertainty remains in the market regarding the ramifications of the UK's withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased volatility and illiquidity, and companies that conduct a significant amount of business in the UK or Europe may experience lower revenue and/or profit growth, all of which may adversely affect the value of a fund's investments. Brexit also may cause additional member states to contemplate departing the EU, which would likely perpetuate political and economic instability in the region and cause additional market disruption in global financial markets.

As a fund may hold investments in issuers that are located in Europe or that depend on revenues generated from operations in Europe, any material negative developments in Europe could have a negative impact on the value and liquidity of these investments, which could harm a fund's performance.

**Foreign Institutions** involve additional risks. The funds may invest in U.S. dollar-denominated securities issued by foreign institutions or securities that are subject to credit or liquidity enhancements provided by foreign institutions. Foreign institutions may not be subject to uniform accounting, auditing and financial reporting standards, practices and requirements that are comparable to those applicable to U.S.

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corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments could have effects on the value of securities issued or supported by foreign institutions. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, change of government or war could affect the value of these securities. In addition, there may be difficulties in obtaining or enforcing judgments against foreign institutions that issue or support securities in which a fund may invest. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

**Illiquid Securities or Investments** means any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The liquidity of a fund's investments is monitored under the supervision and direction of the Board and is governed by the 1940 Act and rules promulgated thereunder, which provide that a fund may not acquire any illiquid investments if, immediately after the acquisition, the fund would have invested more than 15% of the fund's net assets in illiquid investments. Investments currently not considered liquid include, among others, repurchase agreements not maturing within seven days that are not subject to a demand feature of seven days or less and certain restricted securities. Any investment may become illiquid at times of market dislocation.

**Inflation/Deflation Risk.** The funds may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from a fund's investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of a fund's assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of a fund's assets.

**Interfund Borrowing and Lending.** The SEC has granted an exemption to the funds that permits the funds to borrow money from and/or lend money to other funds in the Fund Complex as defined under "Management of the Funds." All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board.

**Large Transaction Risk.** Certain accounts or Charles Schwab & Co., Inc. (Schwab or the distributor) affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities when it would not otherwise do so, which could result in a loss to the fund, negative impact to the fund's brokerage costs, acceleration of the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan), or higher portfolio turnover. Investors should consider whether a fund is an appropriate investment in light of their current financial position and goals.

**Market Disruptions Risk.** The funds are subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, epidemics and pandemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause a fund to lose value. These events can also impair the technology and other operational systems upon which the funds' service providers, including Schwab Asset Management, as the funds' investment adviser, rely, and could otherwise disrupt the funds' service providers' ability to fulfill their obligations to the funds.

The outbreak of COVID-19, a novel coronavirus disease, has caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the funds invest. The transmission of COVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the global economic environment. These disruptions have led to instability in the market place, including losses and overall volatility. The impact of COVID-19, including variants of the underlying virus, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

Russia's military invasion of Ukraine in February 2022, responses by the United States and other countries to the invasion and the potential for wider conflict have increased and may continue to increase volatility and uncertainty in financial markets worldwide. The United States and other countries have imposed broad-ranging economic sanctions on Russia and Russian entities and individuals that, among other restrictions, prohibit companies from doing business with Russia and Russian issuers, and may adversely affect companies with economic or financial exposure to Russia and Russian issuers. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia's military invasion. These and potential similar future sanctions may limit the potential universe of securities in which the funds may invest and may require the funds to freeze or divest its existing investments in a company that becomes subject to such restrictions. A number of large corporations and U.S. states have also announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses. The extent and duration of Russia's military actions and the repercussions of such

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actions, including any retaliatory actions or countermeasures that may be taken by Russia or others subject to sanctions (such as cyberattacks on other governments, corporations or individuals) are unpredictable, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These events could negatively affect the funds' performance.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, market closures, changes in interest rates, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the funds. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the funds being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.

To satisfy any shareholder redemption requests during periods of extreme volatility, it is more likely the funds may be required to dispose of portfolio investments at inopportune times or prices.

**Money Market Securities** are high-quality, short term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker's acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker's acceptances are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short term credit needs.

Money market securities pay fixed-, variable- or floating-rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately; these puts, which are sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When a fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts.

A fund may keep a portion of its assets in cash for business operations. A fund may invest in money market securities to reduce the effect this otherwise uninvested cash would have on its performance. A fund may also invest in money market securities to the extent it is consistent with its investment objective.

*<u>Banker's Acceptances or Notes</u>* are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. A fund will invest only in banker's acceptances of banks that have capital, surplus and undivided profits in the aggregate in excess of $100 million.

*<u>Certificates of Deposit or Time Deposits</u>* are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. A fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits, in the aggregate, in excess of $100 million.

*<u>Commercial Paper</u>* consists of short term, promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

*<u>Fixed Time Deposits</u>* are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but may be subject to early withdrawal penalties, which vary depending upon market conditions and the remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a fixed time deposit to a third party, although there is no market for such deposits. A fund will not invest in fixed time deposits, that (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight deposits) if, in the aggregate, more than 15% of its net assets would be invested in such deposits, repurchase agreements maturing in more than seven days and other illiquid assets.

*<u>Promissory Notes</u>* are written agreements committing the maker or issuer to pay the payee a specified amount either on demand or at a fixed date in the future, with or without interest. These are sometimes called negotiable notes or instruments and are subject to credit risk. Bank notes are notes used to represent obligations issued by banks in large denominations.

*<u>Repurchase Agreements</u>* are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer's holding period. Any repurchase agreements a fund enters into will involve a fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short, from overnight to one week, although the securities collateralizing a repurchase agreement may have longer maturity dates. Default by the seller might cause a fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. A fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement's seller, a fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value

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of the underlying securities and loss of income. Certain repurchase agreements a fund may enter into may or may not be subject to an automatic stay in bankruptcy proceedings. A fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank.

**Non-Publicly Traded Securities and Private Placements.** A fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a fund may be required to bear the expenses of registration.

**Restricted Securities** are securities that are subject to legal restrictions on their sale. Difficulty in selling restricted securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended (1933 Act), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. To the extent a fund invests in restricted securities that are deemed liquid, the general level of illiquidity in the fund's portfolio may be increased if such securities become illiquid.

**Securities Lending** of portfolio securities is a common practice in the securities industry. A fund may engage in security lending arrangements. When a fund is lending portfolio securities, a fund may receive cash collateral and may invest it in short-term, interest-bearing obligations, including cash collateral funds, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies. Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities and efforts to recall such securities promptly may be unsuccessful, especially for foreign securities. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent. A fund will also bear the risk of any decline in value of securities acquired with cash collateral.

A fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other permitted instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) a fund may at any time call the loan and obtain the return of the securities loaned; (3) a fund will receive payments in lieu of any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security's voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to a fund, it is expected that a fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer's corporate governance policies or structure.

To the extent a fund participates in securities lending under the current securities lending agreements with unaffiliated lending agents, costs and expenses, including agent fees, associated with securities lending activities under the securities lending program paid to the unaffiliated lending agents start at 9% of gross lending revenue, with subsequent breakpoints to a low of 5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by a fund, as applicable. No portion of the lending revenue is paid to or retained by Schwab Asset Management or any affiliate of Schwab Asset Management.

**Securities of Other Investment Companies.** Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a continuous basis; (2) business development companies that generally invest in, and provide services to, privately-held companies or thinly-traded public companies (see the sub-section titled "Business Development Companies" under "Equity Securities" for more information); (3) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; (4) unit investment trusts that generally offer a fixed number of redeemable shares; and (5) money market funds that typically seek current income by investing in money market securities (see the section titled "Money Market Securities" for more information). Certain open-end funds, closed-end funds and unit investment trusts are traded on exchanges (see the sub-section entitled "Exchange-Traded Funds" under "Equity Securities" for more information).

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To the extent a fund invests, or has invested, in shares of other investment companies, including BDCs, during its prior fiscal year, the fund, pursuant to SEC rules, must disclose any material fees and expenses indirectly incurred by the fund as a result of such investments. These indirect fees and expenses, to the extent incurred, will appear in the fee table of the fund's prospectus as a separate line item captioned "Acquired fund fees and expenses."

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The funds may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. A fund may invest in investment companies that are not registered with the SEC or in privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause a fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which a fund may invest in another investment company may be limited. Except as described below, the 1940 Act currently requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of a fund's total assets will be invested in the securities of any one acquired investment company ("acquired fund"), (ii) not more than 10% of the value of its total assets will be invested in the aggregate in securities of acquired funds as a group and (iii) not more than 3% of the outstanding voting stock of any one acquired fund will be owned by a fund.

The limitations described above do not apply to investments in money market funds subject to certain conditions. The funds may invest in affiliated and unaffiliated money market funds without limit under Rule 12d1-1 under the 1940 Act subject to the fund's investment policies and restrictions and the conditions of the Rule.

Rule 12d1-4 allows a fund to acquire shares of an acquired fund in excess of the limitations currently imposed by the 1940 Act. Fund of funds arrangements relying on Rule 12d1-4 will be subject to several conditions, certain of which are specific to a fund's position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (i) control and voting that prohibit an acquiring fund, its investment adviser (or a sub-adviser) and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund; (ii) certain required findings relating to complexity, fees and undue influence (among other things); (iii) fund of funds investment agreements; and (iv) general limitations on an acquired fund's investments in other investment companies and private funds to no more than 10% of the acquired fund's asset, except in certain circumstances. To the extent a fund is an acquired fund, the limitations placed on acquired funds under Rule 12d1-4 may impact the investments made by a fund.

**Short Sales** may be used by a fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. A fund may engage in short sales that are either "against the box" or "uncovered." A short sale is "against the box" if at all times during which the short position is open, a fund owns at least an equal amount of the securities or securities convertible into, or has the right to acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to a fund with respect to the securities that are sold short. "Uncovered" short sales are transactions under which a fund sells a security it does not own. To complete such transaction, a fund may borrow the security through a broker to make delivery to the buyer and, in doing so, a fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. A fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, a fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until a fund replaces the borrowed securities.

A fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. If a fund sells securities short "against the box," it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

A fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities.

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**Temporary Defensive Investments.** During unusual economic or market conditions or for temporary defensive or liquidity purposes, each of the Schwab Active Equity Funds may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations.

**U.S. Government Securities** are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the U.S. government. Some U.S. government securities, such as those issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Student Loan Marketing Association (Sallie Mae), and the Federal Home Loan Banks, are supported by a line of credit the issuing entity has with the U.S. Treasury. Securities issued by other issuers are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. U.S. government securities, including U.S. Treasury securities, are among the safest securities; however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer or director of Fannie Mae and Freddie Mac with respect to Fannie Mae and Freddie Mac and the assets of Fannie Mae and Freddie Mac. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement (SPA) with each of Fannie Mae and Freddie Mac pursuant to which the U.S. Treasury agreed to purchase up to 1,000,000 shares of senior preferred stock with an aggregate initial liquidation preference of $1 billion and obtained warrants and options for the purchase of common stock of each of Fannie Mae and Freddie Mac. Under the SPAs as currently amended, the U.S. Treasury has pledged to provide financial support to a government-sponsored enterprise (GSE) in any quarter in which the GSE has a net worth deficit as defined in the respective SPA. Under the current arrangement, the GSEs have a maximum amount of funding available to them which will be reduced by any future draws. There is a risk that if a GSE experiences a loss in any fiscal quarter that results in the GSE having a negative net worth that is greater than the amount available under the U.S. Treasury's funding commitment that the FHFA could place the GSE in receivership. In addition, each GSE may only retain a certain amount of its profits at the end of each fiscal quarter and the U.S. Treasury's liquidation preference will increase in an amount equal to any increase in a GSE's net worth up to a certain amount. The SPAs contain various covenants that severely limit each enterprise's operations.

Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The SPAs are intended to enhance each of Fannie Mae's and Freddie Mac's ability to meet its obligations. The FHFA has indicated that the conservatorship of each enterprise will end when the director of the FHFA determines that the FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. Should Fannie Mae and Freddie Mac be taken out of conservatorship, it is unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations under the SPAs. It also is unclear how the capital structure of Fannie Mae and Freddie Mac would be constructed post-conservatorship, and what effects, if any, the privatization of Fannie Mae and Freddie Mac will have on their creditworthiness and guarantees of certain mortgage-backed securities. Accordingly, should the FHFA take Fannie Mae and Freddie Mac out of conservatorship, there could be an adverse impact on the value of their securities which could cause a fund's investments to lose value.

Although the risk of default with the U.S. government securities is considered unlikely, any default on the part of a portfolio investment could cause a fund's share price or yield to fall. The risk of default on U.S. government securities may be heightened when there is uncertainty relating to negotiations in the U.S. Congress over increasing the statutory debt ceiling. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling, the U.S. government may default on certain U.S. government securities including those held by a fund, which could have an adverse impact on the fund. In August 2011, the long-term credit rating of the U.S. government was downgraded by a major rating agency as a result of concern about the U.S. government's budget deficit and rising debt burden. Similar downgrades in the future could increase volatility in domestic and foreign financial markets, result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of different kinds of debt. Although remote, it is at least theoretically possible that under certain scenarios the U.S. government could default on its debt, including U.S. Treasury securities.

#### INVESTMENT LIMITATIONS AND RESTRICTIONS

#### The following investment limitations may be changed only by vote of a majority of each fund's outstanding voting shares:

#### Each fund may not:
(1) Purchase or sell commodities or real estate, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Make loans to other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Borrow money, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Issue senior securities, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

(5) Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

 **In addition, each of the Schwab Large-Cap Growth Fund, Schwab Dividend Equity Fund, Schwab International Core Equity Fund, Schwab Core Equity Fund, and Schwab Small-Cap Equity Fund may not:** 

(1) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### In addition, the Schwab Health Care Fund:
(1) Will concentrate its investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. The Schwab Health Care Fund will concentrate its investments in securities of companies in the health care sector.

#### The following are non-fundamental investment policies and restrictions, and may be changed by the Board.

#### Each fund may not:
(1) Sell securities short except as in accordance with current SEC rules and interpretations.

(2) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(3) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that the fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs), (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts, and (iii) purchase securities of companies that deal in precious metals or interests therein.

(5) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

 **In addition, the Schwab Large-Cap Growth Fund, Schwab Dividend Equity Fund, Schwab International Core Equity Fund, Schwab Core Equity Fund, Schwab Small-Cap Equity Fund and Schwab Health Care Fund may not:** 

(1) Borrow money except that the fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

#### In addition, each of the Schwab Large-Cap Growth Fund, Schwab Dividend Equity Fund, and Schwab International Core Equity Fund may not:
(1) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries.

#### In addition, the Schwab Core Equity Fund may not:
(1) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries (except that the fund may purchase securities to the extent that the S&P 500<sup>®</sup> is also so concentrated).

#### In addition, the Schwab Small-Cap Equity Fund may not:
(1) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries (except that the fund may purchase securities to the extent that the Russell 2000<sup>®</sup> Index is also so concentrated).

#### The following descriptions of the 1940 Act may assist investors in understanding the above policies and restrictions.
<u>Borrowing.</u> The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 ⅓% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are entered into in accordance with the conditions to applicable SEC requirements shall not be regarded as borrowings for the purposes of a fund's investment restriction.

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<u>Concentration.</u> The SEC has defined concentration as investing more than 25% of an investment company's total assets in an industry or group of industries, with certain exceptions.

<u>Diversification.</u> Under the 1940 Act and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer's voting securities would be held by a fund.

<u>Lending.</u> Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

<u>Real Estate.</u> The 1940 Act does not directly restrict an investment company's ability to invest in real estate, but does require that every investment company have a fundamental investment policy governing such investments. Each fund has adopted a fundamental policy that would permit direct investment in real estate. However, each fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of a fund's Board.

<u>Senior Securities.</u> Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits each fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, when such investments are entered into in accordance with the conditions to applicable SEC requirements.

<u>Underwriting.</u> Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets. The foregoing restriction does not apply to non-diversified funds.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of a fund's acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in total assets or net assets, as applicable, or other circumstances does not require a fund to sell an investment if it could not then make the same investment.

#### MANAGEMENT OF THE FUNDS
The funds are overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of each fund. The trustees met five times during the most recent fiscal year.

Certain trustees are "interested persons." A trustee is considered an interested person (Interested Trustee) of the Trust under the 1940 Act if he or she is an officer, director, or an employee of Schwab Asset Management or Schwab. A trustee also may be considered an interested person of the Trust under the 1940 Act if he or she owns stock of The Charles Schwab Corporation (CSC), a publicly traded company and the parent company of Schwab Asset Management and Schwab.

As used herein, the terms "Fund Complex" and "Family of Investment Companies" each refer collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust which, as of February 27, 2023, included 105 funds. As used herein, the term "Schwab Funds" refers collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Capital Trust; and the term "Schwab ETFs" refers to Schwab Strategic Trust.

Each of the officers and/or trustees serves in the same capacity, unless otherwise noted, for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The tables below provide information about the trustees and officers for the Trust, which includes the funds in this SAI. The address of each individual listed below is 211 Main Street, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(2)</sup> <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016-Sept. 2019), Principal Funds (investment management). | 105  | Director (2016-2019), <br> Principal Funds, Inc. |
| Robert W. Burns <br> 1959 <br> Trustee <br> (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105  |  |
| Nancy F. Heller <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105  |  |
| David L. Mahoney <br> 1954 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105  | Director (2004-present), <br> Corcept Therapeutics Incorporated <br> Director (2009-2021), <br> Adamas Pharmaceuticals, Inc. <br> Director (2003-2019), <br> Symantec Corporation  |
| Jane P. Moncreiff <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018-present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare). | 105  |  |
| Kimberly S. Patmore <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008-present), Patmore Management Consulting (management consulting). | 105  |  |
| J. Derek Penn <br> 1957 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006-2018), BNY Mellon (financial services). | 105  |  |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II<sup>(3)</sup> <br> 1960 <br> Chairman and Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022-present), Director and Chief Executive Officer (Oct. 2008-present) and President (Feb. 2007-Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008-Oct. 2021) and Director (May 2008-Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006-present), Charles Schwab Bank, SSB; Director (Nov. 2017-present), Charles Schwab Premier Bank, SSB; Director (July 2019-present), Charles Schwab Trust Bank; Director (May 2008-present), Chief Executive Officer (Aug. 2017-present) and President (Aug. 2017-Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020-present), TD Ameritrade Holding Corporation; Director (July 2016-Oct. 2021), Charles Schwab Investment Management, Inc. | 105  | Director (2008-present), <br> The Charles Schwab Corporation |
| Richard A. Wurster<sup>(2)(3)</sup> <br> 1973 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021-present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021-present), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021) and Senior Vice President – Advisory (May 2016-July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021-present), Schwab Holdings, Inc.; Director (Oct. 2021-present) and Chief Executive Officer (Nov. 2019-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018-Oct. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016-Apr. 2018) and President (Mar. 2017-Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016-Apr. 2018), Windhaven Investment Management, Inc. | 105  |  |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Jonathan de St. Paer <br> 1973 <br> President and Chief Executive Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019-present), President (Oct. 2018-present), Chief Operating Officer (Jan. 2021-present) and Chief Executive Officer (Apr. 2019-Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020-Mar. 2022) and Chief Operating Officer (Jan. 2021-Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019-present), President (Nov. 2018-present) and Trustee (Apr. 2019-Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (May 2022-present), Senior Vice President (Apr. 2019-May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014-Mar. 2019), Charles Schwab & Co., Inc. |
| Mark Fischer <br> 1970 <br> Chief Operating Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Chief Operating Officer (Dec. 2020-present) and Treasurer and Chief Financial Officer (Jan. 2016-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020-present) and Vice President (Oct. 2013-present), Charles Schwab Investment Management, Inc. |
| Dana Smith <br> 1965 <br> Treasurer and Chief Financial Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2023) | Treasurer and Chief Financial Officer (Jan. 2023-present) and Assistant Treasurer (Dec. 2015-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Vice President (Mar. 2022-present) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present), Charles Schwab & Co., Inc. |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Omar Aguilar <br> 1970 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Dec. 2021), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022 – present), Charles Schwab Investment Advisory, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Brett Wander <br> 1961 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| William P. McMahon, Jr. <br> 1972 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021-present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018-Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001-Apr. 2018), ThomasPartners, Inc. |
| Catherine MacGregor <br> 1964 <br> Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs <br> Chief Legal Officer, Vice President and Clerk, Laudus Trust <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022-present) and Vice President (Sept. 2005-present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (July 2005-May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005-present) and Chief Legal Officer and Clerk (Mar. 2007-present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President (Nov. 2005-Oct. 2021) and Assistant Secretary (June 2007-Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President and Assistant Secretary (Oct. 2009-Oct. 2021), Schwab ETFs. |

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<sup>(1)</sup>

Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee's twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.

?

<sup>(2)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(3)</sup>

Mr. Bettinger and Mr. Wurster are Interested Trustees. Mr. Bettinger and Mr. Wurster are Interested Trustees because each owns stock of CSC, the parent company of Schwab Asset Management, the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc., the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust.

<sup>(4)</sup>

The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

#### Board Leadership Structure
The Chairman of the Board, Walter W. Bettinger II, is Chief Executive Officer and a member of the Board of Directors of CSC and an interested person of the Trust as that term is defined in the 1940 Act. The Board is comprised of a super-majority (75 percent) of trustees who are not interested persons of the Trust (i.e., independent trustees). The Trust does not have a single lead independent trustee. There are three primary committees of the Board: the Audit, Compliance and Valuation Committee; the Governance Committee; and the Investment Oversight Committee. Each of the Committees is chaired by an independent trustee, and each Committee is currently comprised solely of independent trustees. The Committee chairs preside at Committee meetings, participate in formulating agendas for those meetings, and coordinate with management to serve as a liaison between the independent trustees and management on matters within the scope of the responsibilities of each Committee as set forth in its Board-approved charter. The Board has determined that this leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the independent trustees of the Trust constitute a super-majority of the Board, the fact that Committee chairs are independent trustees, the number of funds (and classes) overseen by the Board, and the total number of trustees on the Board.

#### Board Oversight of Risk Management
Like most investment companies, fund management and its other service providers have responsibility for day-to-day risk management for the funds. The Board's duties, as part of its risk oversight of the Trust, consist of monitoring risks identified during regular and special reports to the Committees of the Board, as well as regular and special reports to the full Board. In addition to monitoring such risks, the Committees and the Board oversee efforts of fund management and service providers to manage risks to which the funds of the Trust may be exposed. For example, the Investment Oversight Committee meets with portfolio managers and receives regular reports regarding investment risk and credit risk of a fund's portfolio. The Audit, Compliance and Valuation Committee meets with the funds' Chief Compliance Officer and Chief Financial Officer and receives regular reports regarding compliance risks, operational risks and risks related to the valuation and liquidity of portfolio securities. From its review of these reports and discussions with management, each Committee receives information about the material risks of the funds of the Trust and about how management and service providers mitigate those risks, enabling the independent Committee chairs and other independent members of the Committees to discuss these risks with the full Board.

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The Board recognizes that not all risks that may affect the funds can be identified nor can processes and controls be developed to eliminate or mitigate the occurrence or effects of certain risks; some risks are simply beyond the reasonable control of the funds, their management, and service providers. Although the risk oversight functions of the Board, and the risk management policies of fund management and fund service providers, are designed to be effective, there is no guarantee that they will eliminate or mitigate all risks. In addition, it may be necessary to bear certain risks (such as investment-related risks) to achieve each fund's investment objective. As a result of the foregoing and other factors, the funds' ability to manage risk is subject to significant limitations.

#### Individual Trustee Qualifications
The Board has concluded that each of the trustees should initially and continue to serve on the Board because of (i) his or her ability to review and understand information about the Trust provided to them by management, to identify and request other information they may deem relevant to the performance of their duties, to question management regarding material factors bearing on the management of the Trust, and to exercise their business judgment in a manner that serves the best interests of the Trust's shareholders and (ii) the trustee's experience, qualifications, attributes or skills as described below.

The Board has concluded that Mr. Beer should serve as trustee of the Trust because of the experience he gained serving as director, president and chief executive officer of Principal Funds and his knowledge and experience in the investment management industry.

The Board has concluded that Mr. Bettinger should serve as trustee of the Trust because of the experience he gained as president and chief executive officer of The Charles Schwab Corporation, his knowledge of and experience in the financial services industry, and the experience he has gained serving as trustee of the Schwab Funds since 2008, the Schwab ETFs since 2009, and the Laudus Trust since 2010.

The Board has concluded that Mr. Burns should serve as trustee of the Trust because of the experience he gained as managing director of Pacific Investment Management Company, LLC (PIMCO) and president of PIMCO Funds as well as the experience he has gained serving as trustee of the Schwab ETFs since 2009, and the Schwab Funds and Laudus Trust since 2016.

The Board has concluded that Ms. Heller should serve as trustee of the Trust because of the experience she gained as president of TIAA Charitable and as senior managing director at TIAA, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2018.

The Board has concluded that Mr. Mahoney should serve as trustee of the Trust because of the experience he gained serving as trustee of the Schwab Funds and Laudus Trust since 2011 and Schwab ETFs since 2016, as co-chief executive officer of McKesson Corporation, and his service on other public company boards.

The Board has concluded that Ms. Moncreiff should serve as trustee of the Trust because of the experience she gained as chief investment officer of CareGroup Healthcare System, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2019.

The Board has concluded that Ms. Patmore should serve as trustee of the Trust because of the experience she gained serving as chief financial officer and executive vice president of First Data Corporation, her knowledge of and experience in management consulting, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2016.

The Board has concluded that Mr. Penn should serve as trustee of the Trust because of the experience he gained as head of equity sales and trading of BNY Mellon and his knowledge of and experience in the financial services industry, as well as the experience he has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2021.

The Board has concluded that Mr. Wurster should serve as trustee of the Trust because of the experience he gained leading investment advisory firms and organizations, including Schwab Asset Management, and his knowledge of and experience in the investment management industry.

#### Trustee Committees
The Board has established certain committees and adopted Committee charters with respect to those committees, each as described below:

<sup>●</sup>

The Audit, Compliance and Valuation Committee reviews the integrity of the Trust's financial reporting processes and compliance policies, procedures and processes, and the Trust's overall system of internal controls. The Audit, Compliance and Valuation Committee also reviews and evaluates the qualifications, independence and performance of the Trust's independent auditors, and the implementation and operation of the Trust's valuation policy and procedures. This Committee is comprised of at least three independent trustees and currently has the following members: Kimberly S. Patmore (Chair), Michael J. Beer and J. Derek Penn. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Governance Committee reviews and makes recommendations to the Board regarding Trust governance-related matters, including but not limited to Board compensation practices, retirement policies and term limits, Board self-evaluations, the effectiveness and allocation of assignments and functions by the Board, the composition of Committees of the Board, and the training of trustees.

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The Governance Committee is responsible for selecting and nominating candidates to serve as trustees. The Governance Committee does not have a written policy with respect to consideration of candidates for trustee submitted by shareholders. However, if the Governance Committee determined that it would be in the best interests of the Trust to fill a vacancy on the Board, and a shareholder submitted a candidate for consideration by the Board to fill the vacancy, the Governance Committee would evaluate that candidate in the same manner as it evaluates nominees identified by the Governance Committee. Nominee recommendations may be submitted to the Secretary of the Trust at the Trust's principal business address. This Committee is comprised of at least three independent trustees and currently has the following members: David L. Mahoney (Chair), Robert W. Burns and Kimberly S. Patmore. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Investment Oversight Committee reviews the investment activities of the Trust and the performance of the funds' investment adviser. This Committee is comprised of at least three trustees (at least two-thirds of whom shall be independent trustees) and currently has the following members: Jane P. Moncreiff (Chair), Robert W. Burns, Nancy F. Heller and David L. Mahoney. The Committee met four times during the most recent fiscal year.

#### Trustee Compensation
The following table provides trustee compensation for the fiscal year ended October 31, 2022, earned with respect to the funds in this SAI and the Fund Complex.

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| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Aggregate Compensation <br> from the Funds in this SAI**  | **Pension or Retirement Benefits <br> Accrued as Part of Fund Expenses**  | **Total Compensation from the Funds <br> and Fund Complex Paid to Trustees**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II |  | N/A  |  |
| Richard A. Wurster<sup>(1)</sup> |  | N/A  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(1)</sup> | $1669 | N/A  | $82500 |
| Robert W. Burns | $7076 | N/A  | $330000 |
| Nancy F. Heller | $7076 | N/A  | $330000 |
| David L. Mahoney | $7505 | N/A  | $350000 |
| Jane P. Moncreiff | $7505 | N/A  | $350000 |
| Kiran M. Patel<sup>(2)</sup> | $7505 | N/A  | $350000 |
| Kimberly S. Patmore | $7076 | N/A  | $330000 |
| J. Derek Penn | $7076 | N/A  | $330000 |

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<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

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<sup>(2)</sup>

Mr. Patel retired from the Board effective December 31, 2022.

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#### Securities Beneficially Owned by Each Trustee
The following table provides each trustee's equity ownership of the funds and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2022.

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Walter W. Bettinger II**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **Richard A. Wurster<sup>(1)</sup>**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Michael J. Beer<sup>(1)</sup>**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **Robert W. Burns**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **Nancy F. Heller**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **David L. Mahoney**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **Jane P. Moncreiff**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **Kimberly S. Patmore**  |  | Over $100,000  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |
| **J. Derek Penn** |  |  |
|  | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab International Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund |  |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

As of December 31, 2022, none of the independent trustees or their immediate family members owned beneficially or of record any securities of Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Schwab Asset Management or Schwab or any sub-advisers or the distributor of the funds.

#### Deferred Compensation Plan
Independent trustees may enter into a fee deferral plan. Under this plan, deferred fees will be credited to an account established by the Trust as of the date that such fees would have been paid to the trustee. The value of this account will equal the value that the account would have if the fees credited to the account had been invested in the shares of Schwab Funds selected by the trustee. Currently, none of the independent trustees has elected to participate in this plan.

#### Code of Ethics
The funds, the investment adviser and Schwab have adopted a Code of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Code of Ethics permits the trustees, directors, officers or advisory representatives of the funds or the investment adviser or the directors or officers of Schwab to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the funds. Securities transactions by some of these individuals may be subject to prior approval of the investment adviser's Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

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#### CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2023, the officers and trustees of the Trust, as a group owned, of record or beneficially, less than 1% of the outstanding voting securities of each fund.

As of January 31, 2023, the following persons or entities owned, of record or beneficially, 5% or more of the outstanding voting securities of each fund (a shareholder's or an entity's address will be listed once at the first mention and not repeated for future entries):

---

| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Large-Cap Growth Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N <br> 211 Main Street <br> San Francisco, CA 94105-1905 | 92.93% |
| Schwab Core Equity Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 93.86% |
| Schwab Core Equity Fund  | Schwab Balanced Fund (SWOBX) <br> 211 Main Street <br> San Francisco, CA 94105 | 13.22%<sup>(1)</sup> |
| Schwab International Core Equity Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 95.07% |
| Schwab International Core Equity Fund  | Schwab Target 2040 Fund (SWERX) <br> 211 Main Street <br> San Francisco, CA 94105 | 15.51%<sup>(1)</sup> |
| Schwab International Core Equity Fund  | Schwab Target 2030 Fund (SWDRX) <br> 211 Main Street <br> San Francisco, CA 94105 | 11.04%<sup>(1)</sup> |
| Schwab International Core Equity Fund  | Schwab Target 2035 Fund (SWIRX) <br> 211 Main Street <br> San Francisco, CA 94105 | 7.03%<sup>(1)</sup> |
| Schwab Dividend Equity Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N | 91.92% |
| Schwab Small-Cap Equity Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 97.17% |
| Schwab Small-Cap Equity Fund  | Schwab Balanced Fund (SWOBX) | 9.86%<sup>(1)</sup> |
| Schwab Small-Cap Equity Fund  | Schwab Target 2040 Fund (SWERX) | 7.85%<sup>(1)</sup> |
| Schwab Small-Cap Equity Fund  | Schwab Target 2030 Fund (SWDRX) | 5.15%<sup>(1)</sup> |
| Schwab Health Care Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N | 88.33% |

---

<sup>(1)</sup>

These shares are held within the Charles Schwab & Co., Inc. account listed elsewhere in the table.

Persons who beneficially own more than 25% of a fund may be deemed to control the fund. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of such fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.

#### INVESTMENT ADVISORY AND OTHER SERVICES

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 211 Main Street, San Francisco, CA 94105, serves as each fund's investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (Advisory Agreement) between it and the Trust. Schwab is an affiliate of Schwab Asset Management and is the Trust's distributor. Charles R. Schwab is the founder, Chairman and Director of CSC. As a result of his ownership of and interests in CSC, Mr. Schwab may be deemed to be a controlling person of Schwab Asset Management and Schwab.

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#### Advisory Agreement
The continuation of a fund's Advisory Agreement must be specifically approved at least annually (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (independent trustees), cast in person, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, at a meeting called for the purpose of voting on such approval.

Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement between the Trust and Schwab Asset Management with respect to existing funds in the Trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Schwab Asset Management, as well as extensive data provided by third parties, and the independent trustees receive advice from counsel to the independent trustees.

As described below, the investment adviser is entitled to receive from each fund an annual fee, payable monthly, for its advisory and administrative services to each fund.

The table below sets forth the advisory fees paid by the funds to the investment adviser for the past three fiscal years. The figures in the "net fees paid" row represent the actual amounts paid to the investment adviser, which include the effect of any reductions due to the application of a fund's expense limitation (expense cap). The figures in the "gross fees reduced by" row represent the amount, if any, the advisory fees payable to the investment adviser were reduced due to the application of a fund's expense cap.

The expense cap is not intended to cover all fund expenses, and a fund's expenses may exceed the expense cap. For example, the expense cap does not cover investment-related expenses, such as brokerage commissions, interest, taxes and the fees and expenses of pooled investment vehicles, such as ETFs, REITs, and other investment companies, that are held by the funds, nor does it cover extraordinary or non-routine expenses, such as shareholder meeting costs.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Fund and Advisory Fee Schedule**  |  | **2022**  | **2021**  | **2020**  | **Expense <br> Cap**  |
| **Schwab Large-Cap Growth Fund** <br> 0.72% of the fund's average daily net assets  | Net fees paid:  | $1762104 | $1737112 | $1343941 | 0.99% |
| **Schwab Large-Cap Growth Fund** <br> 0.72% of the fund's average daily net assets  | Gross fees reduced by: | $72581 | $81036 | $46229 |  |
| **Schwab Core Equity Fund** <br> 0.47% of the fund's average daily net assets  | Net fees paid:  | $7063747 | $9120924 | $9713496 | 0.75% |
| **Schwab Core Equity Fund** <br> 0.47% of the fund's average daily net assets  | Gross fees reduced by: | $0 | $0 | $0 |  |
| **Schwab International Core Equity Fund** <br> 0.58% of the fund's average daily net assets  | Net fees paid  | $3414620 | $4123846 | $4506556 | 0.86% |
| **Schwab International Core Equity Fund** <br> 0.58% of the fund's average daily net assets  | Gross fees reduced by: | $110440 | $16426 | $101087 |  |
| **Schwab Dividend Equity Fund** <br> 0.62% of the fund's average daily net assets  | Net fees paid:  | $3668947 | $3916115 | $4270210 | 0.89% |
| **Schwab Dividend Equity Fund** <br> 0.62% of the fund's average daily net assets  | Gross fees reduced by: | $55121 | $43666 | $27768 |  |
| **Schwab Small-Cap Equity Fund** <br> 0.81% of the fund's average daily net assets  | Net fees paid:  | $4823124 | $5098257 | $4069530 | 1.12% |
| **Schwab Small-Cap Equity Fund** <br> 0.81% of the fund's average daily net assets  | Gross fees reduced by: | $0 | $0 | $0 |  |
| **Schwab Health Care Fund** <br> 0.54% of the fund's average daily net assets not in excess of $500 million; <br> 0.515% of such net assets over $500 million but not in excess of $1 billion; <br> and 0.49% of such net assets over $1 billion  | Net fees paid:  | $4489115 | $4432806 | $4101607 | 0.82% |
| **Schwab Health Care Fund** <br> 0.54% of the fund's average daily net assets not in excess of $500 million; <br> 0.515% of such net assets over $500 million but not in excess of $1 billion; <br> and 0.49% of such net assets over $1 billion  | Gross fees reduced by: | $0 | $0 | $0 |  |

---

#### Distributor
Pursuant to a Second Amended and Restated Distribution Agreement between Schwab and the Trust, Schwab, located at 211 Main Street, San Francisco, CA 94105, is the principal underwriter for shares of the funds and is the Trust's agent for the purpose of the continuous offering of the funds' shares. The funds pay for prospectuses and shareholder reports to be prepared and delivered to existing shareholders. Schwab pays such costs when the described materials are used in connection with the offering of shares to prospective investors and for supplemental sales literature and advertising. Schwab receives no fee under the Distribution Agreement; however, as described below in "Payments to Financial Intermediaries," Schwab Asset Management compensates Schwab, in its capacity as a financial intermediary and not in its capacity as distributor and principal underwriter for the funds, for providing certain additional services that may be deemed to be distribution-related.

#### Payments to Financial Intermediaries
Schwab Asset Management and its affiliates make payments to certain broker-dealers, banks, trust companies, insurance companies, retirement plan service providers, consultants and other financial intermediaries (Intermediaries) for services and expenses incurred in connection with certain activities or services which may educate financial advisors or facilitate, directly or indirectly, investment in the funds and other investment companies advised by Schwab Asset Management, including the Schwab ETFs. These payments are made by Schwab Asset Management or its affiliates at their own expense, and not from the assets of the funds. Although a portion of Schwab Asset Management's and its affiliates' revenue comes directly or indirectly in part from fees paid by the funds, these payments do not increase the expenses paid by investors for the purchase of fund shares, or the cost of owning a fund.

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These payments may relate to educational efforts regarding the funds, or for other activities, such as marketing and/or fund promotion activities and presentations, educational training programs, conferences, data analytics and support, or the development and support of technology platforms and/or reporting systems. In addition, Schwab Asset Management or its affiliates make payments to certain Intermediaries that make shares of the funds available to their customers or otherwise promote the funds, which may include Intermediaries that allow customers to buy and sell fund shares without paying a commission or other transaction charge. Payments of this type are sometimes referred to as revenue-sharing or marketing support.

Payments made to Intermediaries may be significant and may cause an Intermediary to make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive. As a result, these payments could create conflicts of interest between an Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the funds over other investments.

As of February 27, 2023, Schwab Asset Management anticipates that Envestnet Asset Management, Inc., E\*TRADE Securities LLC, Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, Principal Life Insurance Company and Teachers Insurance and Annuity Association of America will receive these payments. Schwab Asset Management may enter into similar agreements with other FINRA member firms (or their affiliates) in the future. In addition to member firms of FINRA, Schwab Asset Management and its affiliates may also make these payments to certain other financial intermediaries, such as banks, trust companies, insurance companies, and plan administrators and consultants that sell fund shares or provide services to the funds and their shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments.

Schwab Asset Management also makes payments to Schwab for certain administrative, professional and support services provided by Schwab, in its capacity as an affiliated financial intermediary and not as distributor and principal underwriter of the funds. These payments reimburse Schwab for its charges, costs and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support and technology.

#### Shareholder Servicing Plan
The Trust's Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables the funds to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain shareholder services to the current shareholders of the funds. Pursuant to the Plan, each fund is subject to an annual shareholder servicing fee, up to the amount set forth below:

---

| | |
|:---|:---|
| **Fund**  | **Shareholder Servicing Fee**  |
| Schwab Large-Cap Growth Fund | 0.25% |
| Schwab Core Equity Fund | 0.25% |
| Schwab International Core Equity Fund | 0.25% |
| Schwab Dividend Equity Fund | 0.25% |
| Schwab Small-Cap Equity Fund | 0.25% |
| Schwab Health Care Fund | 0.25% |

---

Pursuant to the Plan, the funds may pay service providers (including Schwab) that, pursuant to written agreements with Schwab or the Trust, provide certain account maintenance, customer liaison and shareholder services to fund shareholders. The service providers may provide fund shareholders with the following shareholder services, among other shareholder services: (i) maintaining records for shareholders that hold shares of a fund; (ii) communicating with shareholders, including the mailing of regular statements and confirmation statements, distributing fund-related materials, mailing prospectuses and reports to shareholders, and responding to shareholder inquiries; (iii) communicating and processing shareholder purchase, redemption and exchange orders; (iv) communicating mergers, splits or other reorganization activities to fund shareholders; and (v) preparing and filing tax information, returns and reports.

The shareholder servicing fee paid to a particular service provider is calculated at the annual rate set forth in the chart above and is based on the average daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

The Plan shall continue in effect for a fund for so long as its continuance is specifically approved at least annually by a vote of the majority of both (i) the Board of the Trust and (ii) the Trustees of the Trust who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it (the Qualified Trustees). The Plan requires that Schwab or any person

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authorized to direct the disposition of monies paid or payable by the funds pursuant to the Plan furnish quarterly written reports of amounts spent under the Plan and the purposes of such expenditures to the Board of the Trust for review. All material amendments to the Plan must be approved by votes of the majority of both (i) the Board and (ii) the Qualified Trustees.

#### Transfer Agent
BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581, serves as the funds' transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the funds' shares.

#### Custodians and Fund Accountant
Citibank, N.A. (Citibank), 388 Greenwich Street, New York, NY 10013 serves as custodian for the following funds:

Schwab Large-Cap Growth Fund

Schwab Dividend Equity Fund

Schwab Small-Cap Equity Fund

Schwab Health Care Fund

State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, MA, 02111, serves as custodian for the following funds:

Schwab Core Equity Fund

Schwab International Core Equity Fund

State Street also serves as fund accountant for each of the funds.

The custodians are responsible for the daily safekeeping of securities and cash held by the funds. The fund accountant maintains all books and records related to the funds' transactions.

#### Independent Registered Public Accounting Firm
The funds' independent registered public accounting firm, Deloitte & Touche LLP (Deloitte), 1601 Wewatta Street, Suite 400, Denver, CO 80202, audits and reports on the annual financial statements of the funds and reviews certain regulatory reports. Deloitte or one of its affiliates also reviews each fund's federal income tax returns and performs other professional, accounting, auditing, tax and advisory services when engaged to do so by the Trust.

#### Other Services
With respect to the Schwab Active Equity Funds, Schwab provides the investment adviser with quantitative analyses of the relative attractiveness of stocks in which these funds might invest. Pursuant to an agreement between the investment adviser and Schwab, the investment adviser pays Schwab a fixed annual fee for these services.

#### Securities Lending Activities
Effective May 23, 2022, Citibank is the securities lending agent for the Schwab Large-Cap Growth Fund, Schwab Dividend Equity Fund, Schwab Small-Cap Equity Fund and Schwab Health Care Fund. Prior to May 23, 2022, Brown Brothers Harriman & Co. was the securities lending agent for the Schwab Large-Cap Growth Fund, Schwab Dividend Equity Fund, Schwab Small-Cap Equity Fund and Schwab Health Care Fund. Goldman Sachs Bank USA (d/b/a Goldman Sachs Agency Lending) is the securities lending agent for the Schwab Core Equity Fund and Schwab International Core Equity Fund. The securities lending agents provide services to the funds which include the following: locating borrowers, negotiating the loan terms, monitoring the value of loans and collateral on a daily basis, marking each loan to market on a daily basis, coordinating collateral movements, collecting income, monitoring and processing corporate actions, managing recalls of loaned securities and termination of loans, and recordkeeping.

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The table below summarizes key information regarding the funds' securities lending activities to the extent each fund engaged in securities lending during the most recent fiscal year.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Schwab <br> Large-Cap <br> Growth Fund**  | **Schwab <br> Core <br> Equity Fund**  | **Schwab <br> International <br> Core Equity <br> Fund**  | **Schwab <br> Dividend Equity <br> Fund**  |
| **Gross income from securities lending activities** |  |  | $**169372** | $**16** |
| Fees and/or compensation paid for securities lending activities and related services:  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  |  |  | $8498 | $1 |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees deducted from <br> a pooled cash collateral reinvestment vehicle) that are not included in a revenue <br> split  |  |  | $4839 | $5 |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  |  |  | $44929 |  |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |  |  |  |
| **Aggregate fees/compensation paid for securities lending activities** |  |  | $**58266** | $**6** |
| **Net income from securities lending activities<sup>(1)</sup>** |  |  | $**111106** | $**10** |

---

---

| | | |
|:---|:---|:---|
| | **Schwab <br> Small-Cap <br> Equity Fund**  | **Schwab <br> Health <br> Care Fund**  |
| **Gross income from securities lending activities** | $**31941** |  |
| Fees and/or compensation paid for securities lending activities and related services:  |  |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  | $2002 |  |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split  | $4166 |  |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  | $5833 |  |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |  |
| **Aggregate fees/compensation paid for securities lending activities** | $**12001** |  |
| **Net income from securities lending activities<sup>(1)</sup>** | $**19940** |  |

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<sup>(1)</sup>

"Net income from securities lending activities" may not match the fund's current financial statements, which may reflect certain accrual adjustments.

#### PORTFOLIO MANAGERS
**Other Accounts.** In addition to the funds, each portfolio manager (collectively, referred to as the Portfolio Managers) is responsible for the day-to-day management of certain other accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of October 31, 2022.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Bill McMahon | 0 | $0 | 0 | $0 | 0 | $0 |
| Iain Clayton | 1 | $281856716 | 0 | $0 | 0 | $0 |
| Holly Emerson  | 1 | $281856716 | 0 | $0 | 0 | $0 |
| Brian Hillburn | 0 | $0 | 0 | $0 | 0 | $0 |
| Wei Li | 1 | $281856716 | 0 | $0 | 0 | $0 |
| Gretchen Novak  | 0 | $0 | 0 | $0 | 0 | $0 |
| Jim Serhant | 0 | $0 | 0 | $0 | 0 | $0 |

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**Conflicts of Interest.** A Portfolio Manager's management of other accounts may give rise to potential conflicts of interest in connection with his or her management of a fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts

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include separate accounts and other mutual funds advised by Schwab Asset Management (collectively, the Other Managed Accounts). The Other Managed Accounts might have similar investment objectives as a fund, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by a fund. While the Portfolio Managers' management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, Schwab Asset Management does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, Schwab Asset Management believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

*<u>Knowledge of the Timing and Size of Fund Trades.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' day-to-day management of the funds. Because of their positions with the funds, the Portfolio Managers know the size, timing, and possible market impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of a fund. However, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to index funds, which seek to track their respective benchmark indexes, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding separate accounts, with those of a fund. All aggregated orders are subject to Schwab Asset Management's aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account's order.

*<u>Investment Opportunities.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' management of a fund and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over a fund, which conflict of interest may be exacerbated to the extent that Schwab Asset Management or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the fund. Notwithstanding this theoretical conflict of interest, it is Schwab Asset Management's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for a fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for a fund in an effort to outperform its specific benchmark, such an approach might not be suitable for a fund given its investment objectives and related restrictions.

**Compensation.** During the most recent fiscal year, Portfolio Manager compensation consisted of a fixed annual (base) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual Portfolio Manager's overall performance such as the Portfolio Manager's contribution to the investment process, good corporate citizenship, risk management and mitigation, and functioning as an active contributor to the firm's success. The discretionary bonus is determined in accordance with the relevant Portfolio Manager Incentive Plan (the Plan) as follows:

There are two independent funding components for the Plan:

<sup>●</sup>

a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

<sup>●</sup>

a portion based on Corporate results

#### Investment Fund Performance
At the close of the year, each fund's performance will be determined by its 1-year, 1- and 2-year, or 1- and 3-year percentile standing (based on pre-tax return before expenses) within its designated benchmark, peer group, or category, depending on the strategy of the fund (i.e., whether the fund is passively or actively managed) using standard statistical methods approved by Schwab Asset Management senior management. Investment Fund Performance measurements may be changed or modified at the discretion of the Schwab Asset Management President and Schwab Asset Management Chief Operating Officer. As each participant may be a member of a team that manages and/or supports a number of funds, there may be several funds and/or Other Managed Accounts considered in arriving at the incentive compensation funding.

Portfolio Managers who are chief investment officers of the investment adviser are covered by a Plan that specifically includes a risk mitigation component in the funding determination.

#### Corporate Performance
The Corporate Bonus Plan is an annual bonus plan that provides discretionary awards based on the financial performance of CSC during the annual performance period. Quarterly advances may be paid for the first three quarters. Allocations are discretionary and aligned with CSC and individual performance. Funding for the Plan is determined at the conclusion of the calendar year. Funding will be capped at 200% of target.

#### Allocation of Discretionary Bonus
At year-end, funding for both components of discretionary bonus is allocated to Plan participants by Schwab Asset Management senior management based on their assessment of a variety of performance factors.

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Factors considered in Schwab Asset Management senior management's allocation process will include objective and subjective factors that will take into consideration total performance and will include, but are not limited to:

<sup>●</sup>

Fund performance relative to performance measure

<sup>●</sup>

Risk management and mitigation

<sup>●</sup>

Individual performance against key objectives

<sup>●</sup>

Contribution to overall group results

<sup>●</sup>

Functioning as an active contributor to the firm's success

<sup>●</sup>

Team work

<sup>●</sup>

Collaboration between Analysts and Portfolio Managers

<sup>●</sup>

Regulatory/Compliance management

The Portfolio Managers' compensation is not based on the value of the assets held in a fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares.** The following table shows the dollar amount range of the Portfolio Managers' "beneficial ownership" of shares of the funds they managed as of October 31, 2022. Dollar amount ranges disclosed are established by the SEC. "Beneficial ownership" is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (1934 Act).

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range**  |
| Bill McMahon | Schwab Large-Cap Growth Fund |  |
|  | Schwab Core Equity Fund |  |
|  | Schwab Dividend Equity Fund |  |
| Iain Clayton | Schwab Core Equity Fund | $10001-$50000  |
|  | Schwab International Core Equity Fund | $10001-$50000  |
|  | Schwab Small-Cap Equity Fund |  |
|  | Schwab Health Care Fund | $10001-$50000  |
| Holly Emerson | Schwab Large-Cap Growth Fund |  |
|  | Schwab Small-Cap Equity Fund |  |
| Brian Hillburn | Schwab Core Equity Fund | $100001-$500000  |
| Wei Li | Schwab International Core Equity Fund | $10001-$50000  |
|  | Schwab Dividend Equity Fund | $1-$10000  |
|  | Schwab Small-Cap Equity Fund | $1-$10000  |
|  | Schwab Health Care Fund |  |
| Gretchen Novak | Schwab Large-Cap Growth Fund | $50001-$100000  |
| Jim Serhant | Schwab Dividend Equity Fund |  |

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#### BROKERAGE ALLOCATION AND OTHER PRACTICES

#### Portfolio Turnover
For reporting purposes, a fund's portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (short-term securities) are excluded. Securities delivered in the processing of in-kind redemptions are also excluded from the calculation.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate higher capital gains and transaction costs, such as brokerage commissions.

Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, and/or changes in the investment adviser's investment outlook.

The portfolio turnover rate for each of the funds for the past two fiscal years is as follows.

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| | | |
|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  |
| Schwab Large-Cap Growth Fund | 19% | 42% |
| Schwab Core Equity Fund | 28% | 86% |
| Schwab International Core Equity Fund | 94% | 103% |
| Schwab Dividend Equity Fund | 27% | 83% |
| Schwab Small-Cap Equity Fund | 74% | 84% |
| Schwab Health Care Fund | 59% | 70% |

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#### Portfolio Transactions
The investment adviser makes decisions with respect to the purchase and sale of portfolio securities on behalf of the funds. The investment adviser is responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. A fund generally does not incur any commissions or sales charges when it invests in underlying Schwab Funds, but it may incur such costs if it invests directly in other types of securities or in unaffiliated funds. Purchases and sales of securities on a stock exchange, including ETF shares, or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed-income securities may be transacted with the issuer, the issuer's underwriter or a dealer. The funds do not usually pay brokerage commissions on purchases and sales of fixed-income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The prices the funds pay to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the funds may invest are traded primarily in the over-the-counter market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the funds will primarily consist of dealer spreads and brokerage commissions.

The investment adviser seeks to obtain the best execution for the funds' portfolio transactions. The investment adviser may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following: execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling; provision of additional brokerage or research services or products; whether a broker guarantees that a fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to "market-on-close" pricing aligns with fund objectives; or whether a broker guarantees that a fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser believes that VWAP execution is in a fund's best interest. In addition, the investment adviser may have incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser may cause a fund to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: company financial data and economic data (e.g., unemployment, inflation rates and GDP figures), stock quotes, last sale prices and trading volumes, research reports analyzing the performance of a particular company or stock, narrowly distributed trade magazines or technical journals covering specific industries, products, or issuers, seminars or conferences registration fees which provide substantive content relating to eligible research, quantitative analytical software and software that provides analyses of securities portfolios, trading strategies and pre/post trade analytics, discussions with research analysts or meetings with corporate executives which provide a means of obtaining oral advice on securities, markets or particular issuers, short-term custody related to effecting particular transactions and clearance and settlement of those trades, lines between the broker-dealer and order management systems operated by a third party vendor, dedicated lines between the broker-dealer and the investment adviser's order management system, dedicated lines providing direct dial-up service between the investment adviser and the trading desk at the broker-dealer, message services used to transmit orders to broker-dealers for execution, electronic communication of allocation instructions between institutions and broker-dealers, comparison services required by the SEC or another regulator (e.g., use of electronic confirmation and affirmation of institutional trades), exchange of messages among broker-dealers, custodians, and institutions related to a trade, post-trade matching of trade information, routing settlement instructions to custodian banks and broker-dealers' clearing agents, software that provides algorithmic trading strategies, and trading software operated by a broker-dealer to route orders to market centers or direct market access systems. The investment adviser may use research services furnished by brokers or dealers in servicing all client accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser may receive a service from a broker or dealer that has both a "research" and a "non-research" use. When this occurs, the investment adviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service.

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The percentage of the service that is used for research purposes may be paid for with client commissions or spreads, while the investment adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser faces a potential conflict of interest, but the investment adviser believes that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser may purchase for the funds, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will provide research "credits" in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the 1934 Act.

The investment adviser may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable funds to trade directly with other institutional holders. At times, this may allow funds to trade larger blocks than would be possible trading through a single market maker.

The investment adviser may aggregate securities sales or purchases among two or more funds. The investment adviser will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of a fund are aggregated with other accounts managed by the investment adviser, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

In determining when and to what extent to use Schwab or any other affiliated broker-dealer as its broker for executing orders for the funds on securities exchanges, the investment adviser follows procedures, adopted by the funds' Board, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

#### Brokerage Commissions
For each of the last three fiscal years, the funds paid the following brokerage commissions. Variances in brokerage commissions paid by a fund from year to year are due to increases and decreases in portfolio turnover in response to asset flows and fluctuations in trading activity to meet shareholder purchase and redemption orders.

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| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| Schwab Large-Cap Growth Fund | $4691 | $16997 | $29109 |
| Schwab Core Equity Fund | $141125 | $465507 | $553490 |
| Schwab International Core Equity Fund | $384481 | $597618 | $702764 |
| Schwab Dividend Equity Fund | $87531 | $177809 | $251402 |
| Schwab Small-Cap Equity Fund | $260768 | $329366 | $487678 |
| Schwab Health Care Fund | $172134 | $210771 | $232380 |

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#### Regular Broker-Dealers
During the fiscal year, certain of the funds held securities issued by their respective "regular broker-dealers" (as defined in Rule 10b-1 under the 1940 Act), indicated below as of October 31, 2022.

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| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
| Schwab Large-Cap Growth Fund |  | N/A |
| Schwab Core Equity Fund | BofA Securities, Inc. | $21636253 |
| Schwab International Core Equity Fund | UBS Securities LLC | $6853369 |
| Schwab Dividend Equity Fund | J.P. Morgan Securities LLC | $15735000 |
|  | Morgan Stanley & Co. LLC | $12736350 |
| Schwab Small-Cap Equity Fund |  | N/A |
| Schwab Health Care Fund |  | N/A |

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#### PROXY VOTING
The Board has delegated the responsibility for voting proxies to Schwab Asset Management, pursuant to the investment adviser's Proxy Voting Policy with respect to proxies voted on behalf of the various Schwab Funds' portfolios. A description of such Proxy Voting Policy is included in Appendix – Proxy Voting Policy.

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The Trust is required to disclose annually a fund's complete proxy voting record on Form N-PX. A fund's proxy voting record for the most recent 12-month period ended June 30th is available by visiting the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**. A fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

#### PORTFOLIO HOLDINGS DISCLOSURE
 **For this section only, the following disclosure relates to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust (collectively, the Trusts) and each series thereunder (each a fund and collectively, the funds).** 

The Trusts' Board has approved policies and procedures that govern the timing and circumstances regarding the disclosure of fund portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds' portfolio securities is in the best interests of fund shareholders, and include procedures to address conflicts between the interests of the funds' shareholders, on the one hand, and those of the funds' investment adviser, subadviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, subadviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a fund's subadviser, if applicable) to authorize the release of the funds' portfolio holdings prior to regular public disclosure (as outlined in the prospectus and below) or regular public filings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of the funds' policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities which were authorized to be provided "early disclosure" of the funds' portfolio holdings information and will periodically review any agreements that the Trusts have entered into to selectively disclose portfolio holdings.

Portfolio holdings may be made available on a selective basis to ratings agencies, certain industry organizations, consultants and other qualified financial professionals when the appropriate officer of the Trusts determines such disclosure meets the requirements noted above and serves a legitimate business purpose. Agreements entered into with such entities will describe the permitted use of portfolio holdings and provide that, among other customary confidentiality provisions: (i) the portfolio holdings will be kept confidential; (ii) the person will not trade on the basis of any material non-public information; and (iii) the information will be used only for the purpose described in the agreement.

The funds' service providers including, without limitation, the investment adviser, subadvisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser, counsel, auditor, proxy voting service provider, pricing information vendors, trade execution measurement vendors, portfolio management system providers, cloud database providers, securities lending agents, publisher, printer and mailing agent may receive disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Schwab Asset Management, any subadviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street and/or Brown Brothers Harriman & Co., as service providers to the funds, are currently receiving this information on a daily basis. Donnelley Financial Solutions, as a service provider to the funds, is currently receiving this information on a quarterly basis. Deloitte, the Transfer Agent, and the Distributor, as service providers to the funds, receive this information on an as-needed basis. Service providers are subject to a duty of confidentiality with respect to any portfolio holdings information they receive whether imposed by the confidentiality provisions of the service providers' agreements with the Trusts or by the nature of its relationship with the Trusts. Although certain of the service providers are not under formal confidentiality obligations in connection with disclosure of portfolio holdings, a fund will not continue to conduct business with a service provider who the fund believes is misusing the disclosed information.

To the extent that a fund invests in an unaffiliated acquired fund, the Trusts will, when required by Rule 12d1-4, promptly notify the acquired fund, upon causing a fund to acquire more than 3% of the acquired fund's outstanding shares.

The funds' policies and procedures prohibit the funds, the funds' investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

Generally, a complete list of a fund's portfolio holdings is published on the fund's website www.schwabassetmanagement.com on the "Prospectus & Reports" tab under "Portfolio Holdings" generally 60-80 days after a fund's fiscal quarter-end in-line with regulatory filings unless a different timing is outlined in the fund's prospectus.

Specifically for the Schwab ETFs (other than the Schwab Ariel ESG ETF), each Schwab ETF discloses its portfolio holdings each business day on its website before the opening of regular trading on the ETF's primary listing exchange in accordance with the requirements of Rule 6c-11 under the 1940 Act. Portfolio holdings information made available in connection with the process of purchasing or redeeming Creation Units for the Schwab ETFs may be provided to other entities that provided services to the funds in the ordinary course of business after it has been disseminated to the NSCC.

The Schwab Money Funds have an ongoing arrangement to make available information about the funds' portfolio holdings and information derived from the funds' portfolio holdings to iMoneyNet, a rating and ranking organization, which is subject to a confidentiality agreement. Under its arrangement with the funds, iMoneyNet, among other things, receives information concerning the funds' net assets, yields, maturities and portfolio compositions on a weekly basis, subject to a one business day lag.

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On the website, the funds also may provide, on a monthly or quarterly basis, information regarding certain attributes of a fund's portfolio, such as a fund's top ten holdings, sector weightings, composition, credit quality and duration and maturity, as applicable. This information is generally updated within 5-25 days after the end of the period. This information on the website is publicly available to all categories of persons.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of a fund in connection with or relating to a fund or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases, commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning a fund. Commentary and analysis include, but are not limited to, the allocation of a fund's portfolio securities and other investments among various asset classes, sectors, industries, countries or other relevant category, the characteristics of the stock components and other investments of a fund, the attribution of fund returns by asset class, sector, industry, country or other relevant category, and the volatility characteristics of a fund.

#### DESCRIPTION OF THE TRUST
Each fund is a series of Schwab Capital Trust, an open-end management investment company organized as a Massachusetts business trust on May 7, 1993.

The funds may hold special shareholder meetings, which may cause the funds to incur non-routine expenses. These meetings may be called for purposes such as electing trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon.

The bylaws of the Trust provide that one-third of shares present in person or represented by proxy and entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, or of the Declaration of Trust or of the bylaws permits or requires that (1) holders of any series shall vote as a series, then one-third of the aggregate number of shares of that series present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (2) holders of any class shall vote as a class, then one-third of the aggregate number of shares of that class present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any meeting of shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date or time, whether or not a quorum is present. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. The Declaration of Trust specifically authorizes the Board to terminate the Trust (or any of its funds) by notice to the shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance, which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. There is a remote possibility that a fund could become liable for a misstatement in the prospectus or SAI about another fund.

As more fully described in the Declaration of Trust, the trustees may each year, or more frequently, distribute to the shareholders of each series accrued income less accrued expenses and any net realized capital gains less accrued expenses. Distributions of each year's income of each series shall be distributed pro rata to shareholders in proportion to the number of shares of each series held by each of them. Distributions will be paid in cash or shares or a combination thereof as determined by the trustees. Distributions paid in shares will be paid at the net asset value as determined in accordance with the bylaws.

Any series of the Trust may reorganize or merge with one or more other series of the Trust or of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the trustees and entered into by the relevant series in connection therewith. In addition, such reorganization or merger may be authorized by vote of a majority of the trustees then in office and, to the extent permitted by applicable law and the Declaration of Trust, without the approval of shareholders of any series.

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#### PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES

#### Purchasing and Redeeming Shares of the Funds
The funds are open each day that the New York Stock Exchange (NYSE) is open. The NYSE's trading session is normally conducted from 9:30 a.m. until 4:00 p.m. Eastern Time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE's trading session closes early. The NYSE typically observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although it is expected that the same holidays will be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time. Orders that are received in good order by a fund's transfer agent no later than the time specified by the Trust will be executed that day at the fund's share price calculated that day. On any day that the NYSE closes early, the funds reserve the right to advance the time by which purchase, exchange and redemption orders must be received by the funds in order to be executed that day at that day's share price. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase, exchange and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

The funds have authorized one or more financial intermediaries, including Schwab, to accept on their behalf purchase, exchange and redemption orders. Such financial intermediaries have also been authorized to designate other intermediaries to accept purchase, exchange and redemption orders on the funds' behalf. The funds will be deemed to have received a purchase, exchange or redemption order when an authorized intermediary or, if applicable, an intermediary's authorized designee, receives such order. Such orders will be priced at the respective fund's net asset value per share next determined after such orders are received by an authorized intermediary or the intermediary's authorized designee.

As long as the funds or Schwab follow reasonable procedures to confirm that an investor's telephone or internet order is genuine, they will not be liable for any losses the investor may experience due to unauthorized or fraudulent instructions. These procedures may include requiring a form of personal identification or other confirmation before acting upon any telephone or internet order, providing written confirmation of telephone or internet orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab, other authorized financial intermediaries or, for direct shareholders, by the funds' transfer agent.

The Trust's Declaration of Trust provides that shares may be automatically redeemed if held by a shareholder in an amount less than the minimum required by each fund. Each fund's minimum initial investments and minimum balance requirements, if any, are set forth in the prospectus. The minimums may be changed without prior notice.

Each of the funds has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of these limits may be paid, in whole or in part, in investment securities or in cash, as the Board may deem advisable. Payment will be made wholly in cash unless the Board believes that economic or market conditions exist that would make such payment a detriment to the best interests of a fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Pricing of Shares." A redeeming shareholder would normally incur transaction costs if he or she were to convert the securities to cash.

Each fund is designed for long-term investing. Because short-term trading activities can disrupt the smooth management of a fund and increase its expenses, each fund reserves the right, in its sole discretion, to refuse any purchase or exchange order, including any purchase or exchange order which appears to be associated with short-term trading activities or "market timing." Because market timing decisions to buy and sell securities typically are based on an individual investor's market outlook, including such factors as the perceived strength of the economy or the anticipated direction of interest rates, it is difficult for a fund to determine in advance what purchase or exchange orders may be deemed to be associated with market timing or short-term trading activities. More information regarding the funds' policies regarding "market timing" is included in the funds' prospectus.

In certain circumstances, shares of a fund may be purchased "in kind" (i.e., in exchange for securities, rather than for cash). The securities tendered as part of an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable as evidenced by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities accepted by a fund will be valued, as set forth in the fund's prospectus, as of the time of the next determination of net asset value after such acceptance. The shares of a fund that are issued to the shareholder in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of a fund and must be delivered to the fund by the investor upon receipt from the issuer. A fund will not accept securities in exchange for its shares unless such securities are, at the time of the exchange, eligible to be held by the fund and satisfy such other conditions as may be imposed by the fund's investment adviser.

#### Exchanging Shares of the Funds
Methods to purchase and redeem shares are set forth in the funds' prospectus. An exchange order involves the redemption of all or a portion of the shares of one Schwab Fund and the simultaneous purchase of shares of another Schwab Fund. Exchange orders must meet the minimum investment and any other requirements of the fund or class purchased. Exchange orders may not be executed between shares of

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Sweep Investments<sup>®</sup> and shares of non-Sweep Investments. Shares of Sweep Investments may be bought and sold automatically pursuant to the terms and conditions of your Schwab account agreement. In addition, different exchange policies may apply to Schwab Funds that are bought and sold through third-party intermediaries and the exchange privilege between Schwab Funds may not be available through third-party intermediaries.

The funds and Schwab reserve certain rights with regard to exchanging shares of the funds. These rights include the right to: (i) refuse any purchase or exchange order that may negatively impact a fund's operations; (ii) refuse orders that appear to be associated with short-term trading activities; and (iii) materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

#### Delivery of Shareholder Documents
Typically once a year, an updated prospectus will be mailed or electronically delivered to shareholders describing each fund's investment strategies, risks and shareholder policies. Twice a year, financial reports will be mailed or electronically delivered (or a notice will be mailed and financial reports will be made available on the fund's designated website) to shareholders describing each fund's performance and investment holdings. In order to eliminate duplicate mailings of shareholder documents, each household may receive one copy of these documents, under certain conditions. This practice is commonly called "householding." If you want to receive multiple copies, you may write or call your fund at the address or telephone number on the front of this SAI or contact the financial intermediary through which you hold fund shares. Your instructions will be effective within 30 days of receipt by a fund or other date as communicated by the financial intermediary.

#### Pricing of Shares
Each business day, the funds calculate their share price, net asset value per share or NAV, as of the close of the NYSE (generally 4:00 p.m. Eastern time). This means that NAVs are calculated using the values of a fund's portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available or that the investment adviser deems to be unreliable are required to be valued at fair value following procedures approved by the Board. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

To the extent a fund invests in foreign securities, shareholders of funds that invest in foreign securities should be aware that because foreign markets are often open on weekends and other days when the funds are closed, the value of some of a fund's securities may change on days when it is not possible to buy or sell shares of the fund.

The funds use approved pricing sources (including pricing services) to provide values for their portfolio securities. Values are generally determined by the approved pricing sources as follows: generally securities traded on stock exchanges, excluding the NASDAQ National Market System, are valued at the last-quoted sales price on the exchange on which such securities are primarily traded (closing values), or, lacking any sales, at the mean between the bid and ask prices; securities traded in the over-the-counter market are generally valued at an evaluated price using a mid-price as supplied by an approved, independent pricing service. The mid-price is the mean of the bid and ask prices as calculated by the pricing service. Generally, securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the official closing price or last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate. Fixed income securities normally are valued based on valuations provided by approved pricing services. Securities will be fair valued pursuant to procedures approved by the funds' Board when market quotations are not "readily available" or the investment adviser deems them unreliable. For example, the fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market. The Board has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments. The Valuation Designee periodically provides reports to the Board on items related to its fair value of fund investments.

#### TAXATION
This discussion of U.S. federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

#### Federal Tax Information for the Funds
It is each fund's policy to qualify for taxation as a "regulated investment company" (RIC) by meeting the requirements of Subchapter M of the Internal Revenue Code. By qualifying as a RIC, each fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If a fund does not qualify as a RIC under the Internal Revenue Code, it will be subject to federal income tax on its net investment

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income and any net realized capital gains. In addition, each fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

Each fund is treated as a separate entity for federal income tax purposes and is not combined with the Trust's other funds. Each fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, a fund must, among other requirements, distribute annually to its shareholders an amount at least equal to the sum of 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and 90% of its net tax-exempt income. Among these requirements are the following: (i) at least 90% of a fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of a fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as "qualified publicly traded partnerships" for purposes of the Subchapter M diversification rules described above. In order to do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, the partnership must meet the 90% gross income requirements for the exception from treatment as a corporation with gross income other than income consisting of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Internal Revenue Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as defined in the Internal Revenue Code) for the calendar year plus 98.2% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, a fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year and certain amounts with respect to which estimated taxes are paid in such calendar year. A fund may in certain circumstances be required to liquidate fund investments to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of a fund to satisfy the requirements for qualification as a RIC.

A fund's transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Internal Revenue Code and are subject to special tax rules. In a given case, these rules may accelerate income to a fund, defer its losses, cause adjustments in the holding periods of a fund's assets, convert short-term capital losses into long-term capital losses or otherwise affect the character of a fund's income. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of a fund and its shareholders.

Each fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. Each fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. Each fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund's fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon or other securities which are sold at original issue discount and thus do not make periodic cash interest payments, a fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any corresponding interest payments on such obligations during that period. Because each fund distributes all of its net investment income to its shareholders, a fund may have to sell fund securities to distribute such imputed income which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

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#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in each fund's prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of the funds. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in the funds.

Any dividends declared by a fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by a fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced rates to individuals as described below) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of the fund become ex-dividend with respect to such dividend (and the fund must also satisfy those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by each fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gains (if any) that are reported as capital gain dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of a fund. However, if you receive a capital gain dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gain dividend, be treated as a long-term capital loss. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the taxpayer's income exceeds certain threshold amounts.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

A fund will inform you of the amount of your ordinary income dividends and capital gains distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year. For corporate investors in a fund, dividend distributions the fund reports as dividends received from qualifying domestic corporations will be eligible for the 50% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by a fund also may be subject to state, local and foreign taxes, and their treatment under applicable tax laws may differ from the federal income tax treatment.

If a fund makes a distribution to a shareholder in excess of a fund's current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of the shareholder's tax basis in its shares, and thereafter, as capital gain. A return of capital is not taxable, but reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. To the extent that a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares.

A fund will be required in certain cases to withhold at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends and redemption proceeds paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to "backup withholding;" or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on taxable distributions derived from net investment income and short-term capital gains; provided, however, that U.S. source interest related dividends and short-term capital gain dividends generally are not subject to U.S. withholding taxes if a fund elects to make reports with respect to such dividends. Distributions to foreign shareholders of such short-term capital gain dividends and long-term capital gains, and any gains from the sale or other disposition of shares of a fund, generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Internal Revenue Code's definition of "resident alien" or (2) is physically present in the U.S. for 183 days or more per year. Foreign shareholders may also be subject to U.S. estate taxes with respect to shares in a fund. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United

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States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Notwithstanding the foregoing, income, if any, derived by a fund from investments in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) may be classified as "excess inclusion income." With respect to foreign shareholders, no exemption or reduction in withholding tax will apply to such excess inclusion income.

The funds are required to withhold U.S. tax (at a 30% rate) on payments of dividends made to certain non-U.S. entities that fail to comply with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, each fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in a fund where, for example, (i) the fund invests in REITs that hold residual interests in REMICs or (ii) shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special rules and should consult their tax advisors. There are no restrictions preventing a fund from holding investments in REITs that hold residual interests in REMICs, and a fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

For taxable years beginning after 2017 and before 2026, non-corporate taxpayers generally may deduct 20% of "qualified business income" derived either directly or through partnerships or S corporations. For this purpose, "qualified business income" generally includes ordinary REIT dividends and income derived from MLP investments. A fund is permitted to pass through to shareholders the character of ordinary REIT dividends so as to allow non-corporate shareholders to claim this deduction. There currently is no mechanism for a fund to pass through to non-corporate shareholders the character of income derived from MLP investments. It is uncertain whether future legislation or other guidance will enable the funds to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

Income that Schwab International Core Equity Fund, Schwab Dividend Equity Fund or Schwab Health Care Fund receives from sources within various foreign countries may be subject to foreign income taxes withheld at the source. If any of these funds has more than 50% of its assets invested in foreign securities at the end of its taxable year, it may elect to "pass through" to its shareholders the ability to take either the foreign tax credit or the deduction for foreign taxes. Pursuant to this election, U.S. shareholders must include in gross income, even though not actually received, their respective pro rata share of foreign taxes, and may either deduct their pro rata share of foreign taxes (but not for alternative minimum tax purposes) or credit the tax against U.S. income taxes, subject to certain limitations described in Internal Revenue Code sections 901 and 904. A shareholder who does not itemize deductions may not claim a deduction for foreign taxes. It is expected that the Schwab International Core Equity Fund will have more than 50% of the value of its total assets at the close of its taxable year invested in foreign securities, and that it will make this election. It is expected that the Schwab Dividend Equity Fund and the Schwab Health Care Fund will not have more than 50% of their assets invested in foreign securities at the close of their taxable years, and therefore will not be permitted to make this election.

Section 988 of the Internal Revenue Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by a fund. Under these rules, foreign exchange gain or loss realized by a fund with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. Foreign currency losses could result in distributions of ordinary income being reclassified as a return of capital for tax purposes.

The Schwab International Core Equity Fund, Schwab Dividend Equity Fund and Schwab Health Care Fund may invest in non-U.S. corporations, which could be treated as a passive foreign investment company (PFIC) or become a PFIC under the Internal Revenue Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent any of these funds do invest in PFICs, they may be eligible to elect to treat the PFIC as a "qualified electing fund" or mark-to-market its investments in PFICs annually. In either case, these funds may be required to distribute amounts in excess of realized income and gains. To the extent these funds do invest in foreign securities which are determined to be PFIC securities and are required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to the funds' shareholders. Therefore, the payment of this tax would reduce a funds' economic return from its PFIC shares, and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a

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RIC such as a fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in a fund.

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#### APPENDIX – PROXY VOTING POLICY
The Charles Schwab Family of Funds Schwab Investments Schwab Capital Trust Schwab Annuity Portfolios Laudus Trust Schwab Strategic Trust

### PROXY VOTING POLICY AS OF MARCH 2023
The Boards of Trustees (the "Board") of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Laudus Trust ("Schwab Funds") and Schwab Strategic Trust ("Schwab ETFs"; collectively with Schwab Funds, the "Funds") have delegated to the Funds' investment adviser, Charles Schwab Investment Management, Inc. ("CSIM"), the responsibility to vote proxies relating to the Funds' portfolio securities pursuant to CSIM's Proxy Voting Policy ("CSIM Proxy Policy"). On an annual basis, CSIM will report to the Board any changes to the CSIM Proxy Policy and on the implementation of the CSIM Proxy Policy.

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Charles Schwab Investment Management, Inc.

I. ### INTRODUCTION
Charles Schwab Investment Management, Inc. ("CSIM"), as an investment adviser, is responsible for voting proxies with respect to the securities held in accounts of investment companies and other clients that have delegated the authority to vote proxies to CSIM. CSIM's Proxy Committee exercises and documents CSIM's responsibility with regard to voting of client proxies, including the review and approval of the Proxy Voting Policy (the "Proxy Policy"). CSIM's Investment Stewardship Team has the primary responsibility to oversee that voting is carried out consistent with the Proxy Policy. The Investment Stewardship Team also conducts research into proxy issues and carries out engagement activities with companies. The Proxy Committee receives reports from the Investment Stewardship Team on these activities.

II. ### PHILOSOPHY
As a leading asset manager, it is CSIM's responsibility to use its proxy votes to encourage transparency, corporate governance structures, and the management of environmental, social and governance (ESG) issues that it believes protect and promote shareholder value.

Just as the investors in CSIM's equity funds generally have a long-term investment horizon, CSIM takes a long-term, measured approach to investment stewardship. CSIM's client-first philosophy drives all of its efforts, including its approach to decision making. In the investment stewardship context, that unfolds through CSIM's efforts to appropriately manage risk by encouraging transparency and focusing on corporate governance structures that will help protect or promote shareholder value. CSIM also recognizes that companies can conduct themselves in ways that have important environmental and social consequences. Therefore, CSIM's focus on maximizing long-term shareholder value includes consideration of potential environmental and social impacts that we believe are relevant to individual companies.

In general, CSIM believes corporate directors, as the elected representatives of all shareholders, are best positioned to oversee the management of their companies. Accordingly, CSIM typically supports a board of directors' and management's recommendations on proxy matters. However, CSIM will vote against management's recommendations when it believes doing so will protect or promote long-term shareholder value.

III. ### USE OF PROXY ADVISORS
To assist CSIM in its responsibility for voting proxies and the overall proxy voting process, CSIM has retained Glass, Lewis & Co., LLC ("Glass Lewis") as an expert in the proxy voting and corporate governance area. The services provided by Glass Lewis include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. CSIM has also retained Institutional Shareholder Services Inc. to conduct research and provide voting recommendations on certain topics and may retain additional experts in the proxy voting, corporate governance, and ESG areas in the future.

To support CSIM in efficiently executing its votes, Glass Lewis, simultaneously with issuing its voting recommendations, also automatically populates votes based on CSIM's custom voting guidelines, except for certain ballot items which CSIM elects to vote manually. CSIM's votes are executed just prior to the vote deadline, which allows CSIM the opportunity to incorporate changes in Glass Lewis voting recommendations or the receipt of additional information from the company or other parties.

IV. ### PROXY VOTING PRINCIPLES
CSIM invests on behalf of its clients in companies domiciled all over the world. Since corporate governance standards and best practices differ by country and jurisdiction, the market context is taken into account in the analysis of proposals. Furthermore, there are instances where CSIM may determine that voting is not in the best interests of its clients (typically due to costs or to trading restrictions) and will refrain from submitting votes.

The Proxy Committee reviews CSIM's proxy voting guidelines with input from the Investment Stewardship Team at least annually and evaluates them in light of the long-term best interests of shareholders. In addition, for U.S. companies, contested director elections, "vote no" campaigns, mergers and acquisitions, some executive compensation and election of director proposals, and many shareholder proposals, including ESG-related proposals, such as those requesting additional environmental, social and political disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

The following is a summary of CSIM's proxy voting principles which are grouped according to types of proposals usually presented to shareholders in proxy statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

DIRECTORS AND AUDITORS

i. <u>Directors</u>

As a starting point, CSIM expects the board to be composed of at least a majority of independent directors and to be responsive to shareholders. CSIM also expects directors that serve on a company's nominating, compensation or audit committee to be independent. CSIM believes that diversity of background, experience and skills, and personal characteristics, including gender, race, ethnicity and age, meaningfully contribute to a board's ability to make effective decisions on behalf of shareholders.

Factors that may result in a vote against one or more directors:

<sup>●</sup>

The board is not majority independent

<sup>●</sup>

A large-cap company board does not have at least two female directors, or a mid- or small-cap company does not have any female directors, and the board has not provided a reasonable explanation for its lack of gender diversity

<sup>●</sup>

A large-cap company board does not have at least one racially/ethnically diverse director, or has not provided explicit disclosure of director diversity and skills

<sup>●</sup>

Non-independent directors serve on the nominating, compensation or audit committees

<sup>●</sup>

A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

<sup>●</sup>

The directors approved executive compensation schemes that appear misaligned with shareholders' interests

<sup>●</sup>

A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to concerns of shareholders

<sup>●</sup>

The company has not provided explicit disclosure of board oversight of material risks, including environmental and social risks

ii. <u>Contested Director Elections</u>

A proxy contest is when a dissident shareholder (or group of shareholders) proposes outside nominees to compete against incumbent directors. A "Vote No" campaign is when an activist shareholder attempts to solicit votes against certain directors. CSIM evaluates proxy contests and Vote No campaigns on a case-by-case basis and votes for the outcome it believes will maximize long-term shareholder value. CSIM considers numerous factors when making its voting decision, including but not limited to the merit of the campaign, the qualifications of director nominees, long-term company performance compared to peers, board oversight of material risks, and, in the case of proxy contests, the dissident's and management's strategic plans for driving improvements.

iii. <u>Auditors</u>

CSIM typically supports the ratification of auditors unless CSIM believes that the auditors' independence may have been compromised.

Factors that may result in a vote against the ratification of auditors:

<sup>●</sup>

Audit-related fees are less than half of the total fees paid by the company to the audit firm

<sup>●</sup>

A recent material restatement of annual financial statements

<sup>●</sup>

A pattern of inaccurate audits or other behavior that may call into question an auditor's effectiveness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

BOARD MATTERS

i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

<sup>●</sup>

Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

<sup>●</sup>

Number of nominees is no more than 20% of current board (rounded down to nearest whole number)

<sup>●</sup>

Group size is capped at 20 shareholders

iv. <u>Separation of Chair and CEO role</u>

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CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring the separation of these roles unless certain circumstances are in place.

Factors that may result in a vote supporting a shareholder proposal requiring the separation of the Chair and CEO roles:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

<sup>●</sup>

Lack of robust lead independent director

v. <u>Independent Chair</u>

CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring an independent chair unless CSIM has concerns regarding the board's accountability or responsiveness to shareholders.

Factors that may result in a vote supporting a shareholder proposal requiring an independent chair:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

COMPENSATION

i. <u>Advisory Vote on Executive Compensation and Frequency</u>

CSIM generally supports advisory votes on executive compensation (which are proposed by management and are known as "Say-On-Pay") when the compensation scheme appears aligned with shareholder economic interests and lacks problematic features.

Factors that may result in a vote against a company's Say-On-Pay proposal:

<sup>●</sup>

Executive compensation is out of line with industry peers considering the company's performance over time

<sup>●</sup>

Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

<sup>●</sup>

Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

<sup>●</sup>

Compensation amounts are increased, or goals are lowered without providing a valid explanation

<sup>●</sup>

Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

CSIM typically supports annual advisory votes on executive compensation.

ii. <u>Equity Compensation Plans</u>

CSIM generally supports stock-based compensation plans when they do not overly dilute shareholders by providing participants with excessive awards and lack problematic features.

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Factors that may result in a vote against Equity Compensation Plans:

<sup>●</sup>

Plan's total potential dilution appears excessive

<sup>●</sup>

Plan's burn rate appears excessive compared to industry peers

<sup>●</sup>

Plan allows for the re-pricing of options without shareholder approval

<sup>●</sup>

Plan has an evergreen feature

iii. <u>Employee Stock Purchase Plans</u>

CSIM supports the concept of broad employee participation in a company's equity. Therefore, CSIM typically supports employee stock purchase plans when the shares can be purchased at 85% or more of the shares' market value.

iv. <u>Re-price/Exchange Option Plans</u>

CSIM generally only supports management proposals to re-price options when the plan excludes senior management and directors, does not excessively dilute shareholders, and the company has not significantly underperformed its industry peers over time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

ANTI-TAKEOVER

i. <u>Shareholder Rights Plans</u>

Shareholder Rights Plans constrain a potential acquirer's ability to buy shares in a company above a certain threshold without the approval of the company's board of directors. While such a plan may help a company in achieving a higher bid, it may also entrench the incumbent management and board. CSIM believes that shareholders should have the right to approve a Shareholder Rights Plan within a year of its adoption. CSIM generally votes against such plans if they do not have safeguards to protect shareholder interests.

Factors that may result in a vote against a Shareholder Rights Plan proposal:

<sup>●</sup>

Plan does not expire in a relatively short time horizon

<sup>●</sup>

Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

<sup>●</sup>

Plan automatically renews without shareholder approval

<sup>●</sup>

Company's corporate governance profile

ii. <u>Right to Call Special Meeting</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to call a special meeting unless the threshold to call a special meeting is 25% or more of shares outstanding to avoid wasting corporate resources.

iii. <u>Right to Act by Written Consent</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to act by written consent if the company already offers shareholders the right to call special meetings. CSIM expects appropriate mechanisms for implementation.

iv. <u>Supermajority Voting</u>

CSIM generally supports the concept of simple majority standards to pass proposals.

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

i. <u>Increase in Authorized Common Shares</u>

CSIM typically supports proposals to increase the authorized shares unless the company does not sufficiently justify the need for the use of the proposed shares.

ii. <u>Preferred Shares</u>

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

iii. <u>Mergers and Acquisitions</u>

CSIM generally supports transactions that appear to maximize shareholder value. CSIM assesses these proposals on a case-by-case basis and considers the proposed transaction's strategic rationale, the offer premium, the board's oversight of the sales process, and other pertinent factors.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F.

ENVIRONMENTAL AND SOCIAL PROPOSALS

Effective oversight of material ESG risks relevant to a company and its business is an essential board function. In CSIM's view, appropriate risk oversight of environmental and social issues contributes to sustainable long-term value and companies should provide pertinent information on material risks common to their industry and specific to their business. CSIM evaluates, on a case-by-case basis, shareholder proposals regarding environmental and social issues, including those calling for additional disclosure of material risks to a company, with emphasis placed on those risks identified within the framework of the Sustainability Accounting Standards Board (SASB).

CSIM recognizes that financial performance can be impacted by a company's environmental, social and human capital management policies. CSIM's case-by-case evaluation of these proposals takes into consideration a company's current practices, level of reporting, disclosures by its peers, and the existence of controversies or litigation related to the issue.

CSIM believes that, in most instances, the board is best positioned to determine a company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

i. <u>Climate Change Proposals</u>

CSIM believes that companies should provide pertinent information on the management of potential climate change-related risks, with the understanding that the relevance of this disclosure for any specific company will vary depending on its industry and operations. For companies operating in carbon-intensive industries, we believe boards should be considering a range of energy demand scenarios. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

ii. <u>Corporate Political Activity Proposals</u>

CSIM expects the board of directors to have a stated oversight process for political contributions and lobbying activities. CSIM evaluates proposals asking for disclosure of a company's political contributions and lobbying activities and generally supports them if there is no evidence of board oversight or a company's disclosure is deficient and lags that of its peers.

V. ### ADMINISTRATION
?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

CONFLICTS OF INTERESTS

CSIM maintains the following practices that seek to prevent undue influence on its proxy voting activity. Such influence might arise from any relationship between the company holding the proxy (or any shareholder or board member of the company) and CSIM, CSIM's affiliates, a mutual fund or exchange-traded fund managed by CSIM ("Affiliated Fund"), an affiliate of such Fund, or a CSIM employee. The Proxy Committee has directed that Glass Lewis be instructed to vote any such proxies in the same proportion as the votes of all other shareholders in the fund (i.e., "echo vote").

With respect to proxies of an underlying Affiliated Fund, the Investment Stewardship Team will ensure that such proxies are "echo voted", unless otherwise required by law. When required by law or applicable exemptive order, the Investment Stewardship Team will also ensure the "echo voting" of an unaffiliated mutual fund or exchange traded fund. For example, certain exemptive orders issued to a fund by the Securities and Exchange Commission and Section 12(d)(1)(F) of the Investment Company Act of 1940, as amended, require the fund, under certain circumstances, to "echo vote" proxies of registered investment companies that serve as underlying investments of the fund.

In addition, with respect to holdings of The Charles Schwab Corporation ("CSC") (ticker symbol: SCHW), the Investment Stewardship Team will ensure such proxies are echo-voted, unless otherwise required by law.

Where the Proxy Committee has delegated an item to the Investment Stewardship Team, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

<sup>●</sup>

reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

<sup>●</sup>

defaulting to the standard CSIM Proxy Voting Policy.

In all other cases, proxy issues that present material conflicts of interest between CSIM, and/or any of its affiliates, and CSIM's clients, will be delegated to Glass Lewis to be voted in accordance with CSIM's Proxy Voting Guidelines which are set each year based on governance criteria and not influenced by any individual issuer or ballot item.

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Where CSIM's Investment Stewardship Team conducts an engagement meeting with a company, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

ensuring that no members of the Board of (i) CSC or (ii) an Affiliated Fund, that are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

FOREIGN SECURITIES/SHAREBLOCKING

Voting proxies with respect to shares of foreign securities may involve significantly greater effort and corresponding cost than voting proxies with respect to domestic securities due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting. Problems voting foreign proxies may include the following:

<sup>●</sup>

proxy statements and ballots written in a foreign language,

<sup>●</sup>

untimely and/or inadequate notice of shareholder meetings,

<sup>●</sup>

restrictions of foreigner's ability to exercise votes,

<sup>●</sup>

requirements to vote proxies in person,

<sup>●</sup>

requirements to provide local agents with power of attorney to facilitate CSIM's voting instructions.

In consideration of the foregoing issues, CSIM, in conjunction with Glass Lewis, uses its best efforts to vote foreign proxies. As part of its ongoing oversight, the Proxy Committee will monitor the voting of foreign proxies to determine whether all reasonable steps are taken to vote foreign proxies. If the Proxy Committee determines that the cost associated with the attempt to vote outweighs the potential benefits clients may derive from voting, the Proxy Committee may decide not to attempt to vote. In addition, certain foreign countries impose restrictions on the sale of securities for a period of time before and/or after the shareholder meeting. To avoid these trading restrictions, the Proxy Committee instructs Glass Lewis not to vote such foreign proxies (share-blocking).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

SECURITIES LENDING

Certain of the funds managed by CSIM enter into securities lending arrangements with lending agents to generate additional revenue for their portfolios. In securities lending arrangements, any voting rights that accompany the loaned securities generally pass to the borrower of the securities, but the lender retains the right to recall a security and may then exercise the security's voting rights. In order to vote the proxies of securities out on loan, the securities must be recalled prior to the established record date. CSIM will use its best efforts to recall a fund's securities on loan when deemed appropriate and in the best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

SUB-ADVISORY RELATIONSHIPS

Where CSIM has delegated day-to-day investment management responsibilities to an investment sub-adviser, CSIM may (but generally does not) delegate proxy voting responsibility to such investment sub-adviser. In addition, CSIM may share proxy voting with an investment sub-adviser. Each sub-adviser to whom proxy voting responsibility has been delegated will be required to review all proxy solicitation material and to make voting decisions in the best interest of each investment company and its shareholders, or other client associated with the securities it has been allocated. Each sub-adviser to whom proxy voting has been delegated must inform CSIM of its voting decisions to allow CSIM to implement the votes or in the case of shared voting responsibility, potentially override the sub-adviser's vote recommendation. Prior to delegating the proxy voting responsibility, CSIM will review each sub-adviser's proxy voting policy to determine whether it believes that each sub-adviser's proxy voting policy is generally consistent with the maximization of the value of CSIM's clients' investments by protecting the long-term best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

REPORTING AND RECORD RETENTION

CSIM will maintain, or cause Glass Lewis to maintain, records that identify the manner in which proxies have been voted (or not voted) on behalf of CSIM clients. CSIM will comply with all applicable rules and regulations regarding disclosure of its or its clients' proxy voting records and procedures.

CSIM will retain all proxy voting materials and supporting documentation as required under the Investment Advisers Act of 1940, as amended.

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

Schwab Funds<sup>®</sup>

---

| | |
|:---|:---|
| **Schwab<sup>®</sup> Balanced Fund** | **SWOBX** |
| **Schwab MarketTrack Portfolios<sup>®</sup>** |  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack All Equity Portfolio™ | **SWEGX**  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Growth Portfolio™ | **SWHGX**  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Balanced Portfolio™ | **SWBGX**  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Conservative Portfolio™ | **SWCGX**  |
| **Schwab Target Funds** |  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2010 Fund | **SWBRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2015 Fund | **SWGRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2020 Fund | **SWCRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2025 Fund | **SWHRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2030 Fund | **SWDRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2035 Fund | **SWIRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2040 Fund | **SWERX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2045 Fund | **SWMRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2050 Fund | **SWNRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2055 Fund | **SWORX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2060 Fund | **SWPRX**  |
| &nbsp;&nbsp;&nbsp; Schwab<sup>®</sup> Target 2065 Fund | **SWQRX**  |

---

#### STATEMENT OF ADDITIONAL INFORMATION

#### February 27, 2023
The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with each fund's prospectus dated February 27, 2023 (as amended from time to time).

The funds' audited financial statements and the report of the independent registered public accounting firm thereon from the funds' [annual reports](https://www.sec.gov/Archives/edgar/data/904333/000119312523000566/d401383dncsr.htm) for the fiscal year ended October 31, 2022, are incorporated by reference into this SAI.

For a free copy of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

Each fund is a series of Schwab Capital Trust (the Trust). The funds are part of the Schwab complex of funds (Schwab Funds). Charles Schwab Investment Management, Inc., dba Schwab Asset Management™, is the investment adviser to the funds (investment adviser).

REG72330-10

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#### **TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | **<u>Page</u>**  |
| [INVESTMENT OBJECTIVES](#iddaggINVESTMENTO)  | [1](#iddaggINVESTMENTO) |
| [INVESTMENT STRATEGIES](#idcbgbhbINVESTMENTS)  | [1](#idcbgbhbINVESTMENTS) |
| [INVESTMENTS, SECURITIES AND RISKS](#idbjigehINVESTMENTS)  | [3](#idbjigehINVESTMENTS) |
| [INVESTMENT LIMITATIONS AND RESTRICTIONS](#idcdiajINVESTMENTL)  | [27](#idcdiajINVESTMENTL) |
| [MANAGEMENT OF THE FUNDS](#idbaefdcMANAGEMENTO)  | [29](#idbaefdcMANAGEMENTO) |
| [CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES](#idbcdibCONTROLPERS)  | [39](#idbcdibCONTROLPERS) |
| [INVESTMENT ADVISORY AND OTHER SERVICES](#idcffedINVESTMENTA)  | [41](#idcffedINVESTMENTA) |
| [PORTFOLIO MANAGERS](#iddjchhPORTFOLIOMA)  | [44](#iddjchhPORTFOLIOMA) |
| [BROKERAGE ALLOCATION AND OTHER PRACTICES](#iddhadjBROKERAGEAL)  | [47](#iddhadjBROKERAGEAL) |
| [PROXY VOTING](#idiaaproxyvoting-0)  | [50](#idiaaproxyvoting-0) |
| [PORTFOLIO HOLDINGS DISCLOSURE](#idiedbportfolioho-0)  | [50](#idiedbportfolioho-0) |
| [DESCRIPTION OF THE TRUST](#idegjcdescription-0)  | [51](#idegjcdescription-0) |
| [PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES](#idbeedhPURCHASERED)  | [52](#idbeedhPURCHASERED) |
| [TAXATION](#idcigeaTAXATION)  | [54](#idcigeaTAXATION) |
| APPENDIX – PROXY VOTING POLICY |  |

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#### INVESTMENT OBJECTIVES
The **Schwab Balanced Fund** seeks capital growth and income.

The **Schwab MarketTrack All Equity Portfolio** seeks high capital growth through an all-stock portfolio.

The **Schwab MarketTrack Growth Portfolio** seeks high capital growth with less volatility than an all-stock portfolio.

The **Schwab MarketTrack Balanced Portfolio** seeks both capital growth and income.

The **Schwab MarketTrack Conservative Portfolio** seeks income and more growth potential than an all-bond portfolio.

The **Schwab MarketTrack All Equity Portfolio**, **Schwab MarketTrack Growth Portfolio**, **Schwab MarketTrack Balanced Portfolio** and **Schwab MarketTrack Conservative Portfolio** are referred to collectively as the **Schwab MarketTrack Portfolios**.

The **Schwab Target 2010 Fund**, **Schwab Target 2015 Fund**, **Schwab Target 2020 Fund**, **Schwab Target 2025 Fund**, **Schwab Target 2030 Fund**, **Schwab Target 2035 Fund**, **Schwab Target 2040 Fund**, **Schwab Target 2045 Fund**, **Schwab Target 2050 Fund**, **Schwab Target 2055 Fund**, **Schwab Target 2060 Fund** and **Schwab Target 2065 Fund** (collectively, the **Schwab Target Funds**) seek to provide capital appreciation and income consistent with their current asset allocation.

#### Change of Investment Objective
The investment objective for each fund may be changed only by vote of a majority of its outstanding voting shares. A majority of the outstanding voting shares of a fund means the affirmative vote of the lesser of: (a) 67% or more of the voting shares represented at the meeting, if more than 50% of the outstanding voting shares of the fund are represented at the meeting or (b) more than 50% of the outstanding voting shares of a fund. There is no guarantee that a fund will achieve its investment objective.

#### Change of Investment Strategy
While it is the Schwab MarketTrack All Equity Portfolio's target allocation to invest 100% in stock investments, it is the fund's policy that, under normal circumstances, it will invest at least 80% of its net assets in stock investments. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

#### INVESTMENT STRATEGIES
The Schwab Balanced Fund, under normal circumstances, will invest at least 25% of its assets in equity securities, equity funds or investments with similar economic characteristics and at least 25% of its assets in fixed-income securities, fixed-income funds or investments with similar economic characteristics. For purposes of this policy, assets mean net assets plus the amount of any borrowings for investment purposes. The Schwab Balanced Fund seeks to achieve its investment objective by generally investing in a diversified group of other affiliated Schwab Funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. The fund intends to invest in a combination of underlying funds; however, the fund may invest a portion of its assets directly in equity and fixed-income securities, as well as exchange-traded funds (ETFs) or other unaffiliated mutual funds to maintain its asset allocations. These investments and the risks normally associated with these investments are discussed below.

Each Schwab MarketTrack Portfolio seeks to maintain a defined mix of asset classes over time, and each invests mainly in a combination of other affiliated Schwab Funds, including Schwab index funds and Schwab ETFs, which are managed using a variety of indexing strategies, and to a lesser degree in unaffiliated third party mutual funds. Each Schwab MarketTrack Portfolio invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. Each Schwab MarketTrack Portfolio also may invest in securities other than shares of underlying funds, such as stocks, bonds, ETFs and cash equivalents including money market securities, and engage in certain investment techniques. These investments and the risks normally associated with these investments are discussed below.

Each Schwab Target Fund seeks to achieve its investment objective by investing primarily in a combination of other affiliated Schwab Funds. Each Schwab Target Fund may also invest in affiliated Schwab ETFs and unaffiliated third party mutual funds and ETFs. Each Schwab Target Fund invests in the underlying funds in accordance with its target portfolio allocation. These underlying funds invest their assets directly in equity, fixed income, cash and cash equivalents (including money market funds) in accordance with their own investment objectives and policies. For each Schwab Target Fund, the target asset allocation will be adjusted annually based on the adviser's asset allocation strategy. In general, each Schwab Target Fund's allocation to equity securities will decrease and its allocation to fixed-income securities will increase as the fund approaches its target retirement date. At the stated target date, each Schwab Target Fund's allocation will be approximately 44.0% equity securities, 52.0% fixed-income securities and 4.0% cash and cash equivalents (including money market funds). Each Schwab Target Fund will continue to reduce its allocation to equity securities for 20 years beyond the fund's stated target date. Each Schwab Target Fund intends to invest in a combination of underlying funds; however, each fund may invest directly in equity and fixed-income securities and money market securities. These investments and the risks normally associated with these investments are discussed below.

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**Mutual Funds** (open-end mutual funds) are registered investment companies that issue and redeem their shares on a continuous basis. **Closed-End Funds** are registered investment companies that offer a fixed number of shares and are usually listed on an exchange. These funds generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in various types of securities, such as stocks, bonds and money market securities. These funds also make various investments and use certain techniques to enhance their performance. These may include entering into delayed-delivery and when-issued securities transactions or swap agreements; buying and selling futures contracts, illiquid and restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in these funds generally reflect the risks of the securities in which these funds invest and the investment techniques they may employ. Also, these funds charge fees and incur operating expenses. Each Schwab MarketTrack Portfolio will normally invest at least 50% of its assets in other affiliated Schwab Funds that are registered open-end investment companies.

**Equity Funds** typically seek growth of capital and invest primarily in equity securities. Other investments generally include debt securities, such as U.S. government securities, and some illiquid and restricted securities. Equity funds typically may enter into delayed-delivery or when-issued securities transactions, repurchase agreements, swap agreements and futures and options contracts. Some equity funds invest exclusively in equity securities and may focus on a specialized segment of the stock market, like stocks of small companies or foreign issuers, or may focus on a specific industry or group of industries. The greater a fund's investment in stock, the greater exposure it will have to stock risk and stock market risk. Stock risk is the risk that a stock may decline in price over the short or long term. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Some stocks, like small company and international stocks, are more sensitive to stock risk than others. Diversifying investments across companies can help to lower the stock risk of a portfolio. Market risk is typically the result of a negative economic condition that affects the value of an entire class of securities, such as stocks or bonds. Diversification among various asset classes, such as stocks, bonds and cash, can help to lower the market risk of a portfolio. The underlying equity fund(s) that the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds may currently invest in are listed in each fund's prospectus. An equity fund's other investments and use of investment techniques also will affect its performance and portfolio value.

**Small-Cap Equity Funds** typically seek capital growth and invest primarily in equity securities of companies with smaller market capitalizations. Small-cap equity funds generally make similar types of investments and employ similar types of techniques as other equity funds, except that they focus on stocks issued by companies at the lower end of the total capitalization of the U.S. stock market. These stocks tend to be more volatile than stocks of companies of larger capitalized companies. Small-cap equity funds, therefore, tend to be more volatile than equity funds that invest in mid- or large-cap stocks, and are normally recommended for long-term investors. The underlying small-cap equity fund(s) that the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds may currently invest in are listed in each fund's prospectus. For a more detailed discussion of the risks of small-cap stocks, please refer to "Equity Securities" later in the document.

**International Equity Funds** typically seek capital growth and invest primarily in equity securities of foreign issuers. Global equity funds invest primarily in equity securities of both domestic and foreign issuers. International and global equity funds generally make similar types of investments and employ similar types of investment techniques as other equity funds, except they focus on stocks of foreign issuers. Some international and global equity funds invest exclusively in foreign securities. Some of these funds may invest in securities of issuers located in emerging or developing securities markets. These funds have greater exposure to the risks associated with international investing. International and global equity funds also may invest in foreign currencies and depositary receipts and enter into futures and options contracts on foreign currencies and forward foreign currency exchange contracts. The underlying international equity fund(s) that the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds may currently invest in are listed in each fund's prospectus. For a more detailed discussion of the risks of international stocks, please refer to "Foreign Securities" later in the document.

**Fixed-Income Funds** typically seek high current income by investing primarily in debt securities, including U.S. government securities, corporate bonds, stripped securities and mortgage- and asset-backed securities. Other investments may include some illiquid and restricted securities. Fixed-income funds typically may enter into delayed-delivery or when-issued securities transactions, repurchase agreements, swap agreements and futures contracts. Fixed-income funds are subject to interest rate and income risks as well as credit and prepayment risks. When interest rates fall, the prices of debt securities generally rise, which may affect the values of fixed-income funds and their yields. For example, when interest rates fall, issuers tend to pre-pay their outstanding debts and issue new ones paying lower interest rates. A fixed-income fund holding these securities would be forced to invest the principal received from the issuer in lower yielding debt securities. Conversely, in a rising interest rate environment, prepayment on outstanding debt securities generally will not occur. This risk is known as extension risk and may affect the value of a fixed-income fund if the value of its securities are depreciated as a result of the higher market interest rates. In addition, when interest rates rise, bond prices fall as a general rule. This means that the value of an investor's shares in a fixed-income fund could decline in response to a rise in interest rates. Fixed-income funds also are subject to the risk that the issuers of the securities in their portfolios will not make timely interest and/or principal payments or fail to make them at all. The underlying bond fund(s) that the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds may currently invest in are listed in each fund's prospectus. For a more detailed discussion of the risks of bonds, please refer to "Debt Securities" later in the document.

**Money Market Funds** typically seek current income by investing in money market securities. Certain money market funds seek a stable share price of $1.00, while others have a share price that fluctuates. Money market securities include commercial paper and short-term U.S. government securities, certificates of deposit, banker's acceptances and repurchase agreements. Some money market securities may be illiquid or restricted securities or purchased on a delayed-delivery or when-issued basis. Certain underlying money market funds may impose a fee upon

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the sale of shares or may temporarily suspend the ability to sell shares if such fund's liquidity falls below required minimums. The Securities and Exchange Commission (SEC) and other regulatory agencies continue to review the regulation of money market funds. As of the date of this prospectus, the SEC has proposed amendments to the rules that govern money market funds. These proposed amendments, if implemented, may affect an underlying money market fund's investment strategies, performance, yield, expenses, operations and continued viability. The underlying money market fund(s) that the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds may currently invest in is listed in each fund's prospectus. For a more detailed discussion of the risks of money market securities, please refer to "Money Market Securities" later in the document.

**ETFs** are investment companies that typically are registered under the Investment Company Act of 1940, as amended (the 1940 Act), as open-end funds or unit investment trusts (UITs). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold throughout the day at market prices, which may be higher or lower than the shares' net asset value. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's net asset value, the value of ETF holdings, and supply of and demand for ETF shares. Although the creation/redemption feature of ETFs generally makes it more likely that ETF shares will trade close to their net asset value, market volatility, lack of an active trading market for ETF shares, disruptions at market participants (such as Authorized Participants or market makers) and any disruptions in the ordinary functioning of the creation/redemption process may result in ETF shares trading significantly above (at a "premium") or below (at a "discount") their net asset value. An ETF's investment results are based on the ETF's daily net asset value. Investors transacting in ETF shares in the secondary market, where market prices may differ from net asset value, may experience investment results that differ from results based on the ETF's daily net asset value. An "index-based ETF" seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of securities, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

#### INVESTMENTS, SECURITIES AND RISKS
The different types of investments that the underlying funds typically may invest in, the investment techniques they may use and the risks normally associated with these investments are also discussed below. The following investment strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately after and as a result of a fund's acquisition of such security or asset unless otherwise noted. Thus, any subsequent change in values, net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment. Not all investment securities or techniques discussed below are eligible investments for each fund.

From time to time a fund may hold certain securities not otherwise discussed in this SAI as a permissible investment for the fund. To the extent an investment becomes part of a fund's principal or non-principal investment strategy, the fund will take the necessary steps to identify them as permissible investments. In addition, a fund may receive (i.e., not actively invest) such securities as a result of a corporate action, such as securities dividends, spin-offs or rights issues. In such cases, the fund will not actively add to its position and generally will dispose of the securities as soon as reasonably practicable.

Each of the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds also may invest in securities other than shares of underlying funds, such as stocks, bonds, ETFs and money market securities, and engage in certain investment techniques, which are outlined below. For purposes of the descriptions below, references to "a fund" or "the funds" may include each underlying fund as well as the Schwab Balanced Fund, Schwab MarketTrack Portfolios and Schwab Target Funds. Not all securities or techniques discussed below are eligible investments for each fund.

**Borrowing.** A fund may borrow for temporary or emergency purposes; for example, a fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. A fund's borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of a fund's shares and in its portfolio yield. A fund is required to comply with the asset coverage requirements of the 1940 Act, when it engages in borrowing activities. If assets used to secure a borrowing decrease in value, a fund may be required to pledge additional collateral to avoid liquidation of those assets.

A fund may establish lines-of-credit (lines) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by a fund within 60 days and is not extended or renewed. Each fund may use the lines to meet large or unexpected redemptions that would otherwise force a fund to liquidate securities under circumstances which are unfavorable to a fund's remaining shareholders. Each fund will pay fees to the banks for using its lines.

**Build America Bonds** are taxable municipal bonds with federal subsidies for a portion of the issuer's borrowing costs. Build America Bonds were issued through the Build America Bond program, which was created as part of the American Recovery and Reinvestment Act of 2009 (the Act). The objective of the program was to reduce the borrowing costs of state and local governments. Because the Act was not extended beyond

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its expiration date on December 31, 2010, tax subsidies do not apply to Build America Bonds issued following such date (if any). However, Build America Bonds outstanding and issued before such date remain eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds.

If a fund holds Build America Bonds, the fund may be eligible to receive a federal income tax credit; however, the issuer of a Build America Bond may instead elect to receive a cash payment directly from the federal government in lieu of holders such as the fund receiving a tax credit. The interest on Build America Bonds is taxable for federal income tax purposes and will be distributed to shareholders as taxable ordinary income. For any tax credit Build America Bond held by a fund, the fund may elect to pass through to its shareholders any tax credits from those bonds that otherwise would be allowed to the fund. These tax credits can generally be used to offset U.S. federal income taxes and the federal alternative minimum tax, but such credits are generally not refundable. Any unused credits may be carried forward to succeeding taxable years.

**Concentration** means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry's securities. Certain underlying funds may concentrate their investments in a particular industry or group of industries.

**Cyber Security Risk.** As the funds increasingly rely on technology and information systems to operate, the funds become susceptible to operational risks linked to security breaches in those information systems. Both calculated attacks and unintentional events can cause failures in the funds' information systems. Cyber attacks can include acquiring unauthorized access to information systems, usually through hacking or the use of malicious software, for purposes of stealing assets or confidential information, corrupting data, or disrupting a fund's operations. Cyber attacks can also occur without direct access to information systems, for example by making network services unavailable to intended users. Cyber security failures by, or breaches of the information systems of, the investment adviser, distributors, broker-dealers, other service providers (including, but not limited to, index providers, a fund's accountants, custodians, transfer agents and administrators), or the issuers of securities the funds invest in may also cause disruptions and impact the funds' business operations. Breaches in information security may result in financial losses, interference with the funds' ability to calculate net asset value (NAV), impediments to trading, inability of fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The funds have business continuity plans in the event of, and risk management systems to help prevent, such cyber attacks, but these plans and systems have limitations including the possibility that certain risks have not been identified. Moreover, the funds do not control the cyber security plans and systems of their service providers and other third party business partners. The funds and their shareholders could be negatively impacted as a result.

**Debt Securities** are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically "IOUs," but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed-, variable- or floating-rate of interest on the amount of money borrowed (the principal) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Conversely, when interest rates rise, the prices of debt securities generally fall. Certain debt securities have call features that allow issuers to redeem their outstanding debts prior to final maturity. Depending on the call feature, an issuer may pre-pay its outstanding debts and issue new ones paying lower interest rates. This is known as prepayment risk and is more likely to occur in a falling interest rate environment. When borrowers pay off their debt securities sooner than expected, a fund would have to reinvest that money at the lower prevailing interest rate, which may reduce the returns of the fund. In a rising interest rate environment, prepayment on outstanding debt securities is less likely to occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term debt securities (all things being equal), but generally offer greater rates of interest. If an issuer redeems the debt securities prior to final maturity, a fund may have to replace these securities with lower yielding securities, which could result in a lower return.

A change in a central bank's monetary policy or economic conditions may lead to a change in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of debt securities in which a fund invests. Some debt securities, such as bonds with longer durations, are more sensitive to interest rate changes than others and may experience an immediate and considerable reduction in value if interest rates rise. Longer duration securities tend to be more volatile than shorter duration securities. As the values of debt securities in a fund's portfolio adjust to a rise in interest rates, a fund's share price may fall. In the event that a fund holds a large portion of its portfolio in longer duration securities when interest rates increase, the share price of the fund may fall significantly.

Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Corporate debt securities (bonds) tend to have higher credit risk generally than U.S. government debt securities. Debt securities also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- and/or high-quality securities, although some still possess varying degrees of speculative characteristics and risks. Debt securities rated below investment-grade are riskier, but may offer higher yields. These securities are sometimes referred to as high yield securities or "junk bonds." The market for these securities has historically been less liquid and more volatile than for investment-grade securities.

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Corporate bonds are debt securities issued by corporations. Although a higher return is expected from corporate bonds, these securities, while subject to the same general risks as U.S. government securities, are subject to greater credit risk than U.S. government securities. Their prices may be affected by the perceived credit quality of their issuer.

**Depositary Receipts** include American Depositary Receipts (ADRs) as well as other "hybrid" forms of ADRs, including European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), and are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject a fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments; withholding taxes on income, or possible imposition of withholding taxes on income; possible seizure, nationalization or expropriation of foreign deposits; possible establishment of exchange controls; or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States. Please see the section titled "Foreign Securities" for more detail.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder's rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer's request.

**Derivative Instruments** are commonly defined to include instruments or contracts whose values depend on (or "derive" from) the value of one or more other assets such as securities, currencies, or commodities. These "other assets" are commonly referred to as "underlying assets."

In addition to the derivative instruments and strategies described in this SAI, the investment adviser expects to discover additional derivative instruments and other investment, hedging or risk management techniques. The investment adviser may utilize these new derivative instruments and techniques to the extent that they are consistent with a fund's investment objective and permitted by a fund's investment limitations, operating policies and applicable regulatory authorities.

A fund or underlying fund's derivatives instruments can create (i) leverage risk, which generally refers to the risk that derivatives transactions can magnify a fund's gains and losses, (ii) market risk, which generally refers to the risk from potential adverse market movements in relation to a fund's derivatives positions, or the risk that markets could experience a change in volatility that adversely impacts fund returns and a fund's obligations and exposures, (iii) counterparty risk, which generally refers to the risk that a counterparty on a derivatives transaction may not be willing or able to perform its obligations under the derivatives contract, and the related risks of having concentrated exposure to such a counterparty, (iv) liquidity risk, which generally refers to the risk involving the liquidity demands that derivatives transactions can create to make payments of margin, collateral, or settlement payments to counterparties, (v) operational risk, which generally refers to the risk related to

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potential operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error and (vi) legal risk, which generally refers to insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract. Certain of these risks are described in more detail as they apply to specific derivatives instruments in the following sub-sections of this SAI.

*<u>Forward Contracts</u>* are sales contracts between a buyer (holding the "long" position) and the seller (holding the "short" position) for an asset with delivery deferred to a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. The change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset.

*<u>Futures Contracts</u>* are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. A fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the Commodity Futures Trading Commission (CFTC) licenses and regulates on foreign exchanges. Although positions are usually marked-to-market on a daily basis with an intermediary (executing broker), there remains a credit risk with the futures exchange.

A fund must maintain a small portion of its assets in cash to process shareholder transactions and to pay its expenses. To reduce the effect this otherwise uninvested cash would have on its performance, a fund may purchase futures contracts. Such transactions allow a fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, a fund may purchase or sell futures contracts on a specified foreign currency to "fix" the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. A fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, a fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as "initial margin" and must be in the form of liquid assets, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as "variation margin," may be made daily, if necessary, as the value of the futures contracts fluctuates. This process is known as "marking-to-market." The initial margin amount will be returned to a fund upon termination of the futures contracts assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage.

While a fund may purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause a fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if a fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, a fund incurs transaction costs (e.g., brokerage fees) when engaging in futures trading. To the extent a fund also invests in futures in order to simulate full investment, these same risks apply.

When interest rates are rising or securities prices are falling, a fund may seek, through the sale of futures contracts, to offset a decline in the value of its current portfolio securities. When interest rates are falling or prices are rising, a fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when they effect anticipated purchases. Similarly, a fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and its portfolio securities that are denominated in that currency. A fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that a fund has acquired or expects to acquire.

Futures contracts may require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time a fund seeks to close out a futures position. If a fund is unable to close out its position and prices move adversely, a fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a disadvantageous time or incur extra costs by borrowing the cash. Also, a fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

*<u>Options Contracts</u>* generally provide the right, but not the obligation, to buy or sell a security, commodity, futures contract or foreign currency in exchange for an agreed upon price. If the right is not exercised after a specified period, the option expires and the option buyer forfeits the money paid to the option seller.

A call option gives the buyer the right to buy a specified number of shares of a security at a fixed price on or before a specified date or dates in the future. For this right, the call option buyer pays the call option seller, commonly called the call option writer, a fee called a premium. Call option buyers are usually anticipating that the price of the underlying security will rise above the price fixed with the call writer, thereby

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allowing them to profit. If the price of the underlying security does not rise, the call option buyer's losses are limited to the premium paid to the call option writer. For call option writers, a rise in the price of the underlying security will be offset, in part, by the premium received from the call option buyer. If the call option writer does not own the underlying security, however, the losses that may ensue if the price rises could be potentially unlimited. If the call option writer owns the underlying security or commodity, this is called writing a covered call.

A put option is the opposite of a call option. It gives the buyer the right to sell a specified number of shares of a security at a fixed price on or before a specified date in the future. Put option buyers are usually anticipating a decline in the price of the underlying security, and wish to offset those losses when selling the security at a later date. The purpose of writing such options is to generate additional income for a fund. However, in return for the option premium, a fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the securities' market value at the time of purchase. When a fund buys a security with a put feature, losses could occur if the put provider does not perform as agreed. If a put provider fails to honor its commitment upon a fund's attempt to exercise the put, a fund may have to treat the security's final maturity as its effective maturity. If that occurs, the security's price may be negatively impacted, and its sensitivity to interest rate changes may be increased, possibly contributing to increased share price volatility for a fund. This also could lengthen a fund's overall average effective maturity. Standby commitments are types of puts.

A fund may purchase and write put and call options on any securities in which it may invest or any securities index or basket of securities based on securities in which it may invest. In addition, a fund may purchase and sell foreign currency options and foreign currency futures contracts and related options. A fund may purchase and write such options on securities that are listed on domestic or foreign securities exchanges or traded in the over-the-counter market. Like futures contracts, option contracts are rarely exercised. Option buyers usually sell the option before it expires. Option writers may terminate their obligations under a written call or put option by purchasing an option identical to the one it has written. Such purchases are referred to as "closing purchase transactions." A fund may enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased or written.

An exchange-traded currency option position may be closed out only on an options exchange that provides a secondary market for an option of the same series. Although a fund generally will purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular option or at any particular time. If a fund is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) an exchange may impose restrictions on opening transactions or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or the Options Clearing Corporation (OCC) may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), although outstanding options on that exchange that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.

Options trading involves additional risks because of the low margin deposits required and the extremely high degree of leverage that options trading may involve. There may be imperfect correlation between the change in market value of the securities held by a fund and the prices of the options, possible lack of a liquid secondary market, and the resulting inability to close such positions prior to their maturity dates.

A fund may write or purchase an option only when the market value of that option, when aggregated with the market value of all other options transactions made on behalf of a fund, does not exceed 5% of its net assets.

*<u>Derivatives Regulatory Matters.</u>* In October 2020, the SEC adopted a final rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies that rescinded and withdrew the guidance of the SEC and its staff regarding asset segregation and cover transactions previously applicable to a fund's use of such transactions. The rule requires a fund to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management program and reporting requirements. Generally, these requirements apply unless a fund satisfies a "limited derivatives users" exception that is included in the rule. Under the rule, when a fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating a fund's asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance in connection with the rule regarding the use of securities lending collateral that may limit a fund's securities lending activities. In addition, under the rule, a fund will be permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security

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(as defined under Section 18(g) of the 1940 Act), provided that, (i) the fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). A fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the fund treats any such transaction as a "derivatives transaction" for purposes of compliance with the rule. Furthermore, under the rule, a fund will be permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of a fund or underlying fund to use derivatives, and reverse repurchase agreements and similar financing transactions, when-issued, delayed delivery and forward commitment transactions, and unfunded commitment agreements as part of its investment strategies. These requirements may increase the cost of a fund's investments and cost of doing business, which could adversely affect investors. The investment adviser cannot predict the effects of these regulations on a fund. The investment adviser intends to monitor developments and seeks to manage the funds in a manner consistent with achieving the funds' investment objectives, but there can be no assurance that it will be successful in doing so.

The CFTC regulates the trading of commodity interests, including certain futures contracts, options, and swaps in which a fund may invest. A fund that invests in commodity interests will generally be subject to certain CFTC regulatory requirements if it is considered a "commodity pool." A notice of eligibility for exclusion from the definition of the term "commodity pool operator" (CPO) under the Commodity Exchange Act, as amended (CEA) has been filed, by the funds' investment adviser, with respect to each fund's operation. Therefore, each fund and its investment adviser are not subject to registration or regulation as a CPO under the CEA. If a fund's investment adviser were no longer able to claim the exclusion, the fund's investment adviser may be required to register as a CPO and the fund and its investment adviser would be subject to regulation as a CPO under the CEA. If a fund or its investment adviser is subject to CFTC regulation, it may incur additional expenses and/or may choose to make changes to its investment strategies.

*<u>Swap Agreements</u>* are contracts between two parties that generally involve an exchange of payment streams calculated in relation to a rate, index,instrument or certain securities (referred to as the "underlying") and a predetermined amount (referred to as the "notional amount"). Theunderlying for a swap may be an interest rate (fixed or floating), a currency exchange rate, a commodity price index, a security, group of securities are contracts between two parties that generally involve an exchange of payment streams calculated in relation to a rate, index, instrument or certain securities (referred to as the "underlying") and a predetermined amount (referred to as the "notional amount"). The underlying for a swap may be an interest rate (fixed or floating), a currency exchange rate, a commodity price index, a security, group of securities or a securities index, a combination of any of these, or various other rates, assets or indices. Swap agreements generally do not involve the delivery of the underlying or principal, and a party's obligations generally are equal to only the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the swap agreement.

Swap agreements can be structured to increase or decrease a fund's exposure to long or short term interest rates, corporate borrowing rates and other conditions, such as changing security prices and inflation rates. They also can be structured to increase or decrease a fund's exposure to specific issuers or specific sectors of the bond market such as mortgage securities. For example, if a fund agreed to pay a longer-term fixed rate in exchange for a shorter-term floating rate while holding longer-term fixed rate bonds, the swap would tend to decrease a fund's exposure to longer-term interest rates. Swap agreements tend to increase or decrease the overall volatility of a fund's investments and its share price and yield. Changes in interest rates, or other factors determining the amount of payments due to and from a fund, can be the most significant factors in the performance of a swap agreement. If a swap agreement calls for payments from a fund, a fund must be prepared to make such payments when they are due. A fund could sustain losses if a counterparty does not perform as agreed under the terms of the swap. A fund will enter into swap agreements with counterparties deemed creditworthy by the investment adviser.

In addition, the funds may invest in swaptions, which are privately-negotiated option-based derivative products. Swaptions give the holder the right to enter into a swap. A fund may use a swaption in addition to or in lieu of a swap involving a similar rate or index.

Certain standardized swaps are subject to mandatory central clearing and exchange trading requirements. Unlike uncleared swaps, which are negotiated bilaterally and traded over-the-counter, cleared swaps must trade through a futures commission merchant and be cleared through a clearinghouse that serves as the central counterparty to the transaction. Funds post initial and variation margin for cleared swaps by making payments to their clearing member futures commission merchants. Depending on the size of the funds and other factors, the margin required under the rules of a clearinghouse and by a clearing member may be in excess of the collateral required to be posted by the funds to support its obligations under a similar bilateral swap. However, the CFTC and other applicable regulators have adopted rules imposing certain margin requirements, including minimums, on uncleared swaps which, once effective, may result in a fund and its counterparties posting higher margin amounts for uncleared swaps. Any type of swap agreement poses a risk for the funds and may cause them to lose money.

For purposes of applying the funds' investment policies and restrictions (as stated in the prospectus and this SAI) swap agreements are generally valued by the funds at market value. In the case of a credit default swap sold by a fund (i.e., where the fund is selling credit default protection), however, the fund will generally value the swap at its notional amount. The manner in which certain securities or other instruments are valued by the funds for purposes of applying investment policies and restrictions may differ from the manner in which those investments are valued by other types of investors.

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**Diversification** involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. Each fund is a series of an open-end investment management company. Each fund is a diversified mutual fund.

**Emerging or Developing Markets** exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries.

A fund's investments in emerging markets can be considered speculative, and therefore may offer higher potential for gains and losses than investments in developed markets of the world. With respect to an emerging market country, there may be a greater potential for nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or investments in such countries. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

In addition to the risks of investing in emerging market country debt securities, a fund's investment in government or government-related securities of emerging market countries and restructured debt instruments in emerging markets are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt, and requests to extend additional loan amounts. A fund may have limited recourse in the event of default on such debt instruments.

*<u>Investing in China</u>* involves certain additional risks and considerations not typically associated with investing in other more established economies or securities markets. China based companies that incorporate in the People's Republic of China (PRC) can issue different classes of shares depending on where they are listed and which investors are allowed to own them. These are referred to as Class A Shares, Class B shares, and Class H shares, which are all renminbi-denominated shares that trade in different currencies depending on what stock exchange they are listed on. Class H Shares trade on the Hong Kong Stock Exchange, are quoted and traded in Hong Kong dollars, and have no restrictions on who can trade them. Class B Shares trade on either the Shanghai or Shenzhen stock exchanges and can only be traded by non-residents of the PRC or residents with appropriate foreign currency dealing accounts. They trade in U.S. dollars on the Shanghai exchange and in Hong Kong dollars on the Shenzhen exchange. Class A Shares trade on either the Shanghai or Shenzhen exchanges and are quoted in renminbi. Class A Shares may only be traded by residents of the PRC, or under the Qualified Foreign Institutional Investor (QFII) rules, or through the Stock Connect programs (Shanghai-Hong Kong or Shenzhen-Hong Kong). Finally, China based companies that are controlled by PRC residents or PRC state entities and have a majority of their revenue or assets in the PRC may incorporate outside the PRC and trade on an exchange outside the PRC in the currency of the exchange. These are referred to as "Red Chip" (Hong Kong), "P Chip" (Hong Kong), "S Chip" (Singapore), or "N Shares" (United States). The multiplicity of share classes and various restrictions on ownership, in addition to the ability of Chinese regulatory authorities and Chinese issuers to suspend trading and their willingness to exercise this option in response to market volatility and other events, can significantly impact liquidity and volatility of the Chinese market and the markets for Chinese securities. In addition, to the extent that a fund invests in China A Shares, there may be legal restrictions imposed by the PRC on the repatriation of assets or proceeds from the sale of China A Shares. Further, there are quotas on the amount China A Shares available either to QFIIs or through the Stock Connect programs. These quotas are applicable to the entire market, not to a specific fund, but they impact the ability of a fund to implement its investment strategy.

Certain funds may invest a portion of their assets in certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the funds) is prohibited. To facilitate indirect foreign investment in these businesses, many Chinese companies have created VIE structures. In such an arrangement, a China-based operating company typically establishes a shell entity in another jurisdiction, such as the Cayman Islands. The shell company enters into service and other contracts with the China-based operating company, and then issues shares on an exchange (such as the New York Stock Exchange or the Hong Kong Stock Exchange). Non-Chinese investors hold stock in the shell entity rather than directly in the China-based operating company. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. The contractual arrangements also permit the VIE to consolidate the China-based operating company into its financial statements.

Although VIE structures are a longstanding industry practice and well known to officials and regulators in China, VIE structures are not formally recognized under Chinese law. As a result, investors face the risk that future actions by the Chinese government could significantly affect the China-based operating company's financial performance and the enforceability of the VIE structure's contractual arrangements. It is uncertain whether Chinese officials or regulators will withdraw their implicit acceptance of the VIE structure, or whether any new laws, rules or regulations relating to this structure will be adopted (in each case either generally or with respect to specific industries, sectors or companies) and, if adopted, what impact they would have on the interests of shareholders in the VIE structure. Under extreme circumstances, China could prohibit the existence of VIE structures or limit a VIE structure's ability to pass through economic and governance rights to non-Chinese individuals and entities. If the Chinese government takes action affecting VIE structures, the market value of a fund's associated portfolio holdings in VIE structures would likely suffer significant, detrimental, and possibly permanent negative effects, which could result in substantial investment losses to the fund.

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In addition, Chinese companies, including China-based operating companies listed on U.S. exchanges through a VIE structure, are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies based in more developed countries. As a result, information about the Chinese securities and securities in the VIE structure in which a fund invests may be less reliable or complete than investments in other securities. Foreign companies listed on U.S. exchanges, including China-based operating companies that utilize a VIE structure, also could face delisting or other ramifications for failure to meet the requirements of the SEC, the Public Company Accounting Oversight Board or other U.S. regulators. Delisting would significantly decrease the liquidity and value of the securities, decrease the ability of a fund to transact in such securities and may increase the transaction costs of a fund if the fund is required to seek other markets in which to transact in those securities.

Investments involving a VIE structure may also pose additional risks because such investments are made through a company whose interests in the underlying China-based operating company are established through contract rather than through equity ownership. For example, in the event of a dispute, the contractual claims with respect to the China-based operating company may be deemed unenforceable in the PRC, thus limiting (or eliminating) the remedies and rights available to the VIE and its investors. Such legal uncertainty may also be exploited against the interests of the investors in the VIE structure. Further, the interests of the direct equity owners of the China-based operating company may conflict with the interests of the investors in the VIE structure, and the fiduciary duties of the officers and directors of the China-based operating company may differ from, or conflict with, the fiduciary duties of the officers and directors of the shell entity in which a fund invests.

**Equity Securities** represent ownership interests in a company, and are commonly called "stocks." Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company's financial condition, market conditions and political, economic or even company-specific news. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

Types of equity securities include common stocks, preferred stocks, convertible securities, rights and warrants, ADRs, GDRs, EDRs, interests in real estate investment trusts and business development companies (for more information on real estate investment trusts (REITs), see the section titled "Real Estate Investment Trusts").

*<u>Common Stocks,</u>* which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the election of the corporation's directors and any other matters submitted to the corporation's shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer's earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners.

Common stocks are typically categorized by their market capitalization as large-, mid- or small-cap. Small-cap stocks include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small-cap company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Most small-cap company stocks pay low or no dividends.

These factors and others may cause sharp changes in the value of a small-cap company's stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a fund's positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for a fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of a fund's investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

Mid-cap stocks include common stocks issued by operating companies with market capitalizations that place them between the upper and lower end of the stock market, as well as the stocks of companies that are determined to be mid-sized based on several factors, including the capitalization of the company and the amount of revenues. REITs and other real estate companies may be small- to medium-sized companies in relation to the equity markets as a whole. Historically, mid-cap stocks have been riskier than large-cap stocks. Mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of mid-sized companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when mid-cap stocks fall behind other types of investments – large-cap stocks, for instance – a fund's mid-cap holdings could reduce performance.

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*<u>Preferred Stocks</u>* represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation's assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, a fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

*<u>Convertible Securities</u>* are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer's common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company's common stock. The actual return on a convertible bond may exceed its stated yield if the company's common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. Convertible securities are also rated below investment grade (high yield) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and a fund's ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer's creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a conversion feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer's common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company's liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer's convertible securities will tend not to fall as much because the convertible security's income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because its conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

*<u>Initial Public Offering</u>* (IPO). A fund may purchase shares issued as part of, or a short period after, a company's IPO, and may at times dispose of those shares shortly after their acquisition. A fund's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

*<u>Master Limited Partnerships</u>* (MLPs) are limited partnerships in which the common units are publicly traded. MLP common units are freely traded on a securities exchange or in the over-the-counter market and are generally registered with the SEC. MLPs often own several properties or businesses (or own interests) that are related to real estate development and oil and gas industries, but they also may finance motion pictures, research and development and other projects. MLPs generally have two classes of owners, the general partner and limited partners. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership, through ownership of common units, and have a limited role, if any, in the partnership's operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (minimum quarterly distributions). Common and general partner interests also accrue arrearages in distributions to the extent the minimum quarterly distribution is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the minimum quarterly distribution; however, subordinated units do not accrue

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arrearages. Distributable cash in excess of the minimum quarterly distribution paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions are intended to encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results are intended to benefit all security holders of the MLP, however, such incentive distribution payments give rise to potential conflicts of interest between the common unit holders and the general partner.

MLP common units represent a limited partnership interest in the MLP. Common units are listed and traded on U.S. securities exchanges or over-the-counter, with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The funds may purchase common units in market transactions as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions. Common units along with general partner units have first priority to receive quarterly cash distributions up to the minimum quarterly distribution and have arrearage rights. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

MLP subordinated units are typically issued by MLPs to their original sponsors, such as their founders, corporate general partners of MLPs, entities that sell assets to the MLP, and investors. Subordinated units may be purchased directly from these persons as well as newly-issued subordinated units from MLPs themselves. Subordinated units have similar voting rights as common units and are generally not publicly traded. Once the minimum quarterly distribution on the common units, including any arrearages, has been paid, subordinated units receive cash distributions up to the minimum quarterly distribution prior to any incentive payments to the MLP's general partner. Unlike common units, subordinated units do not have arrearage rights. In the event of liquidation, common units and general partner interests have priority over subordinated units. Subordinated units are typically converted into common units on a one-to-one basis after certain time periods and/or performance targets have been satisfied. The purchase or sale price of subordinated units is generally tied to the common unit price less a discount. The size of the discount varies depending on the likelihood of conversion, the length of time remaining to conversion, the size of the block purchased relative to trading volumes, and other factors, including smaller capitalization partnerships or companies potentially having limited product lines, markets or financial resources, lacking management depth or experience, and being more vulnerable to adverse general market or economic development than larger more established companies.

General partner interests of MLPs are typically retained by an MLP's original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder's investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP's aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights, which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Certain MLPs are dependent on their parent companies or sponsors for a majority of their revenues. Any failure by an MLP's parents or sponsors to satisfy their payments or obligations would impact the MLP's revenues and cash flows and ability to make distributions.

*<u>Real Estate Investment Trusts</u>* (REITs) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long-term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 90% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

Like any investment in real estate, a REIT's performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental

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income could decline because of extended vacancies, increased competition from nearby properties, tenants' failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT's performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than – and at times will perform differently from – large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through a fund, a shareholder will bear indirectly a proportionate share of the REIT's expenses in addition to their proportionate share of a fund's expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Internal Revenue Code or to maintain their exemptions from registration under the 1940 Act and CFTC regulations.

*<u>Rights and Warrants</u>* are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company's stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

*<u>Stock Substitution Strategy</u>* is a strategy, whereby certain underlying index funds may, in certain circumstances, substitute a similar stock for a security in their indexes.

*<u>Business Development Companies</u>* (BDCs) are closed-end investment companies that have elected to be BDCs under the 1940 Act and are taxed as regulated investment companies (RICs) under the Internal Revenue Code. BDCs operate as venture capital companies and typically invest in, lend capital to, and provide significant managerial assistance to developing private companies or thinly-traded public companies. Under the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of privately-held U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, a BDC may only incur indebtedness in amounts such that the BDC's coverage ratio of total assets to total senior securities equals 150% or 200%, as applicable.

BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (junk bonds). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that investors may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC's net asset value (for more information on BDCs, see the section titled "Securities of Other Investment Companies").

**Foreign Currency Transactions.** A fund may invest in foreign currency-denominated securities, purchase and sell foreign currency options and foreign currency futures contracts and related options and engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts (forwards) with terms generally of less than one year. A fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.

A fund may use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

A forward involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect a fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, a fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for fund securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of

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the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when a fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, a fund could sustain a loss.

A fund may engage in forward foreign currency exchange options and contracts to protect the value of specific portfolio positions, which is called "position hedging." When engaging in position hedging, a fund may enter into forward foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which portfolio securities are denominated (or against an increase in the value of currency for securities that a fund expects to purchase).

Buying and selling foreign currency exchange options and contracts involves costs and may result in losses. The ability of a fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for a fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a fund's holdings of securities denominated in a particular currency and forward contracts into which a fund enters. Such imperfect correlation may cause a fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss. A fund's transactions in foreign currency exchange contracts may cause a portion of the fund's distributions to constitute returns of capital for tax purposes. To the extent a foreign currency transaction involves a derivatives instrument, the risks discussed under "Derivatives Instruments", above, also will apply.

Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant foreign currencies.

Forwards will be used primarily to adjust the foreign exchange exposure of a fund and a fund might be expected to enter into such contracts under the following circumstances:

*<u>Lock In.</u>* When the investment adviser desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency.

*<u>Cross Hedge.</u>* If a particular currency is expected to decrease against another currency, a fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of a fund's portfolio holdings denominated in the currency sold.

*<u>Direct Hedge.</u>* If the investment adviser wants to eliminate substantially all of the risk of owning a particular currency, and/or if the investment adviser thinks that a fund can benefit from price appreciation in a given country's bonds but does not want to hold the currency, it may employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but a fund would benefit from an increase in value of the bond.

*<u>Proxy Hedge.</u>* The investment adviser might choose to use a proxy hedge, which may be less costly than a direct hedge. In this case, a fund, having purchased a security, will sell a currency whose value is believed to be closely linked to the currency in which the security is denominated. Interest rates prevailing in the country whose currency was sold would be expected to be closer to those in the U.S. and lower than those of securities denominated in the currency of the original holding. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies and the relationships can be very unstable at times.

*<u>Costs of Hedging.</u>* When a fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially reduced or lost if a fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead such costs will, over time, be reflected in a fund's net asset value per share.

*<u>Tax Consequences of Hedging.</u>* Under applicable tax law, a fund may be required to limit its gains from hedging in foreign currency forwards, futures, and options. Although a fund is expected to comply with such limits, the extent to which these limits apply is subject to tax regulations as yet unissued. Hedging may also result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. Those provisions could result in an increase (or decrease) in the amount of taxable dividends paid by a fund and could affect whether dividends paid by a fund are classified as capital gains or ordinary income.

**Foreign Securities.** Investments in foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which a fund may invest include those issued by foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly

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available information about foreign entities. Foreign economic, political and legal developments, a compromise in public health and safety, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, currency blockage, the imposition of sanctions and other similar measures, change of government or war could affect the value of foreign investments. Additionally, a country could experience a public health threat such as an infectious illness which could reduce consumer demand or economic output and/or result in market closures, travel restrictions or quarantines, all of which could affect the value of that country's securities and impact global markets. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. Bankruptcy laws in some foreign countries are sometimes biased to the borrowers and against the creditors. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

In addition, a fund's investments in foreign securities may be subject to economic sanctions or other government restrictions. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to ascertain. These types of measures may include, but are not limited to, banning a sanctioned country or certain persons or entities associated with such country from global payment systems that facilitate cross-border payments, restricting the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities or persons. The imposition of sanctions and other similar measures could, among other things, result in a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings of the sanctioned country's securities or those of companies located in or economically tied to the sanctioned country, currency devaluation or volatility, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could directly or indirectly limit or prevent a fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and adversely impact a fund's liquidity and performance. As a result, such restrictions may limit a fund's ability to meet a large number of shareholder redemption requests.

International trade tensions may arise from time to time which could result in trade tariffs, embargos or other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, an oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies or industries which could have a negative impact on a fund's performance. Events such as these are difficult to predict and may or may not occur in the future.

Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a fund to miss attractive investment opportunities. Losses to a fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for a fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, a fund may hold cash investments in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause a fund to incur costs in connection with conversions between various currencies. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by a fund.

During the 2008-2009 global financial crisis, financial markets in Europe experienced significant volatility due, in part, to concerns about rising levels of government debt and the prevalence of increased budget deficits. As a result, many economies in the region suffered through prolonged economic downturns. Due to the economic integration of the region, another economic downturn in one European country may have a negative impact on the economies of other European countries.

The risk of investing in Europe may be heightened due to steps taken by the United Kingdom (UK) to exit the European Union (EU). On January 31, 2020, the UK officially withdrew from the EU. On December 30, 2020, the EU and UK signed the EU-UK Trade and Cooperation Agreement (TCA) which governs certain aspects of the EU's and the UK's relationship, many of which are still to be determined, including those related to financial services. Notwithstanding the TCA, significant uncertainty remains in the market regarding the ramifications of the UK's withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased

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volatility and illiquidity, and companies that conduct a significant amount of business in the UK or Europe may experience lower revenue and/or profit growth, all of which may adversely affect the value of a fund's investments. Brexit also may cause additional member states to contemplate departing the EU, which would likely perpetuate political and economic instability in the region and cause additional market disruption in global financial markets.

As a fund may hold investments in issuers that are located in Europe or that depend on revenues generated from operations in Europe, any material negative developments in Europe could have a negative impact on the value and liquidity of these investments, which could harm a fund's performance.

**Foreign Institutions** involve additional risks. The funds may invest in U.S. dollar-denominated securities issued by foreign institutions or securities that are subject to credit or liquidity enhancements provided by foreign institutions. Foreign institutions may not be subject to uniform accounting, auditing and financial reporting standards, practices and requirements that are comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments could have effects on the value of securities issued or supported by foreign institutions. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, change of government or war could affect the value of these securities. In addition, there may be difficulties in obtaining or enforcing judgments against foreign institutions that issue or support securities in which a fund may invest. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

**High-Yield Securities,** also called lower quality bonds (junk bonds), are frequently issued by companies without long track records of sales and earnings, or by those of questionable credit strength, and are more speculative and volatile (though typically higher yielding) than investment grade bonds. Adverse economic developments could disrupt the market for high-yield securities, and severely affect the ability of issuers, especially highly-leveraged issuers, to service their debt obligations or to repay their obligations upon maturity.

Also, the secondary market for high-yield securities at times may not be as liquid as the secondary market for higher-quality debt securities. As a result, the investment adviser could find it difficult to sell these securities or experience difficulty in valuing certain high-yield securities at certain times. Prices realized upon the sale of such lower rated securities, under these circumstances, may be less than the prices at which a fund purchased them.

Thus, high-yield securities are more likely to react to developments affecting interest rates and market and credit risk than are more highly rated securities, which primarily react to movements in the general level of interest rates. When economic conditions appear to be deteriorating, medium- to lower-quality debt securities may decline in value more than higher-quality debt securities due to heightened concern over credit quality, regardless of prevailing interest rates. Prices for high-yield securities also could be affected by legislative and regulatory developments. These laws could adversely affect a fund's net asset value and investment practices, the secondary market value for high-yield securities, the financial condition of issuers of these securities and the value of outstanding high-yield securities.

**Hybrid Instruments** are a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index or another interest rate or some other economic factor (each a benchmark). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. An example of a hybrid could be a bond issued by an oil company that pays a small base level of interest with additional interest that accrues in correlation to the extent to which oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil.

Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, duration management, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. The purchase of hybrids also exposes a fund to the credit risk of the issuer of the hybrids. These risks may cause significant fluctuations in the net asset value of a fund. A fund will not invest more than 5% of its total assets in hybrid instruments.

Certain hybrid instruments may provide exposure to the commodities markets. These are derivative securities with one or more commodity-linked components that have payment features similar to commodity futures contracts, commodity options, or similar instruments. Commodity-linked hybrid instruments may be either equity or debt securities, and are considered hybrid instruments because they have both security and commodity-like characteristics. A portion of the value of these instruments may be derived from the value of a commodity, futures contract, index or other economic variable. A fund will only invest in commodity-linked hybrid instruments that qualify under applicable rules of the CFTC for an exemption from the provisions of the CEA.

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Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, a fund's investments in these products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act.

**Illiquid Securities or Investments** means any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The liquidity of a fund's investments is monitored under the supervision and direction of the Board of Trustees (the Board) and is governed by the 1940 Act and rules promulgated thereunder, which provide that a fund may not acquire any illiquid investments if, immediately after the acquisition, the fund would have invested more than 15% of the fund's net assets in illiquid investments. Investments currently not considered liquid include, among others, repurchase agreements not maturing within seven days that are not subject to a demand feature of seven days or less and certain restricted securities. Any investment may become illiquid at times of market dislocation.

**Indexing Strategies** involve tracking the securities represented in, and, therefore, the performance of, an index. The Schwab MarketTrack Portfolios invest mainly in other Schwab Funds, particularly index funds, which seek to track the total returns of various market indices. Each of these index funds normally will primarily invest its assets in the securities of its index. Moreover, each of these index funds seeks to invest so that its portfolio performs similarly to that of its index. Each of these index funds tries to generally match its holdings in a particular security to its weight in the index. Each index fund will seek a correlation between its performance and that of its index of 0.90 or better over time. A perfect correlation of 1.0 is unlikely as the index funds incur operating and trading expenses unlike their indices. An index fund may rebalance its holdings in order to track its index more closely. In the event its intended correlation is not achieved, the Board will consider alternative arrangements for the portfolio or index fund.

There can be no guarantee that the performance of an index fund will achieve a high degree of correlation with that of its index. A number of factors may affect an index fund's ability to achieve a high correlation with its index, including the degree to which an index fund utilizes a sampling technique. The correlation between the performance of an index fund and its index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between an index fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to an index fund but not to the index.

**Inflation/Deflation Risk.** The funds may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from a fund's investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of a fund's assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of a fund's assets.

**Inflation-Protected Securities** are fixed-income securities whose value is periodically adjusted according to the rate of inflation. Two structures are common. The U.S. Treasury and some other issuers utilize a structure that accrues inflation into the principal value of the bond. Other issuers pay out the Consumer Price Index (CPI) accruals as part of a semiannual coupon.

Inflation-protected securities issued by the U.S. Treasury have maturities of approximately five, ten or thirty years, although it is possible that securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semiannual basis equal to a fixed percentage of the inflation adjusted principal amount.

If the periodic adjustment rate measuring inflation falls, the principal value of inflation-protected bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed by the U.S. Treasury in the case of U.S. Treasury inflation-protected bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed and will fluctuate. An underlying fund may also invest in other inflation related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond to be repaid at maturity may be less than the original principal amount and, therefore, is subject to credit risk.

The value of inflation-protected bonds is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the relationship between nominal interest rates and the expected rate of inflation. Therefore, if the rate of inflation rises at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-protected bonds. In contrast, if nominal interest rates increase at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected bonds.

While these securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure.

The periodic adjustment of U.S. inflation-protected bonds is tied to the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-protected bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States.

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Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by the IRS to be taxable income in the year it occurs. An underlying fund's distributions to shareholders may include interest income and the income attributable to principal adjustments, both of which will be taxable to shareholders. The tax treatment of the income attributable to principal adjustments may result in the situation where an underlying fund needs to make its required annual distributions to shareholders in amounts that exceed the cash received. As a result, the underlying fund may need to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation-protected security is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital.

**Interfund Borrowing and Lending.** The SEC has granted an exemption to the funds that permits the funds to borrow money from and/or lend money to other funds in the Fund Complex as defined under "Management of the Funds." All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review of the Board.

**International Bonds** are certain obligations or securities of foreign issuers, including Eurodollar Bonds, which are U.S. dollar-denominated bonds issued by foreign issuers payable in Eurodollars (U.S. dollars held in banks located outside the United States, primarily Europe), Yankee Bonds, which are U.S. dollar-denominated bonds issued in the U.S. by foreign banks and corporations, and EuroBonds, which are bonds denominated in U.S. dollars and usually issued by large underwriting groups composed of banks and issuing houses from many countries. Investments in securities issued by foreign issuers, including ADRs and securities purchased on foreign securities exchanges, may subject a fund to additional investment risks, such as adverse political and economic developments, possible seizure, nationalization or expropriation of foreign investments, less stringent disclosure requirements, non-U.S. withholding taxes and the adoption of other foreign governmental restrictions.

Additional risks include less publicly available information, the risk that companies may not be subject to the accounting, auditing and financial reporting standards and requirements of U.S. companies, the risk that foreign securities markets may have less volume and therefore may be less liquid and their prices more volatile than U.S. securities, and the risk that custodian and transaction costs may be higher. Foreign issuers of securities or obligations are often subject to accounting requirements and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks.

**Large Transaction Risk.** Certain accounts or Charles Schwab & Co., Inc. (Schwab or the distributor) affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities when it would not otherwise do so, which could result in a loss to the fund, negative impact to the fund's brokerage costs, acceleration of the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan), or higher portfolio turnover. Investors should consider whether a fund is an appropriate investment in light of their current financial position and goals.

**Market Disruptions Risk.** The funds are subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, epidemics and pandemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause a fund to lose value. These events can also impair the technology and other operational systems upon which the funds' service providers, including Schwab Asset Management, as the funds' investment adviser, rely, and could otherwise disrupt the funds' service providers' ability to fulfill their obligations to the funds.

The outbreak of COVID-19, a novel coronavirus disease, has caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the funds invest. The transmission of COVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the global economic environment. These disruptions have led to instability in the market place, including losses and overall volatility. The impact of COVID-19, including variants of the underlying virus, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

Russia's military invasion of Ukraine in February 2022, responses by the United States and other countries to the invasion and the potential for wider conflict have increased and may continue to increase volatility and uncertainty in financial markets worldwide. The United States and other countries have imposed broad-ranging economic sanctions on Russia and Russian entities and individuals that, among other restrictions, prohibit companies from doing business with Russia and Russian issuers, and may adversely affect companies with economic or financial exposure to Russia and Russian issuers. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia's military invasion. These and potential similar future sanctions may limit the potential

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universe of securities in which the funds may invest and may require the funds to freeze or divest its existing investments in a company that becomes subject to such restrictions. A number of large corporations and U.S. states have also announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses. The extent and duration of Russia's military actions and the repercussions of such actions, including any retaliatory actions or countermeasures that may be taken by Russia or others subject to sanctions (such as cyberattacks on other governments, corporations or individuals) are unpredictable, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These events could negatively affect the funds' performance.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, market closures, changes in interest rates, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the funds. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the funds being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.

To satisfy any shareholder redemption requests during periods of extreme volatility, it is more likely the funds may be required to dispose of portfolio investments at inopportune times or prices.

**Money Market Securities** are high-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker's acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker's acceptances are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short-term credit needs.

Money market securities pay fixed-, variable- or floating-rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately; these puts, which are sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When a fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts.

A fund may keep a portion of its assets in cash for business operations. A fund may invest in money market securities to reduce the effect this otherwise uninvested cash would have on its performance. A fund may also invest in money market securities to the extent it is consistent with its investment objective.

*<u>Banker's Acceptances or Notes</u>* are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. A fund will invest only in banker's acceptances of banks that have capital, surplus and undivided profits in the aggregate in excess of $100 million.

*<u>Certificates of Deposit or Time Deposits</u>* are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. A fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits, in the aggregate, in excess of $100 million.

*<u>Commercial Paper</u>* consists of short term, promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

*<u>Fixed Time Deposits</u>* are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but may be subject to early withdrawal penalties, which vary depending upon market conditions and the remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a fixed time deposit to a third party, although there is no market for such deposits. A fund will not invest in fixed time deposits, that (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight deposits) if, in the aggregate, more than 15% of its net assets would be invested in such deposits, repurchase agreements maturing in more than seven days and other illiquid assets.

*<u>Promissory Notes</u>* are written agreements committing the maker or issuer to pay the payee a specified amount either on demand or at a fixed date in the future, with or without interest. These are sometimes called negotiable notes or instruments and are subject to credit risk. Bank notes are notes used to represent obligations issued by banks in large denominations.

*<u>Repurchase Agreements</u>* are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer's holding period. Any repurchase agreements a fund enters into will involve a fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short, from overnight to one week, although the securities collateralizing a repurchase agreement

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may have longer maturity dates. Default by the seller might cause a fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. A fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement's seller, a fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying securities and loss of income. Certain repurchase agreements a fund may enter into may or may not be subject to an automatic stay in bankruptcy proceedings. A fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank.

**Mortgage-Backed Securities** (MBS) and other **Asset-Backed Securities** (ABS) may be purchased by a fund. MBS represent participations in mortgage loans, and include pass-through securities, adjustable rate mortgages, collateralized mortgage obligations and stripped MBS. MBS may be issued or guaranteed by U.S. government agencies or instrumentalities, such as the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). MBS may also be issued by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage banks, commercial banks, and special purpose entities (collectively, "private lenders"). MBS are based on different types of mortgages including those on commercial real estate and residential property. MBS issued by private lenders may be supported by pools of mortgage loans or other MBS that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of credit enhancement. To the extent that a fund invests in MBS issued by private lenders, such securities may be issued in the form of several tranches. Depending on their respective seniority, individual tranches are subject to increased (and sometimes different) credit, prepayment and liquidity and valuation risks as compared to other tranches. These securities are often subject to greater credit, prepayment and liquidity and valuation risks than an MBS issued by a U.S. government agency or instrumentality. The investment adviser will consider the creditworthiness of the guarantee providers and/or credit enhancement providers in determining whether a MBS issued by a private lender meets a fund's investment quality standards. There can be no guarantee that the enhancement provider or guarantor of a MBS can meet their obligations under the enhancement or guarantee arrangements.

The average life of a MBS is likely to be substantially shorter than the original maturity of the mortgages underlying the securities. Scheduled payments and prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal investment long before the maturity of the mortgages in the pool.

The National Housing Act authorized Ginnie Mae to guarantee the timely payment of principal and interest on securities backed by a pool of mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the U.S. Department of Veterans Affairs. The Ginnie Mae guarantee is backed by the full faith and credit of the U.S. government. Ginnie Mae is also empowered to borrow without limitation from the U.S. Treasury if necessary to make any payments required under its guarantee.

Freddie Mac was created in 1970 to promote development of a nationwide secondary market in conventional residential mortgages. Fannie Mae was established in 1938 to create a secondary market in mortgages the FHA insures. Securities issued by Freddie Mac and Fannie Mae are not backed by the full faith and credit of the U.S. government.

For more information on securities issued by Fannie Mae and Freddie Mac, see "U.S. Government Securities." On June 3, 2019, under the "Single Security Initiative" undertaken by the Federal Housing Finance Agency (FHFA) seeking to maximize the liquidity for both Fannie Mae and Freddie Mac MBS in the "to-be-announced" (TBA) market, Fannie Mae and Freddie Mac are expected to start issuing uniform MBS (UMBS) in place of their current offerings of TBA-eligible MBS. The effects of the issuance of UMBS on the market for MBS and on a fund's ability to invest in UMBS are uncertain.

*<u>Commercial Mortgage-Backed Securities</u>* (CMBS) include securities that reflect an interest in, and are secured by, mortgage loans on commercial real property. The market for CMBS developed more recently and in terms of total outstanding principal amount of issues is relatively small compared to the market for residential single-family MBS. Many of the risks of investing in CMBS reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants. CMBS may be less liquid and exhibit greater price volatility than other types of mortgage- or asset-backed securities.

*<u>Collateralized Debt Obligations.</u>* A fund may invest in collateralized debt obligations (CDOs), which include collateralized bond obligations (CBOs), collateralized loan obligations (CLOs) and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust that is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans.

For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the "equity" tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically has higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class.

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The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by a fund as illiquid securities, however an active dealer market may exist for CDOs allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed income securities discussed elsewhere in this SAI and a fund's prospectus (e.g., interest rate risk and default risk), CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) a fund may invest in CDOs that are subordinate to other classes; (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results; and (v) credit ratings by major credit rating agencies may be no indication of the creditworthiness of the security.

*<u>Collateralized Mortgage Obligation</u>* (CMO) is a hybrid between a mortgage-backed bond and a mortgage pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, on a monthly basis. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by Ginnie Mae, Freddie Mac, Fannie Mae, and their income streams, as well as private issuers.

CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments.

In a typical CMO transaction, a corporation (issuer) issues multiple series (e.g., A, B, C, Z) of CMO bonds (Bonds). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates (Collateral). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.

The rate of principal payment on MBS and ABS generally depends on the rate of principal payments received on the underlying assets which in turn may be affected by a variety of economic and other factors. As a result, the price and yield on any MBS or ABS is difficult to predict with precision and price and yield to maturity may be more or less than the anticipated yield to maturity. If a fund purchases these securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing the yield to maturity. Conversely, if a fund purchases these securities at a discount, a prepayment rate that is faster than expected will increase yield to maturity, while a prepayment rate that is slower than expected will reduce yield to maturity. Amounts available for reinvestment by a fund are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates than during a period of rising interest rates.

While many MBS and ABS are issued with only one class of security, many are issued in more than one class, each with different payment terms. Multiple class MBS and ABS are issued as a method of providing credit support, typically through creation of one or more classes whose right to payments on the security is made subordinate to the right to such payments of the remaining class or classes. In addition, multiple classes may permit the issuance of securities with payment terms, interest rates, or other characteristics differing both from those of each other and from those of the underlying assets. Examples include stripped securities, which are MBS and ABS entitling the holder to disproportionate interest or principal compared with the assets backing the security, and securities with classes having characteristics different from the assets backing the securities, such as a security with floating interest rates with assets backing the securities having fixed interest rates. The market value of such securities and CMO's generally is more or less sensitive to changes in prepayment and interest rates than is the case with traditional MBS and ABS, and in some cases such market value may be extremely volatile.

*<u>CMO Residuals.</u>* CMO residuals are mortgage securities issued by agencies or instrumentalities of the U.S. government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.

The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to prepayments on the related underlying mortgage assets, in the same manner as an interest-only (IO) class of stripped mortgage-backed securities. See "Stripped Mortgage-Backed Securities." In addition, if a series of a CMO includes a class that bears interest at an adjustable rate,

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the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances a fund may fail to recoup fully its initial investment in a CMO residual.

CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market has only very recently developed and CMO residuals currently may not have the liquidity of other more established securities trading in other markets. Transactions in CMO residuals are generally completed only after careful review of the characteristics of the securities in question. In addition, CMO residuals may, or pursuant to an exemption therefrom, may not have been registered under the Securities Act of 1933, as amended (the 1933 Act). CMO residuals, whether or not registered under the 1933 Act, may be subject to certain restrictions on transferability, and may be deemed "illiquid" and subject to a fund's limitations on investment in illiquid securities.

*<u>Stripped Mortgage-Backed Securities</u>* (SMBS) are derivative multi-class mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.

SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the IO class), while the other class will receive all of the principal (the principal-only or PO class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a fund's yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a fund may fail to recoup some or all of its initial investment in these securities even if the security is in one of the highest rating categories.

Under certain circumstances these securities may be deemed "illiquid" and subject to a fund's limitations on investment in illiquid securities.

*<u>Mortgage Pass-Through Securities.</u>* The term "U.S. agency mortgage pass-through security" refers to a category of pass-through securities backed by pools of mortgages and issued by one of several U.S. government-sponsored entities, such as Ginnie Mae, Fannie Mae or Freddie Mac. In the basic mortgage pass-through structure, mortgages with similar issuer, term and coupon characteristics are collected and aggregated into a "pool" consisting of multiple mortgage loans. The pool is assigned a CUSIP number and undivided interests in the pool are traded and sold as pass-through securities. The holder of the security is entitles to a pro rata share of principal and interest payments (including unscheduled prepayments) from the pool of mortgage loans.

An investment in a specific pool of pass-through securities requires an analysis of the specific prepayment risk of mortgages within the covered pool (since mortgagors typically have the option to prepay their loans). The level of prepayments on a pool of mortgage securities is difficult to predict and can impact the subsequent cash flows, value and yield of the mortgage pool. In addition, when trading specific mortgage pools, precise execution, delivery and settlement arrangements must be negotiated for each transaction. These factors combine to make trading in mortgage pools somewhat cumbersome relative to other fund investments.

For these reasons, a fund may seek to obtain exposure to U.S. agency mortgage pass-through securities, in part or in full, through the use of TBA transactions. TBA refers to a commonly used mechanism for the forward settlement of U.S. agency mortgage pass-through securities, and not to a separate type of mortgage-backed security. Most transactions in the fixed-rate mortgage pass-through securities occur through the use of TBA transactions. TBA transactions are generally conducted in accordance with widely-accepted guidelines that establish commonly observed terms and conditions for execution, settlement and delivery. In a TBA transaction, the buyer and seller decided on general trade parameters, such as agency, settlement date, par amount and price. The actual pools delivered generally are determined two days prior to settlement date. A fund may use TBA transactions in several ways. For example, a fund anticipates that it will regularly enter into TBA agreements and "roll over" such agreements prior to the settlement date stipulated in such agreements. This type of TBA transaction is sometimes known as a "TBA roll." In a TBA roll, the fund generally will sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and will enter into a new TBA agreement for future delivery of pools of mortgage pass-through securities. In addition, a fund may enter into TBA agreements and settle such transactions on the stipulated settlement date by accepting actual receipt or delivery of the pools of mortgage pass-through securities stipulated in the TBA agreement.

Default by or bankruptcy of a counterparty to a TBA transaction would expose a fund to possible loss because of adverse market action, expenses or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in the TBA transaction. To help minimize this risk, a fund will enter into TBA transactions only with established counterparties (such as major broker-dealers) and the fund's investment adviser will monitor the creditworthiness of such counterparties. A fund may also acquire interests in mortgage pools through means other than TBA transactions.

A fund's use of "TBA rolls" may cause the fund to experience higher portfolio turnover, higher transaction costs and to pay higher capital gains distributions to shareholders, which may be taxable, than if it acquired exposure to mortgage pools through means other than TBA transactions.

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Generally, a fund intends to invest cash pending settlement of any TBA transactions in U.S. Treasury securities, money market instruments, repurchase agreements, or other high-quality, liquid short-term instruments, including money market funds.

**Non-Publicly Traded Securities and Private Placements.** A fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a fund may be required to bear the expenses of registration.

**Quality of Fixed-Income Investments** will be principally investment-grade for a fund's assets. Investment-grade quality securities are rated by at least one NRSRO in one of the four highest rating categories (within which there may be sub-categories or gradations indicating relative standing) or have been determined to be of equivalent quality by the investment adviser or sub-adviser. Sometimes an investment-grade quality security may be downgraded to a below investment-grade quality rating. If a security no longer has at least one investment-quality rating from an NRSRO, the investment adviser would reanalyze the security in light of the downgrade and determine whether a fund should continue to hold the security. However, such downgrade would not require the investment adviser or sub-advisers to sell the security on behalf of a fund. Sometimes lower-quality securities may be downgraded to an even lower quality. The investment adviser may also elect to purchase high-yield securities that are rated (at the time of purchase) B or higher or the equivalent by Moody's, Standard & Poor's Financial Services LLC (S&P) or Fitch, Inc. or are determined to be of similar investment quality by the investment manager.

**Restricted Securities** are securities that are subject to legal restrictions on their sale. Difficulty in selling restricted securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the 1933 Act, or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. To the extent a fund invests in restricted securities that are deemed liquid, the general level of illiquidity in the fund's portfolio may be increased if such securities become illiquid.

**Reverse Repurchase Agreements and Mortgage Dollar Rolls** may be used by a fund. A fund may engage in reverse repurchase agreements to facilitate portfolio liquidity, a practice common in the mutual fund industry, or for arbitrage transactions as discussed below. In a reverse repurchase agreement, a fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. A fund generally retains the right to interest and principal payments on the security. If a fund uses the cash it obtains to invest in other securities, this may be considered a form of leverage and may expose a fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value on a fund's portfolio securities. Because a fund receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing.

A fund also may enter into mortgage dollar rolls, in which a fund would sell MBS for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While a fund would forego principal and interest paid on the MBS during the roll period, a fund would be compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. A fund also could be compensated through the receipt of fee income equivalent to a lower forward price. This transaction allows a fund to have the same price and duration exposure in the mortgage security while having the cash for the bonds for the given time period. Mortgage dollar roll transactions may be considered a borrowing by a fund.

The mortgage dollar rolls and reverse repurchase agreements entered into by a fund may be used as arbitrage transactions in which a fund will maintain an offsetting position in short duration investment-grade debt obligations. Since a fund will receive interest on the securities or repurchase agreements in which it invests the transaction proceeds, such transactions may involve leverage. However, since such securities or repurchase agreements will be high quality and short duration, the investment adviser believes that such arbitrage transactions present lower risks to a fund than those associated with other types of leverage. There can be no assurance that a fund's use of the cash it receives from a mortgage dollar roll will provide a positive return.

A fund also may effect simultaneous purchase and sale transactions that are known as "sale-buybacks." A sale-buyback is similar to a reverse repurchase agreement, except that in a sale-buyback, the counterparty who purchases the security is entitled to receive any principal or interest payments made on the underlying security pending settlement of the fund's repurchase of the underlying security. A fund's obligations under a sale-buyback typically would be offset by liquid assets equal in value to the amount of the fund's forward commitment to repurchase the subject security.

**Securities Lending** of portfolio securities is a common practice in the securities industry. A fund may engage in security lending arrangements. When a fund is lending portfolio securities, a fund may receive cash collateral and may invest it in short-term, interest-bearing obligations, including cash collateral funds, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies.

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Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities and efforts to recall such securities promptly may be unsuccessful, especially for foreign securities. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities, if the borrower fails to return the security loaned or becomes insolvent. A fund will also bear the risk of any decline in value of securities acquired with cash collateral.

A fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other permitted instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) a fund may at any time call the loan and obtain the return of the securities loaned; (3) a fund will receive payments in lieu of any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security's voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to a fund, it is expected that a fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer's corporate governance policies or structure.

To the extent a fund participates in securities lending under the current securities lending agreements with unaffiliated lending agents, costs and expenses, including agent fees, associated with securities lending activities under the securities lending program paid to the unaffiliated lending agents start at 9% of gross lending revenue, with subsequent breakpoints to a low of 5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by a fund, as applicable. No portion of the lending revenue is paid to or retained by Schwab Asset Management or any affiliate of Schwab Asset Management.

**Securities of Other Investment Companies.** Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a continuous basis; (2) business development companies that generally invest in, and provide services to, privately-held companies or thinly-traded public companies (see the sub-section titled "Business Development Companies" for more information); (3) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; (4) UITs that generally offer a fixed number of redeemable shares; and (5) money market funds that typically seek current income by investing in money market securities (see the sections titled "Money Market Funds" and "Money Market Securities" for more information). Certain open-end funds, closed-end funds and UITs are traded on exchanges (see the section titled "Exchange-Traded Funds" for more information).

To the extent a fund invests, or has invested, in shares of other investment companies, including BDCs, during its prior fiscal year, the fund, pursuant to SEC rules, must disclose any material fees and expenses indirectly incurred by the fund as a result of such investments. These indirect fees and expenses, to the extent incurred, will appear in the fee table of a fund's prospectus as a separate line item captioned "Acquired fund fees and expenses."

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The funds may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. A fund may invest in investment companies that are not registered with the SEC or in privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause a fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which a fund may invest in another investment company may be limited. Except as described below, the 1940 Act currently requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of a fund's total assets will be invested in the securities of any one acquired investment company (acquired fund), (ii) not more than 10% of the value of its total assets will be invested in the aggregate in securities of acquired funds as a group and (iii) not more than 3% of the outstanding voting stock of any one acquired fund will be owned by a fund.

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The limitations described above do not apply to investments in money market funds subject to certain conditions. The funds may invest in affiliated and unaffiliated money market funds without limit under Rule 12d1-1 under the 1940 Act subject to the fund's investment policies and restrictions and the conditions of the Rule.

Section 12(d)(1)(G) of the 1940 Act permits a fund to invest in acquired funds in the "same group of investment companies" ("affiliated funds"), government securities and short-term paper. In order to be an eligible investment under Section 12(d)(1)(G), an affiliated acquired fund must have a policy prohibiting it from investing in other registered open-end funds under Section 12(d)(1)(F) or (G) of the 1940 Act and, under certain circumstances, limit itself from investing in other investment companies and private funds.

Rule 12d1-4 allows a fund to acquire shares of an acquired fund in excess of the limitations currently imposed by the 1940 Act. Fund of funds arrangements relying on Rule 12d1-4 will be subject to several conditions, certain of which are specific to a fund's position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (i) control and voting that prohibit an acquiring fund, its investment adviser (or a subadviser) and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund; (ii) certain required findings relating to complexity, fees and undue influence (among other things); (iii) fund of funds investment agreements; and (iv) general limitations on an acquired fund's investments in other investment companies and private funds to no more than 10% of the acquired fund's asset, except in certain circumstances. The limitation on a fund and its investment adviser and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund could limit a fund's investment in an unaffiliated acquired fund or cause the fund to sell shares of the unaffiliated acquired fund, potentially at an inopportune time.

**Short Sales** may be used by a fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. A fund may engage in short sales that are either "against the box" or "uncovered." A short sale is "against the box" if at all times during which the short position is open, a fund owns at least an equal amount of the securities or securities convertible into, or has the right to acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to a fund with respect to the securities that are sold short. "Uncovered" short sales are transactions under which a fund sells a security it does not own. To complete such transaction, a fund may borrow the security through a broker to make delivery to the buyer and, in doing so, a fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. A fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, a fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until a fund replaces the borrowed securities.

A fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. If a fund sells securities short "against the box," it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

A fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities.

**Temporary Defensive Investments.** During unusual economic or market conditions or for temporary defensive or liquidity purposes, the funds may invest up to 100% of their assets in cash, money market instruments, repurchase agreements and other short-term obligations.

**U.S. Government Securities** are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the U.S. government. Some U.S. government securities, such as those issued by Fannie Mae, Freddie Mac, the Student Loan Marketing Association (Sallie Mae) and the Federal Home Loan Banks (FHLB), are supported by a line of credit the issuing entity has with the U.S. Treasury. Securities issued by other issuers are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. U.S. government securities, including U.S. Treasury securities, are among the safest securities; however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer or director of Fannie Mae and Freddie Mac with respect to Fannie Mae and Freddie Mac and the assets of Fannie Mae and Freddie Mac. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement (SPA) with each of Fannie Mae and Freddie Mac pursuant to which the U.S. Treasury agreed to purchase up to 1,000,000 shares of senior preferred stock with an aggregate initial liquidation preference of $1 billion and obtained warrants and options for the purchase of common stock of each of Fannie Mae and Freddie Mac. Under the SPAs as currently amended, the U.S. Treasury has pledged to provide financial support to a government-sponsored enterprise (GSE) in any quarter in which the GSE has a net worth deficit as defined in the respective SPA. Under the current arrangement, the GSEs have a maximum

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amount of funding available to them which will be reduced by any future draws. There is a risk that if a GSE experiences a loss in any fiscal quarter that results in the GSE having a negative net worth that is greater than the amount available under the U.S. Treasury's funding commitment that the FHFA could place the GSE in receivership. In addition, each GSE may only retain a certain amount of its profits at the end of each fiscal quarter and the U.S. Treasury's liquidation preference will increase in an amount equal to any increase in a GSE's net worth up to a certain amount. The SPAs contain various covenants that severely limit each enterprise's operations.

Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The SPAs are intended to enhance each of Fannie Mae's and Freddie Mac's ability to meet its obligations. The FHFA has indicated that the conservatorship of each enterprise will end when the director of the FHFA determines that the FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. The FHFA recently announced plans to consider taking Fannie Mae and Freddie Mac out of conservatorship. Should Fannie Mae and Freddie Mac be taken out of conservatorship, it is unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations under the SPAs. It also is unclear how the capital structure of Fannie Mae and Freddie Mac would be constructed post-conservatorship, and what effects, if any, the privatization of Fannie Mae and Freddie Mac will have on their creditworthiness and guarantees of certain mortgage-backed securities. Accordingly, should the FHFA take Fannie Mae and Freddie Mac out of conservatorship, there could be an adverse impact on the value of their securities which could cause a fund's investments to lose value.

The risk of default may be heightened when there is uncertainty relating to negotiations in the U.S. Congress over increasing the statutory debt ceiling. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling, the U.S. government may default on certain U.S. government securities including those held by a fund, which could have an adverse impact on a fund. In August 2011, the long-term credit rating of the U.S. government was downgraded by a major rating agency as a result of concern about the U.S. government's budget deficit and rising debt burden. Similar downgrades in the future could increase volatility in domestic and foreign financial markets, result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of different kinds of debt. Although remote, it is at least theoretically possible that under certain scenarios the U.S. government could default on its debt, including U.S. Treasury securities.

In accordance with recommendations made by the Treasury Market Practices Group, to the extent a fund enters into transactions involving U.S. Treasury securities, agency debt instruments issued by Fannie Mae, Freddie Mac and the FHLB, and agency-pass-through MBS issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, the fund may pay "fails charges" to or be owed "fails charges" from a counterparty, in connection with certain trade settlement charges.

**Wrap Agreements** may be entered into by a fund with insurance companies, banks or other financial institutions (wrapper providers). A wrap agreement typically obligates the wrapper provider to maintain the value of the assets covered under the agreement (covered assets) up to a specified maximum dollar amount upon the occurrence of certain specified events. The value is pre-determined using the purchase price of the securities plus interest at a specified rate minus an adjustment for any defaulted securities. The specified interest rate may be adjusted periodically under the terms of the agreement. While the rate typically will reflect movements in the market rates of interest, it may at times be less or more than the actual rate of income earned on the covered assets. The rate also can be impacted by defaulted securities and by purchase and redemption levels in a fund. A fund also pays a fee under the agreement, which reduces the rate as well.

Wrap agreements may be used as a risk management technique intended to help minimize fluctuations in a fund's NAV. However, a fund's NAV will typically fluctuate at least minimally, and may fluctuate more at times when interest rates are fluctuating. Additionally, wrap agreements do not protect against losses a fund may incur if the issuers of portfolio securities do not make timely payments of interest and/or principal. A wrap agreement provider also could default on its obligations under the agreement. Therefore, a fund will only invest in a wrap provider with an investment-grade credit rating. There is no active trading market for wrap agreements and none is expected to develop. Therefore, wrap agreements are considered illiquid investments. There is no guarantee that a fund will be able to purchase any wrap agreements or replace ones that defaulted. Wrap agreements are valued using procedures adopted by the Board. There are risks that the value of a wrap agreement may not be sufficient to minimize the fluctuations in a fund's NAV. All of these factors might result in a decline in the value of a fund's shares.

**Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities** are debt securities that do not make cash interest payments throughout the period prior to maturity. Zero-coupon and step-coupon securities are sold at a deep discount to their face value. A zero-coupon security pays no interest to its holders during its life. Step-coupon securities are debt securities that, instead of having a fixed coupon for the life of the security, have coupon or interest payments that may increase or decrease to predetermined rates at future dates. Some step-coupon securities are issued with no coupon payments at all during an initial period, and only become interest-bearing at a future date; these securities are sold at a deep discount to their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because such securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. High-yield securities structured as zero-coupon bonds or pay-in-kind securities tend to be especially volatile as they are especially sensitive to downward pricing pressures from rising interest rates and may require a fund to pay out imputed income without receiving the actual cash delivery. Thus, these types of high yield investments increase the chance that the fund may lose money. While these securities do not pay current cash income, federal income tax law requires the holders of zero-coupon, step-coupon, and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accruing that year. In order to continue to qualify as a "regulated investment company" or "RIC" under the Internal Revenue Code and avoid a certain excise tax, a fund may be required to distribute a portion of such discount and income and may be required to dispose of other portfolio securities, which may occur in periods of adverse market prices, in order to generate cash to meet these distribution requirements.

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#### INVESTMENT LIMITATIONS AND RESTRICTIONS

#### Schwab Balanced Fund

#### The following investment limitations may be changed only by vote of a majority of the fund's outstanding voting shares:

#### The fund may not:
(1) Purchase securities of any issuer unless consistent with the maintenance of its status as a diversified company under the 1940 Act.

(2) Concentrate investments in a particular industry or group of industries as concentration is defined under the 1940 Act, or the rules or regulations thereunder.

(3) Purchase or sell commodities, commodities contracts or real estate, lend or borrow money, issue senior securities, underwrite securities, or pledge, mortgage or hypothecate any of its assets, except as permitted by the 1940 Act or the rules or regulations thereunder.

#### The following investment policies and restrictions are non-fundamental and may be changed by the Board.

#### The fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Sell securities short except as in accordance with current SEC rules and interpretations.

(3) Purchase securities on margin, except such short term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(4) Borrow money except that the fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(5) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

(6) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries.

(7) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that the fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs); (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts; and (iii) purchase securities of companies that deal in precious metals or interests therein.

#### Schwab MarketTrack Portfolios

#### The following investment policies and restrictions may be changed only by a vote of a majority of each fund's outstanding voting shares:

#### The Schwab MarketTrack All Equity Portfolio may not:
(1) Purchase securities of any issuer unless consistent with the maintenance of its status as a diversified company under the 1940 Act.

(2) Concentrate investments in a particular industry or group of industries as concentration is defined under the 1940 Act, or the rules or regulations thereunder.

(3) &nbsp;&nbsp;&nbsp;&nbsp; (i) Purchase or sell commodities, commodities contracts or real estate, (ii) lend or borrow money; (iii) issue senior securities; (iv) underwrite securities; or (v) pledge, mortgage or hypothecate any of its assets, except as permitted by the 1940 Act or the rules or regulations thereunder.

#### Each of the Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative Portfolio may not:
(1) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Purchase or sell commodities or real estate, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Purchase securities of other investment companies, except as permitted by the 1940 Act, including any exemptive relief granted by the SEC.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

(5) Make loans to other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(6) Borrow money, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(7) Issue senior securities, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(8) Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### The following are non-fundamental investment policies and restrictions, and may be changed by the Board.

#### Each fund may not:
(1) Sell securities short except as in accordance with current SEC rules and interpretations.

(2) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts and options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(3) Borrow money except that the portfolio may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(4) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

(5) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries.

(6) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that the portfolio may (i) purchase securities of companies that deal in real estate or interests therein (including REITs); (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts; and (iii) purchase securities of companies that deal in precious metals or interests therein.

#### In addition, the Schwab MarketTrack All Equity Portfolio may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### Schwab Target Funds

#### The following investment policies and restrictions may be changed only by a vote of a majority of each fund's outstanding voting shares:

#### Each fund may not:
(1) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Purchase or sell commodities or real estate, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Make loans to other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Borrow money, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(5) Issue senior securities, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(6) Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(7) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### The following investment policies and restrictions are non-fundamental and may be changed by the Board.

#### Each fund may not:
(1) Sell securities short except as in accordance with current SEC rules and interpretations.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

(2) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(3) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that the fund may (1) purchase securities of companies that deal in real estate or interests therein (including REITs); (2) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts; and (3) purchase securities of companies that deal in precious metals or interests therein.

(4) Borrow money except that the fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(5) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

(6) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries.

#### The following descriptions of the 1940 Act may assist investors in understanding the above policies and restrictions.
<u>Borrowing.</u> The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 ⅓% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are entered into in accordance with the conditions to applicable SEC requirements shall not be regarded as borrowings for the purposes of a fund's investment restriction.

<u>Concentration.</u> The SEC has defined concentration as investing more than 25% of an investment company's total assets in an industry or group of industries, with certain exceptions.

<u>Diversification.</u> Under the 1940 Act and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer's voting securities would be held by a fund.

<u>Lending.</u> Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

<u>Real Estate.</u> The 1940 Act does not directly restrict an investment company's ability to invest in real estate, but does require that every investment company have a fundamental investment policy governing such investments. Each fund has adopted a fundamental policy that would permit direct investment in real estate. However, each fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of a fund's Board.

<u>Senior Securities.</u> Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits each fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, when such investments are entered into in accordance with the conditions to applicable SEC requirements.

<u>Underwriting.</u> Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets. The foregoing restriction does not apply to non-diversified funds.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of a fund's acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in total assets or net assets, as applicable, or other circumstances does not require a fund to sell an investment if it could not then make the same investment.

#### MANAGEMENT OF THE FUNDS
The funds are overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of each fund. The trustees met five times during the most recent fiscal year.

Certain trustees are "interested persons." A trustee is considered an interested person (Interested Trustee) of the Trust under the 1940 Act if he or she is an officer, director, or an employee of Schwab Asset Management or Schwab. A trustee also may be considered an interested person of the Trust under the 1940 Act if he or she owns stock of The Charles Schwab Corporation (CSC), a publicly traded company and the parent company of Schwab Asset Management and Schwab.

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As used herein, the terms "Fund Complex" and "Family of Investment Companies" each refer collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust which, as of February 27, 2023, included 105 funds. As used herein, the term "Schwab Funds" refers collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Capital Trust; and the term "Schwab ETFs" refers to Schwab Strategic Trust.

Each of the officers and/or trustees serves in the same capacity, unless otherwise noted, for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The tables below provide information about the trustees and officers for the Trust, which includes the funds in this SAI. The address of each individual listed below is 211 Main Street, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(2)</sup> <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016-Sept. 2019), Principal Funds (investment management). | 105  | Director (2016-2019), <br> Principal Funds, Inc. |
| Robert W. Burns <br> 1959 <br> Trustee <br> (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105  |  |
| Nancy F. Heller <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105  |  |
| David L. Mahoney <br> 1954 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105  | Director (2004-present), <br> Corcept Therapeutics Incorporated <br> Director (2009-2021), <br> Adamas Pharmaceuticals, Inc. <br> Director (2003-2019), <br> Symantec Corporation  |
| Jane P. Moncreiff <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018-present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare). | 105  |  |
| Kimberly S. Patmore <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008-present), Patmore Management Consulting (management consulting). | 105  |  |
| J. Derek Penn <br> 1957 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006-2018), BNY Mellon (financial services). | 105  |  |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II<sup>(3)</sup> <br> 1960 <br> Chairman and Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022-present), Director and Chief Executive Officer (Oct. 2008-present) and President (Feb. 2007-Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008-Oct. 2021) and Director (May 2008-Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006-present), Charles Schwab Bank, SSB; Director (Nov. 2017-present), Charles Schwab Premier Bank, SSB; Director (July 2019-present), Charles Schwab Trust Bank; Director (May 2008-present), Chief Executive Officer (Aug. 2017-present) and President (Aug. 2017-Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020-present), TD Ameritrade Holding Corporation; Director (July 2016-Oct. 2021), Charles Schwab Investment Management, Inc. | 105  | Director (2008-present), <br> The Charles Schwab Corporation |
| Richard A. Wurster<sup>(2)(3)</sup> <br> 1973 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021-present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021-present), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021) and Senior Vice President – Advisory (May 2016-July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021-present), Schwab Holdings, Inc.; Director (Oct. 2021-present) and Chief Executive Officer (Nov. 2019-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018-Oct. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016-Apr. 2018) and President (Mar. 2017-Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016-Apr. 2018), Windhaven Investment Management, Inc. | 105  |  |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Jonathan de St. Paer <br> 1973 <br> President and Chief Executive Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019-present), President (Oct. 2018-present), Chief Operating Officer (Jan. 2021-present) and Chief Executive Officer (Apr. 2019-Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020-Mar. 2022) and Chief Operating Officer (Jan. 2021-Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019-present), President (Nov. 2018-present) and Trustee (Apr. 2019-Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (May 2022-present), Senior Vice President (Apr. 2019-May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014-Mar. 2019), Charles Schwab & Co., Inc. |
| Mark Fischer <br> 1970 <br> Chief Operating Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Chief Operating Officer (Dec. 2020-present) and Treasurer and Chief Financial Officer (Jan. 2016-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020-present) and Vice President (Oct. 2013-present), Charles Schwab Investment Management, Inc. |
| Dana Smith <br> 1965 <br> Treasurer and Chief Financial Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2023) | Treasurer and Chief Financial Officer (Jan. 2023-present) and Assistant Treasurer (Dec. 2015-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Vice President (Mar. 2022-present) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present), Charles Schwab & Co., Inc. |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Omar Aguilar <br> 1970 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Dec. 2021), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022 – present), Charles Schwab Investment Advisory, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Brett Wander <br> 1961 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| William P. McMahon, Jr. <br> 1972 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021-present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018-Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001-Apr. 2018), ThomasPartners, Inc. |
| Catherine MacGregor <br> 1964 <br> Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs <br> Chief Legal Officer, Vice President and Clerk, Laudus Trust <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022-present) and Vice President (Sept. 2005-present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (July 2005-May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005-present) and Chief Legal Officer and Clerk (Mar. 2007-present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President (Nov. 2005-Oct. 2021) and Assistant Secretary (June 2007-Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President and Assistant Secretary (Oct. 2009-Oct. 2021), Schwab ETFs. |

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<sup>(1)</sup>

Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee's twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.

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<sup>(2)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

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<sup>(3)</sup>

Mr. Bettinger and Mr. Wurster are Interested Trustees. Mr. Bettinger and Mr. Wurster are Interested Trustees because each owns stock of CSC, the parent company of Schwab Asset Management, the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc., the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust.

<sup>(4)</sup>

The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

#### Board Leadership Structure
The Chairman of the Board, Walter W. Bettinger II, is Chief Executive Officer and a member of the Board of Directors of CSC and an interested person of the Trust as that term is defined in the 1940 Act. The Board is comprised of a super-majority (75 percent) of trustees who are not interested persons of the Trust (i.e., independent trustees). The Trust does not have a single lead independent trustee. There are three primary committees of the Board: the Audit, Compliance and Valuation Committee; the Governance Committee; and the Investment Oversight Committee. Each of the Committees is chaired by an independent trustee, and each Committee is currently comprised solely of independent trustees. The Committee chairs preside at Committee meetings, participate in formulating agendas for those meetings, and coordinate with management to serve as a liaison between the independent trustees and management on matters within the scope of the responsibilities of each Committee as set forth in its Board-approved charter. The Board has determined that this leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the independent trustees of the Trust constitute a super-majority of the Board, the fact that Committee chairs are independent trustees, the number of funds (and classes) overseen by the Board, and the total number of trustees on the Board.

#### Board Oversight of Risk Management
Like most investment companies, fund management and its other service providers have responsibility for day-to-day risk management for the funds. The Board's duties, as part of its risk oversight of the Trust, consist of monitoring risks identified during regular and special reports to the Committees of the Board, as well as regular and special reports to the full Board. In addition to monitoring such risks, the Committees and the Board oversee efforts of fund management and service providers to manage risks to which the funds of the Trust may be exposed. For example, the Investment Oversight Committee meets with portfolio managers and receives regular reports regarding investment risk and credit risk of a fund's portfolio. The Audit, Compliance and Valuation Committee meets with the funds' Chief Compliance Officer and Chief Financial Officer and receives regular reports regarding compliance risks, operational risks and risks related to the valuation and liquidity of portfolio securities. From its review of these reports and discussions with management, each Committee receives information about the material risks of the funds of the Trust and about how management and service providers mitigate those risks, enabling the independent Committee chairs and other independent members of the Committees to discuss these risks with the full Board.

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The Board recognizes that not all risks that may affect the funds can be identified nor can processes and controls be developed to eliminate or mitigate the occurrence or effects of certain risks; some risks are simply beyond the reasonable control of the funds, their management, and service providers. Although the risk oversight functions of the Board, and the risk management policies of fund management and fund service providers, are designed to be effective, there is no guarantee that they will eliminate or mitigate all risks. In addition, it may be necessary to bear certain risks (such as investment-related risks) to achieve each fund's investment objective. As a result of the foregoing and other factors, the funds' ability to manage risk is subject to significant limitations.

#### Individual Trustee Qualifications
The Board has concluded that each of the trustees should initially and continue to serve on the Board because of (i) his or her ability to review and understand information about the Trust provided to them by management, to identify and request other information they may deem relevant to the performance of their duties, to question management regarding material factors bearing on the management of the Trust, and to exercise their business judgment in a manner that serves the best interests of the Trust's shareholders and (ii) the trustee's experience, qualifications, attributes or skills as described below.

The Board has concluded that Mr. Beer should serve as trustee of the Trust because of the experience he gained serving as director, president and chief executive officer of Principal Funds and his knowledge and experience in the investment management industry.

The Board has concluded that Mr. Bettinger should serve as trustee of the Trust because of the experience he gained as president and chief executive officer of The Charles Schwab Corporation, his knowledge of and experience in the financial services industry, and the experience he has gained serving as trustee of the Schwab Funds since 2008, the Schwab ETFs since 2009, and the Laudus Trust since 2010.

The Board has concluded that Mr. Burns should serve as trustee of the Trust because of the experience he gained as managing director of Pacific Investment Management Company, LLC (PIMCO) and president of PIMCO Funds as well as the experience he has gained serving as trustee of the Schwab ETFs since 2009, and the Schwab Funds and Laudus Trust since 2016.

The Board has concluded that Ms. Heller should serve as trustee of the Trust because of the experience she gained as president of TIAA Charitable and as senior managing director at TIAA, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2018.

The Board has concluded that Mr. Mahoney should serve as trustee of the Trust because of the experience he gained serving as trustee of the Schwab Funds and Laudus Trust since 2011 and Schwab ETFs since 2016, as co-chief executive officer of McKesson Corporation, and his service on other public company boards.

The Board has concluded that Ms. Moncreiff should serve as trustee of the Trust because of the experience she gained as chief investment officer of CareGroup Healthcare System, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2019.

The Board has concluded that Ms. Patmore should serve as trustee of the Trust because of the experience she gained serving as chief financial officer and executive vice president of First Data Corporation, her knowledge of and experience in management consulting, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2016.

The Board has concluded that Mr. Penn should serve as trustee of the Trust because of the experience he gained as head of equity sales and trading of BNY Mellon and his knowledge of and experience in the financial services industry, as well as the experience he has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2021.

The Board has concluded that Mr. Wurster should serve as trustee of the Trust because of the experience he gained leading investment advisory firms and organizations, including Schwab Asset Management, and his knowledge of and experience in the investment management industry.

#### Trustee Committees
The Board has established certain committees and adopted Committee charters with respect to those committees, each as described below:

<sup>●</sup>

The Audit, Compliance and Valuation Committee reviews the integrity of the Trust's financial reporting processes and compliance policies, procedures and processes, and the Trust's overall system of internal controls. The Audit, Compliance and Valuation Committee also reviews and evaluates the qualifications, independence and performance of the Trust's independent auditors, and the implementation and operation of the Trust's valuation policy and procedures. This Committee is comprised of at least three independent trustees and currently has the following members: Kimberly S. Patmore (Chair), Michael J. Beer and J. Derek Penn. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Governance Committee reviews and makes recommendations to the Board regarding Trust governance-related matters, including but not limited to Board compensation practices, retirement policies and term limits, Board self-evaluations, the effectiveness and allocation of assignments and functions by the Board, the composition of Committees of the Board, and the training of trustees.

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The Governance Committee is responsible for selecting and nominating candidates to serve as trustees. The Governance Committee does not have a written policy with respect to consideration of candidates for trustee submitted by shareholders. However, if the Governance Committee determined that it would be in the best interests of the Trust to fill a vacancy on the Board, and a shareholder submitted a candidate for consideration by the Board to fill the vacancy, the Governance Committee would evaluate that candidate in the same manner as it evaluates nominees identified by the Governance Committee. Nominee recommendations may be submitted to the Secretary of the Trust at the Trust's principal business address. This Committee is comprised of at least three independent trustees and currently has the following members: David L. Mahoney (Chair), Robert W. Burns and Kimberly S. Patmore. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Investment Oversight Committee reviews the investment activities of the Trust and the performance of the funds' investment adviser. This Committee is comprised of at least three trustees (at least two-thirds of whom shall be independent trustees) and currently has the following members: Jane P. Moncreiff (Chair), Robert W. Burns, Nancy F. Heller and David L. Mahoney. The Committee met four times during the most recent fiscal year.

#### Trustee Compensation
The following table provides trustee compensation for the fiscal year ended October 31, 2022, earned with respect to the funds in this SAI and the Fund Complex.

---

| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Aggregate Compensation <br> from the Funds in this SAI**  | **Pension or Retirement Benefits <br> Accrued as Part of Fund Expenses**  | **Total Compensation from the Funds <br> and Fund Complex Paid to Trustees**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II |  | N/A  |  |
| Richard A. Wurster<sup>(1)</sup> |  | N/A  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(1)</sup> | $4333 | N/A  | $82500 |
| Robert W. Burns | $18283 | N/A  | $330000 |
| Nancy F. Heller | $18283 | N/A  | $330000 |
| David L. Mahoney | $19392 | N/A  | $350000 |
| Jane P. Moncreiff | $19392 | N/A  | $350000 |
| Kiran M. Patel <sup>(2)</sup> | $19392 | N/A  | $350000 |
| Kimberly S. Patmore | $18283 | N/A  | $330000 |
| J. Derek Penn | $18283 | N/A  | $330000 |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(2)</sup>

Mr. Patel retired from the Board effective December 31, 2022.

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#### Securities Beneficially Owned by Each Trustee
The following table provides each trustee's equity ownership of the funds and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2022.

---

| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Walter W. Bettinger II** | | **Over $100,000**  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| **Richard A. Wurster<sup>(1)</sup>**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |

---

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Michael J. Beer<sup>(1)</sup>**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| **Robert W. Burns**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |

---

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Nancy F. Heller**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| **David L. Mahoney**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |

---

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---

| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Jane P. Moncreiff**  |  | Over $100,000  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| **Kimberly S. Patmore** |  | **Over $100,000**  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |

---

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **J. Derek Penn** | | **None**  |
|  | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

As of December 31, 2022, none of the independent trustees or their immediate family members owned beneficially or of record any securities of Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds.

#### Deferred Compensation Plan
Independent trustees may enter into a fee deferral plan. Under this plan, deferred fees will be credited to an account established by the Trust as of the date that such fees would have been paid to the trustee. The value of this account will equal the value that the account would have if the fees credited to the account had been invested in the shares of Schwab Funds selected by the trustee. Currently, none of the independent trustees has elected to participate in this plan.

#### Code of Ethics
The funds, the investment adviser and Schwab have adopted a Code of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Code of Ethics permits the trustees, directors, officers or advisory representatives of the funds or the investment adviser or the directors or officers of Schwab to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the funds. Securities transactions by some of these individuals may be subject to prior approval of the investment adviser's Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

#### CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2023, the officers and trustees of the Trust, as a group owned, of record or beneficially, less than 1% of the outstanding voting securities of each fund.

As of January 31, 2023, the following persons or entities owned, of record or beneficially, 5% or more of the outstanding voting securities of each fund (a shareholder's or an entity's address will be listed once at the first mention and not repeated for future entries):

---

| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Balanced Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N <br> 211 Main Street <br> San Francisco, CA 94105-1905  | 93.34% |

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab MarketTrack All Equity Portfolio | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 92.96% |
| Schwab MarketTrack Growth Portfolio | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 95.22% |
| Schwab MarketTrack Balanced Portfolio  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 96.09% |
| Schwab MarketTrack Balanced Portfolio  | Charles Schwab Trust Bank <br> 2360 Corporate Circle Suite 400 <br> Henderson, NV 89074  | 5.26%<sup>(1)</sup> |
| Schwab MarketTrack Conservative Portfolio | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 96.72% |
| Schwab Target 2010 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 95.07% |
| Schwab Target 2010 Fund  | HS Sapere Aude, LLC <br> c/o Schulte Roth & Zabel LLP <br> 919 Third Avenue <br> New York, NY 10022  | 8.09%<sup>(1)</sup> |
| Schwab Target 2015 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 90.98% |
| Schwab Target 2015 Fund  | Roger P. Vincent MD <br> Charles Schwab & Co., Inc. Cust <br> c/o Charles Schwab & Co., Inc. – Attn: Schwab Funds CLO <br> 211 Main Street <br> San Francisco, CA 94105-1905  | 6.10%<sup>(1)</sup> |
| Schwab Target 2015 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC <br> 8515 E Orchard Road 2T2 <br> Greenwood Village, CO 80111-5002  | 5.85% |
| Schwab Target 2020 Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 91.66% |
| Schwab Target 2025 Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 92.19% |
| Schwab Target 2030 Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 92.59% |
| Schwab Target 2035 Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 90.92% |
| Schwab Target 2040 Fund | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 91.78% |
| Schwab Target 2045 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 79.15% |
| Schwab Target 2045 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC  | 17.33% |

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Target 2050 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 77.98% |
| Schwab Target 2050 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC  | 18.86% |
| Schwab Target 2055 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 69.90% |
| Schwab Target 2055 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC  | 26.59% |
| Schwab Target 2060 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 85.90% |
| Schwab Target 2060 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC  | 10.80% |
| Schwab Target 2065 Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 84.79% |
| Schwab Target 2065 Fund  | Empower Trust FBO <br> The Childrens Hospital Association 403B <br> c/o Fascore LLC  | 8.61% |
| Schwab Target 2065 Fund  | TD Ameritrade Clearing, Inc. <br> For The Exclusive Benefit Of Our Clients <br> PO Box 2226 <br> Omaha, NE 68103-2226  | 6.42% |

---

<sup>(1)</sup>

These shares are held within the Charles Schwab & Co., Inc. account listed elsewhere in the table.

Persons who beneficially own more than 25% of a fund may be deemed to control the fund. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of such fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.

#### INVESTMENT ADVISORY AND OTHER SERVICES

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 211 Main Street, San Francisco, CA 94105, serves as each fund's investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (Advisory Agreement) between it and the Trust. Schwab is an affiliate of Schwab Asset Management and is the Trust's distributor. Charles R. Schwab is the founder, Chairman and Director of CSC. As a result of his ownership of and interests in CSC, Mr. Schwab may be deemed to be a controlling person of Schwab Asset Management and Schwab.

#### Advisory Agreement
After an initial two-year term, the continuation of a fund's Advisory Agreement must be specifically approved at least annually (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (independent trustees), cast in person, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, at a meeting called for the purpose of voting on such approval.

Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement between the Trust and Schwab Asset Management with respect to existing funds in the Trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Schwab Asset Management, as well as extensive data provided by third parties, and the independent trustees receive advice from counsel to the independent trustees.

#### Schwab Balanced Fund
Schwab Asset Management does not receive a fee for the services it performs for the fund. However, Schwab Asset Management is entitled to receive an annual management fee from each of the underlying Schwab Funds.

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Schwab Asset Management and its affiliates have agreed to maintain the "net operating expenses" of the fund (excluding interest, taxes and certain non-routine expenses) at 0.00% for so long as the investment adviser serves as adviser to the fund. This agreement is limited to the fund's direct operating expenses and, therefore, does not apply to acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds. This net operating expense agreement may only be amended or terminated with the approval of the Board.

#### Schwab MarketTrack Portfolios
As described below, Schwab Asset Management is entitled to receive from each Schwab MarketTrack Portfolio an annual fee, payable monthly, for its advisory and administrative services to each fund.

The table below sets forth the advisory fees paid by the funds to Schwab Asset Management for the past three fiscal years. The figures in the "net fees paid" row represent the actual amounts paid to Schwab Asset Management, which include the effect of any reductions due to the application of a fund's expense limitation (expense cap). The figures in the "gross fees reduced by" row represent the amount, if any, the advisory fees payable to Schwab Asset Management were reduced due to the application of a fund's expense cap.

Schwab Asset Management and its affiliates have agreed to maintain the "net operating expenses" of each fund (excluding interest, taxes and certain non-routine expenses) at 0.50% for so long as the investment adviser serves as adviser to the funds. This agreement is limited to each fund's direct operating expenses and, therefore, does not apply to acquired fund fees and expenses, which are indirect expenses incurred by each fund through its investments in the underlying funds. This net operating expense agreement may only be amended or terminated with the approval of the Board.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Fund and Advisory Fee Schedule**  |  | **2022**  | **2021**  | **2020**  | **Expense <br> Cap**  |
| **Schwab MarketTrack All Equity Portfolio** <br> 0.13% of the fund's average daily net assets  | Net fees paid:  | $1011089 | $1029414 | $844678 | 0.50% |
| **Schwab MarketTrack All Equity Portfolio** <br> 0.13% of the fund's average daily net assets  | Gross fees reduced by: |  |  |  |  |
| **Schwab MarketTrack Growth Portfolio** <br> 0.13% of the fund's average daily net assets  | Net fees paid:  | $1156133 | $1183320 | $1009086 | 0.50% |
| **Schwab MarketTrack Growth Portfolio** <br> 0.13% of the fund's average daily net assets  | Gross fees reduced by: |  |  |  |  |
| **Schwab MarketTrack Balanced Portfolio** <br> 0.13% of the fund's average daily net assets  | Net fees paid:  | $770324 | $794727 | $686149 | 0.50% |
| **Schwab MarketTrack Balanced Portfolio** <br> 0.13% of the fund's average daily net assets  | Gross fees reduced by: |  |  |  |  |
| **Schwab MarketTrack Conservative Portfolio** <br> 0.13% of the fund's average daily net assets  | Net fees paid:  | $373899 | $401039 | $360010 | 0.50% |
| **Schwab MarketTrack Conservative Portfolio** <br> 0.13% of the fund's average daily net assets  | Gross fees reduced by: |  |  |  |  |

---

#### Schwab Target Funds
Schwab Asset Management does not receive a fee for the services it performs for the funds. However, Schwab Asset Management is entitled to receive an annual management fee from each of the underlying Schwab Funds and Schwab ETFs.

Schwab Asset Management and its affiliates have agreed to maintain the "net operating expenses" of each fund (excluding interest, taxes and certain non-routine expenses) at 0.00% for so long as the investment adviser serves as adviser to the funds. This agreement is limited to each fund's direct operating expenses and, therefore, does not apply to acquired fund fees and expenses, which are indirect expenses incurred by each fund through its investments in the underlying funds. This net operating expense agreement may only be amended or terminated with the approval of the Board.

#### Distributor
Pursuant to a Second Amended and Restated Distribution Agreement between Schwab and the Trust, Schwab, located at 211 Main Street, San Francisco, CA 94105, is the principal underwriter for shares of the funds and is the Trust's agent for the purpose of the continuous offering of the funds' shares. The funds pay for prospectuses and shareholder reports to be prepared and delivered to existing shareholders. Schwab pays such costs when the described materials are used in connection with the offering of shares to prospective investors and for supplemental sales literature and advertising. Schwab receives no fee under the Distribution Agreement; however, as described below in "Payments to Financial Intermediaries," Schwab Asset Management compensates Schwab, in its capacity as a financial intermediary and not in its capacity as distributor and principal underwriter for the funds, for providing certain additional services that may be deemed to be distribution-related.

#### Payments to Financial Intermediaries
Schwab Asset Management and its affiliates make payments to certain broker-dealers, banks, trust companies, insurance companies, retirement plan service providers, consultants and other financial intermediaries (Intermediaries) for services and expenses incurred in connection with certain activities or services which may educate financial advisors or facilitate, directly or indirectly, investment in the funds and other investment companies advised by Schwab Asset Management, including the Schwab ETFs. These payments are made by Schwab Asset

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Management or its affiliates at their own expense, and not from the assets of the funds. Although a portion of Schwab Asset Management's and its affiliates' revenue comes directly or indirectly in part from fees paid by the funds, these payments do not increase the expenses paid by investors for the purchase of fund shares, or the cost of owning a fund.

These payments may relate to educational efforts regarding the funds, or for other activities, such as marketing and/or fund promotion activities and presentations, educational training programs, conferences, data analytics and support, or the development and support of technology platforms and/or reporting systems. In addition, Schwab Asset Management or its affiliates make payments to certain Intermediaries that make shares of the funds available to their customers or otherwise promote the funds, which may include Intermediaries that allow customers to buy and sell fund shares without paying a commission or other transaction charge. Payments of this type are sometimes referred to as revenue-sharing or marketing support.

Payments made to Intermediaries may be significant and may cause an Intermediary to make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive. As a result, these payments could create conflicts of interest between an Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the funds over other investments.

As of February 27, 2023, Schwab Asset Management anticipates that Envestnet Asset Management, Inc., E\*TRADE Securities LLC, Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, Principal Life Insurance Company and Teachers Insurance and Annuity Association of America will receive these payments. Schwab Asset Management may enter into similar agreements with other FINRA member firms (or their affiliates) in the future. In addition to member firms of FINRA, Schwab Asset Management and its affiliates may also make these payments to certain other financial intermediaries, such as banks, trust companies, insurance companies, and plan administrators and consultants that sell fund shares or provide services to the funds and their shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments.

Schwab Asset Management also makes payments to Schwab for certain administrative, professional and support services provided by Schwab, in its capacity as an affiliated financial intermediary and not as distributor and principal underwriter of the funds. These payments reimburse Schwab for its charges, costs and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support and technology.

#### Shareholder Servicing Plan
The Trust's Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables the funds to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain shareholder services to the current shareholders of the funds. Pursuant to the Plan, certain funds are subject to an annual shareholder servicing fee, as set forth below:

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| | |
|:---|:---|
| **Fund<sup>(1)</sup>**  | **Shareholder Servicing Fee**  |
| Schwab MarketTrack All Equity Portfolio | 0.25% |
| Schwab MarketTrack Growth Portfolio | 0.25% |
| Schwab MarketTrack Balanced Portfolio | 0.25% |
| Schwab MarketTrack Conservative Portfolio | 0.25% |

---

<sup>(1)</sup>

The Schwab Balanced Fund and Schwab Target Funds are not subject to any shareholder servicing fees under the Plan.

Pursuant to the Plan, the funds may pay service providers (including Schwab) that, pursuant to written agreements with Schwab or the Trust, provide certain account maintenance, customer liaison and shareholder services to fund shareholders. The service providers may provide fund shareholders with the following shareholder services, among other shareholder services: (i) maintaining records for shareholders that hold shares of a fund; (ii) communicating with shareholders, including the mailing of regular statements and confirmation statements, distributing fund-related materials, mailing prospectuses and reports to shareholders, and responding to shareholder inquiries; (iii) communicating and processing shareholder purchase, redemption and exchange orders; (iv) communicating mergers, splits or other reorganization activities to fund shareholders; and (v) preparing and filing tax information, returns and reports.

The shareholder servicing fee paid to a particular service provider is calculated at the annual rate set forth in the chart above and is based on the average daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

The Plan shall continue in effect for a fund for so long as its continuance is specifically approved at least annually by a vote of the majority of both (i) the Board of the Trust and (ii) the Trustees of the Trust who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it (the Qualified Trustees). The Plan requires that Schwab or any person

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authorized to direct the disposition of monies paid or payable by the funds pursuant to the Plan furnish quarterly written reports of amounts spent under the Plan and the purposes of such expenditures to the Board of the Trust for review. All material amendments to the Plan must be approved by votes of the majority of both (i) the Board and (ii) the Qualified Trustees.

#### Transfer Agent
BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581, serves as the funds' transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the funds' shares.

#### Custodians and Fund Accountant
Citibank, N.A. (Citibank), 388 Greenwich Street, New York, NY 10013 serves as custodian for the Schwab MarketTrack Portfolios and Schwab Target Funds.

State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, MA, 02111, serves as custodian for the Schwab Balanced Fund.

State Street also serves as fund accountant for each of the funds.

The custodians are responsible for the daily safekeeping of securities and cash held by the funds. The fund accountant maintains all books and records related to the funds' transactions.

#### Independent Registered Public Accounting Firm
The funds' independent registered public accounting firm, Deloitte & Touche LLP (Deloitte), 1601 Wewatta Street, Suite 400, Denver, CO 80202, audits and reports on the annual financial statements of the funds and reviews certain regulatory reports. Deloitte or one of its affiliates also reviews each fund's federal income tax returns and performs other professional, accounting, auditing, tax and advisory services when engaged to do so by the Trust.

#### Securities Lending Activities
As of the most recent fiscal year-end, the funds had not entered into a contract with a securities lending agent and were not engaged in securities lending.

#### PORTFOLIO MANAGERS
**Other Accounts.** In addition to the funds, each portfolio manager (collectively, referred to as the Portfolio Managers) is responsible for the day-to-day management of certain other accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of October 31, 2022.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Zifan Tang | 18 | $4520943546 | 0 | $0 | 0 | $0 |
| Drew Hayes<sup>(1)</sup>  | 18 | $5041419787 | 0 | $0 | 0 | $0 |
| Patrick Kwok  | 18 | $4520943546 | 0 | $0 | 0 | $0 |

---

<sup>(1)</sup>

Drew Hayes became responsible for the day-to-day co-management of the funds as of the date of this SAI. Information is reflected as of January 31, 2023.

**Conflicts of Interest.** A Portfolio Manager's management of other accounts may give rise to potential conflicts of interest in connection with his or her management of a fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include separate accounts and other mutual funds advised by Schwab Asset Management (collectively, the Other Managed Accounts). The Other Managed Accounts might have similar investment objectives as a fund, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by a fund. While the Portfolio Managers' management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, Schwab Asset Management does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, Schwab Asset Management believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

*<u>Knowledge of the Timing and Size of Fund Trades.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' day-to-day management of the funds. Because of their positions with the funds, the Portfolio Managers know the size, timing, and possible market impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of a fund. However, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to index funds, which

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seek to track their respective indexes, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding separate accounts, with those of a fund. All aggregated orders are subject to Schwab Asset Management's aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account's order.

*<u>Investment Opportunities.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' management of a fund and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over a fund, which conflict of interest may be exacerbated to the extent that Schwab Asset Management or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the fund. Notwithstanding this theoretical conflict of interest, it is Schwab Asset Management's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for a fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for a fund in an effort to outperform its specific benchmark, such an approach might not be suitable for a fund given its investment objectives and related restrictions.

*<u>Fund of Funds Information Barrier.</u>* The Portfolio Managers for any Schwab Fund or fund that invests in other Schwab Funds (Underlying Affiliated Funds) must make investment decisions without taking into consideration, or being in possession of, material non-public information about the Underlying Affiliated Funds. Despite a Portfolio Manager's intention to not receive material, non-public information, Schwab Asset Management has established procedures to prevent Portfolio Managers from having access to and trading on material, non-public information regarding Underlying Affiliated Funds. Under these procedures, the adviser monitors Schwab fund of funds' trading activity in Underlying Affiliated Funds, escalates breaches of information barriers and develops enhancements to information barriers as necessary. In the event that a Portfolio Manager comes into possession of material, non-public information about an Underlying Affiliated Fund, a Portfolio Manager's ability to initiate transactions in that Underlying Affiliated Fund could potentially be restricted as a result of a Portfolio Manager's possession of such information. The trading restriction could have an adverse effect on the ability of a fund managed by the Portfolio Manager to participate in any potential gains or avoid any potential losses in the restricted Underlying Affiliated Fund. In some instances, these trading restrictions could continue in effect for a substantial period of time.

**Compensation.** During the most recent fiscal year, Portfolio Manager compensation consisted of a fixed annual (base) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual Portfolio Manager's overall performance such as the Portfolio Manager's contribution to the investment process, good corporate citizenship, risk management and mitigation, and functioning as an active contributor to the firm's success. The discretionary bonus is determined in accordance with the relevant Portfolio Manager Incentive Plan (the Plan) as follows:

There are two independent funding components for the Plan:

<sup>●</sup>

a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

<sup>●</sup>

a portion based on Corporate results

#### Investment Fund Performance
At the close of the year, each fund's performance will be determined by its 1-year, 1- and 2-year, or 1- and 3-year percentile standing (based on pre-tax return before expenses) within its designated benchmark, peer group, or category, depending on the strategy of the fund (i.e., whether the fund is passively or actively managed) using standard statistical methods approved by Schwab Asset Management senior management. Investment Fund Performance measurements may be changed or modified at the discretion of the Schwab Asset Management President and Schwab Asset Management Chief Operating Officer. As each participant may be a member of a team that manages and/or supports a number of funds, there may be several funds and/or Other Managed Accounts considered in arriving at the incentive compensation funding.

Portfolio Managers who are chief investment officers of the investment adviser are covered by a Plan that specifically includes a risk mitigation component in the funding determination.

#### Corporate Performance
The Corporate Bonus Plan is an annual bonus plan that provides discretionary awards based on the financial performance of CSC during the annual performance period. Quarterly advances may be paid for the first three quarters. Allocations are discretionary and aligned with CSC and individual performance. Funding for the Plan is determined at the conclusion of the calendar year. Funding will be capped at 200% of target.

#### Allocation of Discretionary Bonus
At year-end, funding for both components of discretionary bonus is allocated to Plan participants by Schwab Asset Management senior management based on their assessment of a variety of performance factors.

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Factors considered in Schwab Asset Management senior management's allocation process will include objective and subjective factors that will take into consideration total performance and will include, but are not limited to:

<sup>●</sup>

Fund performance relative to performance measure

<sup>●</sup>

Risk management and mitigation

<sup>●</sup>

Individual performance against key objectives

<sup>●</sup>

Contribution to overall group results

<sup>●</sup>

Functioning as an active contributor to the firm's success

<sup>●</sup>

Team work

<sup>●</sup>

Collaboration between Analysts and Portfolio Managers

<sup>●</sup>

Regulatory/Compliance management

The Portfolio Managers' compensation is not based on the value of the assets held in a fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares.** The following table shows the dollar amount range of the Portfolio Managers' "beneficial ownership" of shares of the funds they manage as of October 31, 2022. Dollar amount ranges disclosed are established by the SEC. "Beneficial ownership" is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (the 1934 Act).

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range of <br> Fund Shares**  |
| Zifan Tang | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund  | $1-$10000  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| Drew Hayes<sup>(1)</sup> | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund |  |

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range of <br> Fund Shares**  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund |  |
| Patrick Kwok | Schwab Balanced Fund |  |
|  | Schwab MarketTrack All Equity Portfolio |  |
|  | Schwab MarketTrack Growth Portfolio |  |
|  | Schwab MarketTrack Balanced Portfolio |  |
|  | Schwab MarketTrack Conservative Portfolio |  |
|  | Schwab Target 2010 Fund |  |
|  | Schwab Target 2015 Fund |  |
|  | Schwab Target 2020 Fund |  |
|  | Schwab Target 2025 Fund |  |
|  | Schwab Target 2030 Fund |  |
|  | Schwab Target 2035 Fund |  |
|  | Schwab Target 2040 Fund |  |
|  | Schwab Target 2045 Fund |  |
|  | Schwab Target 2050 Fund | $10001-$50000  |
|  | Schwab Target 2055 Fund |  |
|  | Schwab Target 2060 Fund |  |
|  | Schwab Target 2065 Fund | $1-$10000  |

---

<sup>(1)</sup>

Drew Hayes became responsible for the day-to-day co-management of the funds as of the date of this SAI. Information is reflected as of January 31, 2023.

#### BROKERAGE ALLOCATION AND OTHER PRACTICES

#### Portfolio Turnover
For reporting purposes, a fund's portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (short-term securities) are excluded.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate higher capital gains and transaction costs, such as brokerage commissions.

Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, and/or changes in the investment adviser's investment outlook.

The portfolio turnover rate for each fund for the past two fiscal years is as follows:

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| | | |
|:---|:---|:---|
| | **2022**  | **2021**  |
| **Schwab Balanced Fund**  | 31% | 6% |
| **Schwab MarketTrack Portfolios** |  |  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack All Equity Portfolio  | 7% | 6% |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Growth Portfolio  | 8% | 8% |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Balanced Portfolio  | 11% | 10% |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Conservative Portfolio  | 11% | 13% |
| **Schwab Target Funds** |  |  |
| &nbsp;&nbsp;&nbsp; Schwab Target 2010 Fund  | 24% | 21% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2015 Fund  | 19% | 14% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2020 Fund  | 17% | 10% |

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| | | |
|:---|:---|:---|
| | **2022**  | **2021**  |
| &nbsp;&nbsp;&nbsp; Schwab Target 2025 Fund  | 19% | 16% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2030 Fund  | 16% | 14% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2035 Fund  | 13% | 14% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2040 Fund  | 10% | 14% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2045 Fund  | 7% | 12% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2050 Fund  | 6% | 19% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2055 Fund  | 4% | 11% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2060 Fund  | 15% | 11% |
| &nbsp;&nbsp;&nbsp; Schwab Target 2065 Fund  | 26% | 34%<sup>(1)</sup> |

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<sup>(1)</sup>

From February 26, 2021 (commencement of operations) to October 31, 2021.

#### Portfolio Transactions
The investment adviser makes decisions with respect to the purchase and sale of portfolio securities on behalf of the funds. The investment adviser is responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. A fund generally does not incur any commissions or sales charges when it invests in underlying Schwab Funds, but it may incur such costs if it invests directly in other types of securities or in unaffiliated funds. Purchases and sales of securities on a stock exchange, including ETF shares, or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed-income securities may be transacted with the issuer, the issuer's underwriter or a dealer. The funds do not usually pay brokerage commissions on purchases and sales of fixed-income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The prices the funds pay to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the funds may invest are traded primarily in the over-the-counter market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the funds will primarily consist of dealer spreads and brokerage commissions.

The investment adviser seeks to obtain the best execution for the funds' portfolio transactions. The investment adviser may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following: execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling; provision of additional brokerage or research services or products; whether a broker guarantees that a fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to "market-on-close" pricing aligns with fund objectives; or whether a broker guarantees that a fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser believes that VWAP execution is in a fund's best interest. In addition, the investment adviser may have incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser may cause a fund to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: company financial data and economic data (e.g., unemployment, inflation rates and GDP figures), stock quotes, last sale prices and trading volumes, research reports analyzing the performance of a particular company or stock, narrowly distributed trade magazines or technical journals covering specific industries, products, or issuers, seminars or conferences registration fees which provide substantive content relating to eligible research, quantitative analytical software and software that provides analyses of securities portfolios, trading strategies and pre/post trade analytics, discussions with research analysts or meetings with corporate executives which provide a means of obtaining oral advice on securities, markets or particular issuers, short-term custody related to effecting particular transactions and clearance and settlement of those trades, lines between the broker-dealer and order management systems operated by a third party vendor, dedicated lines between the broker-dealer and the investment adviser's order management system, dedicated lines providing direct dial-up service between the investment adviser and the trading desk at the broker-dealer, message services used to transmit orders to broker-dealers for execution, electronic communication of allocation instructions between institutions and broker-dealers, comparison services required by the SEC or another regulator (e.g., use of electronic confirmation and affirmation of institutional trades), exchange of messages among broker-dealers, custodians, and institutions related to a trade, post-trade matching of trade information, routing settlement instructions

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to custodian banks and broker-dealers' clearing agents, software that provides algorithmic trading strategies, and trading software operated by a broker-dealer to route orders to market centers or direct market access systems. The investment adviser may use research services furnished by brokers or dealers in servicing all client accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser may receive a service from a broker or dealer that has both a "research" and a "non-research" use. When this occurs, the investment adviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions or spreads, while the investment adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser faces a potential conflict of interest, but the investment adviser believes that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser may purchase for the funds, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will provide research "credits" in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the 1934 Act.

The investment adviser may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable funds to trade directly with other institutional holders. At times, this may allow funds to trade larger blocks than would be possible trading through a single market maker.

The investment adviser may aggregate securities sales or purchases among two or more funds. The investment adviser will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of a fund are aggregated with other accounts managed by the investment adviser, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

In determining when and to what extent to use Schwab or any other affiliated broker-dealer as its broker for executing orders for the funds on securities exchanges, the investment adviser follows procedures, adopted by the funds' Board, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

#### Brokerage Commissions
For each of the last three fiscal years, the below funds paid the following brokerage commissions.

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| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| **Schwab Balanced Fund**  | $0 | $0 | $0 |
| **Schwab MarketTrack Portfolios** |  |  |  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack All Equity Portfolio  | $749(1) | $920(1) | $6694(1) |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Growth Portfolio  | $847(1) | $553(1) | $6860(1) |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Balanced Portfolio  | $907(1) | $686(1) | $3497(1) |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Conservative Portfolio  | $344(1) | $228(1) | $1647(1) |
| **Schwab Target Funds** |  |  |  |
| &nbsp;&nbsp;&nbsp; Schwab Target 2010 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2015 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2020 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2025 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2030 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2035 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2040 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2045 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2050 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2055 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2060 Fund  | $0 | $0 | $0 |
| &nbsp;&nbsp;&nbsp; Schwab Target 2065 Fund  | $0 | $0(2) | N/A |

---

<sup>(1)</sup>

During the fiscal years ended October 31, 2020, October 31, 2021 and October 31, 2022, the fund invested in shares of the Schwab U.S. REIT ETF, which were subject to brokerage commissions.

<sup>(2)</sup>

From February 26, 2021 (commencement of operations) to October 31, 2021.

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#### Regular Broker-Dealers
During the fiscal year, the funds held securities issued by their respective "regular broker-dealers" (as defined in Rule 10b-1 under the 1940 Act), indicated below as of October 31, 2022.

---

| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
| **Schwab Balanced Fund**  |  | N/A |
| **Schwab MarketTrack Portfolios** |  |  |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack All <br> Equity Portfolio  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack Growth <br> Portfolio  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack <br> Balanced Portfolio  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab MarketTrack <br> Conservative Portfolio  |  | N/A |
| **Schwab Target Funds** |  |  |
| &nbsp;&nbsp;&nbsp; Schwab Target 2010 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2015 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2020 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2025 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2030 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2035 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2040 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2045 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2050 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2055 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2060 Fund  |  | N/A |
| &nbsp;&nbsp;&nbsp; Schwab Target 2065 Fund  |  | N/A |

---

#### PROXY VOTING
The Board has delegated the responsibility for voting proxies to Schwab Asset Management, pursuant to the investment adviser's Proxy Voting Policy with respect to proxies voted on behalf of the various Schwab Funds' portfolios. A description of such Proxy Voting Policy is included in Appendix – Proxy Voting Policy.

The Trust is required to disclose annually a fund's complete proxy voting record on Form N-PX. A fund's proxy voting record for the most recent 12-month period ended June 30th is available by visiting the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**. A fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

#### PORTFOLIO HOLDINGS DISCLOSURE
 **For this section only, the following disclosure relates to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust (collectively, the Trusts) and each series thereunder (each a fund and collectively, the funds).** 

The Trusts' Board has approved policies and procedures that govern the timing and circumstances regarding the disclosure of fund portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds' portfolio securities is in the best interests of fund shareholders, and include procedures to address conflicts between the interests of the funds' shareholders, on the one hand, and those of the funds' investment adviser, subadviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, subadviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a fund's subadviser, if applicable) to authorize the release of the funds' portfolio holdings prior to regular public disclosure (as outlined in the prospectus and below) or regular public filings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of the funds' policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities which were

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authorized to be provided "early disclosure" of the funds' portfolio holdings information and will periodically review any agreements that the Trusts have entered into to selectively disclose portfolio holdings.

Portfolio holdings may be made available on a selective basis to ratings agencies, certain industry organizations, consultants and other qualified financial professionals when the appropriate officer of the Trusts determines such disclosure meets the requirements noted above and serves a legitimate business purpose. Agreements entered into with such entities will describe the permitted use of portfolio holdings and provide that, among other customary confidentiality provisions: (i) the portfolio holdings will be kept confidential; (ii) the person will not trade on the basis of any material non-public information; and (iii) the information will be used only for the purpose described in the agreement.

The funds' service providers including, without limitation, the investment adviser, subadvisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser, counsel, auditor, proxy voting service provider, pricing information vendors, trade execution measurement vendors, portfolio management system providers, cloud database providers, securities lending agents, publisher, printer and mailing agent may receive disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Schwab Asset Management, any subadviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street and/or Brown Brothers Harriman & Co., as service providers to the funds, are currently receiving this information on a daily basis. Donnelley Financial Solutions, as a service provider to the funds, is currently receiving this information on a quarterly basis. Deloitte, the Transfer Agent, and the Distributor, as service providers to the funds, receive this information on an as-needed basis. Service providers are subject to a duty of confidentiality with respect to any portfolio holdings information they receive whether imposed by the confidentiality provisions of the service providers' agreements with the Trusts or by the nature of its relationship with the Trusts. Although certain of the service providers are not under formal confidentiality obligations in connection with disclosure of portfolio holdings, a fund will not continue to conduct business with a service provider who the fund believes is misusing the disclosed information.

To the extent that a fund invests in an unaffiliated acquired fund, the Trusts will, when required by Rule 12d1-4, promptly notify the acquired fund, upon causing a fund to acquire more than 3% of the acquired fund's outstanding shares.

The funds' policies and procedures prohibit the funds, the funds' investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

Generally, a complete list of a fund's portfolio holdings is published on the fund's website www.schwabassetmanagement.com on the "Prospectus & Reports" tab under "Portfolio Holdings" generally 60-80 days after a fund's fiscal quarter-end in-line with regulatory filings unless a different timing is outlined in the fund's prospectus.

Specifically for the Schwab ETFs (other than the Schwab Ariel ESG ETF), each Schwab ETF discloses its portfolio holdings each business day on its website before the opening of regular trading on the ETF's primary listing exchange in accordance with the requirements of Rule 6c-11 under the 1940 Act. Portfolio holdings information made available in connection with the process of purchasing or redeeming Creation Units for the Schwab ETFs may be provided to other entities that provided services to the funds in the ordinary course of business after it has been disseminated to the NSCC.

The Schwab Money Funds have an ongoing arrangement to make available information about the funds' portfolio holdings and information derived from the funds' portfolio holdings to iMoneyNet, a rating and ranking organization, which is subject to a confidentiality agreement. Under its arrangement with the funds, iMoneyNet, among other things, receives information concerning the funds' net assets, yields, maturities and portfolio compositions on a weekly basis, subject to a one business day lag.

On the website, the funds also may provide, on a monthly or quarterly basis, information regarding certain attributes of a fund's portfolio, such as a fund's top ten holdings, sector weightings, composition, credit quality and duration and maturity, as applicable. This information is generally updated within 5-25 days after the end of the period. This information on the website is publicly available to all categories of persons.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of a fund in connection with or relating to a fund or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases, commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning a fund. Commentary and analysis include, but are not limited to, the allocation of a fund's portfolio securities and other investments among various asset classes, sectors, industries, countries or other relevant category, the characteristics of the stock components and other investments of a fund, the attribution of fund returns by asset class, sector, industry, country or other relevant category, and the volatility characteristics of a fund.

#### DESCRIPTION OF THE TRUST
Each fund is a series of Schwab Capital Trust, an open-end management investment company organized as a Massachusetts business trust on May 7, 1993.

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The funds may hold special shareholder meetings, which may cause the funds to incur non-routine expenses. These meetings may be called for purposes such as electing trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon.

The bylaws of the Trust provide that one-third of shares present in person or represented by proxy and entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, or of the Declaration of Trust or of the bylaws permits or requires that (1) holders of any series shall vote as a series, then one-third of the aggregate number of shares of that series present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (2) holders of any class shall vote as a class, then one-third of the aggregate number of shares of that class present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any meeting of shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date or time, whether or not a quorum is present. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. The Declaration of Trust specifically authorizes the Board to terminate the Trust (or any of its funds) by notice to the shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance, which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. There is a remote possibility that a fund could become liable for a misstatement in the prospectus or SAI about another fund.

As more fully described in the Declaration of Trust, the trustees may each year, or more frequently, distribute to the shareholders of each series accrued income less accrued expenses and any net realized capital gains less accrued expenses. Distributions of each year's income of each series shall be distributed pro rata to shareholders in proportion to the number of shares of each series held by each of them. Distributions will be paid in cash or shares or a combination thereof as determined by the trustees. Distributions paid in shares will be paid at the net asset value as determined in accordance with the bylaws.

Any series of the Trust may reorganize or merge with one or more other series of the Trust or of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the trustees and entered into by the relevant series in connection therewith. In addition, such reorganization or merger may be authorized by vote of a majority of the trustees then in office and, to the extent permitted by applicable law and the Declaration of Trust, without the approval of shareholders of any series.

#### PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES

#### Purchasing and Redeeming Shares of the Funds
The funds are open each day that the New York Stock Exchange (NYSE) is open. The NYSE's trading session is normally conducted from 9:30 a.m. until 4:00 p.m. Eastern Time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE's trading session closes early. The NYSE typically observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although it is expected that the same holidays will be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time. Only orders that are received in good order by a fund's transfer agent no later than the time specified by the Trust will be executed that day at the fund's share price calculated that day. On any day that the NYSE closes early, the funds reserve the right to advance the time by which purchase, exchange and redemption orders must be received by the funds in order to be executed that day at that day's share price. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase, exchange and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

The funds have authorized one or more financial intermediaries, including Schwab, to accept on their behalf purchase, exchange and redemption orders. Such financial intermediaries have also been authorized to designate other intermediaries to accept purchase, exchange and redemption orders on the funds' behalf. The funds will be deemed to have received a purchase, exchange or redemption order when an authorized intermediary or, if applicable, an intermediary's authorized designee, receives such order. Such orders will be priced at the respective fund's net asset value per share next determined after such orders are received by an authorized intermediary or the intermediary's authorized designee.

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As long as the funds or Schwab follow reasonable procedures to confirm that an investor's telephone or internet order is genuine, they will not be liable for any losses the investor may experience due to unauthorized or fraudulent instructions. These procedures may include requiring a form of personal identification or other confirmation before acting upon any telephone or internet order, providing written confirmation of telephone or internet orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab, other authorized financial intermediaries or, for direct shareholders, by the funds' transfer agent.

The Trust's Declaration of Trust provides that shares may be automatically redeemed if held by a shareholder in an amount less than the minimum required by each fund. Each fund's minimum initial investments and minimum balance requirements, if any, are set forth in the prospectus. The minimums may be changed without prior notice.

Each of the funds has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of these limits may be paid, in whole or in part, in investment securities or in cash, as the Board may deem advisable. Payment will be made wholly in cash unless the Board believes that economic or market conditions exist that would make such payment a detriment to the best interests of a fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Pricing of Shares." A redeeming shareholder would normally incur transaction costs if he or she were to convert the securities to cash.

Each fund is designed for long-term investing. Because short-term trading activities can disrupt the smooth management of a fund and increase its expenses, each fund reserves the right, in its sole discretion, to refuse any purchase or exchange order, including any purchase or exchange order which appears to be associated with short-term trading activities or "market timing." Because market timing decisions to buy and sell securities typically are based on an individual investor's market outlook, including such factors as the perceived strength of the economy or the anticipated direction of interest rates, it is difficult for a fund to determine in advance what purchase or exchange orders may be deemed to be associated with market timing or short-term trading activities. More information regarding the funds' policies regarding "market timing" is included in the funds' prospectus.

In certain circumstances, shares of a fund may be purchased "in kind" (i.e., in exchange for securities, rather than for cash). The securities tendered as part of an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable as evidenced by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities accepted by a fund will be valued, as set forth in the fund's prospectus, as of the time of the next determination of net asset value after such acceptance. The shares of a fund that are issued to the shareholder in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of a fund and must be delivered to the fund by the investor upon receipt from the issuer. A fund will not accept securities in exchange for its shares unless such securities are, at the time of the exchange, eligible to be held by the fund and satisfy such other conditions as may be imposed by the fund's investment adviser.

#### Exchanging Shares of the Funds
Methods to purchase and redeem shares are set forth in the funds' prospectus. An exchange order involves the redemption of all or a portion of the shares of one Schwab Fund and the simultaneous purchase of shares of another Schwab Fund. Exchange orders must meet the minimum investment and any other requirements of the fund or class purchased. Exchange orders may not be executed between shares of Sweep Investments<sup>®</sup> and shares of non-Sweep Investments. Shares of Sweep Investments may be bought and sold automatically pursuant to the terms and conditions of your Schwab account agreement. In addition, different exchange policies may apply to Schwab Funds that are bought and sold through third-party intermediaries and the exchange privilege between Schwab Funds may not be available through third-party intermediaries.

The funds and Schwab reserve certain rights with regard to exchanging shares of the funds. These rights include the right to: (i) refuse any purchase or exchange order that may negatively impact a fund's operations; (ii) refuse orders that appear to be associated with short-term trading activities; and (iii) materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

#### Delivery of Shareholder Documents
Typically once a year, an updated prospectus will be mailed or electronically delivered to shareholders describing each fund's investment strategies, risks and shareholder policies. Twice a year, financial reports will be mailed or electronically delivered (or a notice will be mailed and financial reports will be made available on the fund's designated website) to shareholders describing each fund's performance and investment holdings. In order to eliminate duplicate mailings of shareholder documents, each household may receive one copy of these documents, under certain conditions. This practice is commonly called "householding." If you want to receive multiple copies, you may write or call your fund at the address or telephone number on the front of this SAI. Your instructions will be effective within 30 days of receipt by a fund or other date as communicated by the financial intermediary.

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#### Pricing of Shares
Each business day, each fund calculates its share price, net asset value per share or NAV, as of the close of the NYSE (generally 4:00 p.m. Eastern Time). This means that NAVs are calculated using the values of a fund's portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available or that the investment adviser deems to be unreliable are required to be valued at fair value following procedures approved by the Board. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

To the extent the funds invest in foreign securities, shareholders should be aware that because foreign markets are often open on weekends and other days when the funds are closed, the value of some of a fund's securities may change on days when it is not possible to buy or sell shares of the fund.

The funds use approved pricing sources (including pricing services) to provide values for their portfolio securities. Values are generally determined by the approved pricing sources as follows: generally, securities traded on stock exchanges, excluding the NASDAQ National Market System, are valued at the last-quoted sales price on the exchange on which such securities are primarily traded (closing values), or, lacking any sales, at the mean between the bid and ask prices; securities traded in the over-the-counter market are generally valued at an evaluated price using a mid-price as supplied by an approved, independent pricing service. The mid-price is the mean of the bid and ask prices as calculated by the pricing service. Generally securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the official closing price or last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate. Fixed-income securities normally are valued based on valuations provided by approved pricing services. Securities will be fair valued pursuant to procedures approved by the funds' Board when market quotations are not "readily available" or the investment adviser deems them unreliable. For example, the fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market. The Board has designated the investment adviser as the valuation designee (Valuation Designee) for the fund to perform the fair value determination relating to all fund investments. The Valuation Designee periodically provides reports to the Board on items related to its fair value of fund investments.

In accordance with the 1940 Act, the underlying funds in which the Schwab Balanced Fund, Schwab MarketTrack Portfolios, and Schwab Target Funds invest are valued at their respective net asset values as determined by those funds. The underlying funds that are money market funds may value their portfolio securities based on the value or amortized cost method. The other underlying funds value their portfolio securities based on market quotes if they are readily available.

#### TAXATION
This discussion of federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

#### Federal Tax Information for the Funds
It is each fund's policy to qualify for taxation as a "regulated investment company" (RIC) by meeting the requirements of Subchapter M of the Internal Revenue Code. By qualifying as a RIC, each fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If a fund does not qualify as a RIC under the Internal Revenue Code, it will be subject to federal income tax on its net investment income and any net realized capital gains. In addition, each fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

Each fund is treated as a separate entity for federal income tax purposes and is not combined with the Trust's other funds. Each fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, a fund must, among other requirements, distribute annually to its shareholders an amount at least equal to the sum of 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and 90% of its net tax-exempt income. Among these requirements are the following: (i) at least 90% of a fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of a fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close

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of each quarter of a fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as "qualified publicly traded partnerships" for purposes of the Subchapter M diversification rules described above. To do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, the partnership must meet the 90% gross income requirements for the exception from treatment as a corporation with gross income other than income consisting of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Internal Revenue Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as defined in the Internal Revenue Code) for the calendar year plus 98.2% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, a fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year and certain amounts with respect to which estimated taxes are paid in such calendar year. A fund may in certain circumstances be required to liquidate fund investments to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of a fund to satisfy the requirements for qualification as a RIC.

If a fund fails to qualify as a RIC for any taxable year, it will be taxable at regular corporate rates. In such an event, all distributions (including capital gains distributions) will be taxable as ordinary dividends to the extent of the fund's current and accumulated earnings and profits, subject to the dividends-received deduction for corporate shareholders and the lower tax rates applicable to qualified dividend income distributed to individuals. The Board reserves the right not to maintain the qualification of a fund as a RIC if it determines such course of action to be beneficial to shareholders.

Although each fund intends to distribute substantially all of its net investment income and its capital gains for each taxable year, each fund will be subject to federal income tax to the extent any such income or gains are not distributed. If a fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution generally will not be taxable but will reduce the shareholder's cost basis and result in a higher capital gain or lower capital loss when those shares on which the distribution was received are sold. To the extent that a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares.

A fund's transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Internal Revenue Code and are subject to special tax rules. In a given case, these rules may accelerate income to a fund, defer its losses, cause adjustments in the holding periods of a fund's assets, convert short-term capital losses into long-term capital losses or otherwise affect the character of a fund's income. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of a fund and its shareholders.

Each fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked-to-market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. Each fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. Each fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund's fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon or other securities which are sold at original issue discount and thus do not make periodic cash interest payments, a fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any corresponding interest payments on such obligations during that period. Because each fund distributes all of its net investment income to its shareholders, a fund may have to sell fund securities to distribute such imputed income which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in each fund's prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of a fund. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in a fund.

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Any dividends declared by a fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by a fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced rates to individuals as described below) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of the fund become ex-dividend with respect to such dividend (and the fund must also satisfy those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by each fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gains (if any) that are reported as capital gain dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of a fund. However, if you receive a capital gain dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gain dividend, be treated as a long-term capital loss.

The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the taxpayer's income exceeds certain threshold amounts.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

A fund will inform you of the amount of your ordinary income dividends and capital gains distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year. For corporate investors in a fund, dividend distributions the fund reports to be from dividends received from qualifying domestic corporations will be eligible for the 50% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by a fund also may be subject to state, local and foreign taxes, and their treatment under applicable tax laws may differ from the federal income tax treatment.

In general, a sale of shares results in capital gain or loss, and for individual shareholders, is taxable at a federal rate dependent upon the length of time the shares were held. A redemption of a shareholder's fund shares is normally treated as a sale for tax purposes. Fund shares held for a period of one year or less at the time of such sale or redemption will, for tax purposes, generally result in short-term capital gains or losses, and those held for more than one year will generally result in long-term capital gains or losses.

The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts.

Gain or loss on the sale or redemption of shares in a fund is measured by the difference between the amount received and the adjusted tax basis of the shares. Shareholders should keep records of investments made (including shares acquired through reinvestment of dividends and distribution) so they can compute the tax basis of their shares.

A loss realized on a sale or exchange of shares of a fund may be disallowed if other substantially identical shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a sixty-one (61) day period beginning thirty (30) days before and ending thirty (30) days after the date that the shares are disposed of. In such a case, the basis of the shares acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale or exchange of shares held for six (6) months or less is treated as long-term capital loss to the extent of any capital gain dividends received by the shareholders.

At the beginning of every year, each fund will provide shareholders with a tax reporting statement containing information detailing the estimated tax status of any distributions that the fund paid during the previous calendar year.

If a fund makes a distribution to a shareholder in excess of the fund's current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of the shareholder's tax basis in its shares, and thereafter, as capital gain. A return of capital is not taxable, but reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. To the extent that a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares. Each fund will be required in certain cases to withhold

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at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends and redemption proceeds paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to "backup withholding;" or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on distributions derived from net investment income and short-term capital gains; provided, however, that U.S. source interest related dividends and short-term capital gain dividends generally are not subject to U.S. withholding taxes if a fund elects to make reports with respect to such dividends. Distributions to foreign shareholders of such short-term capital gains and long-term capital gains, and any gains from the sale or other disposition of shares of a fund, generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Internal Revenue Code's definition of "resident alien" or (2) is physically present in the U.S. for 183 days or more per year. Foreign shareholders may also be subject to U.S. estate taxes with respect to shares in a fund. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Notwithstanding the foregoing, a portion of the income, if any, derived by a fund from investments in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) may be classified as "excess inclusion income." With respect of foreign shareholders, no exemption or reduction in withholding tax will apply to such excess inclusion income.

The funds are required to withhold U.S. tax (at a 30% rate) on payments of dividends made to certain non-U.S. entities that fail to comply with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, each fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in the fund where, for example, (i) a fund invests in REITs that hold residual interests in REMICs, thereby causing the fund to derive "excess inclusion income," or (ii) shares in a fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special rules and should consult their tax advisors. In addition, tax may be imposed on a fund on the portion of any excess inclusion income allocable to any shareholders that are classified as "disqualified organizations." There are no restrictions preventing a fund from holding investments in REITs that hold residual interests in REMICs, and a fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

For taxable years beginning after 2017 and before 2026, non-corporate taxpayers generally may deduct 20% of "qualified business income" derived either directly or through partnerships or S corporations. For this purpose, "qualified business income" generally includes ordinary REIT dividends and income derived from MLP investments. A fund is permitted to pass through to shareholders the character of ordinary REIT dividends so as to allow non-corporate shareholders to claim this deduction. There currently is no mechanism for a fund to pass through to non-corporate shareholders (whether investing directly or indirectly through a fund) the character of income derived from MLP investments. It is uncertain whether future legislation or other guidance will enable the funds to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

The funds can have income, gains or losses from any distributions or redemptions in the underlying funds. The funds cannot use gains distributed by one underlying fund to offset losses in another underlying fund. Redemptions of shares in an underlying fund, including those resulting from allocation changes, could also cause additional distributable gains to shareholders, a portion of which may be short-term capital gains distributable as ordinary income. Further, a portion of any losses on underlying fund share redemptions may be deferred under the "wash sale" rules. As a result of these factors, the funds' "fund of funds" structure could affect the amount, timing and character of distributions to shareholders.

Income that a Schwab MarketTrack Portfolio or Schwab Target Fund receives from sources within various foreign countries may be subject to foreign income taxes withheld at the source. If any of these funds has more than 50% of its assets invested in foreign securities at the end of its taxable year, it may elect to "pass through" to its shareholders the ability to take either the foreign tax credit or the deduction for foreign taxes. Pursuant to this election, U.S. shareholders must include in gross income, even though not actually received, their respective pro rata share of foreign taxes, and may either deduct their pro rata share of foreign taxes (but not for alternative minimum tax purposes) or credit the tax against U.S. income taxes, subject to certain limitations described in the Internal Revenue Code sections 901 and 904. A shareholder who does not itemize deductions may not claim a deduction for foreign taxes. It is expected that the Schwab MarketTrack Portfolios and Schwab Target Funds will not have more than 50% of their assets invested in foreign securities at the close of their taxable years, and therefore will not be permitted to make this election. Each shareholder's respective pro rata share of foreign taxes a Schwab MarketTrack Portfolio or Schwab Target

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Fund pays will, therefore, be netted against its share of the Schwab MarketTrack Portfolio or Schwab Target Fund's gross income. To the extent, however, a Schwab MarketTrack Portfolio or Schwab Target Fund invests in an underlying mutual fund that elects to pass through foreign taxes, the Schwab MarketTrack Portfolio or Schwab Target Fund will be able to pass through the taxes paid by the underlying mutual fund in a given year, provided that at least 50% of the value of the Schwab MarketTrack Portfolio's of Schwab Target Fund's total assets is invested in underlying mutual funds at the end of each quarter of such taxable year.

The Schwab MarketTrack Portfolios and Schwab Target Funds may invest in non-U.S. corporations, which could be treated as a passive foreign investment company (PFIC) or become a PFIC under the Internal Revenue Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent any of these funds do invest in PFICs, they may elect to treat the PFIC as a "qualified electing fund" or mark-to-market its investments in PFICs annually. In either case, these funds may be required to distribute amounts in excess of realized income and gains. To the extent these funds do invest in foreign securities which are determined to be PFIC securities and are required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to the funds' shareholders. Therefore, the payment of this tax would reduce a funds' economic return from its PFIC shares, and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains.

Section 988 of the Internal Revenue Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by a fund. Under these rules, foreign exchange gain or loss realized by a fund with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. Foreign currency losses could result in distributions of ordinary income being reclassified as a return of capital for tax purposes.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC such as a fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in a fund.

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#### APPENDIX – PROXY VOTING POLICY
The Charles Schwab Family of Funds Schwab Investments Schwab Capital Trust Schwab Annuity Portfolios Laudus Trust Schwab Strategic Trust

### PROXY VOTING POLICY AS OF MARCH 2023
The Boards of Trustees (the "Board") of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Laudus Trust ("Schwab Funds") and Schwab Strategic Trust ("Schwab ETFs"; collectively with Schwab Funds, the "Funds") have delegated to the Funds' investment adviser, Charles Schwab Investment Management, Inc. ("CSIM"), the responsibility to vote proxies relating to the Funds' portfolio securities pursuant to CSIM's Proxy Voting Policy ("CSIM Proxy Policy"). On an annual basis, CSIM will report to the Board any changes to the CSIM Proxy Policy and on the implementation of the CSIM Proxy Policy.

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Charles Schwab Investment Management, Inc.

I. ### INTRODUCTION
Charles Schwab Investment Management, Inc. ("CSIM"), as an investment adviser, is responsible for voting proxies with respect to the securities held in accounts of investment companies and other clients that have delegated the authority to vote proxies to CSIM. CSIM's Proxy Committee exercises and documents CSIM's responsibility with regard to voting of client proxies, including the review and approval of the Proxy Voting Policy (the "Proxy Policy"). CSIM's Investment Stewardship Team has the primary responsibility to oversee that voting is carried out consistent with the Proxy Policy. The Investment Stewardship Team also conducts research into proxy issues and carries out engagement activities with companies. The Proxy Committee receives reports from the Investment Stewardship Team on these activities.

II. ### PHILOSOPHY
As a leading asset manager, it is CSIM's responsibility to use its proxy votes to encourage transparency, corporate governance structures, and the management of environmental, social and governance (ESG) issues that it believes protect and promote shareholder value.

Just as the investors in CSIM's equity funds generally have a long-term investment horizon, CSIM takes a long-term, measured approach to investment stewardship. CSIM's client-first philosophy drives all of its efforts, including its approach to decision making. In the investment stewardship context, that unfolds through CSIM's efforts to appropriately manage risk by encouraging transparency and focusing on corporate governance structures that will help protect or promote shareholder value. CSIM also recognizes that companies can conduct themselves in ways that have important environmental and social consequences. Therefore, CSIM's focus on maximizing long-term shareholder value includes consideration of potential environmental and social impacts that we believe are relevant to individual companies.

In general, CSIM believes corporate directors, as the elected representatives of all shareholders, are best positioned to oversee the management of their companies. Accordingly, CSIM typically supports a board of directors' and management's recommendations on proxy matters. However, CSIM will vote against management's recommendations when it believes doing so will protect or promote long-term shareholder value.

III. ### USE OF PROXY ADVISORS
To assist CSIM in its responsibility for voting proxies and the overall proxy voting process, CSIM has retained Glass, Lewis & Co., LLC ("Glass Lewis") as an expert in the proxy voting and corporate governance area. The services provided by Glass Lewis include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. CSIM has also retained Institutional Shareholder Services Inc. to conduct research and provide voting recommendations on certain topics and may retain additional experts in the proxy voting, corporate governance, and ESG areas in the future.

To support CSIM in efficiently executing its votes, Glass Lewis, simultaneously with issuing its voting recommendations, also automatically populates votes based on CSIM's custom voting guidelines, except for certain ballot items which CSIM elects to vote manually. CSIM's votes are executed just prior to the vote deadline, which allows CSIM the opportunity to incorporate changes in Glass Lewis voting recommendations or the receipt of additional information from the company or other parties.

IV. ### PROXY VOTING PRINCIPLES
CSIM invests on behalf of its clients in companies domiciled all over the world. Since corporate governance standards and best practices differ by country and jurisdiction, the market context is taken into account in the analysis of proposals. Furthermore, there are instances where CSIM may determine that voting is not in the best interests of its clients (typically due to costs or to trading restrictions) and will refrain from submitting votes.

The Proxy Committee reviews CSIM's proxy voting guidelines with input from the Investment Stewardship Team at least annually and evaluates them in light of the long-term best interests of shareholders. In addition, for U.S. companies, contested director elections, "vote no" campaigns, mergers and acquisitions, some executive compensation and election of director proposals, and many shareholder proposals, including ESG-related proposals, such as those requesting additional environmental, social and political disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

The following is a summary of CSIM's proxy voting principles which are grouped according to types of proposals usually presented to shareholders in proxy statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

DIRECTORS AND AUDITORS

i. <u>Directors</u>

As a starting point, CSIM expects the board to be composed of at least a majority of independent directors and to be responsive to shareholders. CSIM also expects directors that serve on a company's nominating, compensation or audit committee to be independent. CSIM believes that diversity of background, experience and skills, and personal characteristics, including gender, race, ethnicity and age, meaningfully contribute to a board's ability to make effective decisions on behalf of shareholders.

Factors that may result in a vote against one or more directors:

<sup>●</sup>

The board is not majority independent

<sup>●</sup>

A large-cap company board does not have at least two female directors, or a mid- or small-cap company does not have any female directors, and the board has not provided a reasonable explanation for its lack of gender diversity

<sup>●</sup>

A large-cap company board does not have at least one racially/ethnically diverse director, or has not provided explicit disclosure of director diversity and skills

<sup>●</sup>

Non-independent directors serve on the nominating, compensation or audit committees

<sup>●</sup>

A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

<sup>●</sup>

The directors approved executive compensation schemes that appear misaligned with shareholders' interests

<sup>●</sup>

A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to concerns of shareholders

<sup>●</sup>

The company has not provided explicit disclosure of board oversight of material risks, including environmental and social risks

ii. <u>Contested Director Elections</u>

A proxy contest is when a dissident shareholder (or group of shareholders) proposes outside nominees to compete against incumbent directors. A "Vote No" campaign is when an activist shareholder attempts to solicit votes against certain directors. CSIM evaluates proxy contests and Vote No campaigns on a case-by-case basis and votes for the outcome it believes will maximize long-term shareholder value. CSIM considers numerous factors when making its voting decision, including but not limited to the merit of the campaign, the qualifications of director nominees, long-term company performance compared to peers, board oversight of material risks, and, in the case of proxy contests, the dissident's and management's strategic plans for driving improvements.

iii. <u>Auditors</u>

CSIM typically supports the ratification of auditors unless CSIM believes that the auditors' independence may have been compromised.

Factors that may result in a vote against the ratification of auditors:

<sup>●</sup>

Audit-related fees are less than half of the total fees paid by the company to the audit firm

<sup>●</sup>

A recent material restatement of annual financial statements

<sup>●</sup>

A pattern of inaccurate audits or other behavior that may call into question an auditor's effectiveness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

BOARD MATTERS

i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

<sup>●</sup>

Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

<sup>●</sup>

Number of nominees is no more than 20% of current board (rounded down to nearest whole number)

<sup>●</sup>

Group size is capped at 20 shareholders

iv. <u>Separation of Chair and CEO role</u>

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CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring the separation of these roles unless certain circumstances are in place.

Factors that may result in a vote supporting a shareholder proposal requiring the separation of the Chair and CEO roles:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

<sup>●</sup>

Lack of robust lead independent director

v. <u>Independent Chair</u>

CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring an independent chair unless CSIM has concerns regarding the board's accountability or responsiveness to shareholders.

Factors that may result in a vote supporting a shareholder proposal requiring an independent chair:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

COMPENSATION

i. <u>Advisory Vote on Executive Compensation and Frequency</u>

CSIM generally supports advisory votes on executive compensation (which are proposed by management and are known as "Say-On-Pay") when the compensation scheme appears aligned with shareholder economic interests and lacks problematic features.

Factors that may result in a vote against a company's Say-On-Pay proposal:

<sup>●</sup>

Executive compensation is out of line with industry peers considering the company's performance over time

<sup>●</sup>

Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

<sup>●</sup>

Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

<sup>●</sup>

Compensation amounts are increased, or goals are lowered without providing a valid explanation

<sup>●</sup>

Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

CSIM typically supports annual advisory votes on executive compensation.

ii. <u>Equity Compensation Plans</u>

CSIM generally supports stock-based compensation plans when they do not overly dilute shareholders by providing participants with excessive awards and lack problematic features.

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Factors that may result in a vote against Equity Compensation Plans:

<sup>●</sup>

Plan's total potential dilution appears excessive

<sup>●</sup>

Plan's burn rate appears excessive compared to industry peers

<sup>●</sup>

Plan allows for the re-pricing of options without shareholder approval

<sup>●</sup>

Plan has an evergreen feature

iii. <u>Employee Stock Purchase Plans</u>

CSIM supports the concept of broad employee participation in a company's equity. Therefore, CSIM typically supports employee stock purchase plans when the shares can be purchased at 85% or more of the shares' market value.

iv. <u>Re-price/Exchange Option Plans</u>

CSIM generally only supports management proposals to re-price options when the plan excludes senior management and directors, does not excessively dilute shareholders, and the company has not significantly underperformed its industry peers over time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

ANTI-TAKEOVER

i. <u>Shareholder Rights Plans</u>

Shareholder Rights Plans constrain a potential acquirer's ability to buy shares in a company above a certain threshold without the approval of the company's board of directors. While such a plan may help a company in achieving a higher bid, it may also entrench the incumbent management and board. CSIM believes that shareholders should have the right to approve a Shareholder Rights Plan within a year of its adoption. CSIM generally votes against such plans if they do not have safeguards to protect shareholder interests.

Factors that may result in a vote against a Shareholder Rights Plan proposal:

<sup>●</sup>

Plan does not expire in a relatively short time horizon

<sup>●</sup>

Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

<sup>●</sup>

Plan automatically renews without shareholder approval

<sup>●</sup>

Company's corporate governance profile

ii. <u>Right to Call Special Meeting</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to call a special meeting unless the threshold to call a special meeting is 25% or more of shares outstanding to avoid wasting corporate resources.

iii. <u>Right to Act by Written Consent</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to act by written consent if the company already offers shareholders the right to call special meetings. CSIM expects appropriate mechanisms for implementation.

iv. <u>Supermajority Voting</u>

CSIM generally supports the concept of simple majority standards to pass proposals.

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

i. <u>Increase in Authorized Common Shares</u>

CSIM typically supports proposals to increase the authorized shares unless the company does not sufficiently justify the need for the use of the proposed shares.

ii. <u>Preferred Shares</u>

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

iii. <u>Mergers and Acquisitions</u>

CSIM generally supports transactions that appear to maximize shareholder value. CSIM assesses these proposals on a case-by-case basis and considers the proposed transaction's strategic rationale, the offer premium, the board's oversight of the sales process, and other pertinent factors.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F.

ENVIRONMENTAL AND SOCIAL PROPOSALS

Effective oversight of material ESG risks relevant to a company and its business is an essential board function. In CSIM's view, appropriate risk oversight of environmental and social issues contributes to sustainable long-term value and companies should provide pertinent information on material risks common to their industry and specific to their business. CSIM evaluates, on a case-by-case basis, shareholder proposals regarding environmental and social issues, including those calling for additional disclosure of material risks to a company, with emphasis placed on those risks identified within the framework of the Sustainability Accounting Standards Board (SASB).

CSIM recognizes that financial performance can be impacted by a company's environmental, social and human capital management policies. CSIM's case-by-case evaluation of these proposals takes into consideration a company's current practices, level of reporting, disclosures by its peers, and the existence of controversies or litigation related to the issue.

CSIM believes that, in most instances, the board is best positioned to determine a company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

i. <u>Climate Change Proposals</u>

CSIM believes that companies should provide pertinent information on the management of potential climate change-related risks, with the understanding that the relevance of this disclosure for any specific company will vary depending on its industry and operations. For companies operating in carbon-intensive industries, we believe boards should be considering a range of energy demand scenarios. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

ii. <u>Corporate Political Activity Proposals</u>

CSIM expects the board of directors to have a stated oversight process for political contributions and lobbying activities. CSIM evaluates proposals asking for disclosure of a company's political contributions and lobbying activities and generally supports them if there is no evidence of board oversight or a company's disclosure is deficient and lags that of its peers.

V. ### ADMINISTRATION
?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

CONFLICTS OF INTERESTS

CSIM maintains the following practices that seek to prevent undue influence on its proxy voting activity. Such influence might arise from any relationship between the company holding the proxy (or any shareholder or board member of the company) and CSIM, CSIM's affiliates, a mutual fund or exchange-traded fund managed by CSIM ("Affiliated Fund"), an affiliate of such Fund, or a CSIM employee. The Proxy Committee has directed that Glass Lewis be instructed to vote any such proxies in the same proportion as the votes of all other shareholders in the fund (i.e., "echo vote").

With respect to proxies of an underlying Affiliated Fund, the Investment Stewardship Team will ensure that such proxies are "echo voted", unless otherwise required by law. When required by law or applicable exemptive order, the Investment Stewardship Team will also ensure the "echo voting" of an unaffiliated mutual fund or exchange traded fund. For example, certain exemptive orders issued to a fund by the Securities and Exchange Commission and Section 12(d)(1)(F) of the Investment Company Act of 1940, as amended, require the fund, under certain circumstances, to "echo vote" proxies of registered investment companies that serve as underlying investments of the fund.

In addition, with respect to holdings of The Charles Schwab Corporation ("CSC") (ticker symbol: SCHW), the Investment Stewardship Team will ensure such proxies are echo-voted, unless otherwise required by law.

Where the Proxy Committee has delegated an item to the Investment Stewardship Team, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

<sup>●</sup>

reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

<sup>●</sup>

defaulting to the standard CSIM Proxy Voting Policy.

In all other cases, proxy issues that present material conflicts of interest between CSIM, and/or any of its affiliates, and CSIM's clients, will be delegated to Glass Lewis to be voted in accordance with CSIM's Proxy Voting Guidelines which are set each year based on governance criteria and not influenced by any individual issuer or ballot item.

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Where CSIM's Investment Stewardship Team conducts an engagement meeting with a company, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

ensuring that no members of the Board of (i) CSC or (ii) an Affiliated Fund, that are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

FOREIGN SECURITIES/SHAREBLOCKING

Voting proxies with respect to shares of foreign securities may involve significantly greater effort and corresponding cost than voting proxies with respect to domestic securities due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting. Problems voting foreign proxies may include the following:

<sup>●</sup>

proxy statements and ballots written in a foreign language,

<sup>●</sup>

untimely and/or inadequate notice of shareholder meetings,

<sup>●</sup>

restrictions of foreigner's ability to exercise votes,

<sup>●</sup>

requirements to vote proxies in person,

<sup>●</sup>

requirements to provide local agents with power of attorney to facilitate CSIM's voting instructions.

In consideration of the foregoing issues, CSIM, in conjunction with Glass Lewis, uses its best efforts to vote foreign proxies. As part of its ongoing oversight, the Proxy Committee will monitor the voting of foreign proxies to determine whether all reasonable steps are taken to vote foreign proxies. If the Proxy Committee determines that the cost associated with the attempt to vote outweighs the potential benefits clients may derive from voting, the Proxy Committee may decide not to attempt to vote. In addition, certain foreign countries impose restrictions on the sale of securities for a period of time before and/or after the shareholder meeting. To avoid these trading restrictions, the Proxy Committee instructs Glass Lewis not to vote such foreign proxies (share-blocking).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

SECURITIES LENDING

Certain of the funds managed by CSIM enter into securities lending arrangements with lending agents to generate additional revenue for their portfolios. In securities lending arrangements, any voting rights that accompany the loaned securities generally pass to the borrower of the securities, but the lender retains the right to recall a security and may then exercise the security's voting rights. In order to vote the proxies of securities out on loan, the securities must be recalled prior to the established record date. CSIM will use its best efforts to recall a fund's securities on loan when deemed appropriate and in the best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

SUB-ADVISORY RELATIONSHIPS

Where CSIM has delegated day-to-day investment management responsibilities to an investment sub-adviser, CSIM may (but generally does not) delegate proxy voting responsibility to such investment sub-adviser. In addition, CSIM may share proxy voting with an investment sub-adviser. Each sub-adviser to whom proxy voting responsibility has been delegated will be required to review all proxy solicitation material and to make voting decisions in the best interest of each investment company and its shareholders, or other client associated with the securities it has been allocated. Each sub-adviser to whom proxy voting has been delegated must inform CSIM of its voting decisions to allow CSIM to implement the votes or in the case of shared voting responsibility, potentially override the sub-adviser's vote recommendation. Prior to delegating the proxy voting responsibility, CSIM will review each sub-adviser's proxy voting policy to determine whether it believes that each sub-adviser's proxy voting policy is generally consistent with the maximization of the value of CSIM's clients' investments by protecting the long-term best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

REPORTING AND RECORD RETENTION

CSIM will maintain, or cause Glass Lewis to maintain, records that identify the manner in which proxies have been voted (or not voted) on behalf of CSIM clients. CSIM will comply with all applicable rules and regulations regarding disclosure of its or its clients' proxy voting records and procedures.

CSIM will retain all proxy voting materials and supporting documentation as required under the Investment Advisers Act of 1940, as amended.

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

Schwab Funds<sup>®</sup>

---

| | |
|:---|:---|
| Schwab<sup>®</sup> S&P 500 Index Fund | **SWPPX**  |
| Schwab 1000 Index<sup>®</sup> Fund | **SNXFX**  |
| Schwab Small-Cap Index Fund<sup>®</sup> | **SWSSX**  |
| Schwab Total Stock Market Index Fund<sup>®</sup> | **SWTSX**  |
| Schwab<sup>®</sup> U.S. Large-Cap Growth Index Fund | **SWLGX**  |
| Schwab<sup>®</sup> U.S. Large-Cap Value Index Fund | **SWLVX**  |
| Schwab<sup>®</sup> U.S. Mid-Cap Index Fund | **SWMCX**  |
| Schwab International Index Fund<sup>®</sup> | **SWISX**  |

---

#### STATEMENT OF ADDITIONAL INFORMATION

#### February 27, 2023
The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with each fund's prospectus dated February 27, 2023 (as amended from time to time).

The funds' audited financial statements and the report of the independent registered public accounting firm thereon from the funds' [annual report](https://www.sec.gov/Archives/edgar/data/904333/000119312523000566/d401383dncsr.htm) for the fiscal year ended October 31, 2022, are incorporated by reference into this SAI.

For a free copy of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

Each fund, except for the Schwab 1000 Index Fund, is a series of Schwab Capital Trust, and the Schwab 1000 Index Fund is a series of Schwab Investments (each, a Trust, and collectively, the Trusts). The funds are part of the Schwab complex of funds (Schwab Funds). Charles Schwab Investment Management, Inc., dba Schwab Asset Management™, is the investment adviser to the funds (investment adviser).

REG72271-10

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#### **TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | **<u>Page</u>**  |
| [INVESTMENT OBJECTIVES](#iddegggINVESTMENTO)  | [1](#iddegggINVESTMENTO) |
| [INVESTMENT STRATEGIES, SECURITIES AND RISKS](#idbdiajfINVESTMENTS)  | [5](#idbdiajfINVESTMENTS) |
| [INVESTMENT LIMITATIONS AND RESTRICTIONS](#idbhhjhINVESTMENTL)  | [21](#idbhhjhINVESTMENTL) |
| [MANAGEMENT OF THE FUNDS](#idhehfcMANAGEMENTO)  | [23](#idhehfcMANAGEMENTO) |
| [CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES](#idheddCONTROLPERS)  | [31](#idheddCONTROLPERS) |
| [INVESTMENT ADVISORY AND OTHER SERVICES](#iddeabcINVESTMENTA)  | [32](#iddeabcINVESTMENTA) |
| [PORTFOLIO MANAGERS](#idddhbbPORTFOLIOMA)  | [35](#idddhbbPORTFOLIOMA) |
| [BROKERAGE ALLOCATION AND OTHER PRACTICES](#iddddjdBROKERAGEAL)  | [38](#iddddjdBROKERAGEAL) |
| [PROXY VOTING](#idiacPROXYVOTING)  | [41](#idiacPROXYVOTING) |
| [PORTFOLIO HOLDINGS DISCLOSURE](#idiedbportfolioho-1)  | [41](#idiedbportfolioho-1) |
| [DESCRIPTION OF THE TRUSTS](#idejbgDESCRIPTION)  | [43](#idejbgDESCRIPTION) |
| [PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES](#idbeahfPURCHASERED)  | [43](#idbeahfPURCHASERED) |
| [TAXATION](#idccgdfTAXATION)  | [45](#idccgdfTAXATION) |
| APPENDIX – PROXY VOTING POLICY |  |

---

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#### INVESTMENT OBJECTIVES
The **Schwab S&P 500 Index Fund's** goal is to track the total return of the Standard & Poor's 500 Composite Stock Price Index (S&P 500<sup>®</sup> Index).

The **Schwab 1000 Index Fund's** goal is to match the total return of the Schwab 1000 Index<sup>®</sup>, an index created to represent performance of publicly traded equity securities of the 1,000 largest U.S. companies.

The **Schwab Small-Cap Index Fund's** goal is to track the performance of a benchmark index that measures the total return of small capitalization U.S. stocks.

The **Schwab Total Stock Market Index Fund's** goal is to track the total return of the entire U.S. stock market, as measured by the Dow Jones U.S. Total Stock Market Index<sup>SM</sup>.

The **Schwab U.S. Large-Cap Growth Index Fund's** goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. growth stocks.

The **Schwab U.S. Large-Cap Value Index Fund's** goal is to track the performance of a benchmark index that measures the total return of large capitalization U.S. value stocks.

The **Schwab U.S. Mid-Cap Index Fund's** goal is to track the performance of a benchmark index that measures the total return of mid capitalization U.S. stocks.

The **Schwab International Index Fund's** goal is to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States.

#### Change of Investment Objective
The investment objective for each of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab International Index Fund may be changed only by vote of a majority of its outstanding voting shares. A majority of the outstanding voting shares of a fund means the affirmative vote of the lesser of: (a) 67% or more of the voting shares represented at the meeting, if more than 50% of the outstanding voting shares of the fund are represented at the meeting or (b) more than 50% of the outstanding voting shares of a fund.

The investment objective for each of the Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund is not fundamental and therefore may be changed by the fund's Board of Trustees (the Board) without shareholder approval.

There is no guarantee that a fund will achieve its investment objective.

#### Change to Investment Policy of the Funds
The **Schwab S&P 500 Index Fund** will, under normal circumstances, invest at least 80% of its net assets in securities included in the S&P 500 Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The S&P 500 Index is generally considered to be representative of the performance of the U.S. stock market. The index consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index (stock price times number of shares outstanding), with each stock's weight in the index proportionate to its market value. The S&P 500 Index does not contain the 500 largest stocks, as measured by market capitalization. Although many of the stocks in the index are among the largest, it also includes some relatively small companies. Those companies, however, generally are established companies within their industry group. S&P identifies important industry groups within the U.S. economy and then allocates a representative sample of stocks with each group to the S&P 500 Index. There are four major industry sectors within the index: industrials, utilities, financials and transportation. The fund may purchase securities of companies with which it is affiliated to the extent these companies are represented in its index.

The **Schwab 1000 Index Fund** will, under normal circumstances, invest at least 80% of its net assets in securities included in the Schwab 1000 Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

To be included in the Schwab 1000 Index, a company must satisfy all of the following criteria: (1) it must be an "operating company" (i.e., not an investment company) or real estate investment trust incorporated in the United States, its territories or possessions (depending on business demographics, exception may apply for certain companies incorporated offshore); (2) a liquid market for its common shares must exist on a U.S. exchange; and (3) its market value must place it among the top 1,000 such companies as measured by full float market capitalization (share price times the number of shares outstanding). The fund may purchase securities of companies with which it is affiliated to the extent these companies are represented in its index.

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As of December 31, 2022, the aggregate market capitalization of the stocks included in the Schwab 1000 Index was approximately $39.5 trillion. This represents approximately 93% of the total market value of all publicly-traded U.S. companies, as represented by the Dow Jones U.S. Total Stock Market Index.

The **Schwab Small-Cap Index Fund** will, under normal circumstances, invest at least 80% of its net assets in securities included in the Russell 2000<sup>®</sup> Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Russell 2000 Index is an established index that measures the performance of the small-cap segment of the U.S. equity market. The Russell 2000 Index is a subset of the Russell 3000<sup>®</sup> Index, representing approximately the 2,000 smallest issuers and, as of December 31, 2022, approximately 6% of the total market capitalization of the Russell 3000 Index. The fund may purchase securities of companies with which it is affiliated to the extent these companies are represented in its index.

The **Schwab Total Stock Market Index Fund** will, under normal circumstances, invest at least 80% of its net assets in securities included in the benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Dow Jones U.S. Total Stock Market Index is designed to measure all publicly traded stocks of companies headquartered in the United States for which pricing information is readily available – the index contains 4,270 stocks, as of December 31, 2022. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace. The fund may purchase securities of companies with which it is affiliated to the extent these companies are represented in its index.

Because it would be too expensive to buy all of the stocks included in the index, the investment adviser may use sampling techniques in an attempt to replicate the total return of the U.S. stock market using a smaller number of securities. These techniques use a smaller number of index securities than that included in the index, which, when taken together, are expected to perform similarly to the index. These techniques are based on a variety of factors, including capitalization, dividend yield, price/earnings ratio and industry factors.

The **Schwab U.S. Large-Cap Growth Index Fund** will, under normal circumstances, invest at least 90% of its net assets in securities included in the Russell 1000 Growth<sup>®</sup> Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics.

The **Schwab U.S. Large-Cap Value Index Fund** will, under normal circumstances, invest at least 90% of its net assets in securities included in the Russell 1000<sup>®</sup> Value Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The Russell 1000 Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics.

The **Schwab U.S. Mid-Cap Index Fund** will, under normal circumstances, invest at least 90% of its net assets in securities included in the Russell Midcap<sup>®</sup> Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000<sup>®</sup> Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. As of December 31, 2022, the Russell Midcap Index represented approximately 26% of the total market capitalization of the Russell 1000 companies. The Russell Midcap Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set.

The **Schwab International Index Fund** will, under normal circumstances, invest at least 80% of its net assets in securities included in the MSCI EAFE<sup>®</sup> Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The MSCI EAFE Index is an industry-recognized index composed of MSCI country indices representing developed markets outside of North America – Europe, Australasia, and the Far East. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US and Canada. As of December 31,

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2022, the MSCI EAFE Index consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The fund may purchase securities of companies with which it is affiliated to the extent these companies are represented in its index.

#### Index Providers and Disclaimers
**Description of Schwab 1000 Index.** The Schwab 1000 Index was developed by Charles Schwab & Co., Inc. (Schwab or the funds' distributor). Charles Schwab Invesment Management, Inc., dba Schwab Asset Management (the investment adviser), the funds' investment adviser, and Schwab are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Schwab receives no compensation from the investment adviser or the Schwab 1000 Index Fund for maintaining the index. In constructing the Schwab 1000 Index, Schwab has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index. Schwab Asset Management has entered into an agreement with Schwab pursuant to which the investment adviser has been granted a license to the index which has in turn been sublicensed to the Schwab 1000 Index Fund at no cost to the fund.

Schwab reviews and, as necessary, revises the list of companies whose securities are included in the Schwab 1000 Index, usually annually. Under normal circumstances the Schwab 1000 Index undergoes a quarterly rebalance to reflect outstanding share changes of the existing constituents. Companies known by Schwab to meet or no longer meet the inclusion criteria may be added or deleted as appropriate. Schwab also will modify the index as necessary to account for corporate actions (e.g., new issues, repurchases, stock dividends/splits, tenders, mergers, stock swaps, spinoffs or bankruptcy filings made because of a company's inability to continue operating as a going concern). As a result of corporate actions, the index may be comprised of more or less than 1,000 securities.

A particular stock's weighting in the Schwab 1000 Index is based on its relative float-adjusted market capitalization (i.e., its market price per share times the number of free-float shares outstanding), divided by the total float-adjusted market capitalization of the index.

Schwab may change the Schwab 1000 Index inclusion criteria if it determines that doing so would cause the index to be more representative of the domestic equity market. The Board may select another index for the Schwab 1000 Index Fund, subject to shareholder approval, should it decide that taking such action would be in the best interest of the fund's shareholders.

**Schwab 1000 Index Disclaimers.** Schwab 1000 Index is the property of Schwab, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices LLC or its affiliates or its third party licensors, including Standard & Poor's Financial Services LLC and Dow Jones Trademark Holdings LLC (collectively, "S&P Dow Jones Indices"). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Schwab 1000 Index. "Calculated by S&P Dow Jones Indices" and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by Schwab. S&P<sup>®</sup> is a registered trademark of Standard & Poor's Financial Services LLC, and Dow Jones<sup>®</sup> is a registered trademark of Dow Jones Trademark Holdings LLC.

The fund which is based on the Schwab 1000 Index is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices. S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the fund or any member of the public regarding the advisability of investing in securities generally or in the Schwab 1000 Index or the fund particularly or the ability of the Schwab 1000 Index or the fund to track general market performance. S&P Dow Jones Indices' only relationship to Schwab with respect to the Schwab 1000 Index is the licensing of the S&P Global BMI Index, certain trademarks, service marks and trade names of S&P Dow Jones Indices, and the provision of the calculation services on behalf of Schwab related to the Schwab 1000 Index without regard to Schwab or the fund. S&P Dow Jones Indices is not responsible for and has not participated in the creation of the fund, the determination of the prices and amount of the fund or the timing of the issuance or sale of the fund or in the determination or calculation of the equation by which the fund may be converted into cash or other redemption mechanics. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the fund. There is no assurance that investment products based on the Schwab 1000 Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion or exclusion of a security within the Schwab 1000 Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it investment advice. S&P Dow Jones Indices does not act nor shall be deemed to be acting as a fiduciary in providing the S&P Global BMI Index.

S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE SCHWAB 1000 INDEX, INTELLECTUAL PROPERTY, SOFTWARE, OR ANY DATA RELATED THERETO, OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SCHWAB, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SCHWAB 1000 INDEX, INTELLECTUAL PROPERTY, SOFTWARE, OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR

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GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SCHWAB, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

**Schwab S&P 500 Index Fund - Index Disclaimers -** The S&P 500 Index is a product of S&P Dow Jones Indices LLC (SPDJI), and has been licensed for use by Charles Schwab Investment Management, Inc. Standard & Poor's<sup>®</sup>, S&P<sup>®</sup> and S&P 500<sup>®</sup> are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones<sup>®</sup> is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Charles Schwab Investment Management.

The Schwab S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the shareholders of the Schwab S&P 500 Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Schwab S&P 500 Index Fund particularly, or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Schwab S&P 500 Index Fund is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which is determined, composed and calculated by S&P without regard to the fund. S&P has no obligation to take the needs of the Schwab S&P 500 Index Fund or its shareholders into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of Schwab S&P 500 Index Fund shares or in the determination or calculation of the equation by which the fund's shares are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the fund's shares.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index or any data included therein, and S&P shall have no liability for any errors, omissions or interruptions therein. S&P makes no warranty, express or implied, as to results to be obtained by the Schwab S&P 500 Index Fund, its shareholders or any other person or entity from the use of the S&P 500 Index or any data therein. S&P makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 Index or any data included therein. Without limiting any of the foregoing, in no event shall S&P have any liability for any special, punitive, indirect or consequential damages (including lost profits), even if notified of the possibility of such damages.

**Schwab Total Stock Market Index Fund - Index Disclaimers -** "Standard & Poor's<sup>®</sup>" and "S&P<sup>®</sup>" are registered trademarks of Standard & Poor's Financial Services LLC, and "Dow Jones<sup>®</sup>" is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management. The "Dow Jones U.S. Total Stock Market Index<sup>SM</sup>" is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by Charles Schwab Investment Management. The Schwab Total Stock Market Index Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in the fund.

S&P Dow Jones Indices LLC, Dow Jones, S&P and their affiliates (collectively, S&PDJI) makes no representation or warranty, express or implied, to the owners of the Schwab Total Stock Market Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Schwab Total Stock Market Index Fund particularly or the ability of the Dow Jones U.S. Total Stock Market Index (the Index) to track general market performance. S&P Dow Jones Indices' only relationship to Charles Schwab Investment Management with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Charles Schwab Investment Management or the Schwab Total Stock Market Index Fund. S&PDJI have no obligation to take the needs of Charles Schwab Investment Management or the owners of the Schwab Total Stock Market Index Fund into consideration in determining, composing or calculating the Index. S&PDJI are not responsible for and have not participated in the determination of the prices, and amount of the Schwab Total Stock Market Index Fund or the timing of the issuance or sale of the Schwab Total Stock Market Index Fund or in the determination or calculation of the equation by which the Schwab Total Stock Market Index Fund is to be converted into cash, surrendered or redeemed, as the case may be. S&PDJI have no obligation or liability in connection with the administration, marketing or trading of the Schwab Total Stock Market Index Fund. There is no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&PDJI to buy, sell, or hold such security, nor is it considered to be investment advice.

S&PDJI do not guarantee the adequacy, accuracy, timeliness and/or the completeness of the Index or any data related thereto or any communication, including, but not limited to, oral or written communication (including electronic communications) with respect thereto. S&PDJI shall not be subject to any damages or liability for any errors, omissions or delays therein. S&PDJI make no express or implied warranties, and expressly disclaim all warranties, of merchantability or fitness for a particular purpose or use or as to the results to be obtained by Charles Schwab Investment Management, owners of the Schwab Total Stock Market Index Fund or any other person or entity from the use of the Index or any data related thereto. Without limiting any of the foregoing, in no event whatsoever shall S&PDJI be liable for any indirect, special, incidental, punitive or consequential damages including, but not limited to, loss of profits, trading losses, lost time or goodwill, even if they have been advise of the possibility of such damages, whether in contract, tort, strict liability or otherwise. There are no third party beneficiaries of any agreements or arrangements between S&P Dow Jones Indices, its affiliates and Charles Schwab Investment Management, other than to the licensors of S&PDJI.

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**Schwab Small-Cap Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund - Index Disclaimers -** Charles Schwab Investment Management, the funds' investment adviser, has entered into an agreement with Russell Investment Group (Russell), pursuant to which, the investment adviser has been granted a license to certain of the Russell indexes and the Russell trademarks, which has in turn been sublicensed to the Schwab Small-Cap Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund.

The Schwab Small-Cap Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund are not promoted, sponsored or endorsed by, nor in any way affiliated with Russell. Russell is not responsible for and has not reviewed the Schwab Small-Cap Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund nor any associated literature or publications and Russell makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.

Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell indexes. Russell has no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating any of the Russell indexes.

Russell's publication of the Russell indexes in no way suggests or implies an opinion by Russell as to the attractiveness or appropriateness of investment in any or all securities upon which the Russell indexes are based. Russell makes no representation, warranty, or guarantee as to the accuracy, completeness, reliability, or otherwise of the Russell indexes or any data included in the Russell indexes. Russell makes no representation, warranty or guarantee regarding the use, or the results of use, of the Russell indexes or any data included therein, or any security (or combination thereof) comprising the Russell indexes. Russell makes no other express or implied warranty, and expressly disclaims any warranty, of any kind, including without limitation, any warranty of merchantability or fitness for a particular purpose with respect to the Russell index(es) or any data or any security (or combination thereof) included therein.

**Schwab International Index Fund - Index Disclaimers -** The Schwab International Index Fund is not sponsored, endorsed, sold or promoted by MSCI Inc. (MSCI), any of its affiliates, any of its information providers or any other third party involved in, or related to, compiling, computing or creating any MSCI index (collectively, the MSCI Parties). The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by the investment adviser which has in turn been sublicensed to the fund.

None of the MSCI Parties makes any representation or warranty, express or implied, to the issuer or owners of the fund or any other person or entity regarding the advisability of investing in funds generally or in the fund particularly or the ability of any MSCI index to track corresponding stock market performance. MSCI or its affiliates are the licensors of certain trademarks, service marks and trade names and of the MSCI indexes which are determined, composed and calculated by MSCI without regard to the fund or the issuer or owners of the fund or any other person or entity. None of the MSCI Parties has any obligation to take the needs of the issuer or owners of the fund or any other person or entity into consideration in determining, composing or calculating the MSCI indexes. None of the MSCI Parties is responsible for or has participated in the determination of the timing of, prices at, or quantities of the fund to be issued or in the determination or calculation of the equation by or the consideration into which the fund is redeemable. Further, none of the MSCI Parties has any obligation or liability to the issuer or owners of the fund or any other person or entity in connection with the administration, marketing or offering of the fund.

Although MSCI shall obtain information for inclusion in or for use in the calculation of the MSCI indexes from sources that MSCI considers reliable, none of the MSCI Parties warrants or guarantees the originality, accuracy and/or the completeness of any MSCI index or any data included therein. None of the MSCI Parties makes any warranty, express or implied, as to results to be obtained by the issuer of the fund, owners of the fund, or any other person or entity, from the use of any MSCI index or any data included therein. None of the MSCI Parties shall have any liability for any errors, omissions or interruptions of or in connection with any MSCI index or any data included therein. Further, none of the MSCI Parties makes any express or implied warranties of any kind, and the MSCI Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to each MSCI index and any data included therein. Without limiting any of the foregoing, in no event shall any of the MSCI Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

#### INVESTMENT STRATEGIES, SECURITIES AND RISKS
The different types of investments that the funds typically may invest in, the investment techniques they may use and the risks normally associated with these investments are discussed below. The following investment strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval, unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately after and as a result of a fund's acquisition of such security or asset unless otherwise noted. Thus, any subsequent change in values, net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment. Not all investment securities or techniques discussed below are eligible investments for each fund.

From time to time a fund may hold certain securities not otherwise discussed in this SAI as a permissible investment for the fund. For example, a fund may invest in certain types of securities to the extent its index does even if the types of securities have not been identified as part of the fund's principal or non-principal investment strategy. To the extent an investment becomes part of a fund's principal or non-principal investment

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strategy, the fund will take the necessary steps to identify them as permissible investments. In addition, a fund may receive (i.e., not actively invest) such securities as a result of a corporate action, such as securities dividends, spin-offs or rights issues. In such cases, the fund will not actively add to its position and generally will dispose of the securities as soon as reasonably practicable.

**Borrowing.** A fund may borrow for temporary or emergency purposes; for example, a fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. A fund's borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of a fund's shares and in its portfolio yield. A fund is required to comply with the asset coverage requirements of the Investment Company Act of 1940, as amended (the 1940 Act), when it engages in borrowing activities. If assets used to secure a borrowing decrease in value, a fund may be required to pledge additional collateral to avoid liquidation of those assets.

A fund may establish lines-of-credit (lines) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by a fund within 60 days and is not extended or renewed. Each fund may use the lines to meet large or unexpected redemptions that would otherwise force a fund to liquidate securities under circumstances which are unfavorable to a fund's remaining shareholders. Each fund will pay fees to the banks for using its lines.

**Concentration** means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry's securities. Each of the funds will not concentrate its investments in a particular industry or group of industries, unless the index it is designed to track is so concentrated.

**Cyber Security Risk.** As the funds increasingly rely on technology and information systems to operate, the funds become susceptible to operational risks linked to security breaches in those information systems. Both calculated attacks and unintentional events can cause failures in the funds' information systems. Cyber attacks can include acquiring unauthorized access to information systems, usually through hacking or the use of malicious software, for purposes of stealing assets or confidential information, corrupting data, or disrupting a fund's operations. Cyber attacks can also occur without direct access to information systems, for example by making network services unavailable to intended users. Cyber security failures by, or breaches of the information systems of, the investment adviser, distributors, broker-dealers, other service providers (including, but not limited to, index providers, a fund's accountants, custodians, transfer agents and administrators), or the issuers of securities the funds invest in may also cause disruptions and impact the funds' business operations. Breaches in information security may result in financial losses, interference with the funds' ability to calculate net asset value (NAV), impediments to trading, inability of fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The funds have business continuity plans in the event of, and risk management systems to help prevent, such cyber attacks, but these plans and systems have limitations including the possibility that certain risks have not been identified. Moreover, the funds do not control the cyber security plans and systems of their service providers and other third party business partners. The funds and their shareholders could be negatively impacted as a result.

**Debt Securities** are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically "IOUs," but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed-, variable- or floating-rate of interest on the amount of money borrowed (the principal) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Conversely, when interest rates rise, the prices of debt securities generally fall. Certain debt securities have call features that allow issuers to redeem their outstanding debts prior to final maturity. Depending on the call feature, an issuer may pre-pay its outstanding debts and issue new ones paying lower interest rates. This is known as prepayment risk and is especially true for bonds with sinking fund provisions, which commit the issuer to set aside a certain amount of money to cover timely repayment of principal and typically allow the issuer to annually repurchase certain of its outstanding bonds from the open market or at a pre-set call price. Prepayments are more likely to occur in a falling interest rate environment. When borrowers pay off their debt securities sooner than expected, a fund would have to reinvest that money at the lower prevailing interest rate, which may reduce the returns of a fund. In a rising interest rate environment, prepayment on outstanding debt securities is less likely to occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term securities (all things being equal), but generally offer greater rates of interest. If an issuer redeems the debt securities prior to final maturity, a fund may have to replace these securities with lower yielding securities, which could result in a lower return.

A change in a central bank's monetary policy or economic conditions may lead to a change in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of debt securities in which a fund invests. Some debt securities, such as bonds with longer durations, are more sensitive to interest rate changes than others and may experience an immediate and considerable reduction in value if interest rates rise. Longer duration securities tend to be more volatile than shorter duration securities. As the values of debt securities in a fund's portfolio adjust to a rise in interest rates, a fund's share price may fall. In the event that a fund holds a large portion of its portfolio in longer duration securities when interest rates increase, the share price of the fund may fall significantly.

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Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Corporate debt securities (bonds) tend to have higher credit risk generally than U.S. government debt securities. Debt securities also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- and/or high-quality securities, although some still possess varying degrees of speculative characteristics and risks. Debt securities rated below investment-grade are riskier, but may offer higher yields. These securities are sometimes referred to as high yield securities or "junk bonds." The market for these securities has historically been less liquid and more volatile than for investment-grade securities.

Corporate bonds are debt securities issued by corporations. Although a higher return is expected from corporate bonds, these securities, while subject to the same general risks as U.S. government securities, are subject to greater credit risk than U.S. government securities. Their prices may be affected by the perceived credit quality of their issuer.

**Depositary Receipts** include American Depositary Receipts (ADRs) as well as other "hybrid" forms of ADRs, including European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), and are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject a fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments; withholding taxes on income, or possible imposition of withholding taxes on income; possible seizure, nationalization or expropriation of foreign deposits; possible establishment of exchange controls; or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States. Please see the section titled "Foreign Securities" for more detail.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder's rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer's request.

**Derivative Instruments** are commonly defined to include instruments or contracts whose values depend on (or "derive" from) the value of one or more other assets such as securities, currencies, or commodities. These "other assets" are commonly referred to as "underlying assets." The funds may use derivatives, principally futures contracts, primarily to seek returns on a fund's otherwise uninvested cash assets.

In addition to the derivative instruments and strategies described in this SAI, the investment adviser expects to discover additional derivative instruments and other investment, hedging or risk management techniques. The investment adviser may utilize these new derivative instruments and techniques to the extent that they are consistent with a fund's investment objective and permitted by a fund's investment limitations, operating policies and applicable regulatory authorities.

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A fund's derivatives instruments can create (i) leverage risk, which generally refers to the risk that derivatives transactions can magnify a fund's gains and losses, (ii) market risk, which generally refers to the risk from potential adverse market movements in relation to a fund's derivatives positions, or the risk that markets could experience a change in volatility that adversely impacts fund returns and a fund's obligations and exposures, (iii) counterparty risk, which generally refers to the risk that a counterparty on a derivatives transaction may not be willing or able to perform its obligations under the derivatives contract, and the related risks of having concentrated exposure to such a counterparty, (iv) liquidity risk, which generally refers to the risk involving the liquidity demands that derivatives transactions can create to make payments of margin, collateral, or settlement payments to counterparties, (v) operational risk, which generally refers to the risk related to potential operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error and (vi) legal risk, which generally refers to insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract. Certain of these risks are described in more detail as they apply to specific derivatives instruments in the following sub-sections of this SAI.

*<u>Futures Contracts</u>* are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. A fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the Commodity Futures Trading Commission (CFTC) licenses and regulates on foreign exchanges. Although positions are usually marked-to-market on a daily basis with an intermediary (executing broker), there remains a credit risk with the futures exchange.

A fund must maintain a small portion of its assets in cash to process shareholder transactions and to pay its expenses. To reduce the effect this otherwise uninvested cash would have on its performance, a fund may purchase futures contracts. Such transactions allow a fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, a fund may purchase or sell futures contracts on a specified foreign currency to "fix" the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. A fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, a fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as "initial margin" and must be in the form of liquid assets, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as "variation margin," may be made daily, if necessary, as the value of the futures contracts fluctuates. This process is known as "marking-to-market." The initial margin amount will be returned to a fund upon termination of the futures contracts assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage.

While a fund may purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause a fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if a fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, a fund incurs transaction costs (e.g., brokerage fees) when engaging in futures trading. To the extent a fund also invests in futures in order to simulate full investment, these same risks apply.

When interest rates are rising or securities prices are falling, a fund may seek, through the sale of futures contracts, to offset a decline in the value of its current portfolio securities. When interest rates are falling or prices are rising, a fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when they effect anticipated purchases. Similarly, a fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and its portfolio securities that are denominated in that currency. A fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that a fund has acquired or expects to acquire.

Futures contracts may require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time a fund seeks to close out a futures position. If a fund is unable to close out its position and prices move adversely, a fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a disadvantageous time or incur extra costs by borrowing the cash. Also, a fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

*<u>Derivatives Regulatory Matters.</u>* In October 2020, the U.S. Securities and Exchange Commission (SEC) adopted a final rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies that rescinded and withdrew the guidance of the SEC and its staff regarding asset segregation and cover transactions previously applicable to a fund's use of such transactions. The rule requires a fund to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management program and reporting requirements. Generally, these requirements apply unless a fund satisfies a "limited derivatives users" exception that

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is included in the rule. Under the rule, when a fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating a fund's asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance in connection with the rule regarding the use of securities lending collateral that may limit a fund's securities lending activities. In addition, under the rule, a fund will be permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). A fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the fund treats any such transaction as a "derivatives transaction" for purposes of compliance with the rule. Furthermore, under the rule, a fund will be permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of a fund to use derivatives, and reverse repurchase agreements and similar financing transactions, when-issued, delayed delivery and forward commitment transactions, and unfunded commitment agreements as part of its investment strategies. These requirements may increase the cost of a fund's investments and cost of doing business, which could adversely affect investors. The investment adviser cannot predict the effects of these regulations on a fund. The investment adviser intends to monitor developments and seeks to manage the funds in a manner consistent with achieving the funds' investment objectives, but there can be no assurance that it will be successful in doing so.

The CFTC regulates the trading of commodity interests, including certain futures contracts, options, and swaps in which a fund may invest. A fund that invests in commodity interests will generally be subject to certain CFTC regulatory requirements if it is considered a "commodity pool." A notice of eligibility for exclusion from the definition of the term "commodity pool operator" (CPO) under the Commodity Exchange Act, as amended (CEA) has been filed, by the funds' investment adviser, with respect to each fund's operation. Therefore, each fund and its investment adviser are not subject to registration or regulation as a CPO under the CEA. If a fund's investment adviser were no longer able to claim the exclusion, the fund's investment adviser may be required to register as a CPO and the fund and its investment adviser would be subject to regulation as a CPO under the CEA. If a fund or its investment adviser is subject to CFTC regulation, it may incur additional expenses and/or may choose to make changes to its investment strategies.

**Diversification** involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. Each fund is a series of an open-end investment management company. Each fund is a diversified mutual fund.

*Schwab U.S. Large-Cap Growth Index Fund –* The fund may become "non-diversified," as defined under the 1940 Act, solely as a result of a change in relative market capitalization or index weighting of one or more constituents of the index that the fund is designed to track. A fund that becomes a non-diversified mutual fund means that a relatively high percentage of assets of the fund may be invested in the securities of a limited number of issuers. The value of shares of the fund may be more susceptible to any single economic, political or regulatory occurrence than the shares of a diversified investment company would be. The fund intends to be diversified in approximately the same proportion as its index. In addition, the fund intends to diversify its investments to the extent required to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code).

**Emerging or Developing Markets** exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries.

A fund's investments in emerging markets can be considered speculative, and therefore may offer higher potential for gains and losses than investments in developed markets of the world. With respect to an emerging market country, there may be a greater potential for nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or investments in such countries. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

In addition to the risks of investing in emerging market country debt securities, a fund's investment in government or government-related securities of emerging market countries and restructured debt instruments in emerging markets are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt, and requests to extend additional loan amounts. A fund may have limited recourse in the event of default on such debt instruments.

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*<u>Investing in China</u>* involves certain additional risks and considerations not typically associated with investing in other more established economies or securities markets. China based companies that incorporate in the People's Republic of China (PRC) can issue different classes of shares depending on where they are listed and which investors are allowed to own them. These are referred to as Class A Shares, Class B shares, and Class H shares, which are all renminbi-denominated shares that trade in different currencies depending on what stock exchange they are listed on. Class H Shares trade on the Hong Kong Stock Exchange, are quoted and traded in Hong Kong dollars, and have no restrictions on who can trade them. Class B Shares trade on either the Shanghai or Shenzhen stock exchanges and can only be traded by non-residents of the PRC or residents with appropriate foreign currency dealing accounts. They trade in U.S. dollars on the Shanghai exchange and in Hong Kong dollars on the Shenzhen exchange. Class A Shares trade on either the Shanghai or Shenzhen exchanges and are quoted in renminbi. Class A Shares may only be traded by residents of the PRC, or under the Qualified Foreign Institutional Investor (QFII) rules, or through the Stock Connect programs (Shanghai-Hong Kong or Shenzhen-Hong Kong). Finally, China based companies that are controlled by PRC residents or PRC state entities and have a majority of their revenue or assets in the PRC may incorporate outside the PRC and trade on an exchange outside the PRC in the currency of the exchange. These are referred to as "Red Chip" (Hong Kong), "P Chip" (Hong Kong), "S Chip" (Singapore), or "N Shares" (United States). The multiplicity of share classes and various restrictions on ownership, in addition to the ability of Chinese regulatory authorities and Chinese issuers to suspend trading and their willingness to exercise this option in response to market volatility and other events, can significantly impact liquidity and volatility of the Chinese market and the markets for Chinese securities. In addition, to the extent that a fund invests in China A Shares, there may be legal restrictions imposed by the PRC on the repatriation of assets or proceeds from the sale of China A Shares. Further, there are quotas on the amount China A Shares available either to QFIIs or through the Stock Connect programs. These quotas are applicable to the entire market, not to a specific fund, but they impact the ability of a fund to implement its investment strategy.

Certain funds may invest a portion of their assets in certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the funds) is prohibited. To facilitate indirect foreign investment in these businesses, many Chinese companies have created VIE structures. In such an arrangement, a China-based operating company typically establishes a shell entity in another jurisdiction, such as the Cayman Islands. The shell company enters into service and other contracts with the China-based operating company, and then issues shares on an exchange (such as the New York Stock Exchange or the Hong Kong Stock Exchange). Non-Chinese investors hold stock in the shell entity rather than directly in the China-based operating company. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. The contractual arrangements also permit the VIE to consolidate the China-based operating company into its financial statements.

Although VIE structures are a longstanding industry practice and well known to officials and regulators in China, VIE structures are not formally recognized under Chinese law. As a result, investors face the risk that future actions by the Chinese government could significantly affect the China-based operating company's financial performance and the enforceability of the VIE structure's contractual arrangements. It is uncertain whether Chinese officials or regulators will withdraw their implicit acceptance of the VIE structure, or whether any new laws, rules or regulations relating to this structure will be adopted (in each case either generally or with respect to specific industries, sectors or companies) and, if adopted, what impact they would have on the interests of shareholders in the VIE structure. Under extreme circumstances, China could prohibit the existence of VIE structures or limit a VIE structure's ability to pass through economic and governance rights to non-Chinese individuals and entities. If the Chinese government takes action affecting VIE structures, the market value of a fund's associated portfolio holdings in VIE structures would likely suffer significant, detrimental, and possibly permanent negative effects, which could result in substantial investment losses to the fund.

In addition, Chinese companies, including China-based operating companies listed on U.S. exchanges through a VIE structure, are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies based in more developed countries. As a result, information about the Chinese securities and securities in the VIE structure in which a fund invests may be less reliable or complete than investments in other securities. Foreign companies listed on U.S. exchanges, including China-based operating companies that utilize a VIE structure, also could face delisting or other ramifications for failure to meet the requirements of the SEC, the Public Company Accounting Oversight Board or other U.S. regulators. Delisting would significantly decrease the liquidity and value of the securities, decrease the ability of a fund to transact in such securities and may increase the transaction costs of a fund if the fund is required to seek other markets in which to transact in those securities.

Investments involving a VIE structure may also pose additional risks because such investments are made through a company whose interests in the underlying China-based operating company are established through contract rather than through equity ownership. For example, in the event of a dispute, the contractual claims with respect to the China-based operating company may be deemed unenforceable in the PRC, thus limiting (or eliminating) the remedies and rights available to the VIE and its investors. Such legal uncertainty may also be exploited against the interests of the investors in the VIE structure. Further, the interests of the direct equity owners of the China-based operating company may conflict with the interests of the investors in the VIE structure, and the fiduciary duties of the officers and directors of the China-based operating company may differ from, or conflict with, the fiduciary duties of the officers and directors of the shell entity in which a fund invests.

**Equity Securities** represent ownership interests in a company, and are commonly called "stocks." Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company's financial condition, market conditions and political, economic or even company-specific news. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

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Types of equity securities include common stocks, preferred stocks, convertible securities, rights and warrants, depositary receipts, and interests in real estate investment trusts and business development companies. (For more information on depositary receipts, see the section titled "Depositary Receipts").

*<u>Common Stocks,</u>* which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the election of the corporation's directors and any other matters submitted to the corporation's shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer's earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners. Common stocks are typically categorized by their market capitalization as large-, mid- or small-cap.

*<u>Small-Cap Stocks</u>* include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small-cap company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Most small-cap company stocks pay low or no dividends.

These factors and others may cause sharp changes in the value of a small-cap company's stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a fund's positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for a fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of a fund's investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

*<u>Convertible Securities</u>* are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer's common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company's common stock. The actual return on a convertible bond may exceed its stated yield if the company's common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. Convertible securities are also rated below investment grade (high yield) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and a fund's ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer's creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a conversion feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer's common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company's liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer's convertible securities will tend not to fall as much because the convertible security's income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because its conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

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*<u>Preferred Stocks</u>* represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation's assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, a fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

*<u>Real Estate Investment Trusts</u>* (REITs) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long-term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Internal Revenue Code. To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 90% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

Like any investment in real estate, a REIT's performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental income could decline because of extended vacancies, increased competition from nearby properties, tenants' failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT's performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than – and at times will perform differently from – large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through a fund, a shareholder will bear indirectly a proportionate share of the REIT's expenses in addition to their proportionate share of a fund's expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Internal Revenue Code or to maintain their exemptions from registration under the 1940 Act and CFTC regulations.

*<u>Rights and Warrants</u>* are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company's stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

*<u>Initial Public Offering</u>* (IPO). A fund may purchase shares issued as part of, or a short period after, a company's IPO, and may at times dispose of those shares shortly after their acquisition. A fund's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

*<u>Master Limited Partnerships</u>* (MLPs) are limited partnerships in which the common units are publicly traded. MLP common units are freely traded on a securities exchange or in the over-the-counter market and are generally registered with the SEC. MLPs often own several properties or businesses (or own interests) that are related to real estate development and oil and gas industries, but they also may finance motion

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pictures, research and development and other projects. MLPs generally have two classes of owners, the general partner and limited partners. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership, through ownership of common units, and have a limited role, if any, in the partnership's operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (minimum quarterly distributions). Common and general partner interests also accrue arrearages in distributions to the extent the minimum quarterly distribution is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the minimum quarterly distribution; however, subordinated units do not accrue arrearages. Distributable cash in excess of the minimum quarterly distribution paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions are intended to encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results are intended to benefit all security holders of the MLP, however, such incentive distribution payments give rise to potential conflicts of interest between the common unit holders and the general partner.

MLP common units represent a limited partnership interest in the MLP. Common units are listed and traded on U.S. securities exchanges or over-the-counter, with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The funds may purchase common units in market transactions as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions. Common units along with general partner units have first priority to receive quarterly cash distributions up to the minimum quarterly distribution and have arrearage rights. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

MLP subordinated units are typically issued by MLPs to their original sponsors, such as their founders, corporate general partners of MLPs, entities that sell assets to the MLP, and investors. Subordinated units may be purchased directly from these persons as well as newly-issued subordinated units from MLPs themselves. Subordinated units have similar voting rights as common units and are generally not publicly traded. Once the minimum quarterly distribution on the common units, including any arrearages, has been paid, subordinated units receive cash distributions up to the minimum quarterly distribution prior to any incentive payments to the MLP's general partner. Unlike common units, subordinated units do not have arrearage rights. In the event of liquidation, common units and general partner interests have priority over subordinated units. Subordinated units are typically converted into common units on a one-to-one basis after certain time periods and/or performance targets have been satisfied. The purchase or sale price of subordinated units is generally tied to the common unit price less a discount. The size of the discount varies depending on the likelihood of conversion, the length of time remaining to conversion, the size of the block purchased relative to trading volumes, and other factors, including smaller capitalization partnerships or companies potentially having limited product lines, markets or financial resources, lacking management depth or experience, and being more vulnerable to adverse general market or economic development than larger more established companies.

General partner interests of MLPs are typically retained by an MLP's original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder's investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP's aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights, which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Certain MLPs are dependent on their parent companies or sponsors for a majority of their revenues. Any failure by an MLP's parents or sponsors to satisfy their payments or obligations would impact the MLP's revenues and cash flows and ability to make distributions.

*<u>Business Development Companies</u>* (BDCs) are closed-end investment companies that have elected to be BDCs under the 1940 Act and are taxed as regulated investment companies (RICs) under the Internal Revenue Code. BDCs operate as venture capital companies and typically invest in, lend capital to, and provide significant managerial assistance to developing private companies or thinly-traded public companies. Under

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the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of privately-held U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, a BDC may only incur indebtedness in amounts such that the BDC's coverage ratio of total assets to total senior securities equals 150% or 200%, as applicable.

BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (junk bonds). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that investors may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC's net asset value (for more information on BDCs, see the section titled "Securities of Other Investment Companies").

**Exchange-Traded Funds** (ETFs) are investment companies that typically are registered under the 1940 Act as open-end funds or unit investment trusts (UITs). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold throughout the day at market prices, which may be higher or lower than the shares' net asset value. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's net asset value, the value of ETF holdings, and supply of and demand for ETF shares. Although the creation/redemption feature of ETFs generally makes it more likely that ETF shares will trade close to their net asset value, market volatility, lack of an active trading market for ETF shares, disruptions at market participants (such as Authorized Participants or market makers) and any disruptions in the ordinary functioning of the creation/redemption process may result in ETF shares trading significantly above (at a "premium") or below (at a "discount") their net asset value. An ETF's investment results are based on the ETF's daily net asset value. Investors transacting in ETF shares in the secondary market, where market prices may differ from net asset value, may experience investment results that differ from results based on the ETF's daily net asset value. An "index-based ETF" seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of stocks or an index, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

**Foreign Currency Transactions.** A fund may invest in foreign currency-denominated securities, purchase and sell foreign currency options and foreign currency futures contracts and related options and engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts (forwards) with terms generally of less than one year. A fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.

A fund may use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

A forward involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect a fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, a fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for fund securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when a fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, a fund could sustain a loss.

A fund may engage in forward foreign currency exchange options and contracts to protect the value of specific portfolio positions, which is called "position hedging." When engaging in position hedging, a fund may enter into forward foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which portfolio securities are denominated (or against an increase in the value of currency for securities that a fund expects to purchase).

Buying and selling foreign currency exchange options and contracts involves costs and may result in losses. The ability of a fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for a fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a fund's holdings of securities denominated in a particular currency and forward contracts into which a fund enters. Such imperfect correlation may cause a fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss. A fund's transactions in foreign currency exchange contracts may cause a portion of the fund's distributions to constitute returns of capital for tax purposes. To the extent a foreign currency transaction involves a derivatives instrument, the risks discussed under "Derivatives Instruments," above, also will apply.

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Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant foreign currencies.

Forwards will be used primarily to adjust the foreign exchange exposure of a fund and a fund might be expected to enter into such contracts under the following circumstances:

*<u>Lock In.</u>* When the investment adviser desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency.

*<u>Cross Hedge.</u>* If a particular currency is expected to decrease against another currency, a fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of a fund's portfolio holdings denominated in the currency sold.

*<u>Direct Hedge.</u>* If the investment adviser wants to eliminate substantially all of the risk of owning a particular currency, and/or if the investment adviser thinks that a fund can benefit from price appreciation in a given country's bonds but does not want to hold the currency, it may employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but a fund would benefit from an increase in value of the bond.

*<u>Proxy Hedge.</u>* The investment adviser might choose to use a proxy hedge, which may be less costly than a direct hedge. In this case, a fund, having purchased a security, will sell a currency whose value is believed to be closely linked to the currency in which the security is denominated. Interest rates prevailing in the country whose currency was sold would be expected to be closer to those in the U.S. and lower than those of securities denominated in the currency of the original holding. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies and the relationships can be very unstable at times.

*<u>Costs of Hedging.</u>* When a fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially reduced or lost if a fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead such costs will, over time, be reflected in a fund's net asset value per share.

*<u>Tax Consequences of Hedging.</u>* Under applicable tax law, a fund may be required to limit its gains from hedging in foreign currency forwards, futures, and options. Although a fund is expected to comply with such limits, the extent to which these limits apply is subject to tax regulations as yet unissued. Hedging may also result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. Those provisions could result in an increase (or decrease) in the amount of taxable dividends paid by a fund and could affect whether dividends paid by a fund are classified as capital gains or ordinary income.

**Foreign Securities.** Investments in foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which a fund may invest include those issued by foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments, a compromise in public health and safety, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, currency blockage, the imposition of sanctions and other similar measures, change of government or war could affect the value of foreign investments. Additionally, a country could experience a public health threat such as an infectious illness which could reduce consumer demand or economic output and/or result in market closures, travel restrictions or quarantines, all of which could affect the value of that country's securities and impact global markets. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. Bankruptcy laws in some foreign countries are sometimes biased to the borrowers and against the creditors. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

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In addition, a fund's investments in foreign securities may be subject to economic sanctions or other government restrictions. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to ascertain. These types of measures may include, but are not limited to, banning a sanctioned country or certain persons or entities associated with such country from global payment systems that facilitate cross-border payments, restricting the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities or persons. The imposition of sanctions and other similar measures could, among other things, result in a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings of the sanctioned country's securities or those of companies located in or economically tied to the sanctioned country, currency devaluation or volatility, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could directly or indirectly limit or prevent a fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and adversely impact a fund's liquidity and performance. As a result, such restrictions may limit a fund's ability to meet a large number of shareholder redemption requests.

International trade tensions may arise from time to time which could result in trade tariffs, embargos or other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, an oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies or industries which could have a negative impact on a fund's performance. Events such as these are difficult to predict and may or may not occur in the future.

Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a fund to miss attractive investment opportunities. Losses to a fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for a fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, a fund may hold cash investments in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause a fund to incur costs in connection with conversions between various currencies. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by a fund.

During the 2008-2009 global financial crisis, financial markets in Europe experienced significant volatility due, in part, to concerns about rising levels of government debt and the prevalence of increased budget deficits. As a result, many economies in the region suffered through prolonged economic downturns. Due to the economic integration of the region, another economic downturn in one European country may have a negative impact on the economies of other European countries.

The risk of investing in Europe may be heightened due to steps taken by the United Kingdom (UK) to exit the European Union (EU). On January 31, 2020, the UK officially withdrew from the EU. On December 30, 2020, the EU and UK signed the EU-UK Trade and Cooperation Agreement (TCA) which governs certain aspects of the EU's and the UK's relationship, many of which are still to be determined, including those related to financial services. Notwithstanding the TCA, significant uncertainty remains in the market regarding the ramifications of the UK's withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased volatility and illiquidity, and companies that conduct a significant amount of business in the UK or Europe may experience lower revenue and/or profit growth, all of which may adversely affect the value of a fund's investments. Brexit also may cause additional member states to contemplate departing the EU, which would likely perpetuate political and economic instability in the region and cause additional market disruption in global financial markets.

As a fund may hold investments in issuers that are located in Europe or that depend on revenues generated from operations in Europe, any material negative developments in Europe could have a negative impact on the value and liquidity of these investments, which could harm a fund's performance.

**Foreign Institutions** involve additional risks. The funds may invest in U.S. dollar-denominated securities issued by foreign institutions or securities that are subject to credit or liquidity enhancements provided by foreign institutions. Foreign institutions may not be subject to uniform accounting, auditing and financial reporting standards, practices and requirements that are comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments could have effects on the value of securities issued or supported by foreign institutions. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, change of government or war could affect the value of these securities. In addition, there may be difficulties in obtaining or enforcing judgments against foreign institutions that issue or support securities in which a fund may invest. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

**Illiquid Securities or Investments** means any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The liquidity of a fund's investments is monitored under the supervision and direction of the Board and is governed by the 1940 Act and rules promulgated

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thereunder, which provide that a fund may not acquire any illiquid investments if, immediately after the acquisition, the fund would have invested more than 15% of the fund's net assets in illiquid investments. Investments currently not considered liquid include, among others, repurchase agreements not maturing within seven days that are not subject to a demand feature of seven days or less and certain restricted securities. Any investment may become illiquid at times of market dislocation.

**Indexing Strategies** involve tracking the securities represented in, and therefore the performance of, an index. Each fund normally will invest primarily in the securities of its index. Moreover, each fund invests so that its portfolio performs similarly to that of its index. Each fund tries to generally match its holdings in a particular security to its weight in the index. Each fund will seek a correlation between its performance and that of its index of 0.90 (0.95 for Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund) or better, over time. A perfect correlation of 1.0 is unlikely as the funds incur operating and trading expenses unlike their indices. Each fund may rebalance its holdings in order to track its index more closely. In the event its intended correlation is not achieved, the Board will consider alternative arrangements for each fund.

There can be no guarantee that the performance of a fund will achieve a high degree of correlation with that of its index. A number of factors may affect a fund's ability to achieve a high correlation with its index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of a fund and its index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spinoffs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions such as diversification requirements) that apply to the fund but not to the index.

**Inflation/Deflation Risk.** The funds may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from a fund's investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of a fund's assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of a fund's assets.

**Interfund Borrowing and Lending.** The SEC has granted an exemption to the funds that permits the funds to borrow money from and/or lend money to other funds in the Fund Complex as defined under "Management of the Funds." All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board.

**Large Transaction Risk.** Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities when it would not otherwise do so, which could result in a loss to the fund, negative impact to the fund's brokerage costs, acceleration of the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan), or higher portfolio turnover. Investors should consider whether a fund is an appropriate investment in light of their current financial position and goals.

**Market Disruptions Risk.** The funds are subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, epidemics and pandemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause a fund to lose value. These events can also impair the technology and other operational systems upon which the funds' service providers, including Schwab Asset Management, as the funds' investment adviser, rely, and could otherwise disrupt the funds' service providers' ability to fulfill their obligations to the funds.

The outbreak of COVID-19, a novel coronavirus disease, has caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the funds invest. The transmission of COVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the global economic environment. These disruptions have led to instability in the market place, including losses and overall volatility. The impact of COVID-19, including variants of the underlying virus, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

Russia's military invasion of Ukraine in February 2022, responses by the United States and other countries to the invasion and the potential for wider conflict have increased and may continue to increase volatility and uncertainty in financial markets worldwide. The United States and other countries have imposed broad-ranging economic sanctions on Russia and Russian entities and individuals that, among other restrictions, prohibit companies from doing business with Russia and Russian issuers, and may adversely affect companies with economic or financial exposure to Russia and Russian issuers. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia's military invasion. These and potential similar future sanctions may limit the potential

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universe of securities in which the funds may invest and may require the funds to freeze or divest its existing investments in a company that becomes subject to such restrictions. A number of large corporations and U.S. states have also announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses. The extent and duration of Russia's military actions and the repercussions of such actions, including any retaliatory actions or countermeasures that may be taken by Russia or others subject to sanctions (such as cyberattacks on other governments, corporations or individuals) are unpredictable, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These events could negatively affect the funds' performance.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, market closures, changes in interest rates, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the funds. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the funds being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.

To satisfy any shareholder redemption requests during periods of extreme volatility, it is more likely the funds may be required to dispose of portfolio investments at inopportune times or prices.

**Mid-Cap Stocks** include common stocks issued by operating companies with market capitalizations that place them between the upper and lower end of the stock market, as well as the stocks of companies that are determined to be mid-sized based on several factors, including the capitalization of the company and the amount of revenues. Historically, mid-cap stocks have been riskier than large-cap stocks. Mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of mid-sized companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when mid-cap stocks fall behind other types of investments – large-cap stocks, for instance – a fund's mid-cap holdings could reduce performance.

Mid-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Mid-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively smaller management group. In addition, mid-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Mid-cap company stocks may pay low or no dividends. These factors and others may cause sharp changes in the value of a mid-cap company's stock, and even cause some mid-cap companies to fail. While mid-cap stocks are generally considered to offer greater growth opportunities for investors than large-cap stocks, they involve greater risks and the share price of a fund that invests in mid-cap stocks may change sharply during the short term and long term.

**Money Market Securities** are high-quality, short term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker's acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker's acceptances are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short term credit needs.

Money market securities pay fixed-, variable- or floating-rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately; these puts, which are sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When a fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts.

A fund may keep a portion of its assets in cash for business operations. A fund may invest in money market securities to reduce the effect this otherwise uninvested cash would have on its performance. A fund may also invest in money market securities to the extent it is consistent with its investment objective.

*<u>Banker's Acceptances or Notes</u>* are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. A fund will invest only in banker's acceptances of banks that have capital, surplus and undivided profits in excess of $100 million.

*<u>Certificates of Deposit or Time Deposits</u>* are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. A fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits, in aggregate, in excess of $100 million.

*<u>Commercial Paper</u>* consists of short term, promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

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*<u>Repurchase Agreements</u>* are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer's holding period. Any repurchase agreements a fund enters into will involve a fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short, from overnight to one week, although the securities collateralizing a repurchase agreement may have longer maturity dates. Default by the seller might cause a fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. A fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement's seller, a fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying securities and loss of income. Certain repurchase agreements a fund may enter into may or may not be subject to an automatic stay in bankruptcy proceedings. A fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank.

**Non-Publicly Traded Securities and Private Placements.** A fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a fund may be required to bear the expenses of registration.

**Restricted Securities** are securities that are subject to legal restrictions on their sale. Difficulty in selling restricted securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended (1933 Act), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. To the extent a fund invests in restricted securities that are deemed liquid, the general level of illiquidity in the fund's portfolio may be increased if such securities become illiquid.

**Securities Lending** of portfolio securities is a common practice in the securities industry. A fund may engage in security lending arrangements. When a fund is lending portfolio securities, the fund may receive cash collateral and may invest it in short-term, interest-bearing obligations, including cash collateral funds, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies. Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities and efforts to recall such securities promptly may be unsuccessful, especially for foreign securities. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities, if the borrower fails to return the security loaned or becomes insolvent. A fund will also bear the risk of any decline in value of securities acquired with cash collateral.

A fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other permitted instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) a fund may at any time call the loan and obtain the return of the securities loaned; (3) a fund will receive payments in lieu of any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security's voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to a fund, it is expected that a fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer's corporate governance policies or structure.

To the extent a fund participates in securities lending under the current securities lending agreements with unaffiliated lending agents, costs and expenses, including agent fees, associated with securities lending activities under the securities lending program paid to the unaffiliated lending agents start at 9% of gross lending revenue, with subsequent breakpoints to a low of 5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by a fund, as applicable. No portion of the lending revenue is paid to or retained by Schwab Asset Management or any affiliate of Schwab Asset Management.

**Securities of Other Investment Companies.** Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a

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continuous basis; (2) business development companies that generally invest in, and provide services to, privately-held companies or thinly-traded public companies (see the sub-section titled "Business Development Companies" under "Equity Securities" for more information); (3) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; (4) unit investment trusts that generally offer a fixed number of redeemable shares; and (5) money market funds that typically seek current income by investing in money market securities (see the section titled "Money Market Securities" for more information). Certain open-end funds, closed-end funds and unit investment trusts are traded on exchanges (see the sub-section titled "Exchange-Traded Funds" under "Equity Securities" for more information).

To the extent a fund invests, or has invested, in shares of other investment companies, including BDCs, during its prior fiscal year, the fund, pursuant to SEC rules, must disclose any material fees and expenses indirectly incurred by the fund as a result of such investments. These indirect fees and expenses, to the extent incurred, will appear in the fee table of the fund's prospectus as a separate line item captioned "Acquired fund fees and expenses." Unlike securities of other investment companies, BDCs may be included in various indices by index providers. As a result, particularly to the extent a fund seeks to track the total return of its index by replicating the index (rather than employing sampling techniques), a fund may hold securities of BDCs and may be required to disclose acquired fund fees and expenses.

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The funds may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. A fund may invest in investment companies that are not registered with the SEC or in privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause a fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which a fund may invest in another investment company may be limited. Except as described below, the 1940 Act currently requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of a fund's total assets will be invested in the securities of any one acquired investment company (acquired fund), (ii) not more than 10% of the value of its total assets will be invested in the aggregate in securities of acquired funds as a group and (iii) not more than 3% of the outstanding voting stock of any one acquired fund will be owned by a fund.

The limitations described above do not apply to investments in money market funds subject to certain conditions. The funds may invest in affiliated and unaffiliated money market funds without limit under Rule 12d1-1 under the 1940 Act subject to a fund's investment policies and restrictions and the conditions of the Rule.

Rule 12d1-4 allows a fund to acquire shares of an acquired fund in excess of the limitations currently imposed by the 1940 Act. Fund of funds arrangements relying on Rule 12d1-4 will be subject to several conditions, certain of which are specific to a fund's position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (i) control and voting that prohibit an acquiring fund, its investment adviser (or a subadviser) and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund; (ii) certain required findings relating to complexity, fees and undue influence (among other things); (iii) fund of funds investment agreements; and (iv) general limitations on an acquired fund's investments in other investment companies and private funds to no more than 10% of the acquired fund's asset, except in certain circumstances. To the extent a fund is an acquired fund, the limitations placed on acquired funds under Rule 12d1-4 may impact the investments made by a fund.

**Short Sales** may be used by a fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. A fund may engage in short sales that are either "against the box" or "uncovered." A short sale is "against the box" if at all times during which the short position is open, a fund owns at least an equal amount of the securities or securities convertible into, or has the right to acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to a fund with respect to the securities that are sold short. "Uncovered" short sales are transactions under which a fund sells a security it does not own. To complete such transaction, a fund may borrow the security through a broker to make delivery to the buyer and, in doing so, a fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. A fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, a fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until a fund replaces the borrowed securities.

A fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically

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increase without limit, thus increasing the cost of buying those securities to cover the short position. If a fund sells securities short "against the box," it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

A fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities.

**Stock Substitution Strategy** is a strategy, whereby each fund may, in certain circumstances, substitute a similar stock for a security in its index.

**U.S. Government Securities** are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the U.S. government. Some U.S. government securities, such as those issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Student Loan Marketing Association (Sallie Mae), and the Federal Home Loan Banks, are supported by a line of credit the issuing entity has with the U.S. Treasury. Securities issued by other issuers are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. U.S. government securities, including U.S. Treasury securities, are among the safest securities; however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer or director of Fannie Mae and Freddie Mac with respect to Fannie Mae and Freddie Mac and the assets of Fannie Mae and Freddie Mac. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement (SPA) with each of Fannie Mae and Freddie Mac pursuant to which the U.S. Treasury agreed to purchase up to 1,000,000 shares of senior preferred stock with an aggregate initial liquidation preference of $1 billion and obtained warrants and options for the purchase of common stock of each of Fannie Mae and Freddie Mac. Under the SPAs as currently amended, the U.S. Treasury has pledged to provide financial support to a government-sponsored enterprise (GSE) in any quarter in which the GSE has a net worth deficit as defined in the respective SPA. Under the current arrangement, the GSEs have a maximum amount of funding available to them which will be reduced by any future draws. There is a risk that if a GSE experiences a loss in any fiscal quarter that results in the GSE having a negative net worth that is greater than the amount available under the U.S. Treasury's funding commitment that the FHFA could place the GSE in receivership. In addition, each GSE may only retain a certain amount of its profits at the end of each fiscal quarter and the U.S. Treasury's liquidation preference will increase in an amount equal to any increase in a GSE's net worth up to a certain amount. The SPAs contain various covenants that severely limit each enterprise's operations.

Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The SPAs are intended to enhance each of Fannie Mae's and Freddie Mac's ability to meet its obligations. The FHFA has indicated that the conservatorship of each enterprise will end when the director of the FHFA determines that the FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. Should Fannie Mae and Freddie Mac be taken out of conservatorship, it is unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations under the SPAs. It also is unclear how the capital structure of Fannie Mae and Freddie Mac would be constructed post-conservatorship, and what effects, if any, the privatization of Fannie Mae and Freddie Mac will have on their creditworthiness and guarantees of certain mortgage-backed securities. Accordingly, should the FHFA take Fannie Mae and Freddie Mac out of conservatorship, there could be an adverse impact on the value of their securities which could cause a fund's investments to lose value.

Although the risk of default with the U.S. government securities is considered unlikely, any default on the part of a portfolio investment could cause a fund's share price or yield to fall. The risk of default on U.S. government securities may be heightened when there is uncertainty relating to negotiations in the U.S. Congress over increasing the statutory debt ceiling. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling, the U.S. government may default on certain U.S. government securities including those held by a fund, which could have an adverse impact on the fund. In August 2011, the long-term credit rating of the U.S. government was downgraded by a major rating agency as a result of concern about the U.S. government's budget deficit and rising debt burden. Similar downgrades in the future could increase volatility in domestic and foreign financial markets, result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of different kinds of debt. Although remote, it is at least theoretically possible that under certain scenarios the U.S. government could default on its debt, including U.S. Treasury securities.

#### INVESTMENT LIMITATIONS AND RESTRICTIONS

#### The following investment limitations may be changed only by vote of a majority of each fund's outstanding voting shares:
 **Each of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund, Schwab U.S. Mid-Cap Index Fund and Schwab International Index Fund may not:** 

(1) Borrow money, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

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(2) Make loans to other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Issue senior securities, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time. However, the Schwab U.S. Large-Cap Growth Index Fund may become "non-diversified," as defined in the 1940 Act, with respect to investments in an issuer or several issuers to the extent necessary to approximate the composition of the index the fund seeks to track to the extent permitted by law or regulatory relief.

(5) Purchase or sell commodities or real estate, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(6) Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

 **In addition, each of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund may not:** 

(1) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

 **In addition, each of the Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund may not:** 

(1) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time, except that each fund will concentrate to approximately the same extent that its benchmark index concentrates in the securities of such particular industry or group of industries.

#### In addition, each of the Schwab S&P 500 Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, including any exemptive relief granted by the SEC.

#### In addition, the Schwab S&P 500 Index Fund may not:
(1) Pledge, mortgage or hypothecate any of its assets, except as permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### In addition, the Schwab 1000 Index Fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act.

#### The Schwab Total Stock Market Index Fund may not:
(1) Purchase securities of any issuer, except as consistent with the maintenance of its status as a diversified company under the 1940 Act.

(2) Concentrate investments in a particular industry or group of industries, except as permitted under the 1940 Act, or the rules or regulations thereunder.

(3) &nbsp;&nbsp;&nbsp;&nbsp; (i) Purchase or sell commodities, commodities contracts, futures or real estate; (ii) lend or borrow money; (iii) issue senior securities; (iv) underwrite securities; or (v) pledge, mortgage or hypothecate any of its assets, except as permitted by the 1940 Act, or the rules or regulations thereunder.

#### The following are non-fundamental investment policies and restrictions, and may be changed by the Board.

#### Each fund may not:
(1) Sell securities short except as in accordance with current SEC rules and interpretations.

(2) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(3) Borrow money except that the fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(4) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

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(5) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries (except that each fund may purchase securities to the extent that its index is also so concentrated).

(6) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that each fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs); (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts; and (iii) purchase securities of companies that deal in precious metals or interests therein.

#### In addition, the Schwab Small-Cap Index Fund
(1) Intends to achieve its investment objective by tracking the price and dividend performance (total return) of the Russell 2000 Index.

#### In addition, the Schwab International Index Fund
(1) Intends to achieve its investment objective by tracking the price and dividend performance (total return) of the MSCI EAFE Index.

#### In addition, the Schwab Total Stock Market Index Fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### The following descriptions of the 1940 Act may assist investors in understanding the above policies and restrictions.
<u>Borrowing.</u> The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 ⅓% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are entered into in accordance with the conditions to applicable SEC requirements shall not be regarded as borrowings for the purposes of a fund's investment restriction.

<u>Concentration.</u> The SEC has defined concentration as investing more than 25% of an investment company's total assets in an industry or group of industries, with certain exceptions such as with respect to investments in obligations issued or guaranteed by the U.S. government or its agencies and instrumentalities, or tax-exempt obligations of state or municipal governments and their political subdivisions.

<u>Diversification.</u> Under the 1940 Act and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer's voting securities would be held by a fund.

<u>Lending.</u> Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

<u>Real Estate.</u> The 1940 Act does not directly restrict an investment company's ability to invest in real estate, but does require that every investment company have a fundamental investment policy governing such investments. Each fund has adopted a fundamental policy that would permit direct investment in real estate. However, each fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of a fund's Board.

<u>Senior Securities.</u> Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits each fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, when such investments are entered into in accordance with the conditions to applicable SEC requirements.

<u>Underwriting.</u> Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets. The foregoing restriction does not apply to non-diversified funds.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of a fund's acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in total assets or net assets, as applicable, or other circumstances does not require a fund to sell an investment if it could not then make the same investment.

#### MANAGEMENT OF THE FUNDS
The funds are overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of each fund. The trustees met five times during the most recent fiscal year.

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Certain trustees are "interested persons." A trustee is considered an interested person (Interested Trustee) of a Trust under the 1940 Act if he or she is an officer, director, or an employee of Schwab Asset Management or Schwab. A trustee also may be considered an interested person of the Trusts under the 1940 Act if he or she owns stock of The Charles Schwab Corporation (CSC), a publicly traded company and the parent company of Schwab Asset Management and Schwab.

As used herein, the terms "Fund Complex" and "Family of Investment Companies" each refer collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust which, as of February 27, 2023, included 105 funds. As used herein, the term "Schwab Funds" refers collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Capital Trust; and the term "Schwab ETFs" refers to Schwab Strategic Trust.

Each of the officers and/or trustees serves in the same capacity, unless otherwise noted, for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The tables below provide information about the trustees and officers for the Trusts, which includes the funds in this SAI. The address of each individual listed below is 211 Main Street, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(2)</sup> <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016-Sept. 2019), Principal Funds (investment management). | 105  | Director (2016-2019), <br> Principal Funds, Inc. |
| Robert W. Burns <br> 1959 <br> Trustee <br> (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105  |  |
| Nancy F. Heller <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105  |  |
| David L. Mahoney <br> 1954 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105  | Director (2004-present), <br> Corcept Therapeutics Incorporated <br> Director (2009-2021), <br> Adamas Pharmaceuticals, Inc. <br> Director (2003-2019), <br> Symantec Corporation  |
| Jane P. Moncreiff <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018-present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare). | 105  |  |
| Kimberly S. Patmore <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008-present), Patmore Management Consulting (management consulting). | 105  |  |

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|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| J. Derek Penn <br> 1957 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006-2018), BNY Mellon (financial services). | 105  |  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II<sup>(3)</sup> <br> 1960 <br> Chairman and Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022-present), Director and Chief Executive Officer (Oct. 2008-present) and President (Feb. 2007-Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008-Oct. 2021) and Director (May 2008-Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006-present), Charles Schwab Bank, SSB; Director (Nov. 2017-present), Charles Schwab Premier Bank, SSB; Director (July 2019-present), Charles Schwab Trust Bank; Director (May 2008-present), Chief Executive Officer (Aug. 2017-present) and President (Aug. 2017-Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020-present), TD Ameritrade Holding Corporation; Director (July 2016-Oct. 2021), Charles Schwab Investment Management, Inc. | 105  | Director (2008-present), <br> The Charles Schwab Corporation |
| Richard A. Wurster<sup>(2)(3)</sup> <br> 1973 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021-present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021-present), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021) and Senior Vice President – Advisory (May 2016-July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021-present), Schwab Holdings, Inc.; Director (Oct. 2021-present) and Chief Executive Officer (Nov. 2019-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018-Oct. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016-Apr. 2018) and President (Mar. 2017-Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016- Apr. 2018), Windhaven Investment Management, Inc. | 105  |  |

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|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Jonathan de St. Paer <br> 1973 <br> President and Chief Executive Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019-present), President (Oct. 2018-present), Chief Operating Officer (Jan. 2021-present) and Chief Executive Officer (Apr. 2019-Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020-Mar. 2022) and Chief Operating Officer (Jan. 2021-Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019-present), President (Nov. 2018-present) and Trustee (Apr. 2019-Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (May 2022-present), Senior Vice President (Apr. 2019-May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014-Mar. 2019), Charles Schwab & Co., Inc. |
| Mark Fischer <br> 1970 <br> Chief Operating Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Chief Operating Officer (Dec. 2020-present) and Treasurer and Chief Financial Officer (Jan. 2016-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020-present) and Vice President (Oct. 2013-present), Charles Schwab Investment Management, Inc. |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Dana Smith <br> 1965 <br> Treasurer and Chief Financial Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2023) | Treasurer and Chief Financial Officer (Jan. 2023-present) and Assistant Treasurer (Dec. 2015-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Vice President (Mar. 2022-present) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc. |
| Omar Aguilar <br> 1970 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Dec. 2021), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022-present), Charles Schwab Investment Advisory, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Brett Wander <br> 1961 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| William P. McMahon, Jr. <br> 1972 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021-present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018-Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001-Apr. 2018), ThomasPartners, Inc. |
| Catherine MacGregor <br> 1964 <br> Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs <br> Chief Legal Officer, Vice President and Clerk, Laudus Trust <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022-present) and Vice President (Sept. 2005-present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (July 2005-May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005-present) and Chief Legal Officer and Clerk (Mar. 2007-present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President (Nov. 2005-Oct. 2021) and Assistant Secretary (June 2007-Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President and Assistant Secretary (Oct. 2009-Oct. 2021), Schwab ETFs. |

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<sup>(1)</sup>

Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee's twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.

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<sup>(2)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

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<sup>(3)</sup>

Mr. Bettinger and Mr. Wurster are Interested Trustees. Mr. Bettinger and Mr. Wurster are Interested Trustees because each owns stock of CSC, the parent company of Schwab Asset Management, the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc., the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust.

<sup>(4)</sup>

The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

#### Board Leadership Structure
The Chairman of the Board, Walter W. Bettinger II, is Chief Executive Officer and a member of the Board of Directors of CSC and an interested person of the Trusts as that term is defined in the 1940 Act. The Board is comprised of a super-majority (75 percent) of trustees who are not interested persons of the Trusts (i.e., independent trustees). The Trusts do not have a single lead independent trustee. There are three primary committees of the Board: the Audit, Compliance and Valuation Committee; the Governance Committee; and the Investment Oversight Committee. Each of the Committees is chaired by an independent trustee, and each Committee is currently comprised solely of independent trustees. The Committee chairs preside at Committee meetings, participate in formulating agendas for those meetings, and coordinate with management to serve as a liaison between the independent trustees and management on matters within the scope of the responsibilities of each Committee as set forth in its Board-approved charter. The Board has determined that this leadership structure is appropriate given the specific characteristics and circumstances of the Trusts. The Board made this determination in consideration of, among other things, the fact that the independent trustees of the Trusts constitute a super-majority of the Board, the fact that Committee chairs are independent trustees, the number of funds (and classes) overseen by the Board, and the total number of trustees on the Board.

#### Board Oversight of Risk Management
Like most investment companies, fund management and its other service providers have responsibility for day-to-day risk management for the funds. The Board's duties, as part of its risk oversight of the Trusts, consist of monitoring risks identified during regular and special reports to the Committees of the Board, as well as regular and special reports to the full Board. In addition to monitoring such risks, the Committees and the Board oversee efforts of fund management and service providers to manage risks to which the funds of the Trusts may be exposed. For

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example, the Investment Oversight Committee meets with portfolio managers and receives regular reports regarding investment risk and credit risk of a fund's portfolio. The Audit, Compliance and Valuation Committee meets with the funds' Chief Compliance Officer and Chief Financial Officer and receives regular reports regarding compliance risks, operational risks and risks related to the valuation and liquidity of portfolio securities. From its review of these reports and discussions with management, each Committee receives information about the material risks of the funds of the Trusts and about how management and service providers mitigate those risks, enabling the independent Committee chairs and other independent members of the Committees to discuss these risks with the full Board.

The Board recognizes that not all risks that may affect the funds can be identified nor can processes and controls be developed to eliminate or mitigate the occurrence or effects of certain risks; some risks are simply beyond the reasonable control of the funds, their management, and service providers. Although the risk oversight functions of the Board, and the risk management policies of fund management and fund service providers, are designed to be effective, there is no guarantee that they will eliminate or mitigate all risks. In addition, it may be necessary to bear certain risks (such as investment-related risks) to achieve each fund's investment objective. As a result of the foregoing and other factors, the funds' ability to manage risk is subject to significant limitations.

#### Individual Trustee Qualifications
The Board has concluded that each of the trustees should initially and continue to serve on the Board because of (i) his or her ability to review and understand information about the Trusts provided to them by management, to identify and request other information they may deem relevant to the performance of their duties, to question management regarding material factors bearing on the management of the Trusts, and to exercise their business judgment in a manner that serves the best interests of the Trusts' shareholders and (ii) the trustee's experience, qualifications, attributes or skills as described below.

The Board has concluded that Mr. Beer should serve as trustee of the Trusts because of the experience he gained serving as director, president and chief executive officer of Principal Funds and his knowledge and experience in the investment management industry.

The Board has concluded that Mr. Bettinger should serve as trustee of the Trusts because of the experience he gained as president and chief executive officer of The Charles Schwab Corporation, his knowledge of and experience in the financial services industry, and the experience he has gained serving as trustee of the Schwab Funds since 2008, the Schwab ETFs since 2009, and the Laudus Trust since 2010.

The Board has concluded that Mr. Burns should serve as trustee of the Trusts because of the experience he gained as managing director of Pacific Investment Management Company, LLC (PIMCO) and president of PIMCO Funds as well as the experience he has gained serving as trustee of the Schwab ETFs since 2009, and the Schwab Funds and Laudus Trust since 2016.

The Board has concluded that Ms. Heller should serve as trustee of the Trusts because of the experience she gained as president of TIAA Charitable and as senior managing director at TIAA, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2018.

The Board has concluded that Mr. Mahoney should serve as trustee of the Trusts because of the experience he gained serving as trustee of the Schwab Funds and Laudus Trust since 2011 and Schwab ETFs since 2016, as co-chief executive officer of McKesson Corporation, and his service on other public company boards.

The Board has concluded that Ms. Moncreiff should serve as trustee of the Trusts because of the experience she gained as chief investment officer of CareGroup Healthcare System, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2019.

The Board has concluded that Ms. Patmore should serve as trustee of the Trusts because of the experience she gained serving as chief financial officer and executive vice president of First Data Corporation, her knowledge of and experience in management consulting, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2016.

The Board has concluded that Mr. Penn should serve as trustee of the Trusts because of the experience he gained as head of equity sales and trading of BNY Mellon and his knowledge of and experience in the financial services industry, as well as the experience he has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2021.

The Board has concluded that Mr. Wurster should serve as trustee of the Trusts because of the experience he gained leading investment advisory firms and organizations, including Schwab Asset Management, and his knowledge of and experience in the investment management industry.

#### Trustee Committees
The Board has established certain committees and adopted Committee charters with respect to those committees, each as described below:

<sup>●</sup>

The Audit, Compliance and Valuation Committee reviews the integrity of the Trusts' financial reporting processes and compliance policies, procedures and processes, and the Trusts' overall system of internal controls. The Audit, Compliance and Valuation Committee also reviews and evaluates the qualifications, independence and performance of the Trusts' independent auditors, and the

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implementation and operation of the Trusts' valuation policy and procedures. This Committee is comprised of at least three independent trustees and currently has the following members: Kimberly S. Patmore (Chair), Michael J. Beer and J. Derek Penn. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Governance Committee reviews and makes recommendations to the Board regarding Trust governance-related matters, including but not limited to Board compensation practices, retirement policies and term limits, Board self-evaluations, the effectiveness and allocation of assignments and functions by the Board, the composition of Committees of the Board, and the training of trustees. The Governance Committee is responsible for selecting and nominating candidates to serve as trustees. The Governance Committee does not have a written policy with respect to consideration of candidates for trustee submitted by shareholders. However, if the Governance Committee determined that it would be in the best interests of the Trusts to fill a vacancy on the Board, and a shareholder submitted a candidate for consideration by the Board to fill the vacancy, the Governance Committee would evaluate that candidate in the same manner as it evaluates nominees identified by the Governance Committee. Nominee recommendations may be submitted to the Secretary of the Trusts at the Trusts' principal business address. This Committee is comprised of at least three independent trustees and currently has the following members: David L. Mahoney (Chair), Robert W. Burns and Kimberly S. Patmore. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Investment Oversight Committee reviews the investment activities of the Trusts and the performance of the funds' investment adviser. This Committee is comprised of at least three trustees (at least two-thirds of whom shall be independent trustees) and currently has the following members: Jane P. Moncreiff (Chair), Robert W. Burns, Nancy F. Heller and David L. Mahoney. The Committee met four times during the most recent fiscal year.

#### Trustee Compensation
The following table provides trustee compensation for the fiscal year ended October 31, 2022, earned with respect to the funds in this SAI and the Fund Complex. Trustee compensation for the funds is paid by Schwab Asset Management.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Aggregate Compensation from:**  | **Aggregate Compensation from:**  | **Pension or Retirement <br> Benefits Accrued as <br> Part of Fund Expenses**  | **Total Compensation <br> from the Funds and Fund <br> Complex Paid to Trustees**  |
| **Name of Trustee**  | **The Funds that are a series <br> of Schwab Capital Trust**  | **The Fund that is a series <br> of Schwab Investments**  | **Pension or Retirement <br> Benefits Accrued as <br> Part of Fund Expenses**  | **Total Compensation <br> from the Funds and Fund <br> Complex Paid to Trustees**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II  |  |  | N/A |  |
| Richard A. Wurster<sup>(1)</sup>  |  |  | N/A |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(1)</sup> | $10238 | $1862  | N/A | $82500 |
| Robert W. Burns | $42579 | $7637  | N/A | $330000 |
| Nancy F. Heller | $42579 | $7637  | N/A | $330000 |
| David L. Mahoney | $45160 | $8100  | N/A | $350000 |
| Jane P. Moncreiff | $45160 | $8100  | N/A | $350000 |
| Kiran M. Patel<sup>(2)</sup> | $45160 | $8100  | N/A | $350000 |
| Kimberly S. Patmore  | $42579 | $7637  | N/A | $330000 |
| J. Derek Penn | $42579 | $7637  | N/A | $330000 |

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<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(2)</sup>

Mr. Patel retired from the Board effective December 31, 2022.

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#### Securities Beneficially Owned by Each Trustee
The following table provides each trustee's equity ownership of the funds and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2022.

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| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Walter W. Bettinger II** | | | **Over $100,000**  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund | Over $100,000  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |
| **Richard A. Wurster<sup>(1)</sup>**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund | $50001-$100000  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund | $10001-$50000  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Michael J. Beer<sup>(1)</sup>**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |
| **Robert W. Burns**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |

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| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Nancy F. Heller**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund | $10001-$50000  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund | $10001-$50000  |  |
|  | Schwab Total Stock Market Index Fund | $10001-$50000  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |
| **David L. Mahoney**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |
| **Jane P. Moncreiff**  |  |  | Over $100,000  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |
| **Kimberly S. Patmore** |  |  | **Over $100,000**  |
|  | Schwab S&P 500 Index Fund |  |  |
|  | Schwab 1000 Index Fund |  |  |
|  | Schwab Small-Cap Index Fund |  |  |
|  | Schwab Total Stock Market Index Fund |  |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |  |
|  | Schwab International Index Fund |  |  |

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee Ownership in the Family <br> of Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **J. Derek Penn** | | **None**  |
|  | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund |  |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |
|  | Schwab International Index Fund |  |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

As of December 31, 2022, none of the independent trustees or their immediate family members owned beneficially or of record any securities of Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds.

#### Deferred Compensation Plan
Independent trustees may enter into a fee deferral plan. Under this plan, deferred fees will be credited to an account established by a Trust as of the date that such fees would have been paid to the trustee. The value of this account will equal the value that the account would have if the fees credited to the account had been invested in the shares of Schwab Funds selected by the trustee. Currently, none of the independent trustees has elected to participate in this plan.

#### Code of Ethics
The funds, the investment adviser and Schwab have adopted a Code of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Code of Ethics permits the trustees, directors, officers or advisory representatives of the funds or the investment adviser or the directors or officers of Schwab to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the funds. Securities transactions by some of these individuals may be subject to prior approval of the investment adviser's Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

#### CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2023, the officers and trustees of the Trust, as a group owned, of record or beneficially, less than 1% of the outstanding voting securities of each fund.

As of January 31, 2023, the following persons or entities owned, of record or beneficially, 5% or more of the outstanding voting securities of each fund (a shareholder's or an entity's address will be listed once at the first mention and not repeated for future entries):

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab S&P 500 Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N <br> 211 Main Street <br> San Francisco, CA 94105-1905  | 84.19% |
| Schwab S&P 500 Index Fund  | Charles Schwab Trust Bank <br> 2360 Corporate Circle Suite 400 <br> Henderson, NV 89074 | 11.33%<sup>(1)</sup> |
| Schwab 1000 Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 93.47% |
| Schwab 1000 Index Fund  | Charles Schwab Trust Bank | 11.60%<sup>(1)</sup> |

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Small-Cap Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 81.58% |
| Schwab Small-Cap Index Fund  | Charles Schwab Trust Bank | 10.93%<sup>(1)</sup> |
| Schwab Small-Cap Index Fund  | Schwab Charitable Fund <br> 211 Main Street <br> San Francisco, CA 94105 | 6.19%<sup>(1)</sup> |
| Schwab Total Stock Market Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 88.71% |
| Schwab Total Stock Market Index Fund  | Schwab Charitable Fund | 12.56%<sup>(1)</sup> |
| Schwab U.S. Large-Cap Growth Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 90.21% |
| Schwab U.S. Large-Cap Growth Index Fund  | TD Ameritrade Clearing, Inc. <br> For the Exclusive Benefit of Our Clients <br> PO Box 2226 <br> Omaha, NE 68103-2226 | 5.80%<sup>(2)</sup> |
| Schwab U.S. Large-Cap Value Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 79.64% |
| Schwab U.S. Large-Cap Value Index Fund  | MSCS Financial <br> Attn: Mutual Funds C/O ID 337 <br> SEI Private Trust Company <br> One Freedom Valley Drive <br> Oaks, PA 19456-9989 | 9.53% |
| Schwab U.S. Mid-Cap Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 94.56% |
| Schwab U.S. Mid-Cap Index Fund  | Charles Schwab Trust Bank | 13.40%<sup>(1)</sup> |
| Schwab International Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 83.10% |
| Schwab International Index Fund  | Charles Schwab Trust Bank | 17.57%<sup>(1)</sup> |
| Schwab International Index Fund  | Schwab Charitable Fund | 5.51%<sup>(1)</sup> |

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<sup>(1)</sup>

These shares are held within the Charles Schwab & Co., Inc. account listed elsewhere in the table.

?

<sup>(2)</sup>

TD Ameritrade Clearing, Inc. is an affiliate of Schwab Asset Management.

Persons who beneficially own more than 25% of a fund may be deemed to control the fund. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of such fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.

#### INVESTMENT ADVISORY AND OTHER SERVICES

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 211 Main Street, San Francisco, CA 94105, serves as each fund's investment adviser and administrator pursuant to an investment advisory and administration agreement (Advisory Agreement) between it and the Trusts. Schwab is an affiliate of Schwab Asset Management and is the Trusts' distributor. Charles R. Schwab is the founder, Chairman and Director of CSC. As a result of his ownership of and interests in CSC, Mr. Schwab may be deemed to be a controlling person of Schwab Asset Management and Schwab.

#### Advisory Agreement
The continuation of a fund's Advisory Agreement must be specifically approved at least annually (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (independent trustees), cast in person, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, at a meeting called for the purpose of voting on such approval.

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Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement between the Trust and Schwab Asset Management with respect to existing funds in the Trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Schwab Asset Management, as well as extensive data provided by third parties, and the independent trustees receive advice from counsel to the independent trustees.

Pursuant to the Advisory Agreement between the investment adviser and each fund, Schwab Asset Management pays the operating expenses of the funds, excluding acquired fund fees and expenses, taxes, any brokerage expenses, and extraordinary or non-routine expenses.

The investment adviser is entitled to receive a fee from each fund, payable monthly, for its advisory and administrative services to each fund. Under the Advisory Agreement as compensation for these services, Schwab Asset Management receives a management fee from each fund expressed as a percentage of the fund's average daily net assets, as follows:

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| | |
|:---|:---|
| **Fund**  | **Advisory Fee <br> Schedule**  |
| Schwab S&P 500 Index Fund | 0.02% |
| Schwab 1000 Index Fund | 0.05% |
| Schwab Small-Cap Index Fund | 0.04% |
| Schwab Total Stock Market Index Fund | 0.03% |
| Schwab U.S. Large-Cap Growth Index Fund | 0.035% |
| Schwab U.S. Large-Cap Value Index Fund | 0.035% |
| Schwab U.S. Mid-Cap Index Fund | 0.04% |
| Schwab International Index Fund | 0.06% |

---

The following table shows the advisory fees paid by each fund to the investment adviser for the past three fiscal years.

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| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| Schwab S&P 500 Index Fund | $12965469  | $11509654  | $8499556  |
| Schwab 1000 Index Fund | $6461785  | $6273096  | $4756649  |
| Schwab Small-Cap Index Fund | $2306027  | $2388536  | $1594282  |
| Schwab Total Stock Market Index Fund | $5132595  | $4674020  | $3259136  |
| Schwab U.S. Large-Cap Growth Index Fund | $311233 | $241082 | $118739 |
| Schwab U.S. Large-Cap Value Index Fund | $214388 | $169611 | $95176 |
| Schwab U.S. Mid-Cap Index Fund | $358330 | $284565 | $181186 |
| Schwab International Index Fund | $4860768  | $4776024  | $3421849  |

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#### Distributor
Pursuant to a separate Second Amended and Restated Distribution Agreement between Schwab and each Trust, Schwab, located at 211 Main Street, San Francisco, CA 94105, is the principal underwriter for shares of the funds and is the Trusts' agent for the purpose of the continuous offering of the funds' shares. Schwab pays for the costs of delivering prospectus and shareholder reports used in connection with the offering of shares to prospective investors and for supplemental sales literature and advertising. Schwab receives no fee under the Distribution Agreements; however, as described below in "Payments to Financial Intermediaries," Schwab Asset Management compensates Schwab, in its capacity as a financial intermediary and not in its capacity as distributor and principal under writer for the funds, for providing certain additional services that may be deemed to be distribution related.

#### Payments to Financial Intermediaries
Schwab Asset Management and its affiliates make payments to certain broker-dealers, banks, trust companies, insurance companies, retirement plan service providers, consultants and other financial intermediaries (Intermediaries) for services and expenses incurred in connection with certain activities or services which may educate financial advisors or facilitate, directly or indirectly, investment in the funds and other investment companies advised by Schwab Asset Management, including the Schwab ETFs. These payments are made by Schwab Asset Management or its affiliates at their own expense, and not from the assets of the funds. Although a portion of Schwab Asset Management's and its affiliates' revenue comes directly or indirectly in part from fees paid by the funds, these payments do not increase the expenses paid by investors for the purchase of fund shares, or the cost of owning a fund.

These payments may relate to educational efforts regarding the funds, or for other activities, such as marketing and/or fund promotion activities and presentations, educational training programs, conferences, data analytics and support, or the development and support of technology platforms and/or reporting systems. In addition, Schwab Asset Management or its affiliates make payments to certain Intermediaries that make

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shares of the funds available to their customers or otherwise promote the funds, which may include Intermediaries that allow customers to buy and sell fund shares without paying a commission or other transaction charge. Payments of this type are sometimes referred to as revenue-sharing or marketing support.

Payments made to Intermediaries may be significant and may cause an Intermediary to make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive. As a result, these payments could create conflicts of interest between an Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the funds over other investments.

As of February 27, 2023, Schwab Asset Management anticipates that Envestnet Asset Management, Inc., E\*TRADE Securities LLC, Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, Principal Life Insurance Company and Teachers Insurance and Annuity Association of America will receive these payments. Schwab Asset Management may enter into similar agreements with other FINRA member firms (or their affiliates) in the future. In addition to member firms of FINRA, Schwab Asset Management and its affiliates may also make these payments to certain other financial intermediaries, such as banks, trust companies, insurance companies, and plan administrators and consultants that sell fund shares or provide services to the funds and their shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments.

Schwab Asset Management also makes payments to Schwab for certain administrative, professional and support services provided by Schwab, in its capacity as an affiliated financial intermediary and not as distributor and principal underwriter of the funds. These payments reimburse Schwab for its charges, costs and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support and technology.

#### Transfer Agent
BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581, serves as the funds' transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the funds' shares.

#### Custodians and Fund Accountant
Citibank, N.A. (Citibank), 388 Greenwich Street, New York, NY 10013 serves as custodian for the following funds:

Schwab S&P 500 Index Fund

Schwab Small-Cap Index Fund

Schwab Total Stock Market Index Fund

Schwab International Index Fund

State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, MA 02111, serves as custodian for the following funds:

Schwab 1000 Index Fund

Schwab U.S. Large-Cap Growth Index Fund

Schwab U.S. Large-Cap Value Index Fund

Schwab U.S. Mid-Cap Index Fund

State Street also serves as fund accountant for each of the funds.

The custodians are responsible for the daily safekeeping of securities and cash held by the funds. The fund accountant maintains all books and records related to the funds' transactions.

#### Independent Registered Public Accounting Firm
The funds' independent registered public accounting firm, Deloitte & Touche LLP (Deloitte), 1601 Wewatta Street, Suite 400, Denver, CO 80202, audits and reports on the annual financial statements of the funds and reviews certain regulatory reports. Deloitte or one of its affiliates also reviews each fund's federal income tax returns and performs other professional, accounting, auditing, tax and advisory services when engaged to do so by the Trusts.

#### Securities Lending Activities
Effective May 23, 2022, Citibank is the securities lending agent for the Schwab S&P 500 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab International Index Fund. Prior to May 23, 2022, Brown Brothers Harriman & Co. was the securities lending agent for the Schwab S&P 500 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab International Index Fund. Goldman Sachs Bank USA (d/b/a Goldman Sachs Agency Lending) is the securities lending agent for the Schwab 1000

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Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund. The securities lending agents provide services to the funds which include the following: locating borrowers, negotiating the loan terms, monitoring the value of loans and collateral on a daily basis, marking each loan to market on a daily basis, coordinating collateral movements, collecting income, monitoring and processing corporate actions, managing recalls of loaned securities and termination of loans, and recordkeeping.

The table(s) below summarizes key information regarding the funds' securities lending activities to the extent each fund engaged in securities lending during the most recent fiscal year.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Schwab <br> S&P 500 <br> Index Fund**  | **Schwab <br> 1000 <br> Index Fund**  | **Schwab <br> Small-Cap <br> Index Fund**  | **Schwab <br> Total <br> Stock Market <br> Index Fund**  |
| **Gross income from securities lending activities** | $**41141** | $**576284** | $**5944789** | $**3224375** |
| &nbsp;&nbsp;&nbsp; Fees and/or compensation paid for securities lending activities and related services: <br>|  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  | $2338 | $37039 | $431981 | $258311 |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees deducted from <br> a pooled cash collateral reinvestment vehicle) that are not included in a revenue <br> split  | $7013 | $12610 | $192690 | $83618 |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  | $9550 | $16934 | $212956 | $59121 |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |  |  |  |
| **Aggregate fees/compensation paid for securities lending activities** | $**18901** | $**66583** | $**837627** | $**401050** |
| **Net income from securities lending activities<sup>(1)</sup>** | $**22240** | $**509701** | $**5107162** | $**2823325** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Schwab <br> U.S. Large-Cap <br> Growth Index <br> Fund**  | **Schwab <br> U.S. Large-Cap <br> Value Index <br> Fund**  | **Schwab <br> U.S. Mid-Cap <br> Index Fund**  | **Schwab <br> International <br> Index Fund**  |
| **Gross income from securities lending activities** | $**31802** | $**29696** | $**168553** | $**451201** |
| &nbsp;&nbsp;&nbsp; Fees and/or compensation paid for securities lending activities and related services: <br>|  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  | $2096 | $1874 | $10912 | $26873 |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees deducted from <br> a pooled cash collateral reinvestment vehicle) that are not included in a revenue <br> split  | $721 | $591 | $3175 | $31525 |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  | $1097 | $364 | $2644 | $117758 |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |  |  |  |
| **Aggregate fees/compensation paid for securities lending activities** | $**3914** | $**2829** | $**16731** | $**176156** |
| **Net income from securities lending activities<sup>(1)</sup>** | $**27888** | $**26867** | $**151822** | $**275045** |

---

<sup>(1)</sup>

"Net income from securities lending activities" may not match the fund's current financial statements, which may reflect certain accrual adjustments.

#### PORTFOLIO MANAGERS
**Other Accounts.** In addition to the funds, each portfolio manager (collectively, referred to as the Portfolio Managers) is responsible for the day-to-day management of certain other accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of October 31, 2022.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Christopher Bliss  | 27 | $222793113908 | 0 | $0 | 0 | $0 |
| Jeremy Brown | 15 | $169425728141 | 0 | $0 | 0 | $0 |
| Chuck Craig | 13 | $54350021613 | 0 | $0 | 0 | $0 |

---

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[**TABLE OF CONTENTS**](#toc-8)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Ferian Juwono  | 15 | $169425728141 | 0 | $0 | 0 | $0 |
| David Rios | 13 | $54350021613 | 0 | $0 | 0 | $0 |
| Sabya Sinha | 15 | $169425728141 | 0 | $0 | 0 | $0 |
| Agnes Zau<sup>(1)</sup> | 8 | $152545480653 | 0 | $0 | 0 | $0 |

---

<sup>(1)</sup>

Agnes Zau became responsible for the day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund as of the date of this SAI. Information is reflected as of January 31, 2023.

**Conflicts of Interest.** A Portfolio Manager's management of other accounts may give rise to potential conflicts of interest in connection with his or her management of a fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include separate accounts and other mutual funds advised by Schwab Asset Management (collectively, the Other Managed Accounts). The Other Managed Accounts might have similar investment objectives as a fund, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by a fund. While the Portfolio Managers' management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, Schwab Asset Management does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, Schwab Asset Management believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

*<u>Knowledge of the Timing and Size of Fund Trades.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' day-to-day management of the funds. Because of their positions with the funds, the Portfolio Managers know the size, timing, and possible market impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of a fund. However, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to an index fund, which seeks to track its index, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding separate accounts, with those of a fund. All aggregated orders are subject to Schwab Asset Management's aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account's order.

*<u>Investment Opportunities.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' management of a fund and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over a fund, which conflict of interest may be exacerbated to the extent that Schwab Asset Management or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the fund. Notwithstanding this theoretical conflict of interest, it is Schwab Asset Management's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for a fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for a fund in an effort to outperform its specific benchmark, such an approach might not be suitable for a fund given its investment objectives and related restrictions.

**Compensation.** During the most recent fiscal year, Portfolio Manager compensation consisted of a fixed annual (base) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual Portfolio Manager's overall performance such as the Portfolio Manager's contribution to the investment process, good corporate citizenship, risk management and mitigation, and functioning as an active contributor to the firm's success. The discretionary bonus is determined in accordance with the relevant Portfolio Manager Incentive Plan (the Plan) as follows:

There are two independent funding components for the Plan:

<sup>●</sup>

a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

<sup>●</sup>

a portion based on Corporate results

#### Investment Fund Performance
At the close of the year, each fund's performance will be determined by its 1-year, 1- and 2-year, or 1- and 3-year percentile standing (based on pre-tax return before expenses) within its designated benchmark, peer group, or category, depending on the strategy of the fund (i.e., whether the fund is passively or actively managed) using standard statistical methods approved by Schwab Asset Management senior management.

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Investment Fund Performance measurements may be changed or modified at the discretion of the Schwab Asset Management President and Schwab Asset Management Chief Operating Officer. As each participant may be a member of a team that manages and/or supports a number of funds, there may be several funds and/or Other Managed Accounts considered in arriving at the incentive compensation funding.

Portfolio Managers who are chief investment officers of the investment adviser are covered by a Plan that specifically includes a risk mitigation component in the funding determination.

#### Corporate Performance
The Corporate Bonus Plan is an annual bonus plan that provides discretionary awards based on the financial performance of CSC during the annual performance period. Quarterly advances may be paid for the first three quarters. Allocations are discretionary and aligned with CSC and individual performance. Funding for the Plan is determined at the conclusion of the calendar year. Funding will be capped at 200% of target.

#### Allocation of Discretionary Bonus
At year-end, funding for both components of discretionary bonus is allocated to Plan participants by Schwab Asset Management senior management based on their assessment of a variety of performance factors.

Factors considered in Schwab Asset Management senior management's allocation process will include objective and subjective factors that will take into consideration total performance and will include, but are not limited to:

<sup>●</sup>

Fund performance relative to performance measure

<sup>●</sup>

Risk management and mitigation

<sup>●</sup>

Individual performance against key objectives

<sup>●</sup>

Contribution to overall group results

<sup>●</sup>

Functioning as an active contributor to the firm's success

<sup>●</sup>

Team work

<sup>●</sup>

Collaboration between Analysts and Portfolio Managers

<sup>●</sup>

Regulatory/Compliance management

The Portfolio Managers' compensation is not based on the value of the assets held in a fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares.** The following table shows the dollar amount range of the Portfolio Managers' "beneficial ownership" of shares of the funds they manage as of October 31, 2022. Dollar amount ranges disclosed are established by the SEC. "Beneficial ownership" is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (1934 Act).

---

| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range**  |
| Christopher Bliss | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund |  |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |
|  | Schwab International Index Fund |  |
| Jeremy Brown | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund | $10001-$50000 |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |
| Chuck Craig | Schwab International Index Fund |  |

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[**TABLE OF CONTENTS**](#toc-8)

---

| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range**  |
| Ferian Juwono | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund |  |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |
| David Rios | Schwab International Index Fund | $50001-$100000 |
| Sabya Sinha | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund | $10001-$50000  |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |
| Agnes Zau<sup>(1)</sup> | Schwab S&P 500 Index Fund |  |
|  | Schwab 1000 Index Fund | $50001-$100000 |
|  | Schwab Small-Cap Index Fund |  |
|  | Schwab Total Stock Market Index Fund |  |
|  | Schwab U.S. Large-Cap Growth Index Fund |  |
|  | Schwab U.S. Large-Cap Value Index Fund |  |
|  | Schwab U.S. Mid-Cap Index Fund |  |

---

<sup>(1)</sup>

Agnes Zau became responsible for the day-to-day co-management of the Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund and Schwab U.S. Mid-Cap Index Fund as of the date of this SAI. Information is reflected as of January 31, 2023.

#### BROKERAGE ALLOCATION AND OTHER PRACTICES

#### Portfolio Turnover
For reporting purposes, a fund's portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (short-term securities) are excluded. Securities delivered in the processing of in-kind redemptions are also excluded from the calculation.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate higher capital gains and transaction costs, such as brokerage commissions.

Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, and/or changes in the investment adviser's investment outlook.

The portfolio turnover rate for each of the funds for the past two fiscal years is as follows.

---

| | | |
|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  |
| Schwab S&P 500 Index Fund | 2% | 3% |
| Schwab 1000 Index Fund | 2% | 5% |
| Schwab Small-Cap Index Fund | 16% | 19% |
| Schwab Total Stock Market Index Fund | 2% | 3% |
| Schwab U.S. Large-Cap Growth Index Fund | 18% | 18% |
| Schwab U.S. Large-Cap Value Index Fund | 15% | 20% |
| Schwab U.S. Mid-Cap Index Fund | 11% | 14% |
| Schwab International Index Fund | 5% | 3% |

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[**TABLE OF CONTENTS**](#toc-8)

#### Portfolio Transactions
The investment adviser makes decisions with respect to the purchase and sale of portfolio securities on behalf of the funds. The investment adviser is responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. A fund generally does not incur any commissions or sales charges when it invests in underlying Schwab Funds, but it may incur such costs if it invests directly in other types of securities or in unaffiliated funds. Purchases and sales of securities on a stock exchange, including ETF shares, or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed-income securities may be transacted with the issuer, the issuer's underwriter or a dealer. The funds do not usually pay brokerage commissions on purchases and sales of fixed-income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The prices the funds pay to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the funds may invest are traded primarily in the over-the-counter market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the funds will primarily consist of dealer spreads and brokerage commissions.

The investment adviser seeks to obtain the best execution for the funds' portfolio transactions. The investment adviser may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following: execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling; provision of additional brokerage or research services or products; whether a broker guarantees that a fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to "market-on-close" pricing aligns with fund objectives; or whether a broker guarantees that a fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser believes that VWAP execution is in a fund's best interest. In addition, the investment adviser may have incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser may cause a fund to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: company financial data and economic data (e.g., unemployment, inflation rates and GDP figures), stock quotes, last sale prices and trading volumes, research reports analyzing the performance of a particular company or stock, narrowly distributed trade magazines or technical journals covering specific industries, products, or issuers, seminars or conferences registration fees which provide substantive content relating to eligible research, quantitative analytical software and software that provides analyses of securities portfolios, trading strategies and pre/post trade analytics, discussions with research analysts or meetings with corporate executives which provide a means of obtaining oral advice on securities, markets or particular issuers, short-term custody related to effecting particular transactions and clearance and settlement of those trades, lines between the broker-dealer and order management systems operated by a third party vendor, dedicated lines between the broker-dealer and the investment adviser's order management system, dedicated lines providing direct dial-up service between the investment adviser and the trading desk at the broker-dealer, message services used to transmit orders to broker-dealers for execution, electronic communication of allocation instructions between institutions and broker-dealers, comparison services required by the SEC or another regulator (e.g., use of electronic confirmation and affirmation of institutional trades), exchange of messages among broker-dealers, custodians, and institutions related to a trade, post-trade matching of trade information, routing settlement instructions to custodian banks and broker-dealers' clearing agents, software that provides algorithmic trading strategies, and trading software operated by a broker-dealer to route orders to market centers or direct market access systems. The investment adviser may use research services furnished by brokers or dealers in servicing all client accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser may receive a service from a broker or dealer that has both a "research" and a "non-research" use. When this occurs, the investment adviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions or spreads, while the investment adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser faces a potential conflict of interest, but the investment adviser believes that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser may purchase for the funds, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will provide research "credits" in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the 1934 Act.

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The investment adviser may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable funds to trade directly with other institutional holders. At times, this may allow funds to trade larger blocks than would be possible trading through a single market maker.

The investment adviser may aggregate securities sales or purchases among two or more funds. The investment adviser will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of a fund are aggregated with other accounts managed by the investment adviser, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

In determining when and to what extent to use Schwab or any other affiliated broker-dealer as its broker for executing orders for the funds on securities exchanges, the investment adviser follows procedures, adopted by the funds' Board, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

#### Brokerage Commissions
For each of the last three fiscal years, the funds paid the following brokerage commissions. Variances in brokerage commissions paid by a fund from year to year are due to increases and decreases in portfolio turnover in response to asset flows.

---

| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| Schwab S&P 500 Index Fund | $260768 | $460465 | $420151 |
| Schwab 1000 Index Fund | $96958 | $147753 | $111645 |
| Schwab Small-Cap Index Fund | $1020163 | $725986 | $639045 |
| Schwab Total Stock Market Index Fund | $359021 | $336030 | $169291 |
| Schwab U.S. Large-Cap Growth Index Fund | $35263 | $16193 | $28040 |
| Schwab U.S. Large-Cap Value Index Fund | $32541 | $21294 | $75296 |
| Schwab U.S. Mid-Cap Index Fund | $49078 | $37175 | $54929 |
| Schwab International Index Fund | $584913 | $520427 | $644142 |

---

#### Regular Broker-Dealers
During the fiscal year, certain of the funds held securities issued by their respective "regular broker-dealers" (as defined in Rule 10b-1 under the 1940 Act), indicated below as of October 31, 2022.

---

| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
| Schwab S&P 500 Index Fund | J.P. Morgan Securities LLC | $690218041 |
|  | Wells Fargo Securities, LLC | $326180718 |
|  | Charles Schwab & Co., Inc. | $226553277 |
|  | Goldman Sachs & Co. LLC | $219926916 |
|  | Morgan Stanley & Co. LLC | $205778988 |
|  | Citigroup Global Markets Inc. | $166075936 |
| Schwab 1000 Index Fund | J.P. Morgan Securities LLC | $120522044 |
|  | BofA Securities, Inc. | $82257047 |
|  | Charles Schwab & Co., Inc. | $39532015 |
|  | Goldman Sachs & Co. LLC | $38391161 |
|  | Morgan Stanley & Co. LLC | $35929326 |
|  | Citigroup Global Markets Inc. | $28993747 |
| Schwab Small-Cap Index Fund |  | N/A |

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| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
| Schwab Total Stock Market Index Fund | J.P. Morgan Securities LLC | $153145104 |
|  | BofA Securities, Inc. | $104520433 |
|  | Wells Fargo Securities, LLC | $72313664 |
|  | Charles Schwab & Co., Inc. | $50203015 |
|  | Morgan Stanley & Co. LLC | $45665731 |
|  | Citigroup Global Markets Inc. | $36834844 |
|  | Virtu Americas LLC | $888755 |
| Schwab U.S. Large-Cap Growth Index Fund | Charles Schwab & Co., Inc. | $3444771 |
| Schwab U.S. Large-Cap Value Index Fund | J.P. Morgan Securities LLC | $13002901 |
|  | BofA Securities, Inc. | $8964121 |
|  | Wells Fargo Securities, LLC | $6177147 |
|  | Goldman Sachs & Co. LLC | $4059017 |
|  | Morgan Stanley & Co. LLC | $3644322 |
|  | Citigroup Global Markets Inc. | $3143886 |
|  | Charles Schwab & Co., Inc. | $1897739 |
|  | Jefferies LLC | $248027 |
|  | SVB Securities LLC | $174144 |
|  | Virtu Americas LLC | $76182 |
| Schwab U.S. Mid-Cap Index Fund | Virtu Americas LLC | $208022 |
| Schwab International Index Fund | BNP Paribas | $28675888 |
|  | Australia and New Zealand Banking Group Limited | $26867217 |
|  | Sumitomo Mitsui Banking Corporation | $20211589 |
|  | Barclays Capital Inc. | $15656631 |
|  | Mizuho Securities USA LLC | $14336035 |
|  | SG Americas Securities, LLC | $10040268 |
|  | Skandinaviska Enskilda Banken AB | $9416334 |
|  | DNB Bank ASA | $9033856 |
|  | Credit Suisse Securities (USA) LLC | $6054337 |
|  | Sumitomo Mitsui Trust Bank, Limited | $5353913 |

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#### PROXY VOTING
The Board has delegated the responsibility for voting proxies to Schwab Asset Management, pursuant to the investment adviser's Proxy Voting Policy with respect to proxies voted on behalf of the various Schwab Funds' portfolios. A description of such Proxy Voting Policy is included in Appendix – Proxy Voting Policy.

The Trusts are required to disclose annually a fund's complete proxy voting record on Form N-PX. A fund's proxy voting record for the most recent 12-month period ended June 30th is available by visiting the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**. A fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

#### PORTFOLIO HOLDINGS DISCLOSURE
 **For this section only, the following disclosure relates to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust (collectively, the Trusts) and each series thereunder (each a fund and collectively, the funds).** 

The Trusts' Board has approved policies and procedures that govern the timing and circumstances regarding the disclosure of fund portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds' portfolio securities is in the best interests of fund shareholders, and include procedures to address conflicts between the interests of the funds' shareholders, on the one hand, and those of the funds' investment adviser, subadviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, subadviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a

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fund's subadviser, if applicable) to authorize the release of the funds' portfolio holdings prior to regular public disclosure (as outlined in the prospectus and below) or regular public filings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of the funds' policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities which were authorized to be provided "early disclosure" of the funds' portfolio holdings information and will periodically review any agreements that the Trusts have entered into to selectively disclose portfolio holdings.

Portfolio holdings may be made available on a selective basis to ratings agencies, certain industry organizations, consultants and other qualified financial professionals when the appropriate officer of the Trusts determines such disclosure meets the requirements noted above and serves a legitimate business purpose. Agreements entered into with such entities will describe the permitted use of portfolio holdings and provide that, among other customary confidentiality provisions: (i) the portfolio holdings will be kept confidential; (ii) the person will not trade on the basis of any material non-public information; and (iii) the information will be used only for the purpose described in the agreement.

The funds' service providers including, without limitation, the investment adviser, subadvisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser, counsel, auditor, proxy voting service provider, pricing information vendors, trade execution measurement vendors, portfolio management system providers, cloud database providers, securities lending agents, publisher, printer and mailing agent may receive disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Schwab Asset Management, any subadviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street and/or Brown Brothers Harriman & Co., as service providers to the funds, are currently receiving this information on a daily basis. Donnelley Financial Solutions, as a service provider to the funds, is currently receiving this information on a quarterly basis. Deloitte, the Transfer Agent, and the Distributor, as service providers to the funds, receive this information on an as-needed basis. Service providers are subject to a duty of confidentiality with respect to any portfolio holdings information they receive whether imposed by the confidentiality provisions of the service providers' agreements with the Trusts or by the nature of its relationship with the Trusts. Although certain of the service providers are not under formal confidentiality obligations in connection with disclosure of portfolio holdings, a fund will not continue to conduct business with a service provider who the fund believes is misusing the disclosed information.

To the extent that a fund invests in an unaffiliated acquired fund, the Trusts will, when required by Rule 12d1-4, promptly notify the acquired fund, upon causing a fund to acquire more than 3% of the acquired fund's outstanding shares.

The funds' policies and procedures prohibit the funds, the funds' investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

Generally, a complete list of a fund's portfolio holdings is published on the fund's website www.schwabassetmanagement.com on the "Prospectus & Reports" tab under "Portfolio Holdings" generally 60-80 days after a fund's fiscal quarter-end in-line with regulatory filings unless a different timing is outlined in the fund's prospectus.

Specifically for the Schwab ETFs (other than the Schwab Ariel ESG ETF), each Schwab ETF discloses its portfolio holdings each business day on its website before the opening of regular trading on the ETF's primary listing exchange in accordance with the requirements of Rule 6c-11 under the 1940 Act. Portfolio holdings information made available in connection with the process of purchasing or redeeming Creation Units for the Schwab ETFs may be provided to other entities that provided services to the funds in the ordinary course of business after it has been disseminated to the NSCC.

The Schwab Money Funds have an ongoing arrangement to make available information about the funds' portfolio holdings and information derived from the funds' portfolio holdings to iMoneyNet, a rating and ranking organization, which is subject to a confidentiality agreement. Under its arrangement with the funds, iMoneyNet, among other things, receives information concerning the funds' net assets, yields, maturities and portfolio compositions on a weekly basis, subject to a one business day lag.

On the website, the funds also may provide, on a monthly or quarterly basis, information regarding certain attributes of a fund's portfolio, such as a fund's top ten holdings, sector weightings, composition, credit quality and duration and maturity, as applicable. This information is generally updated within 5-25 days after the end of the period. This information on the website is publicly available to all categories of persons.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of a fund in connection with or relating to a fund or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases, commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning a fund. Commentary and analysis include, but are not limited to, the allocation of a fund's portfolio

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securities and other investments among various asset classes, sectors, industries, countries or other relevant category, the characteristics of the stock components and other investments of a fund, the attribution of fund returns by asset class, sector, industry, country or other relevant category, and the volatility characteristics of a fund.

#### DESCRIPTION OF THE TRUSTS
Each fund, except the Schwab 1000 Index Fund, is a series of Schwab Capital Trust, an open-end management investment company organized as a Massachusetts business trust on May 7, 1993. The Schwab 1000 Index Fund is a series of Schwab Investments, an open-end investment management company organized as a Massachusetts business trust on October 26, 1990.

The funds may hold special shareholder meetings, which may cause the funds to incur non-routine expenses. These meetings may be called for purposes such as electing trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon.

The bylaws of each Trust provide that one-third of shares present in person or represented by proxy and entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, or of the Declaration of Trust or of the bylaws permits or requires that (1) holders of any series shall vote as a series, then one-third of the aggregate number of shares of that series present in person or respresented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (2) holders of any class shall vote as a class, then one-third of the aggregate number of shares of that class present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any meeting of shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date or time, whether or not a quorum is present. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. Each Declaration of Trust specifically authorizes the Board to terminate the Trust (or any of its funds) by notice to the shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. Each Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. In addition, each Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, each Trust will be covered by insurance, which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. There is a remote possibility that a fund could become liable for a misstatement in the prospectus or SAI about another fund.

As more fully described in each Declaration of Trust, the trustees may each year, or more frequently, distribute to the shareholders of each series accrued income less accrued expenses and any net realized capital gains less accrued expenses. Distributions of each year's income of each series shall be distributed pro rata to shareholders in proportion to the number of shares of each series held by each of them. Distributions will be paid in cash or shares or a combination thereof as determined by the trustees. Distributions paid in shares will be paid at the net asset value as determined in accordance with the bylaws.

Any series of a Trust may reorganize or merge with one or more other series of the Trusts or of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the trustees and entered into by the relevant series in connection therewith. In addition, such reorganization or merger may be authorized by vote of a majority of the trustees then in office and, to the extent permitted by applicable law and the applicable Declaration of Trust, without the approval of shareholders of any series.

#### PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES

#### Purchasing and Redeeming Shares of the Funds
The funds are open each day that the New York Stock Exchange (NYSE) is open (business days). The NYSE's trading session is normally conducted from 9:30 a.m. until 4:00 p.m. Eastern Time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE's trading session closes early. The NYSE typically observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although it is expected that the same holidays will be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time. Orders that are received in good order by a fund's transfer agent no later than the time specified by the Trust will be executed that day at the fund's share price calculated that day. On any day that the NYSE closes early, the funds reserve the right to advance the time by which purchase, exchange and redemption orders must be received by the funds in order to be executed that day at

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that day's share price. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase, exchange and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

The funds have authorized one or more financial intermediaries, including Schwab, to accept on their behalf purchase, exchange and redemption orders. Such financial intermediaries have also been authorized to designate other intermediaries to accept purchase, exchange and redemption orders on the funds' behalf. The funds will be deemed to have received a purchase, exchange or redemption order when an authorized intermediary or, if applicable, an intermediary's authorized designee, receives such order. Such orders will be priced at the respective fund's net asset value per share next determined after such orders are received by an authorized intermediary or the intermediary's authorized designee.

As long as the funds or Schwab follow reasonable procedures to confirm that an investor's telephone or internet order is genuine, they will not be liable for any losses the investor may experience due to unauthorized or fraudulent instructions. These procedures may include requiring a form of personal identification or other confirmation before acting upon any telephone or internet order, providing written confirmation of telephone or internet orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab, other authorized financial intermediaries or, for direct shareholders, by the funds' transfer agent.

Each Trust's Declaration of Trust provides that shares may be automatically redeemed if held by a shareholder in an amount less than the minimum required by each fund. Each fund's minimum initial investments and minimum balance requirements, if any, are set forth in the prospectus. Currently, each fund does not have an investment minimum. The minimums may be changed without prior notice.

Each of the funds has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of these limits may be paid, in whole or in part, in investment securities or in cash, as the Board may deem advisable. Payment will be made wholly in cash unless the Board believes that economic or market conditions exist that would make such payment a detriment to the best interests of a fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Pricing of Shares." A redeeming shareholder would normally incur transaction costs if he or she were to convert the securities to cash.

Each fund is designed for long-term investing. Because short-term trading activities can disrupt the smooth management of a fund and increase its expenses, each fund reserves the right, in its sole discretion, to refuse any purchase or exchange order, including any purchase or exchange order which appears to be associated with short-term trading activities or "market timing." Because market timing decisions to buy and sell securities typically are based on an individual investor's market outlook, including such factors as the perceived strength of the economy or the anticipated direction of interest rates, it is difficult for a fund to determine in advance what purchase or exchange orders may be deemed to be associated with market timing or short-term trading activities. More information regarding the funds' policies regarding "market timing" is included in the funds' prospectus.

In certain circumstances, shares of a fund may be purchased "in kind" (i.e., in exchange for securities, rather than for cash). The securities tendered as part of an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable as evidenced by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities accepted by a fund will be valued, as set forth in the fund's prospectus, as of the time of the next determination of net asset value after such acceptance. The shares of a fund that are issued to the shareholder in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of a fund and must be delivered to the fund by the investor upon receipt from the issuer. A fund will not accept securities in exchange for its shares unless such securities are, at the time of the exchange, eligible to be held by the fund and satisfy such other conditions as may be imposed by the fund's investment adviser.

#### Exchanging Shares of the Funds
Methods to purchase and redeem shares are set forth in the funds' prospectus. An exchange order involves the redemption of all or a portion of the shares of one Schwab Fund and the simultaneous purchase of shares of another Schwab Fund. Exchange orders must meet the minimum investment and any other requirements of the fund or class purchased. Exchange orders may not be executed between shares of Sweep Investments<sup>®</sup> and shares of non-Sweep Investments. Shares of Sweep Investments may be bought and sold automatically pursuant to the terms and conditions of your Schwab account agreement. In addition, different exchange policies may apply to Schwab Funds that are bought and sold through third-party intermediaries and the exchange privilege between Schwab Funds may not be available through third-party intermediaries.

The funds and Schwab reserve certain rights with regard to exchanging shares of the funds. These rights include the right to: (i) refuse any purchase or exchange order that may negatively impact a fund's operations; (ii) refuse orders that appear to be associated with short-term trading activities; and (iii) materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

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#### Delivery of Shareholder Documents
Typically once a year, an updated prospectus will be mailed or electronically delivered to shareholders describing each fund's investment strategies, risks and shareholder policies. Twice a year, financial reports will be mailed or electronically delivered (or a notice will be mailed and financial reports will be made available on the fund's designated website) to shareholders describing each fund's performance and investment holdings. In order to eliminate duplicate mailings of shareholder documents, each household may receive one copy of these documents, under certain conditions. This practice is commonly called "householding." If you want to receive multiple copies, you may write or call your fund at the address or telephone number on the front of this SAI or contact the financial intermediary through which you hold fund shares. Your instructions will be effective within 30 days of receipt by a fund or other date as communicated by the financial intermediary.

#### Pricing of Shares
Each business day, the funds calculate their share price, net asset value per share or NAV, as of the close of the NYSE (generally 4:00 p.m. Eastern Time). This means that NAVs are calculated using the values of a fund's portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available or that the investment adviser deems to be unreliable are required to be valued at fair value following procedures approved by the Board. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

To the extent a fund invests in foreign securities, shareholders should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of some of the fund's securities may change on days when it is not possible to buy or sell shares of the fund.

The funds use approved pricing sources (including pricing services) to provide values for their portfolio securities. Values are generally determined by the approved pricing sources as follows: securities traded on stock exchanges, excluding the NASDAQ National Market System, are valued at the last-quoted sales price on the exchange on which such securities are primarily traded (closing values), or, lacking any sales, at the mean between the bid and ask prices; securities traded in the over-the-counter market are generally valued at an evaluated price using a mid-price supplied by an approved, independent pricing service. The mid-price is the mean of the bid and ask prices as calculated by the pricing service. Generally, securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the official closing price or last sales price on the exchange where the securities are primarily traded with these values then translated into U.S. dollars at the current exchange rate. Fixed-income securities normally are valued based on valuations provided by approved pricing services. Securities will be fair valued pursuant to procedures approved by the funds' Board when market quotations are not "readily available" or the investment adviser deems them unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market. The Board has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments. The Valuation Designee periodically provides reports to the Board on items related to its fair value of fund investments.

#### TAXATION
This discussion of U.S. federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

#### Federal Tax Information for the Funds
It is each fund's policy to qualify for taxation as a "regulated investment company" (RIC) by meeting the requirements of Subchapter M of the Internal Revenue Code. By qualifying as a RIC, each fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If a fund does not qualify as a RIC under the Internal Revenue Code, it will be subject to federal income tax on its net investment income and any net realized capital gains. In addition, each fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

Each fund is treated as a separate entity for federal income tax purposes and is not combined with the Trusts' other funds. Each fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, a fund must, among other requirements, distribute annually to its shareholders an amount at least equal to the sum of 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and 90% of its net tax-exempt income. Among these requirements are the following: (i) at least 90% of a fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or

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other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of a fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as "qualified publicly traded partnerships" for purposes of the Subchapter M diversification rules described above. To do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, the partnership must meet the 90% gross income requirements for the exception from treatment as a corporation with gross income other than income consisting of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Internal Revenue Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as defined in the Internal Revenue Code) for the calendar year plus 98.2% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, a fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year and certain amounts with respect to which estimated taxes are paid in such calendar year. A fund may in certain circumstances be required to liquidate fund investments to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of a fund to satisfy the requirements for qualification as a RIC.

A fund's transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Internal Revenue Code and are subject to special tax rules. In a given case, these rules may accelerate income to a fund, defer its losses, cause adjustments in the holding periods of a fund's assets, convert short-term capital losses into long-term capital losses or otherwise affect the character of a fund's income. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of a fund and its shareholders.

Each fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. Each fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. Each fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund's fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon or other securities which are sold at original issue discount and thus do not make periodic cash interest payments, a fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any corresponding interest payments on such obligations during that period. Because each fund distributes all of its net investment income to its shareholders, a fund may have to sell fund securities to distribute such imputed income which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in each fund's prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of the funds. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in the funds.

Any dividends declared by a fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by a fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced rates to individuals as described below) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from

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taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of the fund become ex-dividend with respect to such dividend (and the fund must also satisfy those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by each fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gains (if any) that are reported as capital gain dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of a fund. However, if you receive a capital gain dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gain dividend, be treated as a long-term capital loss. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the taxpayer's income exceeds certain threshold amounts.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

A fund will inform you of the amount of your ordinary income dividends and capital gains distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year. For corporate investors in a fund, dividend distributions the fund reports as dividends received from qualifying domestic corporations will be eligible for the 50% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by a fund also may be subject to state, local and foreign taxes, and their treatment under applicable tax laws may differ from the federal income tax treatment.

A fund will be required in certain cases to withhold at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends and redemption proceeds paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to "backup withholding;" or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on taxable distributions derived from net investment income and short-term capital gains; provided, however, that U.S. source interest related dividends and short-term capital gain dividends generally are not subject to U.S. withholding taxes if a fund elects to make reports with respect to such dividends. Distributions to foreign shareholders of such short-term capital gain dividends and long-term capital gains, and any gains from the sale or other disposition of shares of a fund, generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Internal Revenue Code's definition of "resident alien" or (2) is physically present in the U.S. for 183 days or more per year. Foreign shareholders may also be subject to U.S. estate taxes with respect to shares in a fund. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Notwithstanding the foregoing, income, if any, derived by a fund from investments in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) may be classified as "excess inclusion income." With respect to foreign shareholders, no exemption or reduction in withholding tax will apply to such excess inclusion income.

The funds are required to withhold U.S. tax (at a 30% rate) on payments of dividends made to certain non-U.S. entities that fail to comply with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, each fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in a fund where, for example, (i) the fund invests in REITs that hold residual interests in REMICs or (ii) shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special

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rules and should consult their tax advisors. There are no restrictions preventing a fund from holding investments in REITs that hold residual interests in REMICs, and a fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

For taxable years beginning after 2017 and before 2026, non-corporate taxpayers generally may deduct 20% of "qualified business income" derived either directly or through partnerships or S corporations. For this purpose, "qualified business income" generally includes ordinary REIT dividends and income derived from MLP investments. A fund is permitted to pass through to shareholders the character of ordinary REIT dividends so as to allow non-corporate shareholders to claim this deduction. There currently is no mechanism for a fund to pass through to non-corporate shareholders the character of income derived from MLP investments. It is uncertain whether future legislation or other guidance will enable the funds to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

Income that the Schwab International Index Fund receives from sources within various foreign countries may be subject to foreign income taxes withheld at the source. If a fund has more than 50% of its assets invested in foreign securities at the end of its taxable year, it may elect to "pass through" to its shareholders the ability to take either the foreign tax credit or the deduction for foreign taxes. Pursuant to this election, U.S. shareholders must include in gross income, even though not actually received, their respective pro rata share of foreign taxes, and may either deduct their pro rata share of foreign taxes (but not for alternative minimum tax purposes) or credit the tax against U.S. income taxes, subject to certain limitations described in Internal Revenue Code sections 901 and 904. A shareholder who does not itemize deductions may not claim a deduction for foreign taxes. It is expected that the Schwab International Index Fund will have more than 50% of the value of its total assets at the close of its taxable year invested in foreign securities, and that it will make this election.

The Schwab International Index Fund may invest in non-U.S. corporations, which could be treated as a passive foreign investment company (PFIC) or become a PFIC under the Internal Revenue Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent a fund does invest in a PFIC, it may be eligible to elect to treat the PFIC as a "qualified electing fund" or mark-to-market its investments in PFICs annually. In either case, the fund may be required to distribute amounts in excess of realized income and gains. To the extent a fund does invest in foreign securities which are determined to be PFIC securities and is required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to the funds' shareholders. Therefore, the payment of this tax would reduce a fund's economic return from its PFIC shares, and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains.

Section 988 of the Internal Revenue Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by a fund. Under these rules, foreign exchange gain or loss realized by a fund with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. Foreign currency losses could result in distributions of ordinary income being reclassified as a return of capital for tax purposes.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC such as a fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in a fund.

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#### APPENDIX – PROXY VOTING POLICY
The Charles Schwab Family of Funds Schwab Investments Schwab Capital Trust Schwab Annuity Portfolios Laudus Trust Schwab Strategic Trust

### PROXY VOTING POLICY AS OF MARCH 2023
The Boards of Trustees (the "Board") of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Laudus Trust ("Schwab Funds") and Schwab Strategic Trust ("Schwab ETFs"; collectively with Schwab Funds, the "Funds") have delegated to the Funds' investment adviser, Charles Schwab Investment Management, Inc. ("CSIM"), the responsibility to vote proxies relating to the Funds' portfolio securities pursuant to CSIM's Proxy Voting Policy ("CSIM Proxy Policy"). On an annual basis, CSIM will report to the Board any changes to the CSIM Proxy Policy and on the implementation of the CSIM Proxy Policy.

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Charles Schwab Investment Management, Inc.

I. ### INTRODUCTION
Charles Schwab Investment Management, Inc. ("CSIM"), as an investment adviser, is responsible for voting proxies with respect to the securities held in accounts of investment companies and other clients that have delegated the authority to vote proxies to CSIM. CSIM's Proxy Committee exercises and documents CSIM's responsibility with regard to voting of client proxies, including the review and approval of the Proxy Voting Policy (the "Proxy Policy"). CSIM's Investment Stewardship Team has the primary responsibility to oversee that voting is carried out consistent with the Proxy Policy. The Investment Stewardship Team also conducts research into proxy issues and carries out engagement activities with companies. The Proxy Committee receives reports from the Investment Stewardship Team on these activities.

II. ### PHILOSOPHY
As a leading asset manager, it is CSIM's responsibility to use its proxy votes to encourage transparency, corporate governance structures, and the management of environmental, social and governance (ESG) issues that it believes protect and promote shareholder value.

Just as the investors in CSIM's equity funds generally have a long-term investment horizon, CSIM takes a long-term, measured approach to investment stewardship. CSIM's client-first philosophy drives all of its efforts, including its approach to decision making. In the investment stewardship context, that unfolds through CSIM's efforts to appropriately manage risk by encouraging transparency and focusing on corporate governance structures that will help protect or promote shareholder value. CSIM also recognizes that companies can conduct themselves in ways that have important environmental and social consequences. Therefore, CSIM's focus on maximizing long-term shareholder value includes consideration of potential environmental and social impacts that we believe are relevant to individual companies.

In general, CSIM believes corporate directors, as the elected representatives of all shareholders, are best positioned to oversee the management of their companies. Accordingly, CSIM typically supports a board of directors' and management's recommendations on proxy matters. However, CSIM will vote against management's recommendations when it believes doing so will protect or promote long-term shareholder value.

III. ### USE OF PROXY ADVISORS
To assist CSIM in its responsibility for voting proxies and the overall proxy voting process, CSIM has retained Glass, Lewis & Co., LLC ("Glass Lewis") as an expert in the proxy voting and corporate governance area. The services provided by Glass Lewis include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. CSIM has also retained Institutional Shareholder Services Inc. to conduct research and provide voting recommendations on certain topics and may retain additional experts in the proxy voting, corporate governance, and ESG areas in the future.

To support CSIM in efficiently executing its votes, Glass Lewis, simultaneously with issuing its voting recommendations, also automatically populates votes based on CSIM's custom voting guidelines, except for certain ballot items which CSIM elects to vote manually. CSIM's votes are executed just prior to the vote deadline, which allows CSIM the opportunity to incorporate changes in Glass Lewis voting recommendations or the receipt of additional information from the company or other parties.

IV. ### PROXY VOTING PRINCIPLES
CSIM invests on behalf of its clients in companies domiciled all over the world. Since corporate governance standards and best practices differ by country and jurisdiction, the market context is taken into account in the analysis of proposals. Furthermore, there are instances where CSIM may determine that voting is not in the best interests of its clients (typically due to costs or to trading restrictions) and will refrain from submitting votes.

The Proxy Committee reviews CSIM's proxy voting guidelines with input from the Investment Stewardship Team at least annually and evaluates them in light of the long-term best interests of shareholders. In addition, for U.S. companies, contested director elections, "vote no" campaigns, mergers and acquisitions, some executive compensation and election of director proposals, and many shareholder proposals, including ESG-related proposals, such as those requesting additional environmental, social and political disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

The following is a summary of CSIM's proxy voting principles which are grouped according to types of proposals usually presented to shareholders in proxy statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

DIRECTORS AND AUDITORS

i. <u>Directors</u>

As a starting point, CSIM expects the board to be composed of at least a majority of independent directors and to be responsive to shareholders. CSIM also expects directors that serve on a company's nominating, compensation or audit committee to be independent. CSIM believes that diversity of background, experience and skills, and personal characteristics, including gender, race, ethnicity and age, meaningfully contribute to a board's ability to make effective decisions on behalf of shareholders.

Factors that may result in a vote against one or more directors:

<sup>●</sup>

The board is not majority independent

<sup>●</sup>

A large-cap company board does not have at least two female directors, or a mid- or small-cap company does not have any female directors, and the board has not provided a reasonable explanation for its lack of gender diversity

<sup>●</sup>

A large-cap company board does not have at least one racially/ethnically diverse director, or has not provided explicit disclosure of director diversity and skills

<sup>●</sup>

Non-independent directors serve on the nominating, compensation or audit committees

<sup>●</sup>

A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

<sup>●</sup>

The directors approved executive compensation schemes that appear misaligned with shareholders' interests

<sup>●</sup>

A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to concerns of shareholders

<sup>●</sup>

The company has not provided explicit disclosure of board oversight of material risks, including environmental and social risks

ii. <u>Contested Director Elections</u>

A proxy contest is when a dissident shareholder (or group of shareholders) proposes outside nominees to compete against incumbent directors. A "Vote No" campaign is when an activist shareholder attempts to solicit votes against certain directors. CSIM evaluates proxy contests and Vote No campaigns on a case-by-case basis and votes for the outcome it believes will maximize long-term shareholder value. CSIM considers numerous factors when making its voting decision, including but not limited to the merit of the campaign, the qualifications of director nominees, long-term company performance compared to peers, board oversight of material risks, and, in the case of proxy contests, the dissident's and management's strategic plans for driving improvements.

iii. <u>Auditors</u>

CSIM typically supports the ratification of auditors unless CSIM believes that the auditors' independence may have been compromised.

Factors that may result in a vote against the ratification of auditors:

<sup>●</sup>

Audit-related fees are less than half of the total fees paid by the company to the audit firm

<sup>●</sup>

A recent material restatement of annual financial statements

<sup>●</sup>

A pattern of inaccurate audits or other behavior that may call into question an auditor's effectiveness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

BOARD MATTERS

i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

<sup>●</sup>

Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

<sup>●</sup>

Number of nominees is no more than 20% of current board (rounded down to nearest whole number)

<sup>●</sup>

Group size is capped at 20 shareholders

iv. <u>Separation of Chair and CEO role</u>

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CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring the separation of these roles unless certain circumstances are in place.

Factors that may result in a vote supporting a shareholder proposal requiring the separation of the Chair and CEO roles:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

<sup>●</sup>

Lack of robust lead independent director

v. <u>Independent Chair</u>

CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring an independent chair unless CSIM has concerns regarding the board's accountability or responsiveness to shareholders.

Factors that may result in a vote supporting a shareholder proposal requiring an independent chair:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

COMPENSATION

i. <u>Advisory Vote on Executive Compensation and Frequency</u>

CSIM generally supports advisory votes on executive compensation (which are proposed by management and are known as "Say-On-Pay") when the compensation scheme appears aligned with shareholder economic interests and lacks problematic features.

Factors that may result in a vote against a company's Say-On-Pay proposal:

<sup>●</sup>

Executive compensation is out of line with industry peers considering the company's performance over time

<sup>●</sup>

Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

<sup>●</sup>

Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

<sup>●</sup>

Compensation amounts are increased, or goals are lowered without providing a valid explanation

<sup>●</sup>

Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

CSIM typically supports annual advisory votes on executive compensation.

ii. <u>Equity Compensation Plans</u>

CSIM generally supports stock-based compensation plans when they do not overly dilute shareholders by providing participants with excessive awards and lack problematic features.

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Factors that may result in a vote against Equity Compensation Plans:

<sup>●</sup>

Plan's total potential dilution appears excessive

<sup>●</sup>

Plan's burn rate appears excessive compared to industry peers

<sup>●</sup>

Plan allows for the re-pricing of options without shareholder approval

<sup>●</sup>

Plan has an evergreen feature

iii. <u>Employee Stock Purchase Plans</u>

CSIM supports the concept of broad employee participation in a company's equity. Therefore, CSIM typically supports employee stock purchase plans when the shares can be purchased at 85% or more of the shares' market value.

iv. <u>Re-price/Exchange Option Plans</u>

CSIM generally only supports management proposals to re-price options when the plan excludes senior management and directors, does not excessively dilute shareholders, and the company has not significantly underperformed its industry peers over time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

ANTI-TAKEOVER

i. <u>Shareholder Rights Plans</u>

Shareholder Rights Plans constrain a potential acquirer's ability to buy shares in a company above a certain threshold without the approval of the company's board of directors. While such a plan may help a company in achieving a higher bid, it may also entrench the incumbent management and board. CSIM believes that shareholders should have the right to approve a Shareholder Rights Plan within a year of its adoption. CSIM generally votes against such plans if they do not have safeguards to protect shareholder interests.

Factors that may result in a vote against a Shareholder Rights Plan proposal:

<sup>●</sup>

Plan does not expire in a relatively short time horizon

<sup>●</sup>

Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

<sup>●</sup>

Plan automatically renews without shareholder approval

<sup>●</sup>

Company's corporate governance profile

ii. <u>Right to Call Special Meeting</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to call a special meeting unless the threshold to call a special meeting is 25% or more of shares outstanding to avoid wasting corporate resources.

iii. <u>Right to Act by Written Consent</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to act by written consent if the company already offers shareholders the right to call special meetings. CSIM expects appropriate mechanisms for implementation.

iv. <u>Supermajority Voting</u>

CSIM generally supports the concept of simple majority standards to pass proposals.

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

i. <u>Increase in Authorized Common Shares</u>

CSIM typically supports proposals to increase the authorized shares unless the company does not sufficiently justify the need for the use of the proposed shares.

ii. <u>Preferred Shares</u>

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

iii. <u>Mergers and Acquisitions</u>

CSIM generally supports transactions that appear to maximize shareholder value. CSIM assesses these proposals on a case-by-case basis and considers the proposed transaction's strategic rationale, the offer premium, the board's oversight of the sales process, and other pertinent factors.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F.

ENVIRONMENTAL AND SOCIAL PROPOSALS

Effective oversight of material ESG risks relevant to a company and its business is an essential board function. In CSIM's view, appropriate risk oversight of environmental and social issues contributes to sustainable long-term value and companies should provide pertinent information on material risks common to their industry and specific to their business. CSIM evaluates, on a case-by-case basis, shareholder proposals regarding environmental and social issues, including those calling for additional disclosure of material risks to a company, with emphasis placed on those risks identified within the framework of the Sustainability Accounting Standards Board (SASB).

CSIM recognizes that financial performance can be impacted by a company's environmental, social and human capital management policies. CSIM's case-by-case evaluation of these proposals takes into consideration a company's current practices, level of reporting, disclosures by its peers, and the existence of controversies or litigation related to the issue.

CSIM believes that, in most instances, the board is best positioned to determine a company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

i. <u>Climate Change Proposals</u>

CSIM believes that companies should provide pertinent information on the management of potential climate change-related risks, with the understanding that the relevance of this disclosure for any specific company will vary depending on its industry and operations. For companies operating in carbon-intensive industries, we believe boards should be considering a range of energy demand scenarios. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

ii. <u>Corporate Political Activity Proposals</u>

CSIM expects the board of directors to have a stated oversight process for political contributions and lobbying activities. CSIM evaluates proposals asking for disclosure of a company's political contributions and lobbying activities and generally supports them if there is no evidence of board oversight or a company's disclosure is deficient and lags that of its peers.

V. ### ADMINISTRATION
?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

CONFLICTS OF INTERESTS

CSIM maintains the following practices that seek to prevent undue influence on its proxy voting activity. Such influence might arise from any relationship between the company holding the proxy (or any shareholder or board member of the company) and CSIM, CSIM's affiliates, a mutual fund or exchange-traded fund managed by CSIM ("Affiliated Fund"), an affiliate of such Fund, or a CSIM employee. The Proxy Committee has directed that Glass Lewis be instructed to vote any such proxies in the same proportion as the votes of all other shareholders in the fund (i.e., "echo vote").

With respect to proxies of an underlying Affiliated Fund, the Investment Stewardship Team will ensure that such proxies are "echo voted", unless otherwise required by law. When required by law or applicable exemptive order, the Investment Stewardship Team will also ensure the "echo voting" of an unaffiliated mutual fund or exchange traded fund. For example, certain exemptive orders issued to a fund by the Securities and Exchange Commission and Section 12(d)(1)(F) of the Investment Company Act of 1940, as amended, require the fund, under certain circumstances, to "echo vote" proxies of registered investment companies that serve as underlying investments of the fund.

In addition, with respect to holdings of The Charles Schwab Corporation ("CSC") (ticker symbol: SCHW), the Investment Stewardship Team will ensure such proxies are echo-voted, unless otherwise required by law.

Where the Proxy Committee has delegated an item to the Investment Stewardship Team, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

<sup>●</sup>

reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

<sup>●</sup>

defaulting to the standard CSIM Proxy Voting Policy.

In all other cases, proxy issues that present material conflicts of interest between CSIM, and/or any of its affiliates, and CSIM's clients, will be delegated to Glass Lewis to be voted in accordance with CSIM's Proxy Voting Guidelines which are set each year based on governance criteria and not influenced by any individual issuer or ballot item.

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Where CSIM's Investment Stewardship Team conducts an engagement meeting with a company, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

ensuring that no members of the Board of (i) CSC or (ii) an Affiliated Fund, that are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

FOREIGN SECURITIES/SHAREBLOCKING

Voting proxies with respect to shares of foreign securities may involve significantly greater effort and corresponding cost than voting proxies with respect to domestic securities due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting. Problems voting foreign proxies may include the following:

<sup>●</sup>

proxy statements and ballots written in a foreign language,

<sup>●</sup>

untimely and/or inadequate notice of shareholder meetings,

<sup>●</sup>

restrictions of foreigner's ability to exercise votes,

<sup>●</sup>

requirements to vote proxies in person,

<sup>●</sup>

requirements to provide local agents with power of attorney to facilitate CSIM's voting instructions.

In consideration of the foregoing issues, CSIM, in conjunction with Glass Lewis, uses its best efforts to vote foreign proxies. As part of its ongoing oversight, the Proxy Committee will monitor the voting of foreign proxies to determine whether all reasonable steps are taken to vote foreign proxies. If the Proxy Committee determines that the cost associated with the attempt to vote outweighs the potential benefits clients may derive from voting, the Proxy Committee may decide not to attempt to vote. In addition, certain foreign countries impose restrictions on the sale of securities for a period of time before and/or after the shareholder meeting. To avoid these trading restrictions, the Proxy Committee instructs Glass Lewis not to vote such foreign proxies (share-blocking).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

SECURITIES LENDING

Certain of the funds managed by CSIM enter into securities lending arrangements with lending agents to generate additional revenue for their portfolios. In securities lending arrangements, any voting rights that accompany the loaned securities generally pass to the borrower of the securities, but the lender retains the right to recall a security and may then exercise the security's voting rights. In order to vote the proxies of securities out on loan, the securities must be recalled prior to the established record date. CSIM will use its best efforts to recall a fund's securities on loan when deemed appropriate and in the best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

SUB-ADVISORY RELATIONSHIPS

Where CSIM has delegated day-to-day investment management responsibilities to an investment sub-adviser, CSIM may (but generally does not) delegate proxy voting responsibility to such investment sub-adviser. In addition, CSIM may share proxy voting with an investment sub-adviser. Each sub-adviser to whom proxy voting responsibility has been delegated will be required to review all proxy solicitation material and to make voting decisions in the best interest of each investment company and its shareholders, or other client associated with the securities it has been allocated. Each sub-adviser to whom proxy voting has been delegated must inform CSIM of its voting decisions to allow CSIM to implement the votes or in the case of shared voting responsibility, potentially override the sub-adviser's vote recommendation. Prior to delegating the proxy voting responsibility, CSIM will review each sub-adviser's proxy voting policy to determine whether it believes that each sub-adviser's proxy voting policy is generally consistent with the maximization of the value of CSIM's clients' investments by protecting the long-term best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

REPORTING AND RECORD RETENTION

CSIM will maintain, or cause Glass Lewis to maintain, records that identify the manner in which proxies have been voted (or not voted) on behalf of CSIM clients. CSIM will comply with all applicable rules and regulations regarding disclosure of its or its clients' proxy voting records and procedures.

CSIM will retain all proxy voting materials and supporting documentation as required under the Investment Advisers Act of 1940, as amended.

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

Schwab Funds<sup>®</sup>

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Fundamental US Large Company Index Fund | **SFLNX**  |
| Schwab<sup>®</sup> Fundamental US Small Company Index Fund | **SFSNX**  |
| Schwab<sup>®</sup> Fundamental International Large Company Index Fund | **SFNNX**  |
| Schwab<sup>®</sup> Fundamental International Small Company Index Fund | **SFILX**  |
| Schwab<sup>®</sup> Fundamental Emerging Markets Large Company Index Fund | **SFENX**  |

---

#### STATEMENT OF ADDITIONAL INFORMATION

#### February 27, 2023
The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with each fund's prospectus dated February 27, 2023 (as amended from time to time).

The funds' audited financial statements and the report of the independent registered public accounting firm thereon from the funds' [annual report](https://www.sec.gov/Archives/edgar/data/904333/000119312523000566/d401383dncsr.htm) for the fiscal year ended October 31, 2022 are incorporated by reference into this SAI.

For a free copy of these documents or to request other information or ask questions about the funds, call Schwab Funds at 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

Each fund is a series of Schwab Capital Trust (the Trust). The funds are part of the Schwab complex of funds (Schwab Funds). Charles Schwab Investment Management, Inc., dba Schwab Asset Management™, is the investment adviser to the funds (investment adviser).

REG70150-12

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#### **TABLE OF CONTENTS**

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| | |
|:---|:---|
|  | **<u>Page</u>**  |
| [INVESTMENT OBJECTIVES](#idbcibeINVESTMENTO)  | [1](#idbcibeINVESTMENTO) |
| [INVESTMENT STRATEGIES, SECURITIES AND RISKS](#idbdjcfbINVESTMENTS)  | [2](#idbdjcfbINVESTMENTS) |
| [INVESTMENT LIMITATIONS AND RESTRICTIONS](#idbchijINVESTMENTL)  | [19](#idbchijINVESTMENTL) |
| [MANAGEMENT OF THE FUNDS](#idgdhhhMANAGEMENTO)  | [20](#idgdhhhMANAGEMENTO) |
| [CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES](#idffcjCONTROLPERS)  | [27](#idffcjCONTROLPERS) |
| [INVESTMENT ADVISORY AND OTHER SERVICES](#idchabjINVESTMENTA)  | [28](#idchabjINVESTMENTA) |
| [PORTFOLIO MANAGERS](#idchdbfPORTFOLIOMA)  | [31](#idchdbfPORTFOLIOMA) |
| [BROKERAGE ALLOCATION AND OTHER PRACTICES](#idccbgjBROKERAGEAL)  | [33](#idccbgjBROKERAGEAL) |
| [PROXY VOTING](#idiaaproxyvoting-1)  | [35](#idiaaproxyvoting-1) |
| [PORTFOLIO HOLDINGS DISCLOSURE](#idiedbportfolioho-2)  | [35](#idiedbportfolioho-2) |
| [DESCRIPTION OF THE TRUST](#idegjcdescription-1)  | [37](#idegjcdescription-1) |
| [PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES](#idbeahePURCHASERED)  | [37](#idbeahePURCHASERED) |
| [TAXATION](#idcdahcTAXATION)  | [39](#idcdahcTAXATION) |
| APPENDIX — PROXY VOTING POLICY |  |

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#### INVESTMENT OBJECTIVES
The **Schwab Fundamental US Large Company Index Fund** seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Large Company Index.

The **Schwab Fundamental US Small Company Index Fund** seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ US Small Company Index.

The **Schwab Fundamental International Large Company Index Fund** seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Large Company Index.

The **Schwab Fundamental International Small Company Index Fund** seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Developed ex US Small Company Index.

The **Schwab Fundamental Emerging Markets Large Company Index Fund** seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell RAFI™ Emerging Markets Large Company Index.

The Schwab Fundamental US Large Company Index Fund, Schwab Fundamental US Small Company Index Fund, Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund are collectively referred to as **"Fundamental Index Funds."**

#### Change of Investment Objective
Each fund's investment objective is not fundamental and therefore may be changed by the fund's Board of Trustees (the Board) without shareholder approval. There is no guarantee that a fund will achieve its investment objective.

#### Change to Investment Policy of the Funds
It is the **Schwab Fundamental US Large Company Index Fund's** policy that, under normal circumstances, it will invest at least 90% of its net assets in stocks included in the Russell RAFI US Large Company Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

It is the **Schwab Fundamental US Small Company Index Fund's** policy that, under normal circumstances, it will invest at least 90% of its net assets in stocks included in the Russell RAFI US Small Company Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

It is the **Schwab Fundamental International Large Company Index Fund's** policy that, under normal circumstances, it will invest at least 90% of its net assets in stocks included in the Russell RAFI Developed ex US Large Company Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

It is the **Schwab Fundamental International Small Company Index Fund's** policy that, under normal circumstances, it will invest at least 90% of its net assets in stocks included in the Russell RAFI Developed ex US Small Company Index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

It is the **Schwab Fundamental Emerging Markets Large Company Index Fund's** policy that, under normal circumstances, it will invest at least 80% of its net assets in stocks included in the Russell RAFI Emerging Markets Large Company Index, including depositary receipts representing securities of the index, which may be in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

**Description of the Russell RAFI™ Index Series.** Each Russell RAFI Index strategy is part of the Russell RAFI Index Series. Each Russell RAFI Index strategy is compiled and calculated by Frank Russell Company (Russell) in conjunction with Research Affiliates LLC (RA), and the method of calculating the components of the indices is subject to change. Each Russell RAFI Index strategy selects and weights stocks according to fundamental measures of company size: adjusted sales, retained operating cash flow, and dividends plus buybacks. The Russell RAFI Index Series has a partial quarterly reconstitution. The weighting of the constituents by fundamental scores is determined during the March annual reconstitution. However, this annual reconstitution is spread out equally each quarter. Splitting the index into four equivalent parts (tranches) adds investment capacity.

The Russell RAFI Index Series is created from the leading FTSE Global Total Cap Index. Constituents are scored and weighted based on fundamental measures of company size, then further divided into large company and small company fundamental indexes. Company size is determined by averaging three key non-price measures using publicly available accounting data from the last five years. Weights are calculated and assigned by RA.

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The Russell RAFI US Large Company Index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the U.S. companies in the FTSE Global Total Cap Index. Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the U.S. companies within the FTSE Global Total Cap Index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the Russell RAFI US Large Company Index.

The Russell RAFI US Small Company Index measures the performance of the small company size segment by fundamental overall company scores (scores), which are created using as the universe the U.S. companies in the FTSE Global Total Cap Index. Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the U.S. companies within the FTSE Global Total Cap Index. Companies are split at the 87.5% point based on fundamental weights. Companies below this breakpoint make up the Russell RAFI US Small Company Index.

The Russell RAFI Developed ex US Large Company Index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the developed ex U.S. companies in the FTSE Global Total Cap Index. Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the developed ex U.S. companies within the FTSE Global Total Cap Index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the Russell RAFI Developed ex US Large Company Index.

The Russell RAFI Developed ex US Small Company Index measures the performance of the small company size segment by fundamental overall company scores (scores), which are created using as the universe the developed ex U.S. companies in the FTSE Global Total Cap Index. Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the developed ex U.S. companies within the FTSE Global Total Cap Index. Companies are split at the 87.5% point based on fundamental weights. Companies below this breakpoint make up the Russell RAFI Developed ex US Small Company Index.

The Russell RAFI Emerging Markets Large Company Index measures the performance of the large company size segment by fundamental overall company scores (scores), which are created using as the universe the emerging markets companies in the FTSE Global Total Cap Index. Securities are grouped in order of decreasing score and each company receives a weight based on its percentage of the total scores of the emerging markets companies within the FTSE Global Total Cap Index. Companies are split at the 87.5% point based on fundamental weights. Companies above this breakpoint make up the Russell RAFI Emerging Markets Large Company Index.

The funds' investment adviser, has entered into an agreement with Russell, pursuant to which, the investment adviser has been granted a license to certain indexes within the Russell RAFI Index Series and the Russell trademarks, which has in turn been sublicensed to the funds. Fees payable under the license agreement are paid by the investment adviser.

Russell and RA have entered into a strategic alliance with respect to the Russell RAFI Index Series. Subject to RA's intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series and the indexes within the Russell RAFI Index Series are used by the funds under license. Russell and RA jointly own all trademark and service mark rights in and to the Russell RAFI Index Series. RA is the owner of the trademarks, service marks, patents and copyrights related to the Fundamental Index and the Fundamental Index methodology.

None of the Fundamental Index Funds are promoted, sponsored or endorsed by, nor in any way affiliated with Russell or RA. Russell and RA are not responsible for and have not reviewed the Fundamental Index Funds nor any associated literature or publications and Russell and RA make no representations or warranties, express or implied, as to their accuracy, or completeness, or otherwise.

Russell and RA reserve the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell RAFI Index Series. Russell and RA have no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating any of the Russell RAFI Index strategies.

Russell's publication, in conjunction with RA, of the Russell RAFI Index Series in no way suggests or implies an opinion by Russell or RA as to the attractiveness or appropriateness of investment in any or all securities upon which the Russell RAFI Index strategies are based. Russell and RA make no representations, warranties, or guarantees as to the accuracy, completeness, reliability, or otherwise of the Russell RAFI Index strategies or any data included in the Russell RAFI Index strategies. Russell and RA make no representations, warranties or guarantees regarding the use, or the results of use, of the Russell RAFI Index strategies or any data included therein, or any security (or combination thereof) comprising the Russell RAFI Index strategies. Russell and RA make no other express or implied warranties, and expressly disclaim any warranties, of any kind, including without limitation, any warranties of merchantability or fitness for a particular purpose with respect to the Russell RAFI Index Series or any data or any security (or combination thereof) included therein.

#### INVESTMENT STRATEGIES, SECURITIES AND RISKS
The different types of investments that the funds typically may invest in, the investment techniques they may use and the risks normally associated with these investments are discussed below. The following investment strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval, unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately

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after and as a result of a fund's acquisition of such security or asset unless otherwise noted. Thus, any subsequent change in values, net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment. Not all investment securities or techniques discussed below are eligible investments for each fund.

From time to time a fund may hold certain securities not otherwise discussed in this SAI as a permissible investment for the fund. For example, a fund may invest in certain types of securities to the extent its index does even if the types of securities have not been identified as part of the fund's principal or non-principal investment strategy. To the extent an investment becomes part of a fund's principal or non-principal investment strategy, the fund will take the necessary steps to identify them as permissible investments. In addition, a fund may receive (i.e., not actively invest) such securities as a result of a corporate action, such as securities dividends, spin-offs or rights issues. In such cases, the fund will not actively add to its position and generally will dispose of the securities as soon as reasonably practicable.

**Borrowing.** A fund may borrow for temporary or emergency purposes; for example, a fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. A fund's borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of a fund's shares and in its portfolio yield. A fund is required to comply with the asset coverage requirements of the Investment Company Act of 1940, as amended (the 1940 Act), when it engages in borrowing activities. If assets used to secure a borrowing decrease in value, a fund may be required to pledge additional collateral to avoid liquidation of those assets.

A fund may establish lines-of-credit (lines) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by a fund within 60 days and is not extended or renewed. Each fund may use the lines to meet large or unexpected redemptions that would otherwise force a fund to liquidate securities under circumstances which are unfavorable to a fund's remaining shareholders. Each fund will pay fees to the banks for using its lines.

**Concentration** means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry's securities. Each of the funds will not concentrate its investments in a particular industry or group of industries, unless the index it is designed to track is so concentrated.

**Cyber Security Risk.** As the funds increasingly rely on technology and information systems to operate, the funds become susceptible to operational risks linked to security breaches in those information systems. Both calculated attacks and unintentional events can cause failures in the funds' information systems. Cyber attacks can include acquiring unauthorized access to information systems, usually through hacking or the use of malicious software, for purposes of stealing assets or confidential information, corrupting data, or disrupting a fund's operations. Cyber attacks can also occur without direct access to information systems, for example by making network services unavailable to intended users. Cyber security failures by, or breaches of the information systems of, the investment adviser, distributors, broker-dealers, other service providers (including, but not limited to, index providers, a fund's accountants, custodians, transfer agents and administrators), or the issuers of securities the funds invest in may also cause disruptions and impact the funds' business operations. Breaches in information security may result in financial losses, interference with the funds' ability to calculate net asset value (NAV), impediments to trading, inability of fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The funds have business continuity plans in the event of, and risk management systems to help prevent, such cyber attacks, but these plans and systems have limitations including the possibility that certain risks have not been identified. Moreover, the funds do not control the cyber security plans and systems of their service providers and other third party business partners. The funds and their shareholders could be negatively impacted as a result.

**Debt Securities** are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically "IOUs," but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed-, variable- or floating- rate of interest on the amount of money borrowed (the principal) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Conversely, when interest rates rise, the prices of debt securities generally fall. Certain debt securities have call features that allow issuers to redeem their outstanding debts prior to final maturity. Depending on the call feature, an issuer may pre-pay its outstanding debts and issue new ones paying lower interest rates. This is known as prepayment risk and is especially true for bonds with sinking fund provisions, which commit the issuer to set aside a certain amount of money to cover timely repayment of principal and typically allow the issuer to annually repurchase certain of its outstanding bonds from the open market or at a pre-set call price. Prepayments are more likely to occur in a falling interest rate environment. When borrowers pay off their debt securities sooner than expected, a fund would have to reinvest that money at the lower prevailing interest rate, which may reduce the returns of a fund. In a rising interest rate environment, prepayment on outstanding debt securities is less likely to occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term securities (all things being equal), but generally offer greater rates of interest. If an issuer redeems the debt securities prior to final maturity, a fund may have to replace these securities with lower yielding securities, which could result in a lower return.

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A change in a central bank's monetary policy or economic conditions may lead to a change in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of debt securities in which a fund invests. Some debt securities, such as bonds with longer durations, are more sensitive to interest rate changes than others and may experience an immediate and considerable reduction in value if interest rates rise. Longer duration securities tend to be more volatile than shorter duration securities. As the values of debt securities in a fund's portfolio adjust to a rise in interest rates, a fund's share price may fall. In the event that a fund holds a large portion of its portfolio in longer duration securities when interest rates increase, the share price of the fund may fall significantly.

Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Corporate debt securities (bonds) tend to have higher credit risk generally than U.S. government debt securities. Debt securities also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- and/or high-quality securities, although some still possess varying degrees of speculative characteristics and risks. Debt securities rated below investment-grade are riskier, but may offer higher yields. These securities are sometimes referred to as high yield securities or "junk bonds."

Corporate bonds are debt securities issued by corporations. Although a higher return is expected from corporate bonds, these securities, while subject to the same general risks as U.S. government securities, are subject to greater credit risk than U.S. government securities. Their prices may be affected by the perceived credit quality of their issuer.

**Depositary Receipts** include ADRs as well as other "hybrid" forms of ADRs, including EDRs and GDRs, and are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject a fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments; withholding taxes on income, or possible imposition of withholding taxes on income; possible seizure, nationalization or expropriation of foreign deposits; possible establishment of exchange controls; or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States. Please see the section titled "Foreign Securities" for more detail.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder's rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer's request.

**Derivative Instruments** are commonly defined to include instruments or contracts whose values depend on (or "derive" from) the value of one or more other assets such as securities, currencies, or commodities. These "other assets" are commonly referred to as "underlying assets." The funds may use derivatives, principally futures contracts, primarily to seek returns on a fund's otherwise uninvested cash assets.

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In addition to the derivative instruments and strategies described in this SAI, the investment adviser expects to discover additional derivative instruments and other investment, hedging or risk management techniques. The investment adviser may utilize these new derivative instruments and techniques to the extent that they are consistent with a fund's investment objective and permitted by a fund's investment limitations, operating policies and applicable regulatory authorities.

A fund's derivatives instruments can create (i) leverage risk, which generally refers to the risk that derivatives transactions can magnify a fund's gains and losses, (ii) market risk, which generally refers to the risk from potential adverse market movements in relation to a fund's derivatives positions, or the risk that markets could experience a change in volatility that adversely impacts fund returns and a fund's obligations and exposures, (iii) counterparty risk, which generally refers to the risk that a counterparty on a derivatives transaction may not be willing or able to perform its obligations under the derivatives contract, and the related risks of having concentrated exposure to such a counterparty, (iv) liquidity risk, which generally refers to the risk involving the liquidity demands that derivatives transactions can create to make payments of margin, collateral, or settlement payments to counterparties, (v) operational risk, which generally refers to the risk related to potential operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error and (vi) legal risk, which generally refers to insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract. Certain of these risks are described in more detail as they apply to specific derivatives instruments in the following sub-sections of this SAI.

*<u>Futures Contracts</u>* are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. A fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the Commodity Futures Trading Commission (CFTC) licenses and regulates on foreign exchanges. Although positions are usually marked-to-market on a daily basis with an intermediary (executing broker), there remains a credit risk with the futures exchange.

A fund must maintain a small portion of its assets in cash to process shareholder transactions and to pay its expenses. To reduce the effect this otherwise uninvested cash would have on its performance, a fund may purchase futures contracts. Such transactions allow a fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, a fund may purchase or sell futures contracts on a specified foreign currency to "fix" the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. A fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, a fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as "initial margin" and must be in the form of liquid assets, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as "variation margin," may be made daily, if necessary, as the value of the futures contracts fluctuates. This process is known as "marking-to-market." The initial margin amount will be returned to a fund upon termination of the futures contracts assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage.

While a fund may purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause a fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if a fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, a fund incurs transaction costs (e.g., brokerage fees) when engaging in futures trading. To the extent a fund also invests in futures in order to simulate full investment, these same risks apply.

When interest rates are rising or securities prices are falling, a fund may seek, through the sale of futures contracts, to offset a decline in the value of its current portfolio securities. When interest rates are falling or prices are rising, a fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when they effect anticipated purchases. Similarly, a fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and its portfolio securities that are denominated in that currency. A fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that a fund has acquired or expects to acquire.

Futures contracts may require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time a fund seeks to close out a futures position. If a fund is unable to close out its position and prices move adversely, a fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a disadvantageous time or incur extra costs by borrowing the cash. Also, a fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

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*<u>Derivatives Regulatory Matters.</u>* In October 2020, the U.S. Securities and Exchange Commission (SEC) adopted a final rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies that rescinded and withdrew the guidance of the SEC and its staff regarding asset segregation and cover transactions previously applicable to a fund's use of such transactions. The rule requires a fund to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management program and reporting requirements. Generally, these requirements apply unless a fund satisfies a "limited derivatives users" exception that is included in the rule. Under the rule, when a fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating a fund's asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance in connection with the rule regarding the use of securities lending collateral that may limit a fund's securities lending activities. In addition, under the rule, a fund will be permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). A fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the fund treats any such transaction as a "derivatives transaction" for purposes of compliance with the rule. Furthermore, under the rule, a fund will be permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of a fund to use derivatives, and reverse repurchase agreements and similar financing transactions, when-issued, delayed delivery and forward commitment transactions, and unfunded commitment agreements as part of its investment strategies. These requirements may increase the cost of a fund's investments and cost of doing business, which could adversely affect investors. The investment adviser cannot predict the effects of these regulations on a fund. The investment adviser intends to monitor developments and seeks to manage the funds in a manner consistent with achieving the funds' investment objectives, but there can be no assurance that it will be successful in doing so.

The CFTC regulates the trading of commodity interests, including certain futures contracts, options, and swaps in which a fund may invest. A fund that invests in commodity interests will generally be subject to certain CFTC regulatory requirements if it is considered a "commodity pool." A notice of eligibility for exclusion from the definition of the term "commodity pool operator" (CPO) under the Commodity Exchange Act, as amended (CEA) has been filed, by the funds' investment adviser, with respect to each fund's operation. Therefore, each fund and its investment adviser are not subject to registration or regulation as a CPO under the CEA. If a fund's investment adviser were no longer able to claim the exclusion, the fund's investment adviser may be required to register as a CPO and the fund and its investment adviser would be subject to regulation as a CPO under the CEA. If a fund or its investment adviser is subject to CFTC regulation, it may incur additional expenses and/or may choose to make changes to its investment strategies.

**Diversification** involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. Each fund is a series of an open-end investment management company. Each fund is a diversified mutual fund.

**Emerging or Developing Markets** exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. There are no strict definitions of what is emerging or developing versus what is considered developed and certain countries are considered emerging or developing in some indices yet developed in others.

A fund's investments in emerging markets can be considered speculative, and therefore may offer higher potential for gains and losses than investments in developed markets of the world. With respect to an emerging market country, there may be a greater potential for nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or investments in such countries. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

In addition to the risks of investing in emerging market country debt securities, a fund's investment in government or government-related securities of emerging market countries and restructured debt instruments in emerging markets are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt, and requests to extend additional loan amounts. A fund may have limited recourse in the event of default on such debt instruments.

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*<u>Investing in China</u>* involves certain additional risks and considerations not typically associated with investing in other more established economies or securities markets. China based companies that incorporate in the People's Republic of China (PRC) can issue different classes of shares depending on where they are listed and which investors are allowed to own them. These are referred to as Class A Shares, Class B shares, and Class H shares, which are all renminbi-denominated shares that trade in different currencies depending on what stock exchange they are listed on. Class H Shares trade on the Hong Kong Stock Exchange, are quoted and traded in Hong Kong dollars, and have no restrictions on who can trade them. Class B Shares trade on either the Shanghai or Shenzhen stock exchanges and can only be traded by non-residents of the PRC or residents with appropriate foreign currency dealing accounts. They trade in U.S. dollars on the Shanghai exchange and in Hong Kong dollars on the Shenzhen exchange. Class A Shares trade on either the Shanghai or Shenzhen exchanges and are quoted in renminbi. Class A Shares may only be traded by residents of the PRC, or under the Qualified Foreign Institutional Investor (QFII) rules, or through the Stock Connect programs (Shanghai-Hong Kong or Shenzhen-Hong Kong). Finally, China based companies that are controlled by PRC residents or PRC state entities and have a majority of their revenue or assets in the PRC may incorporate outside the PRC and trade on an exchange outside the PRC in the currency of the exchange. These are referred to as "Red Chip" (Hong Kong), "P Chip" (Hong Kong), "S Chip" (Singapore), or "N Shares" (United States). The multiplicity of share classes and various restrictions on ownership, in addition to the ability of Chinese regulatory authorities and Chinese issuers to suspend trading and their willingness to exercise this option in response to market volatility and other events, can significantly impact liquidity and volatility of the Chinese market and the markets for Chinese securities. In addition, to the extent that a fund invests in China A Shares, there may be legal restrictions imposed by the PRC on the repatriation of assets or proceeds from the sale of China A Shares. Further, there are quotas on the amount China A Shares available either to QFIIs or through the Stock Connect programs. These quotas are applicable to the entire market, not to a specific fund, but they impact the ability of a fund to implement its investment strategy.

Certain funds may invest a portion of their assets in certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the funds) is prohibited. To facilitate indirect foreign investment in these businesses, many Chinese companies have created VIE structures. In such an arrangement, a China-based operating company typically establishes a shell entity in another jurisdiction, such as the Cayman Islands. The shell company enters into service and other contracts with the China-based operating company, and then issues shares on an exchange (such as the New York Stock Exchange or the Hong Kong Stock Exchange). Non-Chinese investors hold stock in the shell entity rather than directly in the China-based operating company. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. The contractual arrangements also permit the VIE to consolidate the China-based operating company into its financial statements.

Although VIE structures are a longstanding industry practice and well known to officials and regulators in China, VIE structures are not formally recognized under Chinese law. As a result, investors face the risk that future actions by the Chinese government could significantly affect the China-based operating company's financial performance and the enforceability of the VIE structure's contractual arrangements. It is uncertain whether Chinese officials or regulators will withdraw their implicit acceptance of the VIE structure, or whether any new laws, rules or regulations relating to this structure will be adopted (in each case either generally or with respect to specific industries, sectors or companies) and, if adopted, what impact they would have on the interests of shareholders in the VIE structure. Under extreme circumstances, China could prohibit the existence of VIE structures or limit a VIE structure's ability to pass through economic and governance rights to non-Chinese individuals and entities. If the Chinese government takes action affecting VIE structures, the market value of a fund's associated portfolio holdings in VIE structures would likely suffer significant, detrimental, and possibly permanent negative effects, which could result in substantial investment losses to the fund.

In addition, Chinese companies, including China-based operating companies listed on U.S. exchanges through a VIE structure, are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies based in more developed countries. As a result, information about the Chinese securities and securities in the VIE structure in which a fund invests may be less reliable or complete than investments in other securities. Foreign companies listed on U.S. exchanges, including China-based operating companies that utilize a VIE structure, also could face delisting or other ramifications for failure to meet the requirements of the SEC, the Public Company Accounting Oversight Board or other U.S. regulators. Delisting would significantly decrease the liquidity and value of the securities, decrease the ability of a fund to transact in such securities and may increase the transaction costs of a fund if the fund is required to seek other markets in which to transact in those securities.

Investments involving a VIE structure may also pose additional risks because such investments are made through a company whose interests in the underlying China-based operating company are established through contract rather than through equity ownership. For example, in the event of a dispute, the contractual claims with respect to the China-based operating company may be deemed unenforceable in the PRC, thus limiting (or eliminating) the remedies and rights available to the VIE and its investors. Such legal uncertainty may also be exploited against the interests of the investors in the VIE structure. Further, the interests of the direct equity owners of the China-based operating company may conflict with the interests of the investors in the VIE structure, and the fiduciary duties of the officers and directors of the China-based operating company may differ from, or conflict with, the fiduciary duties of the officers and directors of the shell entity in which a fund invests.

**Equity Securities** represent ownership interests in a company, and are commonly called "stocks." Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company's financial condition, market conditions and political, economic or even company-specific news. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

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Types of equity securities include common stocks, preferred stocks, convertible securities, rights and warrants, depositary receipts, and interests in real estate investment trusts and business development companies. (For more information on depositary receipts, see the section titled "Depositary Receipts").

*<u>Common Stocks,</u>* which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the election of the corporation's directors and any other matters submitted to the corporation's shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer's earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners. Common stocks are typically categorized by their market capitalization as large-, mid- or small-cap.

*<u>Small-Cap Stocks</u>* include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small-cap company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Most small-cap company stocks pay low or no dividends.

These factors and others may cause sharp changes in the value of a small-cap company's stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a fund's positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for a fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of a fund's investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

*<u>Convertible Securities</u>* are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer's common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company's common stock. The actual return on a convertible bond may exceed its stated yield if the company's common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. Convertible securities are also rated below investment grade (high yield) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and a fund's ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer's creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a conversion feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer's common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company's liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer's convertible securities will tend not to fall as much because the convertible security's income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because its conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

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*<u>Preferred Stocks</u>* represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation's assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, a fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

*<u>Real Estate Investment Trusts</u>* (REITs) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long-term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 90% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

Like any investment in real estate, a REIT's performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental income could decline because of extended vacancies, increased competition from nearby properties, tenants' failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT's performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than – and at times will perform differently from – large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through a fund, a shareholder will bear indirectly a proportionate share of the REIT's expenses in addition to their proportionate share of a fund's expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Internal Revenue Code or to maintain their exemptions from registration under the 1940 Act and CFTC regulations.

*<u>Rights and Warrants</u>* are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company's stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

*<u>Initial Public Offering</u>* (IPO). A fund may purchase shares issued as part of, or a short period after, a company's IPO, and may at times dispose of those shares shortly after their acquisition. A fund's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

*<u>Master Limited Partnerships</u>* (MLPs) are limited partnerships in which the common units are publicly traded. MLP common units are freely traded on a securities exchange or in the over-the-counter market and are generally registered with the SEC. MLPs often own several properties or businesses (or own interests) that are related to real estate development and oil and gas industries, but they also may finance motion

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pictures, research and development and other projects. MLPs generally have two classes of owners, the general partner and limited partners. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership, through ownership of common units, and have a limited role, if any, in the partnership's operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (minimum quarterly distributions). Common and general partner interests also accrue arrearages in distributions to the extent the minimum quarterly distribution is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the minimum quarterly distribution; however, subordinated units do not accrue arrearages. Distributable cash in excess of the minimum quarterly distribution paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions are intended to encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results are intended to benefit all security holders of the MLP, however, such incentive distribution payments give rise to potential conflicts of interest between the common unit holders and the general partner.

MLP common units represent a limited partnership interest in the MLP. Common units are listed and traded on U.S. securities exchanges or over-the-counter, with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The funds may purchase common units in market transactions as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions. Common units along with general partner units have first priority to receive quarterly cash distributions up to the minimum quarterly distribution and have arrearage rights. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

MLP subordinated units are typically issued by MLPs to their original sponsors, such as their founders, corporate general partners of MLPs, entities that sell assets to the MLP, and investors. Subordinated units may be purchased directly from these persons as well as newly-issued subordinated units from MLPs themselves. Subordinated units have similar voting rights as common units and are generally not publicly traded. Once the minimum quarterly distribution on the common units, including any arrearages, has been paid, subordinated units receive cash distributions up to the minimum quarterly distribution prior to any incentive payments to the MLP's general partner. Unlike common units, subordinated units do not have arrearage rights. In the event of liquidation, common units and general partner interests have priority over subordinated units. Subordinated units are typically converted into common units on a one-to-one basis after certain time periods and/or performance targets have been satisfied. The purchase or sale price of subordinated units is generally tied to the common unit price less a discount. The size of the discount varies depending on the likelihood of conversion, the length of time remaining to conversion, the size of the block purchased relative to trading volumes, and other factors, including smaller capitalization partnerships or companies potentially having limited product lines, markets or financial resources, lacking management depth or experience, and being more vulnerable to adverse general market or economic development than larger more established companies.

General partner interests of MLPs are typically retained by an MLP's original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder's investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP's aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights, which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Certain MLPs are dependent on their parent companies or sponsors for a majority of their revenues. Any failure by an MLP's parents or sponsors to satisfy their payments or obligations would impact the MLP's revenues and cash flows and ability to make distributions.

*<u>Business Development Companies</u>* (BDCs) are closed-end investment companies that have elected to be BDCs under the 1940 Act and are taxed as regulated investment companies (RICs) under the Internal Revenue Code. BDCs operate as venture capital companies and typically invest in, lend capital to, and provide significant managerial assistance to developing private companies or thinly-traded public companies. Under

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the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of privately-held U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, a BDC may only incur indebtedness in amounts such that the BDC's coverage ratio of total assets to total senior securities equals 150% or 200%, as applicable.

BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (junk bonds). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that investors may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC's net asset value (for more information on BDCs, see the section titled "Securities of Other Investment Companies").

**Exchange-Traded Funds** (ETFs) are investment companies that typically are registered under the 1940 Act as open-end funds or unit investment trusts (UITs). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold throughout the day at market prices, which may be higher or lower than the shares' net asset value. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's net asset value, the value of ETF holdings, and supply of and demand for ETF shares. Although the creation/redemption feature of ETFs generally makes it more likely that ETF shares will trade close to their net asset value, market volatility, lack of an active trading market for ETF shares, disruptions at market participants (such as Authorized Participants or market makers) and any disruptions in the ordinary functioning of the creation/redemption process may result in ETF shares trading significantly above (at a "premium") or below (at a "discount") their net asset value. An ETF's investment results are based on the ETF's daily net asset value. Investors transacting in ETF shares in the secondary market, where market prices may differ from net asset value, may experience investment results that differ from results based on the ETF's daily net asset value. An "index-based ETF" seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of stocks or an index, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

**Foreign Currency Transactions.** A fund may invest in foreign currency-denominated securities, purchase and sell foreign currency options and foreign currency futures contracts and related options and engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts (forwards) with terms generally of less than one year. A fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.

A fund may use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

A forward involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect a fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, a fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for fund securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when a fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, a fund could sustain a loss.

A fund may engage in forward foreign currency exchange options and contracts to protect the value of specific portfolio positions, which is called "position hedging." When engaging in position hedging, a fund may enter into forward foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which portfolio securities are denominated (or against an increase in the value of currency for securities that a fund expects to purchase).

Buying and selling foreign currency exchange options and contracts involves costs and may result in losses. The ability of a fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for a fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a fund's holdings of securities denominated in a particular currency and forward contracts into which a fund enters. Such imperfect correlation may cause a fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss. A fund's transactions in foreign currency exchange contracts may cause a portion of the fund's distributions to constitute returns of capital for tax purposes. To the extent a foreign currency transaction involves a derivatives instrument, the risks discussed under "Derivatives Instruments," above, also will apply.

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Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant foreign currencies.

Forwards will be used primarily to adjust the foreign exchange exposure of a fund and a fund might be expected to enter into such contracts under the following circumstances:

*<u>Lock In.</u>* When the investment adviser desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency.

*<u>Cross Hedge.</u>* If a particular currency is expected to decrease against another currency, a fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of a fund's portfolio holdings denominated in the currency sold.

*<u>Direct Hedge.</u>* If the investment adviser wants to eliminate substantially all of the risk of owning a particular currency, and/or if the investment adviser thinks that a fund can benefit from price appreciation in a given country's bonds but does not want to hold the currency, it may employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but a fund would benefit from an increase in value of the bond.

*<u>Proxy Hedge.</u>* The investment adviser might choose to use a proxy hedge, which may be less costly than a direct hedge. In this case, a fund, having purchased a security, will sell a currency whose value is believed to be closely linked to the currency in which the security is denominated. Interest rates prevailing in the country whose currency was sold would be expected to be closer to those in the U.S. and lower than those of securities denominated in the currency of the original holding. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies and the relationships can be very unstable at times.

*<u>Costs of Hedging.</u>* When a fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially reduced or lost if a fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead such costs will, over time, be reflected in a fund's net asset value per share.

*<u>Tax Consequences of Hedging.</u>* Under applicable tax law, a fund may be required to limit its gains from hedging in foreign currency forwards, futures, and options. Although a fund is expected to comply with such limits, the extent to which these limits apply is subject to tax regulations as yet unissued. Hedging may also result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. Those provisions could result in an increase (or decrease) in the amount of taxable dividends paid by a fund and could affect whether dividends paid by a fund are classified as capital gains or ordinary income.

**Foreign Securities.** Investments in foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which a fund may invest include those issued by foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments, a compromise in public health and safety, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, currency blockage, the imposition of sanctions and other similar measures, change of government or war could affect the value of foreign investments. Additionally, a country could experience a public health threat such as an infectious illness which could reduce consumer demand or economic output and/or result in market closures, travel restrictions or quarantines, all of which could affect the value of that country's securities and impact global markets. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. Bankruptcy laws in some foreign countries are sometimes biased to the borrowers and against the creditors. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

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In addition, a fund's investments in foreign securities may be subject to economic sanctions or other government restrictions. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to ascertain. These types of measures may include, but are not limited to, banning a sanctioned country or certain persons or entities associated with such country from global payment systems that facilitate cross-border payments, restricting the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities or persons. The imposition of sanctions and other similar measures could, among other things, result in a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings of the sanctioned country's securities or those of companies located in or economically tied to the sanctioned country, currency devaluation or volatility, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could directly or indirectly limit or prevent a fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and adversely impact a fund's liquidity and performance. As a result, such restrictions may limit a fund's ability to meet a large number of shareholder redemption requests.

International trade tensions may arise from time to time which could result in trade tariffs, embargos or other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, an oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies or industries which could have a negative impact on a fund's performance. Events such as these are difficult to predict and may or may not occur in the future.

Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a fund to miss attractive investment opportunities. Losses to a fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for a fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, a fund may hold cash investments in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause a fund to incur costs in connection with conversions between various currencies. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by a fund.

During the 2008-2009 global financial crisis, financial markets in Europe experienced significant volatility due, in part, to concerns about rising levels of government debt and the prevalence of increased budget deficits. As a result, many economies in the region suffered through prolonged economic downturns. Due to the economic integration of the region, another economic downturn in one European country may have a negative impact on the economies of other European countries.

The risk of investing in Europe may be heightened due to steps taken by the United Kingdom (UK) to exit the European Union (EU). On January 31, 2020, the UK officially withdrew from the EU. On December 30, 2020, the EU and UK signed the EU-UK Trade and Cooperation Agreement (TCA) which governs certain aspects of the EU's and the UK's relationship, many of which are still to be determined, including those related to financial services. Notwithstanding the TCA, significant uncertainty remains in the market regarding the ramifications of the UK's withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased volatility and illiquidity, and companies that conduct a significant amount of business in the UK or Europe may experience lower revenue and/or profit growth, all of which may adversely affect the value of a fund's investments. Brexit also may cause additional member states to contemplate departing the EU, which would likely perpetuate political and economic instability in the region and cause additional market disruption in global financial markets.

As a fund may hold investments in issuers that are located in Europe or that depend on revenues generated from operations in Europe, any material negative developments in Europe could have a negative impact on the value and liquidity of these investments, which could harm a fund's performance.

**Foreign Institutions** involve additional risks. The funds may invest in U.S. dollar-denominated securities issued by foreign institutions or securities that are subject to credit or liquidity enhancements provided by foreign institutions. Foreign institutions may not be subject to uniform accounting, auditing and financial reporting standards, practices and requirements that are comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments could have effects on the value of securities issued or supported by foreign institutions. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, change of government or war could affect the value of these securities. In addition, there may be difficulties in obtaining or enforcing judgments against foreign institutions that issue or support securities in which a fund may invest. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

**Illiquid Securities or Investments** means any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The liquidity of a fund's investments is monitored under the supervision and direction of the Board and is governed by the 1940 Act and rules promulgated

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thereunder, which provide that a fund may not acquire any illiquid investments if, immediately after the acquisition, the fund would have invested more than 15% of the fund's net assets in illiquid investments. Investments currently not considered liquid include, among others, repurchase agreements not maturing within seven days that are not subject to a demand feature of seven days or less and certain restricted securities. Any investment may become illiquid at times of market dislocation.

**Indexing Strategies** involve tracking the securities represented in, and therefore the performance of, an index. Each fund normally will invest primarily in the securities of its index. Moreover, each fund invests so that its portfolio performs similarly to that of its index. Each fund (with the exception of the Schwab Fundamental Emerging Markets Large Company Index Fund) tries to generally match its holdings in a particular security to its weight in the index. Each fund will seek a correlation between its performance and that of its index of 0.95 or better, over time. A perfect correlation of 1.0 is unlikely as the funds incur operating and trading expenses unlike their indices. Each fund may rebalance its holdings in order to track its index more closely. In the event its intended correlation is not achieved, the Board will consider alternative arrangements for each fund.

There can be no guarantee that the performance of a fund will achieve a high degree of correlation with that of its index. A number of factors may affect a fund's ability to achieve a high correlation with its index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of a fund and its index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spinoffs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions such as diversification requirements) that apply to the fund but not to the index.

**Inflation/Deflation Risk.** The funds may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from a fund's investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of a fund's assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of a fund's assets.

**Interfund Borrowing and Lending.** The SEC has granted an exemption to the funds that permits the funds to borrow money from and/or lend money to other funds in the Fund Complex as defined under "Management of the Funds." All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board.

**Large Transaction Risk.** Certain accounts or Schwab affiliates may from time to time own (beneficially or of record) or control a significant percentage of a fund's shares. Redemptions by these shareholders of their holdings in a fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force a fund to sell securities when it would not otherwise do so, which could result in a loss to the fund, negative impact to the fund's brokerage costs, acceleration of the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan), or higher portfolio turnover. Investors should consider whether a fund is an appropriate investment in light of their current financial position and goals.

**Market Disruptions Risk.** The funds are subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, epidemics and pandemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause a fund to lose value. These events can also impair the technology and other operational systems upon which the funds' service providers, including Schwab Asset Management, as the funds' investment adviser, rely, and could otherwise disrupt the funds' service providers' ability to fulfill their obligations to the funds.

The outbreak of COVID-19, a novel coronavirus disease, has caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the funds invest. The transmission of COVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the global economic environment. These disruptions have led to instability in the market place, including losses and overall volatility. The impact of COVID-19, including variants of the underlying virus, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

Russia's military invasion of Ukraine in February 2022, responses by the United States and other countries to the invasion and the potential for wider conflict have increased and may continue to increase volatility and uncertainty in financial markets worldwide. The United States and other countries have imposed broad-ranging economic sanctions on Russia and Russian entities and individuals that, among other restrictions, prohibit companies from doing business with Russia and Russian issuers, and may adversely affect companies with economic or financial exposure to Russia and Russian issuers. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia's military invasion. These and potential similar future sanctions may limit the potential

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universe of securities in which the funds may invest and may require the funds to freeze or divest its existing investments in a company that becomes subject to such restrictions. A number of large corporations and U.S. states have also announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses. The extent and duration of Russia's military actions and the repercussions of such actions, including any retaliatory actions or countermeasures that may be taken by Russia or others subject to sanctions (such as cyberattacks on other governments, corporations or individuals) are unpredictable, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These events could negatively affect the funds' performance.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, market closures, changes in interest rates, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the funds. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the funds being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.

To satisfy any shareholder redemption requests during periods of extreme volatility, it is more likely the funds may be required to dispose of portfolio investments at inopportune times or prices.

**Mid-Cap Stocks** include common stocks issued by operating companies with market capitalizations that place them between the upper and lower end of the stock market, as well as the stocks of companies that are determined to be mid-sized based on several factors, including the capitalization of the company and the amount of revenues. Historically, mid-cap stocks have been riskier than large-cap stocks. Mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of mid-sized companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when mid-cap stocks fall behind other types of investments – large-cap stocks, for instance – a fund's mid-cap holdings could reduce performance.

Mid-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Mid-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively smaller management group. In addition, mid-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Mid-cap company stocks may pay low or no dividends. These factors and others may cause sharp changes in the value of a mid-cap company's stock, and even cause some mid-cap companies to fail. While mid-cap stocks are generally considered to offer greater growth opportunities for investors than large-cap stocks, they involve greater risks and the share price of a fund that invests in mid-cap stocks may change sharply during the short term and long term.

**Money Market Securities** are high-quality, short term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker's acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker's acceptances are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short term credit needs.

Money market securities pay fixed-, variable- or floating-rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately; these puts, which are sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When a fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts.

A fund may keep a portion of its assets in cash for business operations. A fund may invest in money market securities to reduce the effect this otherwise uninvested cash would have on its performance. A fund may also invest in money market securities to the extent it is consistent with its investment objective.

*<u>Banker's Acceptances or Notes</u>* are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. A fund will invest only in banker's acceptances of banks that have capital, surplus and undivided profits in excess of $100 million.

*<u>Certificates of Deposit or Time Deposits</u>* are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. A fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits, in the aggregate, in excess of $100 million.

*<u>Commercial Paper</u>* consists of short term, promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

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*<u>Fixed Time Deposits</u>* are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but may be subject to early withdrawal penalties, which vary depending upon market conditions and the remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a fixed time deposit to a third party, although there is no market for such deposits. The funds will not invest in fixed time deposits that (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight deposits) if, in the aggregate, more than 15% of its net assets would be invested in such deposits, repurchase agreements maturing in more than seven days and other illiquid assets.

*<u>Promissory Notes</u>* are written agreements committing the maker or issuer to pay the payee a specified amount either on demand or at a fixed date in the future, with or without interest. These are sometimes called negotiable notes or instruments and are subject to credit risk. Bank notes are notes used to represent obligations issued by banks in large denominations.

*<u>Repurchase Agreements</u>* are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer's holding period. Any repurchase agreements a fund enters into will involve a fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short, from overnight to one week, although the securities collateralizing a repurchase agreement may have longer maturity dates. Default by the seller might cause a fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. A fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement's seller, a fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying securities and loss of income. Certain repurchase agreements a fund may enter into may or may not be subject to an automatic stay in bankruptcy proceedings. A fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank.

**Non-Publicly Traded Securities and Private Placements.** A fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a fund may be required to bear the expenses of registration.

**Restricted Securities** are securities that are subject to legal restrictions on their sale. Difficulty in selling restricted securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended (the 1933 Act), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. To the extent a fund invests in restricted securities that are deemed liquid, the general level of illiquidity in the fund's portfolio may be increased if such securities become illiquid.

**Securities Lending** of portfolio securities is a common practice in the securities industry. A fund may engage in security lending arrangements. When a fund is lending portfolio securities, the fund may receive cash collateral and may invest it in short-term, interest-bearing obligations, including cash collateral funds, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies. Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities and efforts to recall such securities promptly may be unsuccessful, especially for foreign securities. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities, if the borrower fails to return the security loaned or becomes insolvent. A fund will also bear the risk of any decline in value of securities acquired with cash collateral.

A fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other permitted instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) a fund may at any time call the loan and obtain the return of the securities loaned; (3) a fund will receive payments in lieu of any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security's voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to a fund, it is expected that a fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer's corporate governance policies or structure.

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To the extent a fund participates in securities lending under the current securities lending agreements with unaffiliated lending agents, costs and expenses, including agent fees, associated with securities lending activities under the securities lending program paid to the unaffiliated lending agents start at 9% of gross lending revenue, with subsequent breakpoints to a low of 5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by a fund, as applicable. No portion of the lending revenue is paid to or retained by Schwab Asset Management or any affiliate of Schwab Asset Management.

**Securities of Other Investment Companies.** Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a continuous basis; (2) business development companies that generally invest in, and provide services to, privately-held companies or thinly-traded public companies (see the sub-section titled "Business Development Companies" under "Equity Securities" for more information); (3) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; (4) unit investment trusts that generally offer a fixed number of redeemable shares; and (5) money market funds that typically seek current income by investing in money market securities (see the section titled "Money Market Securities" for more information). Certain open-end funds, closed-end funds and unit investment trusts are traded on exchanges (see the sub-section titled "Exchange-Traded Funds" under "Equity Securities" for more information).

To the extent a fund invests, or has invested, in shares of other investment companies, including BDCs, during its prior fiscal year, the fund, pursuant to SEC rules, must disclose any material fees and expenses indirectly incurred by the fund as a result of such investments. These indirect fees and expenses, to the extent incurred, will appear in the fee table of the fund's prospectus as a separate line item captioned "Acquired fund fees and expenses." Unlike securities of other investment companies, BDCs may be included in various indices by index providers. As a result, particularly to the extent a fund seeks to track the total return of its index by replicating the index (rather than employing sampling techniques), a fund may hold securities of BDCs and may be required to disclose acquired fund fees and expenses.

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The funds may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. A fund may invest in investment companies that are not registered with the SEC or in privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause a fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which a fund may invest in another investment company may be limited. Except as described below, the 1940 Act currently requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of a fund's total assets will be invested in the securities of any one acquired investment company (acquired fund), (ii) not more than 10% of the value of its total assets will be invested in the aggregate in securities of acquired funds as a group and (iii) not more than 3% of the outstanding voting stock of any one acquired fund will be owned by a fund.

The limitations described above do not apply to investments in money market funds subject to certain conditions. The funds may invest in affiliated and unaffiliated money market funds without limit under Rule 12d1-1 under the 1940 Act subject to a fund's investment policies and restrictions and the conditions of the Rule.

Rule 12d1-4 allows a fund to acquire shares of an acquired fund in excess of the limitations currently imposed by the 1940 Act. Fund of funds arrangements relying on Rule 12d1-4 will be subject to several conditions, certain of which are specific to a fund's position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (i) control and voting that prohibit an acquiring fund, its investment adviser (or a subadviser) and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund; (ii) certain required findings relating to complexity, fees and undue influence (among other things); (iii) fund of funds investment agreements; and (iv) general limitations on an acquired fund's investments in other investment companies and private funds to no more than 10% of the acquired fund's asset, except in certain circumstances. To the extent a fund is an acquired fund, the limitations placed on acquired funds under Rule 12d1-4 may impact the investments made by a fund.

**Short Sales** may be used by a fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. A fund may engage in short sales that are either "against the box" or "uncovered." A short sale is "against the box" if at all times during which the short position is open, a fund owns at least an equal amount of the securities or securities convertible into, or has the right to

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acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to a fund with respect to the securities that are sold short. "Uncovered" short sales are transactions under which a fund sells a security it does not own. To complete such transaction, a fund may borrow the security through a broker to make delivery to the buyer and, in doing so, a fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. A fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, a fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until a fund replaces the borrowed securities.

A fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. If a fund sells securities short "against the box," it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

A fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities.

**Stock Substitution Strategy** is a strategy, whereby each fund may, in certain circumstances, substitute a similar stock for a security in its index.

**U.S. Government Securities** are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the U.S. government. Some U.S. government securities, such as those issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Student Loan Marketing Association (Sallie Mae), and the Federal Home Loan Banks, are supported by a line of credit the issuing entity has with the U.S. Treasury. Securities issued by other issuers are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. U.S. government securities, including U.S. Treasury securities, are among the safest securities; however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer or director of Fannie Mae and Freddie Mac with respect to Fannie Mae and Freddie Mac and the assets of Fannie Mae and Freddie Mac. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement (SPA) with each of Fannie Mae and Freddie Mac pursuant to which the U.S. Treasury agreed to purchase up to 1,000,000 shares of senior preferred stock with an aggregate initial liquidation preference of $1 billion and obtained warrants and options for the purchase of common stock of each of Fannie Mae and Freddie Mac. Under the SPAs as currently amended, the U.S. Treasury has pledged to provide financial support to a government-sponsored enterprise (GSE) in any quarter in which the GSE has a net worth deficit as defined in the respective SPA. Under the current arrangement, the GSEs have a maximum amount of funding available to them which will be reduced by any future draws. There is a risk that if a GSE experiences a loss in any fiscal quarter that results in the GSE having a negative net worth that is greater than the amount available under the U.S. Treasury's funding commitment that the FHFA could place the GSE in receivership. In addition, each GSE may only retain a certain amount of its profits at the end of each fiscal quarter and the U.S. Treasury's liquidation preference will increase in an amount equal to any increase in a GSE's net worth up to a certain amount. The SPAs contain various covenants that severely limit each enterprise's operations.

Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The SPAs are intended to enhance each of Fannie Mae's and Freddie Mac's ability to meet its obligations. The FHFA has indicated that the conservatorship of each enterprise will end when the director of the FHFA determines that the FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. Should Fannie Mae and Freddie Mac be taken out of conservatorship, it is unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations under the SPAs. It also is unclear how the capital structure of Fannie Mae and Freddie Mac would be constructed post-conservatorship, and what effects, if any, the privatization of Fannie Mae and Freddie Mac will have on their creditworthiness and guarantees of certain mortgage-backed securities. Accordingly, should the FHFA take Fannie Mae and Freddie Mac out of conservatorship, there could be an adverse impact on the value of their securities which could cause a fund's investments to lose value.

Although the risk of default with the U.S. government securities is considered unlikely, any default on the part of a portfolio investment could cause a fund's share price or yield to fall. The risk of default on U.S. government securities may be heightened when there is uncertainty relating to negotiations in the U.S. Congress over increasing the statutory debt ceiling. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling, the U.S. government may default on certain U.S. government securities including those held by a fund, which could have an adverse impact on the fund. In August 2011, the long-term credit rating of the U.S. government was downgraded by a major rating agency as a result of concern about the U.S. government's budget deficit and rising debt burden. Similar downgrades in the future could

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increase volatility in domestic and foreign financial markets, result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of different kinds of debt. Although remote, it is at least theoretically possible that under certain scenarios the U.S. government could default on its debt, including U.S. Treasury securities.

#### INVESTMENT LIMITATIONS AND RESTRICTIONS

#### The following investment limitations may be changed only by vote of a majority of each fund's outstanding voting shares:

#### Each fund may not:
(1) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Purchase or sell commodities, commodities contracts or real estate, lend or borrow money, issue senior securities, underwrite securities, or pledge, mortgage or hypothecate any of its assets, except as permitted by (or not prohibited by) the 1940 Act or the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### The following are non-fundamental investment policies and restrictions, and may be changed by the Board.

#### Each fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Sell securities short except as in accordance with current SEC rules and interpretations.

(3) Purchase securities on margin, except such short term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(4) Borrow money except that a fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(5) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

(6) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries (except that each fund may purchase securities to the extent that the index the fund is designed to track is also so concentrated).

(7) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that a fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs); (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts; and (iii) purchase securities of companies that deal in precious metals or interests therein.

#### The following descriptions of the 1940 Act may assist investors in understanding the above policies and restrictions.
<u>Borrowing.</u> The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 ⅓% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are entered into in accordance with the conditions to applicable SEC requirements shall not be regarded as borrowings for the purposes of a fund's investment restriction.

<u>Concentration.</u> The SEC has defined concentration as investing more than 25% of an investment company's total assets in an industry or group of industries, with certain exceptions such as with respect to investments in obligations issued or guaranteed by the U.S. government or its agencies and instrumentalities, or tax-exempt obligations of state or municipal governments and their political subdivisions.

<u>Diversification.</u> Under the 1940 Act and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer's voting securities would be held by a fund.

<u>Lending.</u> Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

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<u>Real Estate.</u> The 1940 Act does not directly restrict an investment company's ability to invest in real estate, but does require that every investment company have a fundamental investment policy governing such investments. Each fund has adopted a fundamental policy that would permit direct investment in real estate. However, each fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of a fund's Board.

<u>Senior Securities.</u> Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits each fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, when such investments are entered into in accordance with the conditions to applicable SEC requirements.

<u>Underwriting.</u> Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets. The foregoing restriction does not apply to non-diversified funds.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of a fund's acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in total assets or net assets, as applicable, or other circumstances does not require a fund to sell an investment if it could not then make the same investment.

#### MANAGEMENT OF THE FUNDS
The funds are overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of each fund. The trustees met five times during the most recent fiscal year.

Certain trustees are "interested persons." A trustee is considered an interested person (Interested Trustee) of the Trust under the 1940 Act if he or she is an officer, director, or an employee of Schwab Asset Management or Charles Schwab & Co., Inc. (Schwab or the distributor). A trustee also may be considered an interested person of the Trust under the 1940 Act if he or she owns stock of The Charles Schwab Corporation (CSC), a publicly traded company and the parent company of Schwab Asset Management and Schwab.

As used herein, the terms "Fund Complex" and "Family of Investment Companies" each refer collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust which, as of February 27, 2023, included 105 funds. As used herein, the term "Schwab Funds" refers collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Capital Trust; and the term "Schwab ETFs" refers to Schwab Strategic Trust.

Each of the officers and/or trustees serves in the same capacity, unless otherwise noted, for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The tables below provide information about the trustees and officers for the Trust, which includes the funds in this SAI. The address of each individual listed below is 211 Main Street, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(2)</sup> <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016-Sept. 2019), Principal Funds (investment management). | 105  | Director (2016-2019), <br> Principal Funds, Inc. |
| Robert W. Burns <br> 1959 <br> Trustee <br> (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105  |  |
| Nancy F. Heller <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105  |  |
| David L. Mahoney <br> 1954 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105  | Director (2004-present), <br> Corcept Therapeutics Incorporated <br> Director (2009-2021), <br> Adamas Pharmaceuticals, Inc. <br> Director (2003-2019), <br> Symantec Corporation  |
| Jane P. Moncreiff <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018-present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare). | 105  |  |
| Kimberly S. Patmore <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008-present), Patmore Management Consulting (management consulting). | 105  |  |
| J. Derek Penn <br> 1957 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006-2018), BNY Mellon (financial services). | 105  |  |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II<sup>(3)</sup> <br> 1960 <br> Chairman and Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022-present), Director and Chief Executive Officer (Oct. 2008-present) and President (Feb. 2007-Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008-Oct. 2021) and Director (May 2008-Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006-present), Charles Schwab Bank, SSB; Director (Nov. 2017-present), Charles Schwab Premier Bank, SSB; Director (July 2019-present), Charles Schwab Trust Bank; Director (May 2008-present), Chief Executive Officer (Aug. 2017-present) and President (Aug. 2017-Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020-present), TD Ameritrade Holding Corporation; Director (July 2016-Oct. 2021), Charles Schwab Investment Management, Inc. | 105  | Director (2008-present), <br> The Charles Schwab Corporation |
| Richard A. Wurster<sup>(2)(3)</sup> <br> 1973 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021-present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021-present), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021) and Senior Vice President – Advisory (May 2016-July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021-present), Schwab Holdings, Inc.; Director (Oct. 2021-present) and Chief Executive Officer (Nov. 2019-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018-Oct. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016-Apr. 2018) and President (Mar. 2017-Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016-Apr. 2018), Windhaven Investment Management, Inc. | 105  |  |

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|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Jonathan de St. Paer <br> 1973 <br> President and Chief Executive Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019-present), President (Oct. 2018-present), Chief Operating Officer (Jan. 2021-present) and Chief Executive Officer (Apr. 2019-Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020-Mar. 2022) and Chief Operating Officer (Jan. 2021-Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019-present), President (Nov. 2018-present) and Trustee (Apr. 2019-Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (May 2022-present), Senior Vice President (Apr. 2019-May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014-Mar. 2019), Charles Schwab & Co., Inc. |
| Mark Fischer <br> 1970 <br> Chief Operating Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Chief Operating Officer (Dec. 2020-present) and Treasurer and Chief Financial Officer (Jan. 2016-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020-present) and Vice President (Oct. 2013-present), Charles Schwab Investment Management, Inc. |
| Dana Smith <br> 1965 <br> Treasurer and Chief Financial Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2023) | Treasurer and Chief Financial Officer (Jan. 2023-present) and Assistant Treasurer (Dec. 2015-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Vice President (Mar. 2022-present) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc. |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Omar Aguilar <br> 1970 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Dec. 2021), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022-present), Charles Schwab Investment Advisory, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Brett Wander <br> 1961 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| William P. McMahon, Jr. <br> 1972 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021-present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018-Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001-Apr. 2018), ThomasPartners, Inc. |
| Catherine MacGregor <br> 1964 <br> Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs <br> Chief Legal Officer, Vice President and Clerk, Laudus Trust <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022-present) and Vice President (Sept. 2005-present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (July 2005-May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005-present) and Chief Legal Officer and Clerk (Mar. 2007-present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President (Nov. 2005-Oct. 2021) and Assistant Secretary (June 2007-Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President and Assistant Secretary (Oct. 2009-Oct. 2021), Schwab ETFs. |

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<sup>(1)</sup>

Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee's twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.

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<sup>(2)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

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<sup>(3)</sup>

Mr. Bettinger and Mr. Wurster are Interested Trustees. Mr. Bettinger and Mr. Wurster are Interested Trustees because each owns stock of CSC, the parent company of Schwab Asset Management, the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc., the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust.

<sup>(4)</sup>

The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

#### Board Leadership Structure
The Chairman of the Board, Walter W. Bettinger II, is Chief Executive Officer and a member of the Board of Directors of CSC and an interested person of the Trust as that term is defined in the 1940 Act. The Board is comprised of a super-majority (75 percent) of trustees who are not interested persons of the Trust (i.e., independent trustees). The Trust does not have a single lead independent trustee. There are three primary committees of the Board: the Audit, Compliance and Valuation Committee; the Governance Committee; and the Investment Oversight Committee. Each of the Committees is chaired by an independent trustee, and each Committee is currently comprised solely of independent trustees. The Committee chairs preside at Committee meetings, participate in formulating agendas for those meetings, and coordinate with management to serve as a liaison between the independent trustees and management on matters within the scope of the responsibilities of each Committee as set forth in its Board-approved charter. The Board has determined that this leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the independent trustees of the Trust constitute a super-majority of the Board, the fact that Committee chairs are independent trustees, the number of funds (and classes) overseen by the Board, and the total number of trustees on the Board.

#### Board Oversight of Risk Management
Like most investment companies, fund management and its other service providers have responsibility for day-to-day risk management for the funds. The Board's duties, as part of its risk oversight of the Trust, consist of monitoring risks identified during regular and special reports to the Committees of the Board, as well as regular and special reports to the full Board. In addition to monitoring such risks, the Committees and the Board oversee efforts of fund management and service providers to manage risks to which the funds of the Trust may be exposed. For example, the Investment Oversight Committee meets with portfolio managers and receives regular reports regarding investment risk and credit risk of a fund's portfolio. The Audit, Compliance and Valuation Committee meets with the funds' Chief Compliance Officer and Chief Financial Officer and receives regular reports regarding compliance risks, operational risks and risks related to the valuation and liquidity of portfolio securities. From its review of these reports and discussions with management, each Committee receives information about the material risks of the funds of the Trust and about how management and service providers mitigate those risks, enabling the independent Committee chairs and other independent members of the Committees to discuss these risks with the full Board.

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The Board recognizes that not all risks that may affect the funds can be identified nor can processes and controls be developed to eliminate or mitigate the occurrence or effects of certain risks; some risks are simply beyond the reasonable control of the funds, their management, and service providers. Although the risk oversight functions of the Board, and the risk management policies of fund management and fund service providers, are designed to be effective, there is no guarantee that they will eliminate or mitigate all risks. In addition, it may be necessary to bear certain risks (such as investment-related risks) to achieve each fund's investment objective. As a result of the foregoing and other factors, the funds' ability to manage risk is subject to significant limitations.

#### Individual Trustee Qualifications
The Board has concluded that each of the trustees should initially and continue to serve on the Board because of (i) his or her ability to review and understand information about the Trust provided to them by management, to identify and request other information they may deem relevant to the performance of their duties, to question management regarding material factors bearing on the management of the Trust, and to exercise their business judgment in a manner that serves the best interests of the Trust's shareholders and (ii) the trustee's experience, qualifications, attributes or skills as described below.

The Board has concluded that Mr. Beer should serve as trustee of the Trust because of the experience he gained serving as director, president and chief executive officer of Principal Funds and his knowledge and experience in the investment management industry.

The Board has concluded that Mr. Bettinger should serve as trustee of the Trust because of the experience he gained as president and chief executive officer of The Charles Schwab Corporation, his knowledge of and experience in the financial services industry, and the experience he has gained serving as trustee of the Schwab Funds since 2008, the Schwab ETFs since 2009, and the Laudus Trust since 2010.

The Board has concluded that Mr. Burns should serve as trustee of the Trust because of the experience he gained as managing director of Pacific Investment Management Company, LLC (PIMCO) and president of PIMCO Funds as well as the experience he has gained serving as trustee of the Schwab ETFs since 2009, and the Schwab Funds and Laudus Trust since 2016.

The Board has concluded that Ms. Heller should serve as trustee of the Trust because of the experience she gained as president of TIAA Charitable and as senior managing director at TIAA, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2018.

The Board has concluded that Mr. Mahoney should serve as trustee of the Trust because of the experience he gained serving as trustee of the Schwab Funds and Laudus Trust since 2011 and Schwab ETFs since 2016, as co-chief executive officer of McKesson Corporation, and his service on other public company boards.

The Board has concluded that Ms. Moncreiff should serve as trustee of the Trust because of the experience she gained as chief investment officer of CareGroup Healthcare System, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2019.

The Board has concluded that Ms. Patmore should serve as trustee of the Trust because of the experience she gained serving as chief financial officer and executive vice president of First Data Corporation, her knowledge of and experience in management consulting, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2016.

The Board has concluded that Mr. Penn should serve as trustee of the Trust because of the experience he gained as head of equity sales and trading of BNY Mellon and his knowledge of and experience in the financial services industry, as well as the experience he has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2021.

The Board has concluded that Mr. Wurster should serve as trustee of the Trust because of the experience he gained leading investment advisory firms and organizations, including Schwab Asset Management, and his knowledge of and experience in the investment management industry.

#### Trustee Committees
The Board has established certain committees and adopted Committee charters with respect to those committees, each as described below:

<sup>●</sup>

The Audit, Compliance and Valuation Committee reviews the integrity of the Trust's financial reporting processes and compliance policies, procedures and processes, and the Trust's overall system of internal controls. The Audit, Compliance and Valuation Committee also reviews and evaluates the qualifications, independence and performance of the Trust's independent auditors, and the implementation and operation of the Trust's valuation policy and procedures. This Committee is comprised of at least three independent trustees and currently has the following members: Kimberly S. Patmore (Chair), Michael J. Beer and J. Derek Penn. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Governance Committee reviews and makes recommendations to the Board regarding Trust governance-related matters, including but not limited to Board compensation practices, retirement policies and term limits, Board self-evaluations, the effectiveness and allocation of assignments and functions by the Board, the composition of Committees of the Board, and the training of trustees.

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The Governance Committee is responsible for selecting and nominating candidates to serve as trustees. The Governance Committee does not have a written policy with respect to consideration of candidates for trustee submitted by shareholders. However, if the Governance Committee determined that it would be in the best interests of the Trust to fill a vacancy on the Board, and a shareholder submitted a candidate for consideration by the Board to fill the vacancy, the Governance Committee would evaluate that candidate in the same manner as it evaluates nominees identified by the Governance Committee. Nominee recommendations may be submitted to the Secretary of the Trust at the Trust's principal business address. This Committee is comprised of at least three independent trustees and currently has the following members: David L. Mahoney (Chair), Robert W. Burns and Kimberly S. Patmore. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Investment Oversight Committee reviews the investment activities of the Trust and the performance of the funds' investment adviser. This Committee is comprised of at least three trustees (at least two-thirds of whom shall be independent trustees) and currently has the following members: Jane P. Moncreiff (Chair), Robert W. Burns, Nancy F. Heller and David L. Mahoney. The Committee met four times during the most recent fiscal year.

#### Trustee Compensation
The following table provides trustee compensation for the fiscal year ended October 31, 2022, earned with respect to the funds in this SAI and the Fund Complex. Trustee compensation for the funds is paid by Schwab Asset Management.

---

| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Aggregate Compensation <br> from the Funds in this SAI**  | **Pension or Retirement Benefits <br> Accrued as Part of Fund Expenses**  | **Total Compensation from the Funds <br> and Fund Complex Paid to Trustees**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II |  | N/A  |  |
| Richard A. Wurster<sup>(1)</sup> |  | N/A  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(1)</sup> | $2075 | N/A  | $82500 |
| Robert W. Burns | $8695 | N/A  | $330000 |
| Nancy F. Heller | $8695 | N/A  | $330000 |
| David L. Mahoney | $9222 | N/A  | $350000 |
| Jane P. Moncreiff | $9222 | N/A  | $350000 |
| Kiran M. Patel<sup>(2)</sup> | $9222 | N/A  | $350000 |
| Kimberly S. Patmore | $8695 | N/A  | $330000 |
| J. Derek Penn | $8695 | N/A  | $330000 |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(2)</sup>

Mr. Patel retired from the Board effective December 31, 2022.

#### Securities Beneficially Owned by Each Trustee
The following table provides each trustee's equity ownership of the funds and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2022.

---

| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership <br> of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee <br> Ownership in the Family of <br> Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Walter W. Bettinger II** | | **Over $100,000**  |
|  | Schwab Fundamental US Large Company Index Fund |  |
|  | Schwab Fundamental US Small Company Index Fund |  |
|  | Schwab Fundamental International Large Company Index Fund |  |
|  | Schwab Fundamental International Small Company Index Fund |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |

---

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---

| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership <br> of the Funds Included in the SAI**  | **Dollar Range of Trustee Ownership <br> of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee <br> Ownership in the Family of <br> Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Richard A. Wurster<sup>(1)</sup>**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund | $10001-$50000  |  |
|  | Schwab Fundamental International Small Company Index Fund | $10001-$50000  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  | $10001-$50000  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Michael J. Beer<sup>(1)</sup>**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |
| **Robert W. Burns**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |
| **Nancy F. Heller**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund | $10001-$50000  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |
| **David L. Mahoney**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |
| **Jane P. Moncreiff**  |  |  | Over $100,000  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |
| **Kimberly S. Patmore** |  |  | **Over $100,000**  |
|  | Schwab Fundamental US Large Company Index Fund |  |  |
|  | Schwab Fundamental US Small Company Index Fund |  |  |
|  | Schwab Fundamental International Large Company Index Fund |  |  |
|  | Schwab Fundamental International Small Company Index Fund |  |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  |  |  |

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---

| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership <br> of the Funds Included in the SAI**  | **Dollar Range of Trustee Ownership <br> of the Funds Included in the SAI**  | **Aggregate Dollar Range of <br> Trustee <br> Ownership in the Family of <br> Investment Companies**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| J. Derek Penn  | | | None  |
| | Schwab Fundamental US Large Company Index Fund | None  | |
| | Schwab Fundamental US Small Company Index Fund | None  | |
| | Schwab Fundamental International Large Company Index Fund | None  | |
| | Schwab Fundamental International Small Company Index Fund | None  | |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund  | None  |  |

---

<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

As of December 31, 2022, none of the independent trustees or their immediate family members owned beneficially or of record any securities of Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Schwab Asset Management or Schwab or any subadvisers or the distributor of the funds.

#### Deferred Compensation Plan
Independent trustees may enter into a fee deferral plan. Under this plan, deferred fees will be credited to an account established by the Trust as of the date that such fees would have been paid to the trustee. The value of this account will equal the value that the account would have if the fees credited to the account had been invested in the shares of Schwab Funds selected by the trustee. Currently, none of the independent trustees has elected to participate in this plan.

#### Code of Ethics
The funds, the investment adviser and Schwab have adopted a Code of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Code of Ethics permits the trustees, directors, officers or advisory representatives of the funds or the investment adviser or the directors or officers of Schwab to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the funds. Securities transactions by some of these individuals may be subject to prior approval of the investment adviser's Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

#### CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2023, the officers and trustees of the Trust, as a group owned, of record or beneficially, less than 1% of the outstanding voting securities of each fund.

As of January 31, 2023, the following persons or entities owned, of record or beneficially, 5% or more of the outstanding voting securities of each fund (a shareholder's or an entity's address will be listed once at the first mention and not repeated for future entries):

---

| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Fundamental US Large Company Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N <br> 211 Main Street <br> San Francisco, CA 94105-1905  | 67.25% |
| Schwab Fundamental US Large Company Index Fund  | Charles Schwab Trust Bank <br> 2360 Corporate Circle Suite 400 <br> Henderson, NV 89074 | 7.38%<sup>(1)</sup> |
| Schwab Fundamental US Small Company Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 89.36% |
| Schwab Fundamental US Small Company Index Fund  | Charles Schwab Trust Bank | 24.86%<sup>(1)</sup> |
| Schwab Fundamental International Large Company Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 68.78% |
| Schwab Fundamental International Large Company Index Fund  | Charles Schwab Trust Bank | 14.36%<sup>(1)</sup> |

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab Fundamental International Small Company Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 86.61% |
| Schwab Fundamental International Small Company Index Fund  | Charles Schwab Trust Bank | 9.61%<sup>(1)</sup> |
| Schwab Fundamental International Small Company Index Fund  | Schwab MarketTrack All Equity Portfolio <br> 211 Main Street <br> San Francisco, CA 94105 | 6.24%<sup>(1)</sup> |
| Schwab Fundamental Emerging Markets Large Company Index Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn: Schwab Funds Team N  | 77.06% |
| Schwab Fundamental Emerging Markets Large Company Index Fund  | Charles Schwab Trust Bank | 6.10%<sup>(1)</sup> |
| Schwab Fundamental Emerging Markets Large Company Index Fund  | Schwab MarketTrack All Equity Portfolio | 5.21%<sup>(1)</sup> |

---

<sup>(1)</sup>

These shares are held within the Charles Schwab & Co., Inc. account listed elsewhere in the table.

Persons who beneficially own more than 25% of a fund may be deemed to control the fund. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of such fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.

#### INVESTMENT ADVISORY AND OTHER SERVICES

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 211 Main Street, San Francisco, CA 94105, serves as each fund's investment adviser and administrator pursuant to an Amended and Restated Investment Advisory and Administration Agreement (Advisory Agreement) between it and the Trust. Schwab is an affiliate of Schwab Asset Management and is the Trust's distributor. Charles R. Schwab is the founder, Chairman and Director of CSC. As a result of his ownership of and interests in CSC, Mr. Schwab may be deemed to be a controlling person of Schwab Asset Management and Schwab.

#### Advisory Agreement
The continuation of a fund's Advisory Agreement must be specifically approved at least annually (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (independent trustees), cast in person, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, at a meeting called for the purpose of voting on such approval.

Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement between the Trust and Schwab Asset Management with respect to existing funds in the Trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Schwab Asset Management, as well as extensive data provided by third parties, and the independent trustees receive advice from counsel to the independent trustees.

Pursuant to the Advisory Agreement between the investment adviser and each fund, Schwab Asset Management pays the operating expenses of the funds, excluding acquired fund fees and expenses, taxes, any brokerage expenses, and extraordinary or non-routine expenses.

The investment adviser is entitled to receive a fee from each fund, payable monthly, for its advisory and administrative services to each fund. Under the Advisory Agreement as compensation for these services, Schwab Asset Management receives a management fee from each fund expressed as a percentage of the fund's average daily net assets, as follows:

---

| | |
|:---|:---|
| **Fund**  | **Advisory Fee <br> Schedule**  |
| Schwab Fundamental US Large Company Index Fund | 0.25% |
| Schwab Fundamental US Small Company Index Fund | 0.25% |
| Schwab Fundamental International Large Company Index Fund | 0.25% |
| Schwab Fundamental International Small Company Index Fund | 0.39% |
| Schwab Fundamental Emerging Markets Large Company Index Fund | 0.39% |

---

The following table shows the advisory fees paid by the funds to Schwab Asset Management for the past three fiscal years.

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| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| Schwab Fundamental US Large Company Index Fund | $16882430 | $15292884 | $12041457 |
| Schwab Fundamental US Small Company Index Fund | $4347447 | $4793960 | $3985955 |
| Schwab Fundamental International Large Company Index Fund | $3735441 | $3193549 | $2824242 |
| Schwab Fundamental International Small Company Index Fund | $2382862 | $2803590 | $2560565 |
| Schwab Fundamental Emerging Markets Large Company Index Fund | $2620279 | $2744178 | $2312739 |

---

#### Distributor
Pursuant to a Second Amended and Restated Distribution Agreement between Schwab and the Trust, Schwab, located at 211 Main Street, San Francisco, CA 94105, is the principal underwriter for shares of the funds and is the Trust's agent for the purpose of the continuous offering of the funds' shares. Schwab pays such costs of delivering prospectus and shareholder reports used in connection with offering of shares to prospective investors and for supplemental sales literature and advertising. Schwab receives no fee under the Distribution Agreement; however, as described below in "Payments to Financial Intermediaries," Schwab Asset Management compensates Schwab, in its capacity as a financial intermediary and not in its capacity as distributor and principal underwriter for the funds, for providing certain additional services that may be deemed to be distribution-related.

#### Payments to Financial Intermediaries
Schwab Asset Management and its affiliates make payments to certain broker-dealers, banks, trust companies, insurance companies, retirement plan service providers, consultants and other financial intermediaries (Intermediaries) for services and expenses incurred in connection with certain activities or services which may educate financial advisors or facilitate, directly or indirectly, investment in the funds and other investment companies advised by Schwab Asset Management, including the Schwab ETFs. These payments are made by Schwab Asset Management or its affiliates at their own expense, and not from the assets of the funds. Although a portion of Schwab Asset Management's and its affiliates' revenue comes directly or indirectly in part from fees paid by the funds, these payments do not increase the expenses paid by investors for the purchase of fund shares, or the cost of owning a fund.

These payments may relate to educational efforts regarding the funds, or for other activities, such as marketing and/or fund promotion activities and presentations, educational training programs, conferences, data analytics and support, or the development and support of technology platforms and/or reporting systems. In addition, Schwab Asset Management or its affiliates make payments to certain Intermediaries that make shares of the funds available to their customers or otherwise promote the funds, which may include Intermediaries that allow customers to buy and sell fund shares without paying a commission or other transaction charge. Payments of this type are sometimes referred to as revenue-sharing or marketing support.

Payments made to Intermediaries may be significant and may cause an Intermediary to make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive. As a result, these payments could create conflicts of interest between an Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the funds over other investments.

As of February 27, 2023, Schwab Asset Management anticipates that Envestnet Asset Management, Inc., E\*TRADE Securities LLC, Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, Principal Life Insurance Company and Teachers Insurance and Annuity Association of America will receive these payments. Schwab Asset Management may enter into similar agreements with other FINRA member firms (or their affiliates) in the future. In addition to member firms of FINRA, Schwab Asset Management and its affiliates may also make these payments to certain other financial intermediaries, such as banks, trust companies, insurance companies, and plan administrators and consultants that sell fund shares or provide services to the funds and their shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments.

Schwab Asset Management also makes payments to Schwab for certain administrative, professional and support services provided by Schwab, in its capacity as an affiliated financial intermediary and not as distributor and principal underwriter of the funds. These payments reimburse Schwab for its charges, costs and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support and technology.

#### Transfer Agent
BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581, serves as the funds' transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the funds' shares.

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#### Custodians and Fund Accountant
Citibank, N.A. (Citibank), 388 Greenwich Street, New York, NY 10013 serves as custodian for the following funds:

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Citibank and Brown Brothers Harriman & Co. (BBH), 50 Post Office Square, Boston, MA 02110 serve as custodians for the Schwab Fundamental Emerging Markets Large Company Index Fund.

State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, MA 02111, serves as custodian for the following funds:

Schwab Fundamental US Large Company Index Fund

Schwab Fundamental US Small Company Index Fund

State Street also serves as fund accountant for each of the funds.

The custodians are responsible for the daily safekeeping of securities and cash held by the funds. The fund accountant maintains all books and records related to the funds' transactions.

#### Independent Registered Public Accounting Firm
The funds' independent registered public accounting firm, Deloitte & Touche LLP (Deloitte), 1601 Wewatta Street, Suite 400, Denver, CO 80202, audits and reports on the annual financial statements of the funds and reviews certain regulatory reports. Deloitte or one of its affiliates also reviews each fund's federal income tax returns and performs other professional, accounting, auditing, tax and advisory services when engaged to do so by the Trust.

#### Securities Lending Activities
Effective May 23, 2022, Citibank is the securities lending agent for the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund. Prior to May 23, 2022, BBH was the securities lending agent for the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund. Goldman Sachs Bank USA (DBA Goldman Sachs Agency Lending) is the securities lending agent for the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund. The securities lending agents provide services to the funds which include the following: locating borrowers, negotiating the loan terms, monitoring the value of loans and collateral on a daily basis, marking each loan to market on a daily basis, coordinating collateral movements, collecting income, monitoring and processing corporate actions, managing recalls of loaned securities and termination of loans, and recordkeeping.

The table below summarizes key information regarding the funds' securities lending activities to the extent each fund engaged in securities lending during the most recent fiscal year.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Schwab <br> Fundamental <br> US Large <br> Company <br> Index Fund**  | **Schwab <br> Fundamental <br> US Small <br> Company <br> Index Fund**  | **Schwab <br> Fundamental <br> International <br> Large <br> Company <br> Index Fund**  | **Schwab <br> Fundamental <br> International <br> Small <br> Company <br> Index Fund**  | **Schwab <br> Fundamental <br> Emerging <br> Markets <br> Large <br> Company <br> Index Fund**  |
| **Gross income from securities lending activities** | $**53301** | $**686455** | $**185691** | $**198627** | $**38993** |
|  Fees and/or compensation paid for securities lending activities and related <br> services:  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  | $3092 | $44168 | $13081 | $18373 | $3723 |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees <br> deducted from a pooled cash collateral reinvestment vehicle) that are <br> not included in a revenue split  | $1824 | $14903 | $9225 | $7597 | $987 |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  | $1243 | $14952 | $34618 | $1601 | $44 |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |  |  |  |  |
| **Aggregate fees/compensation paid for securities lending activities** | $**6159** | $**74023** | $**56924** | $**27571** | $**4754** |
| **Net income from securities lending activities<sup>(1)</sup>** | $**47142** | $**612432** | $**128767** | $**171056** | $**34239** |

---

<sup>(1)</sup>

"Net income from securities lending activities" may not match the fund's current financial statements, which may reflect certain accrual adjustments.

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#### PORTFOLIO MANAGERS
**Other Accounts.** In addition to the funds, each portfolio manager (collectively, referred to as the Portfolio Managers) is responsible for the day-to-day management of certain other accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of October 31, 2022.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the funds in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Christopher Bliss  | 30 | $316019503414 | 0 | $0 | 0 | $0 |
| Jeremy Brown | 20 | $258218577123 | 0 | $0 | 0 | $0 |
| Chuck Craig | 11 | $58783562136 | 0 | $0 | 0 | $0 |
| Ferian Juwono | 20 | $258218577123 | 0 | $0 | 0 | $0 |
| David Rios | 11 | $58783562136 | 0 | $0 | 0 | $0 |
| Sabya Sinha | 20 | $258218577123 | 0 | $0 | 0 | $0 |
| Agnes Zau<sup>(1)</sup> | 8 | $152545480653 | 0 | $0 | 0 | $0 |

---

<sup>(1)</sup>

Agnes Zau became responsible for the day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund as of the date of this SAI. Information is reflected as of January 31, 2023.

**Conflicts of Interest.** A Portfolio Manager's management of other accounts may give rise to potential conflicts of interest in connection with his or her management of a fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include separate accounts and other mutual funds advised by Schwab Asset Management (collectively, the Other Managed Accounts). The Other Managed Accounts might have similar investment objectives as a fund, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by a fund. While the Portfolio Managers' management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, Schwab Asset Management does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, Schwab Asset Management believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

*<u>Knowledge of the Timing and Size of Fund Trades.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' day-to-day management of the funds. Because of their positions with the funds, the Portfolio Managers know the size, timing, and possible market impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of a fund. However, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to an index fund, which seeks to track its index, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding separate accounts, with those of a fund. All aggregated orders are subject to Schwab Asset Management's aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account's order.

*<u>Investment Opportunities.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' management of a fund and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over a fund, which conflict of interest may be exacerbated to the extent that Schwab Asset Management or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the fund. Notwithstanding this theoretical conflict of interest, it is Schwab Asset Management's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for a fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for a fund in an effort to outperform its specific benchmark, such an approach might not be suitable for a fund given its investment objectives and related restrictions.

**Compensation.** During the most recent fiscal year, Portfolio Manager compensation consisted of a fixed annual (base) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual Portfolio Manager's overall performance such as the Portfolio Manager's contribution to the investment process, good corporate citizenship, risk management and mitigation, and functioning as an active contributor to the firm's success. The discretionary bonus is determined in accordance with the relevant Portfolio Manager Incentive Plan (the Plan) as follows:

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There are two independent funding components for the Plan:

<sup>●</sup>

a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

<sup>●</sup>

a portion based on Corporate results

#### Investment Fund Performance
At the close of the year, each fund's performance will be determined by its 1-year, 1- and 2-year, or 1- and 3-year percentile standing (based on pre-tax return before expenses) within its designated benchmark, peer group, or category, depending on the strategy of the fund (i.e., whether the fund is passively or actively managed) using standard statistical methods approved by Schwab Asset Management senior management. Investment Fund Performance measurements may be changed or modified at the discretion of the Schwab Asset Management President and Schwab Asset Management Chief Operating Officer. As each participant may be a member of a team that manages and/or supports a number of funds, there may be several funds and/or Other Managed Accounts considered in arriving at the incentive compensation funding.

Portfolio Managers who are chief investment officers of the investment adviser are covered by a Plan that specifically includes a risk mitigation component in the funding determination.

#### Corporate Performance
The Corporate Bonus Plan is an annual bonus plan that provides discretionary awards based on the financial performance of CSC during the annual performance period. Quarterly advances may be paid for the first three quarters. Allocations are discretionary and aligned with CSC and individual performance. Funding for the Plan is determined at the conclusion of the calendar year. Funding will be capped at 200% of target.

#### Allocation of Discretionary Bonus
At year-end, funding for both components of discretionary bonus is allocated to Plan participants by Schwab Asset Management senior management based on their assessment of a variety of performance factors.

Factors considered in Schwab Asset Management senior management's allocation process will include objective and subjective factors that will take into consideration total performance and will include, but are not limited to:

<sup>●</sup>

Fund performance relative to performance measure

<sup>●</sup>

Risk management and mitigation

<sup>●</sup>

Individual performance against key objectives

<sup>●</sup>

Contribution to overall group results

<sup>●</sup>

Functioning as an active contributor to the firm's success

<sup>●</sup>

Team work

<sup>●</sup>

Collaboration between Analysts and Portfolio Managers

<sup>●</sup>

Regulatory/Compliance management

The Portfolio Managers' compensation is not based on the value of the assets held in a fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares.** The following table shows the dollar amount range of the Portfolio Managers' "beneficial ownership" of shares of the funds they manage as of October 31, 2022. Dollar amount ranges disclosed are established by the SEC. "Beneficial ownership" is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (the 1934 Act).

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range of Shares**  |
| Christopher Bliss | Schwab Fundamental US Large Company Index Fund |  |
|  | Schwab Fundamental US Small Company Index Fund |  |
|  | Schwab Fundamental International Large Company Index Fund |  |
|  | Schwab Fundamental International Small Company Index Fund |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund |  |
| Jeremy Brown | Schwab Fundamental US Large Company Index Fund |  |
|  | Schwab Fundamental US Small Company Index Fund | $10001-$50000  |
| Chuck Craig | Schwab Fundamental International Large Company Index Fund |  |
|  | Schwab Fundamental International Small Company Index Fund |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund |  |
| Ferian Juwono | Schwab Fundamental US Large Company Index Fund |  |
|  | Schwab Fundamental US Small Company Index Fund |  |

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range of Shares**  |
| David Rios | Schwab Fundamental International Large Company Index Fund | $10001-$50000  |
|  | Schwab Fundamental International Small Company Index Fund |  |
|  | Schwab Fundamental Emerging Markets Large Company Index Fund |  |
| Sabya Sinha | Schwab Fundamental US Large Company Index Fund | $10001-$50000  |
|  | Schwab Fundamental US Small Company Index Fund | $1-$10000  |
| Agnes Zau<sup>(1)</sup> | Schwab Fundamental US Large Company Index Fund | $10001-$50000  |
|  | Schwab Fundamental US Small Company Index Fund |  |

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<sup>(1)</sup>

Agnes Zau became responsible for the day-to-day co-management of the Schwab Fundamental US Large Company Index Fund and Schwab Fundamental US Small Company Index Fund as of the date of this SAI. Information is reflected as of January 31, 2023.

#### BROKERAGE ALLOCATION AND OTHER PRACTICES

#### Portfolio Turnover
For reporting purposes, a fund's portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (short-term securities) are excluded. Securities delivered in the processing of in-kind redemptions are also excluded from the calculation.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate higher capital gains and transaction costs, such as brokerage commissions.

Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, and/or changes in the investment adviser's investment outlook.

The portfolio turnover rate for each of the funds for the past two fiscal years is as follows.

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| | | |
|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  |
| Schwab Fundamental US Large Company Index Fund | 13% | 16% |
| Schwab Fundamental US Small Company Index Fund | 35% | 36% |
| Schwab Fundamental International Large Company Index Fund | 13% | 21% |
| Schwab Fundamental International Small Company Index Fund | 36% | 35% |
| Schwab Fundamental Emerging Markets Large Company Index Fund | 24% | 32% |

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#### Portfolio Transactions
The investment adviser makes decisions with respect to the purchase and sale of portfolio securities on behalf of the funds. The investment adviser is responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. A fund generally does not incur any commissions or sales charges when it invests in underlying Schwab Funds, but it may incur such costs if it invests directly in other types of securities or in unaffiliated funds. Purchases and sales of securities on a stock exchange, including ETF shares, or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed-income securities may be transacted with the issuer, the issuer's underwriter or a dealer. The funds do not usually pay brokerage commissions on purchases and sales of fixed-income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The prices the funds pay to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the funds may invest are traded primarily in the over-the-counter market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the funds will primarily consist of dealer spreads and brokerage commissions.

The investment adviser seeks to obtain the best execution for the funds' portfolio transactions. The investment adviser may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following: execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling;

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provision of additional brokerage or research services or products; whether a broker guarantees that a fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to "market-on-close" pricing aligns with fund objectives; or whether a broker guarantees that a fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser believes that VWAP execution is in a fund's best interest. In addition, the investment adviser may have incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser may cause a fund to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: company financial data and economic data (e.g., unemployment, inflation rates and GDP figures), stock quotes, last sale prices and trading volumes, research reports analyzing the performance of a particular company or stock, narrowly distributed trade magazines or technical journals covering specific industries, products, or issuers, seminars or conferences registration fees which provide substantive content relating to eligible research, quantitative analytical software and software that provides analyses of securities portfolios, trading strategies and pre/post trade analytics, discussions with research analysts or meetings with corporate executives which provide a means of obtaining oral advice on securities, markets or particular issuers, short-term custody related to effecting particular transactions and clearance and settlement of those trades, lines between the broker-dealer and order management systems operated by a third party vendor, dedicated lines between the broker-dealer and the investment adviser's order management system, dedicated lines providing direct dial-up service between the investment adviser and the trading desk at the broker-dealer, message services used to transmit orders to broker-dealers for execution, electronic communication of allocation instructions between institutions and broker-dealers, comparison services required by the SEC or another regulator (e.g., use of electronic confirmation and affirmation of institutional trades), exchange of messages among broker-dealers, custodians, and institutions related to a trade, post-trade matching of trade information, routing settlement instructions to custodian banks and broker-dealers' clearing agents, software that provides algorithmic trading strategies, and trading software operated by a broker-dealer to route orders to market centers or direct market access systems. The investment adviser may use research services furnished by brokers or dealers in servicing all client accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser may receive a service from a broker or dealer that has both a "research" and a "non-research" use. When this occurs, the investment adviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions or spreads, while the investment adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser faces a potential conflict of interest, but the investment adviser believes that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser may purchase for the funds, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will provide research "credits" in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the 1934 Act.

The investment adviser may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable funds to trade directly with other institutional holders. At times, this may allow funds to trade larger blocks than would be possible trading through a single market maker.

The investment adviser may aggregate securities sales or purchases among two or more funds. The investment adviser will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of a fund are aggregated with other accounts managed by the investment adviser, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

In determining when and to what extent to use Schwab or any other affiliated broker-dealer as its broker for executing orders for the funds on securities exchanges, the investment adviser follows procedures, adopted by the funds' Board, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

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#### Brokerage Commissions
For each of the last three fiscal years, the funds paid the following brokerage commissions. Variances in brokerage commissions paid by a fund from year to year are due to increases and decreases in portfolio turnover in response to asset flows.

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| | | | |
|:---|:---|:---|:---|
| **Funds**  | **2022**  | **2021**  | **2020**  |
| Schwab Fundamental US Large Company Index Fund | $257910 | $211110 | $257617 |
| Schwab Fundamental US Small Company Index Fund | $369227 | $344981 | $556689 |
| Schwab Fundamental International Large Company Index Fund | $292649 | $169879 | $159290 |
| Schwab Fundamental International Small Company Index Fund | $110753 | $139997 | $145748 |
| Schwab Fundamental Emerging Markets Large Company Index Fund | $258648 | $306555 | $245102 |

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#### Regular Broker-Dealers
During the fiscal year, the funds held securities issued by their respective "regular broker-dealers" (as defined in Rule 10b-1 under the 1940 Act), indicated below as of October 31, 2022.

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| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | J.P. Morgan Securities LLC | $115369649 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | BofA Securities, Inc. | $72544159 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | Citigroup Global Markets, Inc. | $65772596 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | Goldman Sachs & Co. LLC | $31968116 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | Morgan Stanley & Co. LLC | $18875928 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | Charles Schwab & Co., Inc. | $6547679 |
|  Schwab Fundamental <br> US Large Company <br> Index Fund  | Wells Fargo Securities, LLC | $2545216 |
|  Schwab Fundamental <br> US Small Company <br> Index Fund  | Virtu Americas LLC | $1073457 |
|  Schwab Fundamental <br> International Large Company <br> Index Fund  | HSBC Securities (USA) Inc. | $11312320 |
|  Schwab Fundamental <br> International Large Company <br> Index Fund  | SG Americas Securities, LLC | $4400169 |
|  Schwab Fundamental <br> International Large Company <br> Index Fund  | UBS Securities LLC | $4063514 |
|  Schwab Fundamental <br> International Large Company <br> Index Fund  | Barclays Bank PLC | $3664848 |
|  Schwab Fundamental <br> International Large Company <br> Index Fund  | Credit Suisse Securities (USA) LLC | $1186724 |
|  Schwab Fundamental <br> International Small Company <br> Index Fund  |  | N/A |
|  Schwab Fundamental Emerging <br> Markets Large Company <br> Index Fund  |  | N/A |

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#### PROXY VOTING
The Board has delegated the responsibility for voting proxies to Schwab Asset Management, pursuant to the investment adviser's Proxy Voting Policy with respect to proxies voted on behalf of the various Schwab Funds' portfolios. A description of such Proxy Voting Policy is included in Appendix – Proxy Voting Policy.

The Trust is required to disclose annually a fund's complete proxy voting record on Form N-PX. A fund's proxy voting record for the most recent 12-month period ended June 30th is available by visiting the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**. A fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

#### PORTFOLIO HOLDINGS DISCLOSURE
 **For this section only, the following disclosure relates to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust (collectively, the Trusts) and each series thereunder (each a fund and collectively, the funds).** 

The Trusts' Board has approved policies and procedures that govern the timing and circumstances regarding the disclosure of fund portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds' portfolio securities is in the best interests of fund shareholders, and include procedures to address conflicts between the

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interests of the funds' shareholders, on the one hand, and those of the funds' investment adviser, subadviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, subadviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a fund's subadviser, if applicable) to authorize the release of the funds' portfolio holdings prior to regular public disclosure (as outlined in the prospectus and below) or regular public filings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of the funds' policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities which were authorized to be provided "early disclosure" of the funds' portfolio holdings information and will periodically review any agreements that the Trusts have entered into to selectively disclose portfolio holdings.

Portfolio holdings may be made available on a selective basis to ratings agencies, certain industry organizations, consultants and other qualified financial professionals when the appropriate officer of the Trusts determines such disclosure meets the requirements noted above and serves a legitimate business purpose. Agreements entered into with such entities will describe the permitted use of portfolio holdings and provide that, among other customary confidentiality provisions: (i) the portfolio holdings will be kept confidential; (ii) the person will not trade on the basis of any material non-public information; and (iii) the information will be used only for the purpose described in the agreement.

The funds' service providers including, without limitation, the investment adviser, subadvisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser, counsel, auditor, proxy voting service provider, pricing information vendors, trade execution measurement vendors, portfolio management system providers, cloud database providers, securities lending agents, publisher, printer and mailing agent may receive disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Schwab Asset Management, any subadviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street and/or Brown Brothers Harriman & Co., as service providers to the funds, are currently receiving this information on a daily basis. Donnelley Financial Solutions, as a service provider to the funds, is currently receiving this information on a quarterly basis. Deloitte, the Transfer Agent, and the Distributor, as service providers to the funds, receive this information on an as-needed basis. Service providers are subject to a duty of confidentiality with respect to any portfolio holdings information they receive whether imposed by the confidentiality provisions of the service providers' agreements with the Trusts or by the nature of its relationship with the Trusts. Although certain of the service providers are not under formal confidentiality obligations in connection with disclosure of portfolio holdings, a fund will not continue to conduct business with a service provider who the fund believes is misusing the disclosed information.

To the extent that a fund invests in an unaffiliated acquired fund, the Trusts will, when required by Rule 12d1-4, promptly notify the acquired fund, upon causing a fund to acquire more than 3% of the acquired fund's outstanding shares.

The funds' policies and procedures prohibit the funds, the funds' investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

Generally, a complete list of a fund's portfolio holdings is published on the fund's website www.schwabassetmanagement.com on the "Prospectus & Reports" tab under "Portfolio Holdings" generally 60-80 days after a fund's fiscal quarter-end in-line with regulatory filings unless a different timing is outlined in the fund's prospectus.

Specifically for the Schwab ETFs (other than the Schwab Ariel ESG ETF), each Schwab ETF discloses its portfolio holdings each business day on its website before the opening of regular trading on the ETF's primary listing exchange in accordance with the requirements of Rule 6c-11 under the 1940 Act. Portfolio holdings information made available in connection with the process of purchasing or redeeming Creation Units for the Schwab ETFs may be provided to other entities that provided services to the funds in the ordinary course of business after it has been disseminated to the NSCC.

The Schwab Money Funds have an ongoing arrangement to make available information about the funds' portfolio holdings and information derived from the funds' portfolio holdings to iMoneyNet, a rating and ranking organization, which is subject to a confidentiality agreement. Under its arrangement with the funds, iMoneyNet, among other things, receives information concerning the funds' net assets, yields, maturities and portfolio compositions on a weekly basis, subject to a one business day lag.

On the website, the funds also may provide, on a monthly or quarterly basis, information regarding certain attributes of a fund's portfolio, such as a fund's top ten holdings, sector weightings, composition, credit quality and duration and maturity, as applicable. This information is generally updated within 5-25 days after the end of the period. This information on the website is publicly available to all categories of persons.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of a fund in connection with or relating to a fund or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

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Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases, commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning a fund. Commentary and analysis include, but are not limited to, the allocation of a fund's portfolio securities and other investments among various asset classes, sectors, industries, countries or other relevant category, the characteristics of the stock components and other investments of a fund, the attribution of fund returns by asset class, sector, industry, country or other relevant category, and the volatility characteristics of a fund.

#### DESCRIPTION OF THE TRUST
Each fund is a series of Schwab Capital Trust, an open-end management investment company organized as a Massachusetts business trust on May 7, 1993.

The funds may hold special shareholder meetings, which may cause the funds to incur non-routine expenses. These meetings may be called for purposes such as electing trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon.

The bylaws of the Trust provide that one-third of shares present in person or represented by proxy and entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, or of the Declaration of Trust or of the bylaws permits or requires that (1) holders of any series shall vote as a series, then one-third of the aggregate number of shares of that series present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (2) holders of any class shall vote as a class, then one-third of the aggregate number of shares of that class present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any meeting of shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date or time, whether or not a quorum is present. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. The Declaration of Trust specifically authorizes the Board to terminate the Trust (or any of its funds) by notice to the shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance, which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. There is a remote possibility that a fund could become liable for a misstatement in the prospectus or SAI about another fund.

As more fully described in the Declaration of Trust, the trustees may each year, or more frequently, distribute to the shareholders of each series accrued income less accrued expenses and any net realized capital gains less accrued expenses. Distributions of each year's income of each series shall be distributed pro rata to shareholders in proportion to the number of shares of each series held by each of them. Distributions will be paid in cash or shares or a combination thereof as determined by the trustees. Distributions paid in shares will be paid at the net asset value as determined in accordance with the bylaws.

Any series of the Trust may reorganize or merge with one or more other series of the Trust or of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the trustees and entered into by the relevant series in connection therewith. In addition, such reorganization or merger may be authorized by vote of a majority of the trustees then in office and, to the extent permitted by applicable law and the Declaration of Trust, without the approval of shareholders of any series.

#### PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES

#### Purchasing and Redeeming Shares of the Funds
The funds are open each day that the New York Stock Exchange (NYSE) is open (business days). The NYSE's trading session is normally conducted from 9:30 a.m. until 4:00 p.m. Eastern Time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE's trading session closes early. The NYSE typically observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although it is expected that the same holidays will be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time. Orders that are received in good order by a fund's transfer agent no later than the time specified by the Trust will be executed that day at the fund's share price calculated that day. On any day that the NYSE closes early, the funds reserve the right to advance the time by which purchase, exchange and redemption orders must be received by the funds in order to be executed that day at

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that day's share price. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase, exchange and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

The funds have authorized one or more financial intermediaries, including Schwab, to accept on their behalf purchase, exchange and redemption orders. Such financial intermediaries have also been authorized to designate other intermediaries to accept purchase, exchange and redemption orders on the funds' behalf. The funds will be deemed to have received a purchase, exchange or redemption order when an authorized intermediary or, if applicable, an intermediary's authorized designee, receives such order. Such orders will be priced at the respective fund's net asset value per share next determined after such orders are received by an authorized intermediary or the intermediary's authorized designee.

As long as the funds or Schwab follow reasonable procedures to confirm that an investor's telephone or internet order is genuine, they will not be liable for any losses the investor may experience due to unauthorized or fraudulent instructions. These procedures may include requiring a form of personal identification or other confirmation before acting upon any telephone or internet order, providing written confirmation of telephone or internet orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab, other authorized financial intermediaries or, for direct shareholders, by the funds' transfer agent.

The Trust's Declaration of Trust provides that shares may be automatically redeemed if held by a shareholder in an amount less than the minimum required by each fund. Each fund's minimum initial investments and minimum balance requirements, if any, are set forth in the prospectus. Currently, each fund does not have an investment minimum. The minimums may be changed without prior notice.

Each of the funds has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of these limits may be paid, in whole or in part, in investment securities or in cash, as the Board may deem advisable. Payment will be made wholly in cash unless the Board believes that economic or market conditions exist that would make such payment a detriment to the best interests of a fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Pricing of Shares." A redeeming shareholder would normally incur transaction costs if he or she were to convert the securities to cash.

Each fund is designed for long-term investing. Because short-term trading activities can disrupt the smooth management of a fund and increase its expenses, each fund reserves the right, in its sole discretion, to refuse any purchase or exchange order, including any purchase or exchange order which appears to be associated with short-term trading activities or "market timing." Because market timing decisions to buy and sell securities typically are based on an individual investor's market outlook, including such factors as the perceived strength of the economy or the anticipated direction of interest rates, it is difficult for a fund to determine in advance what purchase or exchange orders may be deemed to be associated with market timing or short-term trading activities. More information regarding the funds' policies regarding "market timing" is included in the funds' prospectus.

In certain circumstances, shares of a fund may be purchased "in kind" (i.e., in exchange for securities, rather than for cash). The securities tendered as part of an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable as evidenced by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities accepted by a fund will be valued, as set forth in the fund's prospectus, as of the time of the next determination of net asset value after such acceptance. The shares of a fund that are issued to the shareholder in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of a fund and must be delivered to the fund by the investor upon receipt from the issuer. A fund will not accept securities in exchange for its shares unless such securities are, at the time of the exchange, eligible to be held by the fund and satisfy such other conditions as may be imposed by the fund's investment adviser.

#### Exchanging Shares of the Funds
Methods to purchase and redeem shares are set forth in the funds' prospectus. An exchange order involves the redemption of all or a portion of the shares of one Schwab Fund and the simultaneous purchase of shares of another Schwab Fund. Exchange orders must meet the minimum investment and any other requirements of the fund or class purchased. Exchange orders may not be executed between shares of Sweep Investments<sup>®</sup> and shares of non-Sweep Investments. Shares of Sweep Investments may be bought and sold automatically pursuant to the terms and conditions of your Schwab account agreement. In addition, different exchange policies may apply to Schwab Funds that are bought and sold through third-party intermediaries and the exchange privilege between Schwab Funds may not be available through third-party intermediaries.

The funds and Schwab reserve certain rights with regard to exchanging shares of the funds. These rights include the right to: (i) refuse any purchase or exchange order that may negatively impact a fund's operations; (ii) refuse orders that appear to be associated with short-term trading activities; and (iii) materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

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#### Delivery of Shareholder Documents
Typically once a year, an updated prospectus will be mailed or electronically delivered to shareholders describing each fund's investment strategies, risks and shareholder policies. Twice a year, financial reports will be mailed or electronically delivered (or a notice will be mailed and financial reports will be made available on the fund's designated website) to shareholders describing each fund's performance and investment holdings. In order to eliminate duplicate mailings of shareholder documents, each household may receive one copy of these documents, under certain conditions. This practice is commonly called "householding." If you want to receive multiple copies, you may write or call your fund at the address or telephone number on the front of this SAI or contact the financial intermediary through which you hold fund shares. Your instructions will be effective within 30 days of receipt by a fund or other date as communicated by the financial intermediary.

#### Pricing of Shares
Each business day, the funds calculate their share price, net asset value per share or NAV, as of the close of the NYSE (generally 4:00 p.m. Eastern Time). This means that NAVs are calculated using the values of a fund's portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available or that the investment adviser deems to be unreliable are required to be valued at fair value following procedures approved by the Board. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share prices as of the normally scheduled close of regular trading on the NYSE for that day.

To the extent a fund invests in foreign securities, shareholders should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of some of the fund's securities may change on days when it is not possible to buy or sell shares of the fund.

The funds use approved pricing sources (including pricing services) to provide values for their portfolio securities. Values are generally determined by the approved pricing sources as follows: securities traded on stock exchanges, excluding the NASDAQ National Market System, are valued at the last-quoted sales price on the exchange on which such securities are primarily traded (closing values), or, lacking any sales, at the mean between the bid and ask prices; securities traded in the over-the-counter market are generally valued at an evaluated price using a mid-price supplied by an approved, independent pricing service. The mid-price is the mean of the bid and ask prices as calculated by the pricing service. Generally, securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the official closing price or last sales price on the exchange where the securities are primarily traded with these values then translated into U.S. dollars at the current exchange rate. Fixed-income securities normally are valued based on valuations provided by approved pricing services. Securities will be fair valued pursuant to procedures approved by the funds' Board when market quotations are not "readily available" or the investment adviser deems them unreliable. For example, a fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market. The Board has designated the investment adviser as the valuation designee (Valuation Designee) for the funds to perform the fair value determination relating to all fund investments. The Valuation Designee periodically provides reports to the Board on items related to its fair value of fund investments.

#### TAXATION
This discussion of U.S. federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

#### Federal Tax Information for the Funds
It is each fund's policy to qualify for taxation as a RIC by meeting the requirements of Subchapter M of the Internal Revenue Code. By qualifying as a RIC, each fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If a fund does not qualify as a RIC under the Internal Revenue Code, it will be subject to federal income tax on its net investment income and any net realized capital gains. In addition, each fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

Each fund is treated as a separate entity for federal income tax purposes and is not combined with the Trust's other funds. Each fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, a fund must, among other requirements, distribute annually to its shareholders an amount at least equal to the sum of 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and 90% of its net tax-exempt income. Among these requirements are the following: (i) at least 90% of a fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or

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other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of a fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as "qualified publicly traded partnerships" for purposes of the Subchapter M diversification rules described above. To do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, the partnership must meet the 90% gross income requirements for the exception from treatment as a corporation with gross income other than income consisting of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Internal Revenue Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as defined in the Internal Revenue Code) for the calendar year plus 98.2% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, a fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year and certain amounts with respect to which estimated taxes are paid in such calendar year. A fund may in certain circumstances be required to liquidate fund investments in order to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of a fund to satisfy the requirements for qualification as a RIC.

A fund's transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Internal Revenue Code and are subject to special tax rules. In a given case, these rules may accelerate income to a fund, defer its losses, cause adjustments in the holding periods of a fund's assets, convert short-term capital losses into long-term capital losses or otherwise affect the character of a fund's income. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of a fund and its shareholders.

Each fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. Each fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. Each fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund's fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon or other securities which are sold at original issue discount and thus do not make periodic cash interest payments, a fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any corresponding interest payments on such obligations during that period. Because each fund distributes all of its net investment income to its shareholders, a fund may have to sell fund securities to distribute such imputed income which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in each fund's prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of the funds. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in the funds.

Any dividends declared by a fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by a fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced rates to individuals as

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described below) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of the fund become ex-dividend with respect to such dividend (and the fund must also satisfy those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by each fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gains (if any) that are reported as capital gain dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of a fund. However, if you receive a capital gain dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gain dividend, be treated as a long-term capital loss. The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the taxpayer's income exceeds certain threshold amounts.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

A fund will inform you of the amount of your ordinary income dividends and capital gains distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year. For corporate investors in a fund, dividend distributions the fund reports as dividends received from qualifying domestic corporations will be eligible for the 50% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by a fund also may be subject to state, local and foreign taxes, and their treatment under applicable tax laws may differ from the federal income tax treatment.

A fund will be required in certain cases to withhold at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends and redemption proceeds paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to "backup withholding;" or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on taxable distributions derived from net investment income and short-term capital gains; provided, however, that U.S. source interest related dividends and short-term capital gains dividends generally are not subject to U.S. withholding taxes if a fund elects to make reports with respect to such dividends. Distributions to foreign shareholders of such short-term capital gains dividends, and long-term capital gains, and any gains from the sale or other disposition of shares of a fund, generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Internal Revenue Code's definition of "resident alien" or (2) is physically present in the U.S. for 183 days or more per year. Foreign shareholders may also be subject to U.S. estate taxes with respect to shares in a fund. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Notwithstanding the foregoing, income, if any, derived by a fund from investments in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) may be classified as "excess inclusion income". With respect to foreign shareholders, no exception or reduction in withholding tax will apply to such excess inclusion income.

The funds are required to withhold U.S. tax (at a 30% rate) on payments of dividends made to certain non-U.S. entities that fail to comply with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the funds to enable the funds to determine whether withholding is required.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, each fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in a fund where, for example, (i) the fund invests in REITs that hold residual interests in REMICs or (ii) shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special

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rules and should consult their tax advisors. There are no restrictions preventing a fund from holding investments in REITs that hold residual interests in REMICs, and a fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

For taxable years beginning after 2017 and before 2026, non-corporate taxpayers generally may deduct 20% of "qualified business income" derived either directly or through partnerships or S corporations. For this purpose, "qualified business income" generally includes ordinary REIT dividends and income derived from MLP investments. A fund is permitted to pass through to shareholders the character of ordinary REIT dividends so as to allow non-corporate shareholders to claim this deduction. There currently is no mechanism for a fund to pass through to non-corporate shareholders the character of income derived from MLP investments. It is uncertain whether future legislation or other guidance will enable the funds to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

Income that the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund or Schwab Fundamental Emerging Markets Large Company Index Fund receives from sources within various foreign countries may be subject to foreign income taxes withheld at the source. If a fund has more than 50% of its assets invested in foreign securities at the end of its taxable year, it may elect to "pass through" to its shareholders the ability to take either the foreign tax credit or the deduction for foreign taxes. Pursuant to this election, U.S. shareholders must include in gross income, even though not actually received, their respective pro rata share of foreign taxes, and may either deduct their pro rata share of foreign taxes (but not for alternative minimum tax purposes) or credit the tax against U.S. income taxes, subject to certain limitations described in Internal Revenue Code sections 901 and 904. A shareholder who does not itemize deductions may not claim a deduction for foreign taxes. It is expected that each of the Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund will have more than 50% of the value of its total assets at the close of its taxable year invested in foreign securities, and that it will make this election.

The Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund may invest in non-U.S. corporations, which could be treated as a passive foreign investment company (PFIC) or become a PFIC under the Internal Revenue Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent a fund does invest in a PFIC, it may be eligible to elect to treat the PFIC as a "qualified electing fund" or mark-to-market its investments in PFICs annually. In either case, these funds may be required to distribute amounts in excess of realized income and gains. To the extent a fund does invest in foreign securities which are determined to be PFIC securities and is required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to the funds' shareholders. Therefore, the payment of this tax would reduce a fund's economic return from its PFIC shares, and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains.

Section 988 of the Internal Revenue Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by a fund. Under these rules, foreign exchange gain or loss realized by a fund with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. Foreign currency losses could result in distributions of ordinary income being reclassified as a return of capital for tax purposes.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC such as a fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in a fund.

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#### APPENDIX – PROXY VOTING POLICY
The Charles Schwab Family of Funds Schwab Investments Schwab Capital Trust Schwab Annuity Portfolios Laudus Trust Schwab Strategic Trust

### PROXY VOTING POLICY AS OF MARCH 2023
The Boards of Trustees (the "Board") of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Laudus Trust ("Schwab Funds") and Schwab Strategic Trust ("Schwab ETFs"; collectively with Schwab Funds, the "Funds") have delegated to the Funds' investment adviser, Charles Schwab Investment Management, Inc. ("CSIM"), the responsibility to vote proxies relating to the Funds' portfolio securities pursuant to CSIM's Proxy Voting Policy ("CSIM Proxy Policy"). On an annual basis, CSIM will report to the Board any changes to the CSIM Proxy Policy and on the implementation of the CSIM Proxy Policy.

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Charles Schwab Investment Management, Inc.

I. ### INTRODUCTION
Charles Schwab Investment Management, Inc. ("CSIM"), as an investment adviser, is responsible for voting proxies with respect to the securities held in accounts of investment companies and other clients that have delegated the authority to vote proxies to CSIM. CSIM's Proxy Committee exercises and documents CSIM's responsibility with regard to voting of client proxies, including the review and approval of the Proxy Voting Policy (the "Proxy Policy"). CSIM's Investment Stewardship Team has the primary responsibility to oversee that voting is carried out consistent with the Proxy Policy. The Investment Stewardship Team also conducts research into proxy issues and carries out engagement activities with companies. The Proxy Committee receives reports from the Investment Stewardship Team on these activities.

II. ### PHILOSOPHY
As a leading asset manager, it is CSIM's responsibility to use its proxy votes to encourage transparency, corporate governance structures, and the management of environmental, social and governance (ESG) issues that it believes protect and promote shareholder value.

Just as the investors in CSIM's equity funds generally have a long-term investment horizon, CSIM takes a long-term, measured approach to investment stewardship. CSIM's client-first philosophy drives all of its efforts, including its approach to decision making. In the investment stewardship context, that unfolds through CSIM's efforts to appropriately manage risk by encouraging transparency and focusing on corporate governance structures that will help protect or promote shareholder value. CSIM also recognizes that companies can conduct themselves in ways that have important environmental and social consequences. Therefore, CSIM's focus on maximizing long-term shareholder value includes consideration of potential environmental and social impacts that we believe are relevant to individual companies.

In general, CSIM believes corporate directors, as the elected representatives of all shareholders, are best positioned to oversee the management of their companies. Accordingly, CSIM typically supports a board of directors' and management's recommendations on proxy matters. However, CSIM will vote against management's recommendations when it believes doing so will protect or promote long-term shareholder value.

III. ### USE OF PROXY ADVISORS
To assist CSIM in its responsibility for voting proxies and the overall proxy voting process, CSIM has retained Glass, Lewis & Co., LLC ("Glass Lewis") as an expert in the proxy voting and corporate governance area. The services provided by Glass Lewis include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. CSIM has also retained Institutional Shareholder Services Inc. to conduct research and provide voting recommendations on certain topics and may retain additional experts in the proxy voting, corporate governance, and ESG areas in the future.

To support CSIM in efficiently executing its votes, Glass Lewis, simultaneously with issuing its voting recommendations, also automatically populates votes based on CSIM's custom voting guidelines, except for certain ballot items which CSIM elects to vote manually. CSIM's votes are executed just prior to the vote deadline, which allows CSIM the opportunity to incorporate changes in Glass Lewis voting recommendations or the receipt of additional information from the company or other parties.

IV. ### PROXY VOTING PRINCIPLES
CSIM invests on behalf of its clients in companies domiciled all over the world. Since corporate governance standards and best practices differ by country and jurisdiction, the market context is taken into account in the analysis of proposals. Furthermore, there are instances where CSIM may determine that voting is not in the best interests of its clients (typically due to costs or to trading restrictions) and will refrain from submitting votes.

The Proxy Committee reviews CSIM's proxy voting guidelines with input from the Investment Stewardship Team at least annually and evaluates them in light of the long-term best interests of shareholders. In addition, for U.S. companies, contested director elections, "vote no" campaigns, mergers and acquisitions, some executive compensation and election of director proposals, and many shareholder proposals, including ESG-related proposals, such as those requesting additional environmental, social and political disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

The following is a summary of CSIM's proxy voting principles which are grouped according to types of proposals usually presented to shareholders in proxy statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

DIRECTORS AND AUDITORS

i. <u>Directors</u>

As a starting point, CSIM expects the board to be composed of at least a majority of independent directors and to be responsive to shareholders. CSIM also expects directors that serve on a company's nominating, compensation or audit committee to be independent. CSIM believes that diversity of background, experience and skills, and personal characteristics, including gender, race, ethnicity and age, meaningfully contribute to a board's ability to make effective decisions on behalf of shareholders.

Factors that may result in a vote against one or more directors:

<sup>●</sup>

The board is not majority independent

<sup>●</sup>

A large-cap company board does not have at least two female directors, or a mid- or small-cap company does not have any female directors, and the board has not provided a reasonable explanation for its lack of gender diversity

<sup>●</sup>

A large-cap company board does not have at least one racially/ethnically diverse director, or has not provided explicit disclosure of director diversity and skills

<sup>●</sup>

Non-independent directors serve on the nominating, compensation or audit committees

<sup>●</sup>

A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

<sup>●</sup>

The directors approved executive compensation schemes that appear misaligned with shareholders' interests

<sup>●</sup>

A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to concerns of shareholders

<sup>●</sup>

The company has not provided explicit disclosure of board oversight of material risks, including environmental and social risks

ii. <u>Contested Director Elections</u>

A proxy contest is when a dissident shareholder (or group of shareholders) proposes outside nominees to compete against incumbent directors. A "Vote No" campaign is when an activist shareholder attempts to solicit votes against certain directors. CSIM evaluates proxy contests and Vote No campaigns on a case-by-case basis and votes for the outcome it believes will maximize long-term shareholder value. CSIM considers numerous factors when making its voting decision, including but not limited to the merit of the campaign, the qualifications of director nominees, long-term company performance compared to peers, board oversight of material risks, and, in the case of proxy contests, the dissident's and management's strategic plans for driving improvements.

iii. <u>Auditors</u>

CSIM typically supports the ratification of auditors unless CSIM believes that the auditors' independence may have been compromised.

Factors that may result in a vote against the ratification of auditors:

<sup>●</sup>

Audit-related fees are less than half of the total fees paid by the company to the audit firm

<sup>●</sup>

A recent material restatement of annual financial statements

<sup>●</sup>

A pattern of inaccurate audits or other behavior that may call into question an auditor's effectiveness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

BOARD MATTERS

i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

<sup>●</sup>

Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

<sup>●</sup>

Number of nominees is no more than 20% of current board (rounded down to nearest whole number)

<sup>●</sup>

Group size is capped at 20 shareholders

iv. <u>Separation of Chair and CEO role</u>

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CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring the separation of these roles unless certain circumstances are in place.

Factors that may result in a vote supporting a shareholder proposal requiring the separation of the Chair and CEO roles:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

<sup>●</sup>

Lack of robust lead independent director

v. <u>Independent Chair</u>

CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring an independent chair unless CSIM has concerns regarding the board's accountability or responsiveness to shareholders.

Factors that may result in a vote supporting a shareholder proposal requiring an independent chair:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

COMPENSATION

i. <u>Advisory Vote on Executive Compensation and Frequency</u>

CSIM generally supports advisory votes on executive compensation (which are proposed by management and are known as "Say-On-Pay") when the compensation scheme appears aligned with shareholder economic interests and lacks problematic features.

Factors that may result in a vote against a company's Say-On-Pay proposal:

<sup>●</sup>

Executive compensation is out of line with industry peers considering the company's performance over time

<sup>●</sup>

Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

<sup>●</sup>

Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

<sup>●</sup>

Compensation amounts are increased, or goals are lowered without providing a valid explanation

<sup>●</sup>

Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

CSIM typically supports annual advisory votes on executive compensation.

ii. <u>Equity Compensation Plans</u>

CSIM generally supports stock-based compensation plans when they do not overly dilute shareholders by providing participants with excessive awards and lack problematic features.

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Factors that may result in a vote against Equity Compensation Plans:

<sup>●</sup>

Plan's total potential dilution appears excessive

<sup>●</sup>

Plan's burn rate appears excessive compared to industry peers

<sup>●</sup>

Plan allows for the re-pricing of options without shareholder approval

<sup>●</sup>

Plan has an evergreen feature

iii. <u>Employee Stock Purchase Plans</u>

CSIM supports the concept of broad employee participation in a company's equity. Therefore, CSIM typically supports employee stock purchase plans when the shares can be purchased at 85% or more of the shares' market value.

iv. <u>Re-price/Exchange Option Plans</u>

CSIM generally only supports management proposals to re-price options when the plan excludes senior management and directors, does not excessively dilute shareholders, and the company has not significantly underperformed its industry peers over time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

ANTI-TAKEOVER

i. <u>Shareholder Rights Plans</u>

Shareholder Rights Plans constrain a potential acquirer's ability to buy shares in a company above a certain threshold without the approval of the company's board of directors. While such a plan may help a company in achieving a higher bid, it may also entrench the incumbent management and board. CSIM believes that shareholders should have the right to approve a Shareholder Rights Plan within a year of its adoption. CSIM generally votes against such plans if they do not have safeguards to protect shareholder interests.

Factors that may result in a vote against a Shareholder Rights Plan proposal:

<sup>●</sup>

Plan does not expire in a relatively short time horizon

<sup>●</sup>

Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

<sup>●</sup>

Plan automatically renews without shareholder approval

<sup>●</sup>

Company's corporate governance profile

ii. <u>Right to Call Special Meeting</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to call a special meeting unless the threshold to call a special meeting is 25% or more of shares outstanding to avoid wasting corporate resources.

iii. <u>Right to Act by Written Consent</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to act by written consent if the company already offers shareholders the right to call special meetings. CSIM expects appropriate mechanisms for implementation.

iv. <u>Supermajority Voting</u>

CSIM generally supports the concept of simple majority standards to pass proposals.

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

i. <u>Increase in Authorized Common Shares</u>

CSIM typically supports proposals to increase the authorized shares unless the company does not sufficiently justify the need for the use of the proposed shares.

ii. <u>Preferred Shares</u>

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

iii. <u>Mergers and Acquisitions</u>

CSIM generally supports transactions that appear to maximize shareholder value. CSIM assesses these proposals on a case-by-case basis and considers the proposed transaction's strategic rationale, the offer premium, the board's oversight of the sales process, and other pertinent factors.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F.

ENVIRONMENTAL AND SOCIAL PROPOSALS

Effective oversight of material ESG risks relevant to a company and its business is an essential board function. In CSIM's view, appropriate risk oversight of environmental and social issues contributes to sustainable long-term value and companies should provide pertinent information on material risks common to their industry and specific to their business. CSIM evaluates, on a case-by-case basis, shareholder proposals regarding environmental and social issues, including those calling for additional disclosure of material risks to a company, with emphasis placed on those risks identified within the framework of the Sustainability Accounting Standards Board (SASB).

CSIM recognizes that financial performance can be impacted by a company's environmental, social and human capital management policies. CSIM's case-by-case evaluation of these proposals takes into consideration a company's current practices, level of reporting, disclosures by its peers, and the existence of controversies or litigation related to the issue.

CSIM believes that, in most instances, the board is best positioned to determine a company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

i. <u>Climate Change Proposals</u>

CSIM believes that companies should provide pertinent information on the management of potential climate change-related risks, with the understanding that the relevance of this disclosure for any specific company will vary depending on its industry and operations. For companies operating in carbon-intensive industries, we believe boards should be considering a range of energy demand scenarios. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

ii. <u>Corporate Political Activity Proposals</u>

CSIM expects the board of directors to have a stated oversight process for political contributions and lobbying activities. CSIM evaluates proposals asking for disclosure of a company's political contributions and lobbying activities and generally supports them if there is no evidence of board oversight or a company's disclosure is deficient and lags that of its peers.

V. ### ADMINISTRATION
?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

CONFLICTS OF INTERESTS

CSIM maintains the following practices that seek to prevent undue influence on its proxy voting activity. Such influence might arise from any relationship between the company holding the proxy (or any shareholder or board member of the company) and CSIM, CSIM's affiliates, a mutual fund or exchange-traded fund managed by CSIM ("Affiliated Fund"), an affiliate of such Fund, or a CSIM employee. The Proxy Committee has directed that Glass Lewis be instructed to vote any such proxies in the same proportion as the votes of all other shareholders in the fund (i.e., "echo vote").

With respect to proxies of an underlying Affiliated Fund, the Investment Stewardship Team will ensure that such proxies are "echo voted", unless otherwise required by law. When required by law or applicable exemptive order, the Investment Stewardship Team will also ensure the "echo voting" of an unaffiliated mutual fund or exchange traded fund. For example, certain exemptive orders issued to a fund by the Securities and Exchange Commission and Section 12(d)(1)(F) of the Investment Company Act of 1940, as amended, require the fund, under certain circumstances, to "echo vote" proxies of registered investment companies that serve as underlying investments of the fund.

In addition, with respect to holdings of The Charles Schwab Corporation ("CSC") (ticker symbol: SCHW), the Investment Stewardship Team will ensure such proxies are echo-voted, unless otherwise required by law.

Where the Proxy Committee has delegated an item to the Investment Stewardship Team, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

<sup>●</sup>

reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

<sup>●</sup>

defaulting to the standard CSIM Proxy Voting Policy.

In all other cases, proxy issues that present material conflicts of interest between CSIM, and/or any of its affiliates, and CSIM's clients, will be delegated to Glass Lewis to be voted in accordance with CSIM's Proxy Voting Guidelines which are set each year based on governance criteria and not influenced by any individual issuer or ballot item.

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Where CSIM's Investment Stewardship Team conducts an engagement meeting with a company, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

ensuring that no members of the Board of (i) CSC or (ii) an Affiliated Fund, that are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

FOREIGN SECURITIES/SHAREBLOCKING

Voting proxies with respect to shares of foreign securities may involve significantly greater effort and corresponding cost than voting proxies with respect to domestic securities due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting. Problems voting foreign proxies may include the following:

<sup>●</sup>

proxy statements and ballots written in a foreign language,

<sup>●</sup>

untimely and/or inadequate notice of shareholder meetings,

<sup>●</sup>

restrictions of foreigner's ability to exercise votes,

<sup>●</sup>

requirements to vote proxies in person,

<sup>●</sup>

requirements to provide local agents with power of attorney to facilitate CSIM's voting instructions.

In consideration of the foregoing issues, CSIM, in conjunction with Glass Lewis, uses its best efforts to vote foreign proxies. As part of its ongoing oversight, the Proxy Committee will monitor the voting of foreign proxies to determine whether all reasonable steps are taken to vote foreign proxies. If the Proxy Committee determines that the cost associated with the attempt to vote outweighs the potential benefits clients may derive from voting, the Proxy Committee may decide not to attempt to vote. In addition, certain foreign countries impose restrictions on the sale of securities for a period of time before and/or after the shareholder meeting. To avoid these trading restrictions, the Proxy Committee instructs Glass Lewis not to vote such foreign proxies (share-blocking).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

SECURITIES LENDING

Certain of the funds managed by CSIM enter into securities lending arrangements with lending agents to generate additional revenue for their portfolios. In securities lending arrangements, any voting rights that accompany the loaned securities generally pass to the borrower of the securities, but the lender retains the right to recall a security and may then exercise the security's voting rights. In order to vote the proxies of securities out on loan, the securities must be recalled prior to the established record date. CSIM will use its best efforts to recall a fund's securities on loan when deemed appropriate and in the best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

SUB-ADVISORY RELATIONSHIPS

Where CSIM has delegated day-to-day investment management responsibilities to an investment sub-adviser, CSIM may (but generally does not) delegate proxy voting responsibility to such investment sub-adviser. In addition, CSIM may share proxy voting with an investment sub-adviser. Each sub-adviser to whom proxy voting responsibility has been delegated will be required to review all proxy solicitation material and to make voting decisions in the best interest of each investment company and its shareholders, or other client associated with the securities it has been allocated. Each sub-adviser to whom proxy voting has been delegated must inform CSIM of its voting decisions to allow CSIM to implement the votes or in the case of shared voting responsibility, potentially override the sub-adviser's vote recommendation. Prior to delegating the proxy voting responsibility, CSIM will review each sub-adviser's proxy voting policy to determine whether it believes that each sub-adviser's proxy voting policy is generally consistent with the maximization of the value of CSIM's clients' investments by protecting the long-term best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

REPORTING AND RECORD RETENTION

CSIM will maintain, or cause Glass Lewis to maintain, records that identify the manner in which proxies have been voted (or not voted) on behalf of CSIM clients. CSIM will comply with all applicable rules and regulations regarding disclosure of its or its clients' proxy voting records and procedures.

CSIM will retain all proxy voting materials and supporting documentation as required under the Investment Advisers Act of 1940, as amended.

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![[MISSING IMAGE: log-csamctr299c.jpg]](log-csamctr299c.jpg)

Schwab Funds<sup>®</sup>

---

| | |
|:---|:---|
| Schwab<sup>®</sup> International Opportunities Fund | **SWMIX**  |

---

#### STATEMENT OF ADDITIONAL INFORMATION

#### February 27, 2023
The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with the fund's prospectus dated February 27, 2023 (as amended from time to time).

The fund's audited financial statements and the report of the independent registered public accounting firm thereon from the fund's [annual report](https://www.sec.gov/Archives/edgar/data/904333/000119312523000566/d401383dncsr.htm) for the fiscal year ended October 31, 2022, are incorporated by reference into this SAI.

For a free copy of these documents or to request other information or ask questions about the fund, call Schwab Funds at 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus** for a free copy of a prospectus, SAI or an annual or semiannual report.

The fund is a series of Schwab Capital Trust (the Trust). The fund is part of the Schwab complex of funds (Schwab Funds). Charles Schwab Investment Management, Inc., dba Schwab Asset Management™, is the investment adviser to the fund (investment adviser).

REG38768-26

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#### **TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | **<u>Page</u>**  |
| [INVESTMENT OBJECTIVE](#idddfaINVESTMENTO)  | [1](#idddfaINVESTMENTO) |
| [INVESTMENT STRATEGIES, SECURITIES AND RISKS](#idbejafbINVESTMENTS)  | [1](#idbejafbINVESTMENTS) |
| [INVESTMENT LIMITATIONS AND RESTRICTIONS](#idbdejjINVESTMENTL)  | [19](#idbdejjINVESTMENTL) |
| [MANAGEMENT OF THE FUND](#idefgacMANAGEMENTO)  | [20](#idefgacMANAGEMENTO) |
| [CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES](#iddcigCONTROLPERS)  | [26](#iddcigCONTROLPERS) |
| [INVESTMENT ADVISORY AND OTHER SERVICES](#iddahbdINVESTMENTA)  | [27](#iddahbdINVESTMENTA) |
| [PORTFOLIO MANAGERS](#idhhjdbPORTFOLIOMA)  | [30](#idhhjdbPORTFOLIOMA) |
| [BROKERAGE ALLOCATION AND OTHER PRACTICES](#idbfddfBROKERAGEAL)  | [37](#idbfddfBROKERAGEAL) |
| [PROXY VOTING](#idiagPROXYVOTING)  | [39](#idiagPROXYVOTING) |
| [PORTFOLIO HOLDINGS DISCLOSURE](#idiedbportfolioho-3)  | [39](#idiedbportfolioho-3) |
| [DESCRIPTION OF THE TRUST](#idegjbDESCRIPTION)  | [40](#idegjbDESCRIPTION) |
| [PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES](#idbdjjjPURCHASERED)  | [41](#idbdjjjPURCHASERED) |
| [TAXATION](#idcddafTAXATION)  | [43](#idcddafTAXATION) |
| APPENDIX — PROXY VOTING POLICY |  |

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#### INVESTMENT OBJECTIVE

#### Schwab International Opportunities Fund seeks long-term capital appreciation.

#### Change of Investment Objective
The fund's investment objective may be changed only by vote of a majority of its outstanding voting shares. A majority of the outstanding voting shares of the fund means the affirmative vote of the lesser of: (a) 67% or more of the voting shares represented at the meeting, if more than 50% of the outstanding voting shares of the fund are represented at the meeting or (b) more than 50% of the outstanding voting shares of the fund.

There is no guarantee the fund will achieve its objective.

#### Investment Policy of the Fund
It is the Schwab International Opportunities Fund's policy that, under normal circumstances, it will invest a substantial amount of its assets in equity securities of companies outside the United States. The fund expects to invest in companies across all market capitalization ranges. The fund typically focuses on developed markets, but may invest in companies from emerging markets as well.

#### Disclaimers
The Schwab International Opportunities Fund has been developed solely by Schwab Asset Management. The fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the LSE Group). FTSE Russell is a trading name of certain of the LSE Group companies.

All rights in the FTSE Developed ex US Quality Factor Index (the Index) vest in the relevant LSE Group company which owns the Index. "FTSE®" is a trade mark of the relevant LSE Group company and is used by any other LSE Group company under license.

The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the fund. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the fund or the suitability of the Index for the purpose to which it is being put by Schwab Asset Management.

#### INVESTMENT STRATEGIES, SECURITIES AND RISKS
The fund's investment adviser, Charles Schwab Investment Management, Inc., dba Schwab Asset Management, manages a portion of the fund and acts as "manager of managers" for the fund. In its manager of managers role, Schwab Asset Management, subject to approval by the fund's Board of Trustees (the Board), hires subadvisers (investment managers or subadvisers) to manage portions of the fund's assets.

Schwab Asset Management, manages a portion of the fund by primarily investing in stocks that are included in the FTSE Developed ex US Quality Factor Index. The index is comprised of securities within the FTSE Developed ex US Index and is designed to reflect the performance of the Quality equity risk premia factor. The index applies a consistent and transparent methodology to select and weight constituents by applying the Quality factor together with industry and country constraints to the market capitalization weight of index constituents. Because it may not be possible or practical to purchase all of the stocks included in the index, Schwab Asset Management seeks to track the total return of the index by using sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including capitalization, performance attributes, dividend yield, price/earnings ratio, risk factors, industry factors and other characteristics.

The different types of investments that the fund typically may invest in, the investment techniques it may use and the risks normally associated with these investments are discussed below. The following investment policies, securities, strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval, unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately after and as a result of the fund's acquisition of such security or asset, unless otherwise noted. Thus, any subsequent change in values, net assets or other circumstances does not require the fund to sell an investment if it could not then make the same investment.

The fund will make investments that are intended to help achieve its investment objective.

From time to time the fund may hold certain securities not otherwise discussed in this SAI as a permissible investment for the fund. To the extent an investment becomes part of the fund's principal or non-principal investment strategy, the fund will take the necessary steps to identify them as permissible investments. In addition, the fund may receive (i.e., not actively invest) such securities as a result of a corporate action, such as securities dividends, spin-offs or rights issues. In such cases, the fund will not actively add to its position and generally will dispose of the securities as soon as reasonably practicable.

**Banker's Acceptances** or notes are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. The fund will invest only in banker's acceptances of banks that have capital, surplus and undivided profits in the aggregate inexcess of $100 million.

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**Borrowing.** The fund may borrow for temporary or emergency purposes; for example, the fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. The fund's borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of the fund's shares and in its portfolio yield. The fund can avoid leverage by not purchasing securities while borrowings are outstanding. The fund is required to comply with the asset coverage requirements of the Investment Company Act of 1940, as amended (the 1940 Act), when it engages in borrowing activities. If assets used to secure a borrowing decrease in value, the fund may be required to pledge additional collateral to avoid liquidation of those assets.

The fund may establish lines-of-credit (lines) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by the fund within 60 days and is not extended or renewed. The fund may use the lines to meet large or unexpected redemptions that would otherwise force the fund to liquidate securities under circumstances which are unfavorable to the fund's remaining shareholders. The fund will pay a fee to the bank for using the lines.

**Concentration** means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry's securities.

**Cyber Security Risk.** As the fund increasingly relies on technology and information systems to operate, it becomes susceptible to operational risks linked to security breaches in those information systems. Both calculated attacks and unintentional events can cause failures in the fund's information systems. Cyber attacks can include acquiring unauthorized access to information systems, usually through hacking or the use of malicious software, for purposes of stealing assets or confidential information, corrupting data, or disrupting fund operations. Cyber attacks can also occur without direct access to information systems, for example by making network services unavailable to intended users. Cyber security failures by, or breaches of the information systems of, the investment adviser, distributors, broker-dealers, other service providers (including, but not limited to, index providers, fund accountants, custodians, transfer agents and administrators), or the issuers of securities the fund invests in may also cause disruptions and impact the fund's business operations. Breaches in information security may result in financial losses, interference with the fund's ability to calculate net asset value (NAV), impediments to trading, inability of fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The fund has business continuity plans in the event of, and risk management systems to help prevent, such cyber attacks, but these plans and systems have limitations including the possibility that certain risks have not been identified. Moreover, the fund does not control the cyber security plans and systems of its service providers and other third party business partners. The fund and its shareholders could be negatively impacted as a result.

**Debt Securities** are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically "IOUs," but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed-, variable- or floating-rate of interest on the amount of money borrowed (principal) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Conversely, when interest rates rise, the prices of debt securities generally fall. Certain debt securities have call features that allow issuers to redeem their outstanding debts prior to final maturity. Depending on the call feature, an issuer may pre-pay its outstanding debts and issue new ones paying lower interest rates. This is especially true for bonds with sinking fund provisions, which commit the issuer to set aside a certain amount of money to cover timely repayment of principal and typically allow the issuer to annually repurchase certain of its outstanding bonds from the open market or at a pre-set call price. If an issuer redeems the debt securities prior to final maturity, the fund may have to replace these securities with lower yielding securities, which could result in a lower return. This is known as prepayment risk and is more likely to occur in a falling interest rate environment. When borrowers pay off their debt securities sooner than expected, the fund would have to reinvest that money at the lower prevailing interest rate, which may reduce the returns of the fund. In a rising interest rate environment, prepayment on outstanding debt securities is less likely to occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term securities (all things being equal), but generally offer greater rates of interest.

A change in a central bank's monetary policy or economic conditions may lead to a change in interest rates, which could have sudden and unpredictable effects on the markets and significantly impact the value of debt securities in which the fund invests. Some debt securities, such as bonds with longer durations, are more sensitive to interest rate changes than others and may experience an immediate and considerable reduction in value if interest rates rise. Longer duration securities tend to be more volatile than shorter duration securities. As the values of debt securities in the fund's portfolio adjust to a rise in interest rates, the fund's share price may fall. In the event that the fund holds a large portion of its portfolio in longer duration securities when interest rates increase, the share price of the fund may fall significantly.

Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Corporate debt securities (bonds) tend to have higher credit risk generally than U.S. government debt securities. Debt securities also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- and/or high-quality securities, although some

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still possess varying degrees of speculative characteristics and risks. Debt securities rated below investment-grade are riskier, but may offer higher yields. These securities are sometimes referred to as high yield securities or "junk bonds." The market for these securities has historically been less liquid and more volatile than for investment-grade securities.

Corporate bonds are debt securities issued by corporations. Although a higher return is expected from corporate bonds, these securities, while subject to the same general risks as U.S. government securities, are subject to greater credit risk than U.S. government securities. Their prices may be affected by the perceived credit quality of their issuer.

**Depositary Receipts** include American Depositary Receipts (ADRs) as well as other "hybrid" forms of ADRs, including European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), and are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject the fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments, possible imposition of withholding taxes on income, possible seizure, nationalization or expropriation of foreign deposits, possible establishment of exchange controls or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States. Please see the section titled "Foreign Securities" for more detail.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder's rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer's request.

**Derivative Instruments** are commonly defined to include instruments or contracts whose values depend on (or "derive" from) the value of one or more other assets such as securities, currencies, or commodities. These "other assets" are commonly referred to as "underlying assets." The fund may use derivatives, principally futures contracts, primarily to seek returns on the fund's otherwise uninvested cash assets.

In addition to the derivative instruments and strategies described in this SAI, the investment adviser or subadviser expects to discover additional derivative instruments and other investment, hedging or risk management techniques. The investment adviser or subadviser may utilize these new derivative instruments and techniques to the extent that they are consistent with the fund's investment objective and permitted by the fund's investment limitations, operating policies and applicable regulatory authorities.

The fund's derivatives instruments can create (i) leverage risk, which generally refers to the risk that derivatives transactions can magnify a fund's gains and losses, (ii) market risk, which generally refers to the risk from potential adverse market movements in relation to a fund's derivatives positions, or the risk that markets could experience a change in volatility that adversely impacts fund returns and a fund's obligations and

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exposures, (iii) counterparty risk, which generally refers to the risk that a counterparty on a derivatives transaction may not be willing or able to perform its obligations under the derivatives contract, and the related risks of having concentrated exposure to such a counterparty, (iv) liquidity risk, which generally refers to the risk involving the liquidity demands that derivatives transactions can create to make payments of margin, collateral, or settlement payments to counterparties, (v) operational risk, which generally refers to the risk related to potential operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error and (vi) legal risk, which generally refers to insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract. Certain of these risks are described in more detail as they apply to specific derivatives instruments in the following sub-sections of this SAI.

*<u>Options Contracts</u>* generally provide the right, but not the obligation, to buy or sell a security, commodity, futures contract or foreign currency in exchange for an agreed upon price. If the right is not exercised after a specified period, the option expires and the option buyer forfeits the money paid to the option seller.

A call option gives the buyer the right to buy a specified number of shares of a security at a fixed price on or before a specified date or dates in the future. For this right, the call option buyer pays the call option seller, commonly called the call option writer, a fee called a premium. Call option buyers are usually anticipating that the price of the underlying security will rise above the price fixed with the call writer, thereby allowing them to profit. If the price of the underlying security does not rise, the call option buyer's losses are limited to the premium paid to the call option writer. For call option writers, a rise in the price of the underlying security will be offset, in part, by the premium received from the call option buyer. If the call option writer does not own the underlying security, however, the losses that may ensue if the price rises could be potentially unlimited. If the call option writer owns the underlying security or commodity, this is called writing a covered call.

A put option is the opposite of a call option. It gives the buyer the right to sell a specified number of shares of a security at a fixed price on or before a specified date in the future. Put option buyers are usually anticipating a decline in the price of the underlying security, and wish to offset those losses when selling the security at a later date. The purpose of writing such options is to generate additional income for the fund. However, in return for the option premium, the fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the securities' market value at the time of purchase. When the fund buys a security with a put feature, losses could occur if the put provider does not perform as agreed. If a put provider fails to honor its commitment upon the fund's attempt to exercise the put, the fund may have to treat the security's final maturity as its effective maturity. If that occurs, the security's price may be negatively impacted, and its sensitivity to interest rate changes may be increased, possibly contributing to increased share price volatility for the fund. This also could lengthen the fund's overall average effective maturity. Standby commitments are types of puts.

The fund may purchase and write put and call options on any securities in which it may invest or any securities index or basket of securities based on securities in which it may invest. In addition, the fund may purchase and sell foreign currency options and foreign currency futures contracts and related options. The fund may purchase and write such options on securities that are listed on domestic or foreign securities exchanges or traded in the over-the-counter market. Like futures contracts, option contracts are rarely exercised. Option buyers usually sell the option before it expires. Option writers may terminate their obligations under a written call or put option by purchasing an option identical to the one it has written. Such purchases are referred to as "closing purchase transactions." The fund may enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased or written.

An exchange-traded currency option position may be closed out only on an options exchange that provides a secondary market for an option of the same series. Although the fund generally will purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular option or at any particular time. If the fund is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) an exchange may impose restrictions on opening transactions or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or the Options Clearing Corporation (OCC) may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), although outstanding options on that exchange that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.

Additional risks are involved with options trading because of the low margin deposits required and the extremely high degree of leverage that may be involved in options trading. There may be imperfect correlation between the change in market value of the securities held by the fund and the prices of the options, possible lack of a liquid secondary market, and the resulting inability to close such positions prior to their maturity dates.

The fund may write or purchase an option only when the market value of that option, when aggregated with the market value of all other options transactions made on behalf of the fund, does not exceed 5% of its net assets.

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*<u>Swap Agreements</u>* are contracts between two parties that generally involve an exchange of payment streams calculated in relation to a rate, index, instrument or certain securities (referred to as the "underlying") and a predetermined amount (referred to as the "notional amount"). The underlying for a swap may be an interest rate (fixed or floating), a currency exchange rate, a commodity price index, a security, group of securities or a securities index, a combination of any of these, or various other rates, assets or indices. Swap agreements generally do not involve the delivery of the underlying or principal, and a party's obligations generally are equal to only the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the swap agreement.

Swap agreements can be structured to increase or decrease the fund's exposure to long or short term interest rates, corporate borrowing rates and other conditions, such as changing security prices and inflation rates. They also can be structured to increase or decrease the fund's exposure to specific issuers or specific sectors of the bond market such as mortgage securities. For example, if the fund agreed to pay a longer-term fixed rate in exchange for a shorter-term floating rate while holding longer-term fixed rate bonds, the swap would tend to decrease the fund's exposure to longer-term interest rates. Swap agreements tend to increase or decrease the overall volatility of the fund's investments and its share price and yield. Changes in interest rates, or other factors determining the amount of payments due to and from the fund, can be the most significant factors in the performance of a swap agreement. If a swap agreement calls for payments from the fund, the fund must be prepared to make such payments when they are due. The fund could sustain losses if a counterparty does not perform as agreed under the terms of the swap. The fund will enter into swap agreements with counterparties deemed creditworthy by the investment adviser.

In addition, the fund may invest in swaptions, which are privately-negotiated option-based derivative products. Swaptions give the holder the right to enter into a swap. The fund may use a swaption in addition to or in lieu of a swap involving a similar rate or index.

Certain standardized swaps are subject to mandatory central clearing and exchange trading requirements. Unlike uncleared swaps, which are negotiated bilaterally and traded over-the-counter, cleared swaps must trade through a futures commission merchant and be cleared through a clearinghouse that serves as the central counterparty to the transaction. The fund posts initial and variation margin for cleared swaps by making payments to its clearing member futures commission merchants. Depending on the size of the fund and other factors, the margin required under the rules of a clearinghouse and by a clearing member may be in excess of the collateral required to be posted by the fund to support its obligations under a similar bilateral swap. However, the Commodity Futures Trading Commission (CFTC) and other applicable regulators have adopted rules imposing certain margin requirements, including minimums, on uncleared swaps which, once effective, may result in the fund and its counterparties posting higher margin amounts for uncleared swaps. Any type of swap agreement poses a risk for the fund and may cause it to lose money.

For purposes of applying the fund's investment policies and restrictions (as stated in the prospectus and this SAI) swap agreements are generally valued by the fund at market value. In the case of a credit default swap sold by the fund (i.e., where the fund is selling credit default protection), however, the fund will generally value the swap at its notional amount. The manner in which certain securities or other instruments are valued by the fund for purposes of applying investment policies and restrictions may differ from the manner in which those investments are valued by other types of investors.

*<u>Derivatives Regulatory Matters.</u>* In October 2020, the Securities and Exchange Commission (SEC) adopted a final rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies that rescinded and withdrew the guidance of the SEC and its staff regarding asset segregation and cover transactions previously applicable to the fund's use of such transactions. The rule requires the fund to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management program and reporting requirements. Generally, these requirements apply unless the fund satisfies a "limited derivatives users" exception that is included in the rule. Under the rule, when the fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the fund's asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of whether the fund satisfies the limited derivatives users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance in connection with the rule regarding the use of securities lending collateral that may limit the fund's securities lending activities. In addition, under the rule, the fund is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). The fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the fund treats any such transaction as a "derivatives transaction" for purposes of compliance with the final rule. Furthermore, under the final rule, the fund will be permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of the fund to use derivatives, and reverse repurchase agreements and similar financing transactions, when-issued, delayed delivery and forward commitment transactions, and unfunded commitment agreements as part of its investment strategies. These requirements may increase the cost of the fund's investments and cost of doing

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business, which could adversely affect investors. The investment adviser cannot predict the effects of these regulations on the fund. The investment adviser intends to monitor developments and seeks to manage the fund in a manner consistent with achieving the fund's investment objectives, but there can be no assurance that it will be successful in doing so.

The CFTC regulates the trading of commodity interests, including certain futures contracts, options, and swaps in which the fund may invest. A fund that invests in commodity interests will generally be subject to certain CFTC regulatory requirements if it is considered a "commodity pool." A notice of eligibility for exclusion from the definition of the term "commodity pool operator" (CPO) under the Commodity Exchange Act, as amended (CEA) has been filed, by the investment adviser, with respect to the fund's operation. Therefore, the fund and its investment adviser are not subject to registration or regulation as a CPO under the CEA. If the fund were no longer able to claim the exclusion, the fund's investment adviser may be required to register as a CPO and the fund and its investment adviser would be subject to regulation as a CPO under the CEA. If the fund or its investment adviser is subject to CFTC regulation, it may incur additional expenses and/or may choose to make changes to its investment strategies.

**Diversification** involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. The fund is a series of an open-end investment management company. The fund is a diversified mutual fund.

**Emerging or Developing Markets** exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. There are no strict definitions of what is emerging or developing versus what is considered developed and certain countries are considered emerging or developing in some indices yet developed in others.

The fund's investments in emerging markets can be considered speculative, and therefore may offer higher potential for gains and losses than investments in developed markets of the world. With respect to an emerging market country, there may be a greater potential for nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or investments in such countries. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

In addition to the risks of investing in emerging market country debt securities, the fund's investment in government or government-related securities of emerging market countries and restructured debt instruments in emerging markets are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt, and requests to extend additional loan amounts. The fund may have limited recourse in the event of default on such debt instruments.

*<u>Investing in China</u>* involves certain additional risks and considerations not typically associated with investing in other more established economies or securities markets. China based companies that incorporate in the People's Republic of China (PRC) can issue different classes of shares depending on where they are listed and which investors are allowed to own them. These are referred to as Class A Shares, Class B shares, and Class H shares, which are all renminbi-denominated shares that trade in different currencies depending on what stock exchange they are listed on. Class H Shares trade on the Hong Kong Stock Exchange, are quoted and traded in Hong Kong dollars, and have no restrictions on who can trade them. Class B Shares trade on either the Shanghai or Shenzhen stock exchanges and can only be traded by non-residents of the PRC or residents with appropriate foreign currency dealing accounts. They trade in U.S. dollars on the Shanghai exchange and in Hong Kong dollars on the Shenzhen exchange. Class A Shares trade on either the Shanghai or Shenzhen exchanges and are quoted in renminbi. Class A Shares may only be traded by residents of the PRC, or under the Qualified Foreign Institutional Investor (QFII) rules, or through the Stock Connect programs (Shanghai-Hong Kong or Shenzhen-Hong Kong). Finally, China based companies that are controlled by PRC residents or PRC state entities and have a majority of their revenue or assets in the PRC may incorporate outside the PRC and trade on an exchange outside the PRC in the currency of the exchange. These are referred to as "Red Chip" (Hong Kong), "P Chip" (Hong Kong), "S Chip" (Singapore), or "N Shares" (United States). The multiplicity of share classes and various restrictions on ownership, in addition to the ability of Chinese regulatory authorities and Chinese issuers to suspend trading and their willingness to exercise this option in response to market volatility and other events, can significantly impact liquidity and volatility of the Chinese market and the markets for Chinese securities. In addition, to the extent that the fund invests in China A Shares, there may be legal restrictions imposed by the PRC on the repatriation of assets or proceeds from the sale of China A Shares. Further, there are quotas on the amount China A Shares available either to QFIIs or through the Stock Connect programs. These quotas are applicable to the entire market, not to a specific fund, but they impact the ability of the fund to implement its investment strategy.

The fund may invest a portion of its assets in certain operating companies in China through legal structures known as variable interest entities (VIEs). In China, ownership of companies in certain sectors by non-Chinese individuals and entities (including U.S. persons and entities, such as the fund) is prohibited. To facilitate indirect foreign investment in these businesses, many Chinese companies have created VIE structures. In such an arrangement, a China-based operating company typically establishes a shell entity in another jurisdiction, such as the Cayman Islands. The shell company enters into service and other contracts with the China-based operating company, and then issues shares on an exchange (such

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as the New York Stock Exchange or the Hong Kong Stock Exchange). Non-Chinese investors hold stock in the shell entity rather than directly in the China-based operating company. This arrangement allows U.S. investors to obtain economic exposure to the China-based operating company through contractual means rather than through formal equity ownership. The contractual arrangements also permit the VIE to consolidate the China-based operating company into its financial statements.

Although VIE structures are a longstanding industry practice and well known to officials and regulators in China, VIE structures are not formally recognized under Chinese law. As a result, investors face the risk that future actions by the Chinese government could significantly affect the China-based operating company's financial performance and the enforceability of the VIE structure's contractual arrangements. It is uncertain whether Chinese officials or regulators will withdraw their implicit acceptance of the VIE structure, or whether any new laws, rules or regulations relating to this structure will be adopted (in each case either generally or with respect to specific industries, sectors or companies) and, if adopted, what impact they would have on the interests of shareholders in the VIE structure. Under extreme circumstances, China could prohibit the existence of VIE structures or limit a VIE structure's ability to pass through economic and governance rights to non-Chinese individuals and entities. If the Chinese government takes action affecting VIE structures, the market value of the fund's associated portfolio holdings in VIE structures would likely suffer significant, detrimental, and possibly permanent negative effects, which could result in substantial investment losses to the fund.

In addition, Chinese companies, including China-based operating companies listed on U.S. exchanges through a VIE structure, are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies based in more developed countries. As a result, information about the Chinese securities and securities in the VIE structure in which the fund invests may be less reliable or complete than investments in other securities. Foreign companies listed on U.S. exchanges, including China-based operating companies that utilize a VIE structure, also could face delisting or other ramifications for failure to meet the requirements of the SEC, the Public Company Accounting Oversight Board or other U.S. regulators. Delisting would significantly decrease the liquidity and value of the securities, decrease the ability of the fund to transact in such securities and may increase the transaction costs of the fund if the fund is required to seek other markets in which to transact in those securities.

Investments involving a VIE structure may also pose additional risks because such investments are made through a company whose interests in the underlying China-based operating company are established through contract rather than through equity ownership. For example, in the event of a dispute, the contractual claims with respect to the China-based operating company may be deemed unenforceable in the PRC, thus limiting (or eliminating) the remedies and rights available to the VIE and its investors. Such legal uncertainty may also be exploited against the interests of the investors in the VIE structure. Further, the interests of the direct equity owners of the China-based operating company may conflict with the interests of the investors in the VIE structure, and the fiduciary duties of the officers and directors of the China-based operating company may differ from, or conflict with, the fiduciary duties of the officers and directors of the shell entity in which the fund invests.

**Equity Securities** represent ownership interests in a company, and are commonly called "stocks." Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company's financial condition, market conditions and political, economic or even company-specific news. When a stock's price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

Types of equity securities include common stocks, preferred stocks, convertible securities, rights and warrants, depositary receipts (ADRs, EDRs and GDRs), interests in real estate investment trusts and interests in business development companies. (For more information on real estate investment trusts (REITs), see the section titled "Real Estate Investment Trusts," for more information on depositary receipts, see the section titled "Depositary Receipts," and for more information on business development companies, see the section titled "Business Development Companies").

*<u>Common Stocks,</u>* which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the election of the corporation's directors and any other matters submitted to the corporation's shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer's earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners. Common stocks are typically categorized by their market capitalization as large-, mid- or small-cap.

*<u>Small-Cap Stocks</u>* include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small-cap company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-cap companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. It is possible for small-cap company stocks pay low or no dividends.

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These factors and others may cause sharp changes in the value of a small-cap company's stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and the fund's positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for the fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of the fund's investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

*<u>Convertible Securities</u>* are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer's common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company's common stock. The actual return on a convertible bond may exceed its stated yield if the company's common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. Convertible securities are also rated below investment grade (high yield) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and the fund's ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer's creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a conversion feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer's common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company's liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer's convertible securities will tend not to fall as much because the convertible security's income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because its conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

*<u>Preferred Stocks</u>* represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation's assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, the fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

*<u>Real Estate Investment Trusts</u>* (REITs) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long-term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 90% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

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Like any investment in real estate, a REIT's performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental income could decline because of extended vacancies, increased competition from nearby properties, tenants' failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT's performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than – and at times will perform differently from – large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through the fund, a shareholder will bear indirectly a proportionate share of the REIT's expenses in addition to their proportionate share of the fund's expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Internal Revenue Code or to maintain their exemptions from registration under the 1940 Act and CFTC regulations.

*<u>Rights and Warrants</u>* are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company's stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and the fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

*<u>Initial Public Offering</u>* (IPO). The fund may purchase shares issued as part of, or a short period after, a company's IPO, and may at times dispose of those shares shortly after their acquisition. The fund's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

*<u>Master Limited Partnerships</u>* (MLPs) are limited partnerships in which the common units are publicly traded. MLP common units are freely traded on a securities exchange or in the over-the-counter market and are generally registered with the SEC. MLPs often own several properties or businesses (or own interests) that are related to real estate development and oil and gas industries, but they also may finance motion pictures, research and development and other projects. MLPs generally have two classes of owners, the general partner and limited partners. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership, through ownership of common units, and have a limited role, if any, in the partnership's operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (minimum quarterly distributions). Common and general partner interests also accrue arrearages in distributions to the extent the minimum quarterly distribution is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the minimum quarterly distribution; however, subordinated units do not accrue arrearages. Distributable cash in excess of the minimum quarterly distribution paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions are intended to encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results are intended to benefit all security holders of the MLP, however, such incentive distribution payments give rise to potential conflicts of interest between the common unit holders and the general partner.

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MLP common units represent a limited partnership interest in the MLP. Common units are listed and traded on U.S. securities exchanges or over-the-counter, with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The fund may purchase common units in market transactions as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions. Common units along with general partner units have first priority to receive quarterly cash distributions up to the minimum quarterly distribution and have arrearage rights. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

MLP subordinated units are typically issued by MLPs to their original sponsors, such as their founders, corporate general partners of MLPs, entities that sell assets to the MLP, and investors. Subordinated units may be purchased directly from these persons as well as newly-issued subordinated units from MLPs themselves. Subordinated units have similar voting rights as common units and are generally not publicly traded. Once the minimum quarterly distribution on the common units, including any arrearages, has been paid, subordinated units receive cash distributions up to the minimum quarterly distribution prior to any incentive payments to the MLP's general partner. Unlike common units, subordinated units do not have arrearage rights. In the event of liquidation, common units and general partner interests have priority over subordinated units. Subordinated units are typically converted into common units on a one-to-one basis after certain time periods and/or performance targets have been satisfied. The purchase or sale price of subordinated units is generally tied to the common unit price less a discount. The size of the discount varies depending on the likelihood of conversion, the length of time remaining to conversion, the size of the block purchased relative to trading volumes, and other factors, including smaller capitalization partnerships or companies potentially having limited product lines, markets or financial resources, lacking management depth or experience, and being more vulnerable to adverse general market or economic development than larger more established companies.

General partner interests of MLPs are typically retained by an MLP's original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder's investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP's aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights, which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Certain MLPs are dependent on their parent companies or sponsors for a majority of their revenues. Any failure by an MLP's parents or sponsors to satisfy their payments or obligations would impact the MLP's revenues and cash flows and ability to make distributions.

*<u>Business Development Companies</u>* (BDCs) are closed-end investment companies that have elected to be BDCs under the 1940 Act and are taxed as regulated investment companies (RICs) under the Internal Revenue Code. BDCs operate as venture capital companies and typically invest in, lend capital to, and provide significant managerial assistance to developing private companies or thinly-traded public companies. Under the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of privately-held U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, a BDC may only incur indebtedness in amounts such that the BDC's coverage ratio of total assets to total senior securities equals 150% or 200%, as applicable.

BDCs generally invest in debt securities that are not rated by a credit rating agency and are considered below investment grade quality (junk bonds). Little public information generally exists for the type of companies in which a BDC may invest and, therefore, there is a risk that investors may not be able to make a fully informed evaluation of the BDC and its portfolio of investments. In addition, investments made by BDCs are typically illiquid and are difficult to value for purposes of determining a BDC's net asset value (for more information on BDCs, see the section titled "Securities of Other Investment Companies").

**Exchange-Traded Funds** (ETFs) are investment companies that typically are registered under the 1940 Act as open-end funds or unit investment trusts (UITs). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold throughout the day at market prices, which may be higher or lower than the shares' net asset value. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's net asset value, the value of ETF holdings, and supply of and demand for ETF shares. Although the creation/redemption feature of ETFs generally makes it more likely that ETF shares will trade close to their net asset value, market volatility, lack of an active trading market for ETF shares, disruptions at market participants (such as Authorized Participants or market makers) and any disruptions in the ordinary functioning of the creation/redemption process may result in ETF shares trading significantly above (at a "premium") or below (at a "discount") their net asset value. An ETF's investment results are based on the ETF's daily net asset value. Investors transacting in ETF shares in the secondary market, where market prices may differ from net asset value, may experience investment results that differ from results based on the ETF's daily net asset

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value. An "index-based ETF" seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of securities, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When the fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF's expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

**Foreign Currency Transactions.** The fund may invest in foreign currency-denominated securities, purchase and sell foreign currency options and foreign currency futures contracts and related options and engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts (forwards) with terms generally of less than one year. The fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.

The fund may use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

A forward involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect the fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, the fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for fund securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when the fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, the fund could sustain a loss.

The fund also may engage in forward foreign currency exchange options and contracts to protect the value of specific portfolio positions, which is called "position hedging." When engaging in position hedging, the fund may enter into forward foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which portfolio securities are denominated (or against an increase in the value of currency for securities that the fund expects to purchase).

Buying and selling foreign currency exchange options and contracts involves costs and may result in losses. The ability of the fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for the fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the fund's holdings of securities denominated in a particular currency and forward contracts into which the fund enters. Such imperfect correlation may cause the fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss. The fund's transactions in foreign currency exchange contracts may cause a portion of the fund's distributions to constitute returns of capital for tax purposes. To the extent a foreign currency transaction involves a derivatives instrument, the risks discussed under "Derivatives Instruments", above, also will apply.

Suitable hedging transactions may not be available in all circumstances and there can be no assurance that the fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for the fund to benefit from favorable fluctuations in relevant foreign currencies.

Forwards will be used primarily to adjust the foreign exchange exposure of the fund and the fund might be expected to enter into such contracts under the following circumstances:

*<u>Lock In.</u>* When the investment adviser or subadviser desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency.

*<u>Cross Hedge.</u>* If a particular currency is expected to decrease against another currency, the fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of the fund's portfolio holdings denominated in the currency sold.

*<u>Direct Hedge.</u>* If the investment adviser or subadviser wants to eliminate substantially all of the risk of owning a particular currency, and/or if the investment adviser or subadviser thinks that the fund can benefit from price appreciation in a given country's bonds but does not want to hold the currency, it may employ a direct hedge back into the U.S. dollar. In either case, the fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but the fund would benefit from an increase in value of the bond.

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*<u>Proxy Hedge.</u>* The investment adviser or subadviser might choose to use a proxy hedge, which may be less costly than a direct hedge. In this case, the fund, having purchased a security, will sell a currency whose value is believed to be closely linked to the currency in which the security is denominated. Interest rates prevailing in the country whose currency was sold would be expected to be closer to those in the U.S. and lower than those of securities denominated in the currency of the original holding. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies and the relationships can be very unstable at times.

*<u>Costs of Hedging.</u>* When the fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially reduced or lost if the fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from the fund's dividend distribution and are not reflected in its yield. Instead such costs will, over time, be reflected in the fund's net asset value per share.

*<u>Tax Consequences of Hedging.</u>* Under applicable tax law, the fund may be required to limit its gains from hedging in foreign currency forwards, futures, and options. Although the fund is expected to comply with such limits, the extent to which these limits apply is subject to tax regulations as yet unissued. Hedging may also result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. Those provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.

**Foreign Securities.** Investments in foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which the fund may invest include those issued by foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments, a compromise in public health and safety, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, currency blockage, the imposition of sanctions and other similar measures, change of government or war could affect the value of foreign investments. Additionally, a country could experience a public health threat such as an infectious illness which could reduce consumer demand or economic output and/or result in market closures, travel restrictions or quarantines, all of which could affect the value of that country's securities and impact global markets. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although the fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. Bankruptcy laws in some foreign countries are sometimes biased to the borrowers and against the creditors. These factors and others may increase the risks with respect to the liquidity of the fund, and its ability to meet a large number of shareholder redemption requests.

In addition, the fund's investments in foreign securities may be subject to economic sanctions or other government restrictions. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to ascertain. These types of measures may include, but are not limited to, banning a sanctioned country or certain persons or entities associated with such country from global payment systems that facilitate cross-border payments, restricting the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities or persons. The imposition of sanctions and other similar measures could, among other things, result in a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings of the sanctioned country's securities or those of companies located in or economically tied to the sanctioned country, currency devaluation or volatility, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could directly or indirectly limit or prevent the fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and adversely impact the fund's liquidity and performance. As a result, such restrictions may limit the fund's ability to meet a large number of shareholder redemption requests.

International trade tensions may arise from time to time which could result in trade tariffs, embargos or other restrictions or limitations on trade. The imposition of any actions on trade could trigger a significant reduction in international trade, an oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies or industries which could have a negative impact on the fund's performance. Events such as these are difficult to predict and may or may not occur in the future.

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Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause the fund to miss attractive investment opportunities. Losses to the fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for the fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, the fund may hold cash investments in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause the fund to incur costs in connection with conversions between various currencies. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by the fund.

During the 2008-2009 global financial crisis, financial markets in Europe experienced significant volatility due, in part, to concerns about rising levels of government debt and the prevalence of increased budget deficits. As a result, many economies in the region suffered through prolonged economic downturns. Due to the economic integration of the region, another economic downturn in one European country may have a negative impact on the economies of other European countries.

The risk of investing in Europe may be heightened due to steps taken by the United Kingdom (UK) to exit the European Union (EU). On January 31, 2020, the UK officially withdrew from the EU. On December 30, 2020, the EU and UK signed the EU-UK Trade and Cooperation Agreement (TCA) which governs certain aspects of the EU's and the UK's relationship, many of which are still to be determined, including those related to financial services. Notwithstanding the TCA, significant uncertainty remains in the market regarding the ramifications of the UK's withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased volatility and illiquidity, and companies that conduct a significant amount of business in the UK or Europe may experience lower revenue and/or profit growth, all of which may adversely affect the value of the fund's investments. Brexit also may cause additional member states to contemplate departing the EU, which would likely perpetuate political and economic instability in the region and cause additional market disruption in global financial markets.

As the fund may hold investments in issuers that are located in Europe or that depend on revenues generated from operations in Europe, any material negative developments in Europe could have a negative impact on the value and liquidity of these investments, which could harm the fund's performance.

**Forward Contracts** are sales contracts between a buyer (holding the "long" position) and the seller (holding the "short" position) for an asset with delivery deferred to a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. The change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset.

**Futures Contracts** are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. The fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the CFTC licenses and regulates on foreign exchanges. Although positions are usually marked-to-market on a daily basis with an intermediary (executing broker), there remains a credit risk with the futures exchange.

The fund must maintain a small portion of its assets in cash to process shareholder transactions in and out of the fund and to pay its expenses. In order to reduce the effect this otherwise uninvested cash would have on its performance, the fund may purchase futures contracts. Such transactions allow the fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, the fund may purchase or sell futures contracts on a specified foreign currency to "fix" the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. The fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, the fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as "initial margin" and must be in the form of liquid assets, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as "variation margin," may be made daily, if necessary, as the value of the futures contracts fluctuates. This process is known as "marking-to-market." The initial margin amount will be returned to the fund upon termination of the futures contracts assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage.

While the fund may purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause the fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if the fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, the fund incurs transaction costs (e.g., brokerage fees) when engaging in futures trading. To the extent the fund also invests in futures in order to simulate full investment, these same risks apply.

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When interest rates are rising or securities prices are falling, the fund may seek, through the sale of futures contracts, to offset a decline in the value of its current portfolio securities. When interest rates are falling or prices are rising, the fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, the fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and its portfolio securities that are denominated in that currency. The fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that the fund has acquired or expects to acquire.

Futures contracts may require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time the fund seeks to close out a futures position. If the fund is unable to close out its position and prices move adversely, the fund would have to continue to make daily cash payments to maintain its margin requirements. If the fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a disadvantageous time or incur extra costs by borrowing the cash. Also, the fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. The fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

**Illiquid Securities or Investments** means any investment that the fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The liquidity of the fund's investments is monitored under the supervision and direction of the Board and is governed by the 1940 Act and rules promulgated thereunder, which provide that a fund may not acquire any illiquid investments if, immediately after the acquisition, the fund would have invested more than 15% of the fund's net assets in illiquid investments. Investments currently not considered liquid include, among others, repurchase agreements not maturing within seven days that are not subject to a demand feature of seven days or less and certain restricted securities. Any investment may become illiquid at times of market dislocation.

**Indexing Strategies** involve tracking the securities represented in, and therefore the performance of, an index. The portion of the fund tracking a particular index normally will be invested primarily in the securities of its index. That portion of the fund may rebalance its holdings in order to track its index more closely. There can be no guarantee that the performance of the portion of the fund tracking a particular index will achieve a high degree of correlation with that of its index. A number of factors may affect the fund's ability to achieve a high correlation with its index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of that portion of the fund tracking a particular index and its index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spinoffs), timing variances, and differences between the fund's portfolio and the index resulting from legal restrictions such as diversification requirements) that apply to the fund but not to the index.

**Inflation/Deflation Risk.** The fund may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from the fund's investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of the fund's assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the fund's assets.

**Interfund Borrowing and Lending.** The SEC has granted an exemption to the fund that permits the fund to borrow money from and/or lend money to other funds in the Fund Complex as defined under "Management of the Fund." All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review of the Board.

**Large Transaction Risk.** Certain accounts or Charles Schwab & Co., Inc. (Schwab or the distributor) affiliates may from time to time own (beneficially or of record) or control a significant percentage of the fund's shares. Redemptions by these shareholders of their holdings in the fund or large redemptions by several shareholders may impact the fund's liquidity and NAV. These redemptions may also force the fund to sell securities when it would not otherwise do so, which could result in a loss to the fund, negative impact to the fund's brokerage costs, acceleration of the realization of taxable income if sales of securities result in capital gains or other income (which particularly would impact shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged investment plan), or higher portfolio turnover. Investors should consider whether the fund is an appropriate investment in light of their current financial position and goals.

**Market Disruptions Risk.** The fund is subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, epidemics and pandemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause the fund to lose value. These events can also impair the technology and other operational systems upon which the fund's service providers, including Schwab Asset Management as the fund's investment adviser, rely, and could otherwise disrupt the fund's service providers' ability to fulfill their obligations to the fund.

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The outbreak of COVID-19, a novel coronavirus disease, has caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the fund invests. The transmission of COVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the global economic environment. These disruptions have led to instability in the market place, including losses and overall volatility. The impact of COVID-19, including variants of the underlying virus, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

Russia's military invasion of Ukraine in February 2022, responses by the United States and other countries to the invasion and the potential for wider conflict have increased and may continue to increase volatility and uncertainty in financial markets worldwide. The United States and other countries have imposed broad-ranging economic sanctions on Russia and Russian entities and individuals that, among other restrictions, prohibit companies from doing business with Russia and Russian issuers, and may adversely affect companies with economic or financial exposure to Russia and Russian issuers. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia's military invasion. These and potential similar future sanctions may limit the potential universe of securities in which the fund may invest and may require the fund to freeze or divest its existing investments in a company that becomes subject to such restrictions. A number of large corporations and U.S. states have also announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses. The extent and duration of Russia's military actions and the repercussions of such actions, including any retaliatory actions or countermeasures that may be taken by Russia or others subject to sanctions (such as cyberattacks on other governments, corporations or individuals) are unpredictable, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These events could negatively affect the fund's performance.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, market closures, changes in interest rates, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the fund. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the fund being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price its investments.

To satisfy any shareholder redemption requests during periods of extreme volatility, it is more likely the fund may be required to dispose of portfolio investments at inopportune times or prices.

**Money Market Securities** are high-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker's acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker's acceptances are credit instruments evidencing a bank's obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short-term credit needs.

Money market securities pay fixed-, variable- or floating-rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately; these puts, which are sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When the fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts.

The fund may keep a portion of its assets in cash for business operations. The fund may invest in money market securities to reduce the effect this otherwise uninvested cash would have on its performance. The fund may also invest in money market securities to the extent it is consistent with its investment objective.

*<u>Certificates of Deposit or Time Deposits</u>* are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. The fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits, in the aggregate, in excess of $100 million.

*<u>Commercial Paper</u>* consists of short term, promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

*<u>Fixed Time Deposits</u>* are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but may be subject to early withdrawal penalties, which vary depending upon market conditions and the remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a fixed time deposit

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to a third party, although there is no market for such deposits. The fund will not invest in fixed time deposits, that (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight deposits) if, in the aggregate, more than 15% of its net assets would be invested in such deposits, repurchase agreements maturing in more than seven days and other illiquid assets.

*<u>Promissory Notes</u>* are written agreements committing the maker or issuer to pay the payee a specified amount either on demand or at a fixed date in the future, with or without interest. These are sometimes called negotiable notes or instruments and are subject to credit risk. Bank notes are notes used to represent obligations issued by banks in large denominations.

*<u>Repurchase Agreements</u>* are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer's holding period. Any repurchase agreements the fund enters into will involve the fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short, from overnight to one week, although the securities collateralizing a repurchase agreement may have longer maturity dates. Default by the seller might cause the fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. The fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement's seller, the fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying securities and loss of income. Certain repurchase agreements the fund may enter into may or may not be subject to an automatic stay in bankruptcy proceedings. The fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank.

**Non-Publicly Traded Securities and Private Placements.** The fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, the fund may be required to bear the expenses of registration.

**Restricted Securities** are securities that are subject to legal restrictions on their sale. Difficulty in selling restricted securities may result in a loss or be costly to the fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended (the 1933 Act), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. To the extent the fund invests in restricted securities that are deemed liquid, the general level of illiquidity in the fund's portfolio may be increased if such securities become illiquid.

**Securities Lending** of portfolio securities is a common practice in the securities industry. The fund may engage in security lending arrangements. When the fund is lending portfolio securities, the fund may receive cash collateral and may invest it in short-term, interest-bearing obligations, including cash collateral funds, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies. Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities and efforts to recall such securities promptly may be unsuccessful, especially for foreign securities. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities, if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral.

The fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other permitted instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) the fund may at any time call the loan and obtain the return of the securities loaned; (3) the fund will receive payments in lieu of any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security's voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to the fund, it is expected that the fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer's corporate governance policies or structure.

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To the extent the fund participates in securities lending under the current securities lending agreements with unaffiliated lending agents, costs and expenses, including agent fees, associated with securities lending activities under the securities lending program paid to the unaffiliated lending agents start at 9% of gross lending revenue, with subsequent breakpoints to a low of 5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by the fund, as applicable. No portion of the lending revenue is paid to or retained by Schwab Asset Management or any affiliate of Schwab Asset Management.

**Securities of Other Investment Companies.** Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders' money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a continuous basis; (2) BDCs that generally invest in, and provide services to, privately-held companies or thinly-traded public companies (see the sub-section titled "Business Development Companies" for more information); (3) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; (4) UITs that generally offer a fixed number of redeemable shares; and (5) money market funds that typically seek current income by investing in money market securities (see the section titled "Money Market Securities" for more information). Certain open-end funds, closed-end funds and UITs are traded on exchanges (see the section titled "Exchange-Traded Funds" for more information).

To the extent the fund invests, or has invested, in shares of other investment companies, including BDCs, during its prior fiscal year, the fund, pursuant to SEC rules, must disclose any material fees and expenses indirectly incurred by the fund as a result of such investments. These indirect fees and expenses, to the extent incurred, will appear in the fee table of the fund's prospectus as a separate line item captioned "Acquired fund fees and expenses."

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The fund may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. The fund may invest in investment companies that are not registered with the SEC or in privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause the fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which the fund may invest in another investment company may be limited. Except as described below, the 1940 Act currently requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of the fund's total assets will be invested in the securities of any one acquired investment company ("acquired fund"), (ii) not more than 10% of the value of its total assets will be invested in the aggregate in securities of acquired funds as a group and (iii) not more than 3% of the outstanding voting stock of any one acquired fund will be owned by the fund.

The limitations described above do not apply to investments in money market funds subject to certain conditions. The fund may invest in affiliated and unaffiliated money market funds without limit under Rule 12d1-1 under the 1940 Act subject to the fund's investment policies and restrictions and the conditions of the Rule.

Rule 12d1-4 allows a fund to acquire shares of an acquired fund in excess of the limitations currently imposed by the 1940 Act. Fund of funds arrangements relying on Rule 12d1-4 will be subject to several conditions, certain of which are specific to a fund's position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (i) control and voting that prohibit an acquiring fund, its investment adviser (or a subadviser) and their respective affiliates from beneficially owning more than 25% of the outstanding voting securities of an unaffiliated acquired fund; (ii) certain required findings relating to complexity, fees and undue influence (among other things); (iii) fund of funds investment agreements; and (iv) general limitations on an acquired fund's investments in other investment companies and private funds to no more than 10% of the acquired fund's asset, except in certain circumstances. To the extent the fund is an acquired fund, the limitations placed on acquired funds under Rule 12d1-4 may impact the investments made by the fund.

**Short Sales** may be used by the fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. The fund may engage in short sales that are either "against the box" or "uncovered." A short sale is "against the box" if at all times during which the short position is open, the fund owns at least an equal amount of the securities or securities convertible into, or has the right to acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to the fund with respect to the securities that are sold short. "Uncovered" short sales are transactions under which the fund sells a security it does not own. To complete such transaction, the fund may borrow the security through a broker to make delivery to the buyer

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and, in doing so, the fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. The fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, the fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until the fund replaces the borrowed securities.

The fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. If the fund sells securities short "against the box," it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

The fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities.

**Temporary Defensive Strategies.** During unusual economic or market conditions or for temporary defensive or liquidity purposes, the fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations that would not ordinarily be consistent with the fund's objectives. The fund will do so only if the investment adviser or subadvisers believe that the risk of loss outweighs the opportunity for capital gains or higher income. When the fund engages in such activities, it may not achieve its investment objective.

**U.S. Government Securities** are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the U.S. government. Some U.S. government securities, such as those issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Student Loan Marketing Association (Sallie Mae) and the Federal Home Loan Banks (FHLB), are supported by a line of credit the issuing entity has with the U.S. Treasury. Securities issued by other issuers are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. U.S. government securities, including U.S. Treasury securities, are among the safest securities; however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer or director of Fannie Mae and Freddie Mac with respect to Fannie Mae and Freddie Mac and the assets of Fannie Mae and Freddie Mac. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement (SPA) with each of Fannie Mae and Freddie Mac pursuant to which the U.S. Treasury agreed to purchase up to 1,000,000 shares of senior preferred stock with an aggregate initial liquidation preference of $1 billion and obtained warrants and options for the purchase of common stock of each of Fannie Mae and Freddie Mac. Under the SPAs as currently amended, the U.S. Treasury has pledged to provide financial support to a government-sponsored enterprise (GSE) in any quarter in which the GSE has a net worth deficit as defined in the respective SPA. Under the current arrangement, the GSEs have a maximum amount of funding available to them which will be reduced by any future draws. There is a risk that if a GSE experiences a loss in any fiscal quarter that results in the GSE having a negative net worth that is greater than the amount available under the U.S. Treasury's funding commitment that the FHFA could place the GSE in receivership. In addition, each GSE may only retain a certain amount of its profits at the end of each fiscal quarter and the U.S. Treasury's liquidation preference will increase in an amount equal to any increase in a GSE's net worth up to a certain amount. The SPAs contain various covenants that severely limit each enterprise's operations.

Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The SPAs are intended to enhance each of Fannie Mae's and Freddie Mac's ability to meet its obligations. The FHFA has indicated that the conservatorship of each enterprise will end when the director of the FHFA determines that the FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. The FHFA recently announced plans to consider taking Fannie Mae and Freddie Mac out of conservatorship. Should Fannie Mae and Freddie Mac be taken out of conservatorship, it is unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations under the SPAs. It also is unclear how the capital structure of Fannie Mae and Freddie Mac would be constructed post-conservatorship, and what effects, if any, the privatization of Fannie Mae and Freddie Mac will have on their creditworthiness and guarantees of certain mortgage-backed securities. Accordingly, should the FHFA take Fannie Mae and Freddie Mac out of conservatorship, there could be an adverse impact on the value of their securities which could cause the fund's investments to lose value.

Although the risk of default with the U.S. government securities is considered unlikely, any default on the part of a portfolio investment could cause the fund's share price or yield to fall. The risk of default on U.S. government securities may be heightened when there is uncertainty relating to negotiations in the U.S. Congress over increasing the statutory debt ceiling. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling, the U.S. government may default on certain U.S. government securities including those held by the fund, which could have an adverse impact on the fund. In August 2011, the long-term credit rating of the U.S. government was downgraded by a major rating agency

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as a result of concern about the U.S. government's budget deficit and rising debt burden. Similar downgrades in the future could increase volatility in domestic and foreign financial markets, result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of different kinds of debt. Although remote, it is at least theoretically possible that under certain scenarios the U.S. government could default on its debt, including U.S. Treasury securities.

#### INVESTMENT LIMITATIONS AND RESTRICTIONS

#### The following investment limitations may be changed only by vote of a majority of the fund's outstanding shares.

#### The Schwab International Opportunities Fund may not:
(1) Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(3) Purchase or sell commodities or real estate, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(4) Make loans to other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(5) Borrow money, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(6) Issue senior securities, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(7) Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

#### The following descriptions of the 1940 Act may assist investors in understanding the above policies and restrictions.
<u>Borrowing.</u> The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 ⅓% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are entered into in accordance with the conditions to applicable SEC requirements shall not be regarded as borrowings for the purposes of the fund's investment restriction.

<u>Concentration.</u> The SEC has defined concentration as investing more than 25% of an investment company's total assets in an industry or group of industries, with certain exceptions.

<u>Diversification.</u> Under the 1940 Act and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer's voting securities would be held by the fund.

<u>Lending.</u> Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

<u>Real Estate.</u> The 1940 Act does not directly restrict an investment company's ability to invest in real estate, but does require that every investment company have a fundamental investment policy governing such investments. The fund has adopted a fundamental policy that would permit direct investment in real estate. However, the fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of the fund's Board.

<u>Senior Securities.</u> Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits the fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, when such investments are entered into in accordance with the conditions to applicable SEC requirements.

<u>Underwriting.</u> Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets.

#### The following are non-fundamental investment policies and restrictions, and may be changed by the Board.

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#### The fund may not:
(1) Purchase securities of other investment companies, except as permitted by the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

(2) Sell securities short except as in accordance with current SEC rules and interpretations.

(3) Purchase securities on margin, except such short term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

(4) Borrow money except that the fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 ⅓% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

(5) Lend any security or make any other loan if, as a result, more than 33 ⅓% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

(6) Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries.

(7) Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that the fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs), (ii) purchase or sell futures contracts, options contracts, equity index participations and index participation contracts, and (iii) purchase securities of companies that deal in precious metals or interests therein.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of the fund's acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in total assets or net assets, as applicable, or other circumstances does not require the fund to sell an investment if it could not then make the same investment.

#### MANAGEMENT OF THE FUND
The fund is overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of the fund. The trustees met five times during the most recent fiscal year.

Certain trustees are "interested persons." A trustee is considered an interested person (Interested Trustee) of the Trust under the 1940 Act if he or she is an officer, director, or an employee of Schwab Asset Management or Charles Schwab & Co., Inc. (Schwab or the distributor). A trustee also may be considered an interested person of the Trust under the 1940 Act if he or she owns stock of The Charles Schwab Corporation (CSC), a publicly traded company and the parent company of Schwab Asset Management and Schwab.

As used herein, the terms "Fund Complex" and "Family of Investment Companies" each refer collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust which, as of February 27, 2023, included 105 funds. As used herein, the term "Schwab Funds" refers collectively to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Capital Trust; and the term "Schwab ETFs" refers to Schwab Strategic Trust.

Each of the officers and/or trustees serves in the same capacity, unless otherwise noted, for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The tables below provide information about the trustees and officers for the Trust, which includes the fund in this SAI. The address of each individual listed below is 211 Main Street, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(2)</sup> <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016-Sept. 2019), Principal Funds (investment management). | 105  | Director (2016-2019), <br> Principal Funds, Inc. |
| Robert W. Burns <br> 1959 <br> Trustee <br> (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105  |  |
| Nancy F. Heller <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105  |  |
| David L. Mahoney <br> 1954 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105  | Director (2004-present), <br> Corcept Therapeutics Incorporated <br> Director (2009-2021), <br> Adamas Pharmaceuticals, Inc. <br> Director (2003-2019), <br> Symantec Corporation  |
| Jane P. Moncreiff <br> 1961 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018-present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare). | 105  |  |
| Kimberly S. Patmore <br> 1956 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008-present), Patmore Management Consulting (management consulting). | 105  |  |
| J. Derek Penn <br> 1957 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006-2018), BNY Mellon (financial services). | 105  |  |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(1)</sup>)**  | **Principal Occupations <br> During the Past Five Years**  | **Number of Portfolios <br> in Fund Complex <br> Overseen by the <br> Trustee**  | **Other Directorships During <br> the Past Five Years**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II<sup>(3)</sup> <br> 1960 <br> Chairman and Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022-present), Director and Chief Executive Officer (Oct. 2008-present) and President (Feb. 2007-Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008-Oct. 2021) and Director (May 2008-Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006-present), Charles Schwab Bank, SSB; Director (Nov. 2017-present), Charles Schwab Premier Bank, SSB; Director (July 2019-present), Charles Schwab Trust Bank; Director (May 2008-present), Chief Executive Officer (Aug. 2017-present) and President (Aug. 2017-Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020-present), TD Ameritrade Holding Corporation; Director (July 2016-Oct. 2021), Charles Schwab Investment Management, Inc. | 105  | Director (2008-present), <br> The Charles Schwab Corporation |
| Richard A. Wurster<sup>(2)(3)</sup> <br> 1973 <br> Trustee <br> (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021-present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021-present), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021) and Senior Vice President – Advisory (May 2016-July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021-present), Schwab Holdings, Inc.; Director (Oct. 2021-present) and Chief Executive Officer (Nov. 2019-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018-Oct. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016-Apr. 2018) and President (Mar. 2017-Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016-Apr. 2018), Windhaven Investment Management, Inc. | 105  |  |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Jonathan de St. Paer <br> 1973 <br> President and Chief Executive Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019-present), President (Oct. 2018-present), Chief Operating Officer (Jan. 2021-present) and Chief Executive Officer (Apr. 2019-Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020-Mar. 2022) and Chief Operating Officer (Jan. 2021-Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019-present), President (Nov. 2018-present) and Trustee (Apr. 2019-Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (May 2022-present), Senior Vice President (Apr. 2019-May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014-Mar. 2019), Charles Schwab & Co., Inc. |
| Mark Fischer <br> 1970 <br> Chief Operating Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Chief Operating Officer (Dec. 2020-present) and Treasurer and Chief Financial Officer (Jan. 2016-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020-present) and Vice President (Oct. 2013-present), Charles Schwab Investment Management, Inc. |
| Dana Smith <br> 1965 <br> Treasurer and Chief Financial Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2023) | Treasurer and Chief Financial Officer (Jan. 2023-present) and Assistant Treasurer (Dec. 2015-Dec. 2022), Schwab Funds, Laudus Trust and Schwab ETFs; Vice President (Mar. 2022-present) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present), Charles Schwab & Co., Inc. |

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| | |
|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br> (Term of Office and Length of Time Served<sup>(4)</sup>)**  | **Principal Occupations During the Past Five Years**  |
| **OFFICERS**  | **OFFICERS**  |
| Omar Aguilar <br> 1970 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Dec. 2021), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022 – present), Charles Schwab Investment Advisory, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Brett Wander <br> 1961 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011-present), Schwab Funds, Laudus Trust and Schwab ETFs. |
| William P. McMahon, Jr. <br> 1972 <br> Vice President and Chief Investment Officer <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020-present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021-present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018-Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001-Apr. 2018), ThomasPartners, Inc. |
| Catherine MacGregor <br> 1964 <br> Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs <br> Chief Legal Officer, Vice President and Clerk, Laudus Trust <br> (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022-present) and Vice President (Sept. 2005-present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (July 2005-May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005-present) and Chief Legal Officer and Clerk (Mar. 2007-present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President (Nov. 2005-Oct. 2021) and Assistant Secretary (June 2007-Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021-present), Vice President and Assistant Secretary (Oct. 2009-Oct. 2021), Schwab ETFs. |

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<sup>(1)</sup>

Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee's twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.

?

<sup>(2)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(3)</sup>

Mr. Bettinger and Mr. Wurster are Interested Trustees. Mr. Bettinger and Mr. Wurster are Interested Trustees because each owns stock of CSC, the parent company of Schwab Asset Management, the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc., the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust.

<sup>(4)</sup>

The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

#### Board Leadership Structure
The Chairman of the Board, Walter W. Bettinger II, is Chief Executive Officer and a member of the Board of Directors of CSC and an interested person of the Trust as that term is defined in the 1940 Act. The Board is comprised of a super-majority (75 percent) of trustees who are not interested persons of the Trust (i.e., independent trustees). The Trust does not have a single lead independent trustee. There are three primary committees of the Board: the Audit, Compliance and Valuation Committee; the Governance Committee; and the Investment Oversight Committee. Each of the Committees is chaired by an independent trustee, and each Committee is currently comprised solely of independent trustees. The Committee chairs preside at Committee meetings, participate in formulating agendas for those meetings, and coordinate with management to serve as a liaison between the independent trustees and management on matters within the scope of the responsibilities of each Committee as set forth in its Board-approved charter. The Board has determined that this leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the independent trustees of the Trust constitute a super-majority of the Board, the fact that Committee chairs are independent trustees, the number of funds (and classes) overseen by the Board, and the total number of trustees on the Board.

#### Board Oversight of Risk Management
Like most investment companies, fund management and its other service providers have responsibility for day-to-day risk management for the fund. The Board's duties, as part of its risk oversight of the Trust, consist of monitoring risks identified during regular and special reports to the Committees of the Board, as well as regular and special reports to the full Board. In addition to monitoring such risks, the Committees and the Board oversee efforts of fund management and service providers to manage risks to which the funds of the Trust may be exposed. For example, the Investment Oversight Committee meets with portfolio managers and receives regular reports regarding investment risk and credit risk of the fund's portfolio. The Audit, Compliance and Valuation Committee meets with the fund's Chief Compliance Officer and Chief Financial Officer and receives regular reports regarding compliance risks, operational risks and risks related to the valuation and liquidity of portfolio securities. From its review of these reports and discussions with management, each Committee receives information about the material risks of the funds of the Trust and about how management and service providers mitigate those risks, enabling the independent Committee chairs and other independent members of the Committees to discuss these risks with the full Board.

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The Board recognizes that not all risks that may affect the fund can be identified nor can processes and controls be developed to eliminate or mitigate the occurrence or effects of certain risks; some risks are simply beyond the reasonable control of the fund, its management, and service providers. Although the risk oversight functions of the Board, and the risk management policies of fund management and fund service providers, are designed to be effective, there is no guarantee that they will eliminate or mitigate all risks. In addition, it may be necessary to bear certain risks (such as investment-related risks) to achieve the fund's investment objective. As a result of the foregoing and other factors, the fund's ability to manage risk is subject to significant limitations.

#### Individual Trustee Qualifications
The Board has concluded that each of the trustees should initially and continue to serve on the Board because of (i) his or her ability to review and understand information about the Trust provided to them by management, to identify and request other information they may deem relevant to the performance of their duties, to question management regarding material factors bearing on the management of the Trust, and to exercise their business judgment in a manner that serves the best interests of the Trust's shareholders and (ii) the trustee's experience, qualifications, attributes or skills as described below.

The Board has concluded that Mr. Beer should serve as trustee of the Trust because of the experience he gained serving as director, president and chief executive officer of Principal Funds and his knowledge and experience in the investment management industry.

The Board has concluded that Mr. Bettinger should serve as trustee of the Trust because of the experience he gained as president and chief executive officer of The Charles Schwab Corporation, his knowledge of and experience in the financial services industry, and the experience he has gained serving as trustee of the Schwab Funds since 2008, the Schwab ETFs since 2009, and the Laudus Trust since 2010.

The Board has concluded that Mr. Burns should serve as trustee of the Trust because of the experience he gained as managing director of Pacific Investment Management Company, LLC (PIMCO) and president of PIMCO Funds as well as the experience he has gained serving as trustee of the Schwab ETFs since 2009, and the Schwab Funds and Laudus Trust since 2016.

The Board has concluded that Ms. Heller should serve as trustee of the Trust because of the experience she gained as president of TIAA Charitable and as senior managing director at TIAA, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2018.

The Board has concluded that Mr. Mahoney should serve as trustee of the Trust because of the experience he gained serving as trustee of the Schwab Funds and Laudus Trust since 2011 and Schwab ETFs since 2016, as co-chief executive officer of McKesson Corporation, and his service on other public company boards.

The Board has concluded that Ms. Moncreiff should serve as trustee of the Trust because of the experience she gained as chief investment officer of CareGroup Healthcare System, the experience she has gained serving on other non-public company boards, her knowledge of and experience in the financial services industry, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2019.

The Board has concluded that Ms. Patmore should serve as trustee of the Trust because of the experience she gained serving as chief financial officer and executive vice president of First Data Corporation, her knowledge of and experience in management consulting, as well as the experience she has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2016.

The Board has concluded that Mr. Penn should serve as trustee of the Trust because of the experience he gained as head of equity sales and trading of BNY Mellon and his knowledge of and experience in the financial services industry, as well as the experience he has gained serving as trustee of the Schwab Funds and Schwab ETFs since 2021.

The Board has concluded that Mr. Wurster should serve as trustee of the Trust because of the experience he gained leading investment advisory firms and organizations, including Schwab Asset Management, and his knowledge of and experience in the investment management industry.

#### Trustee Committees
The Board has established certain committees and adopted Committee charters with respect to those committees, each as described below:

<sup>●</sup>

The Audit, Compliance and Valuation Committee reviews the integrity of the Trust's financial reporting processes and compliance policies, procedures and processes, and the Trust's overall system of internal controls. The Audit, Compliance and Valuation Committee also reviews and evaluates the qualifications, independence and performance of the Trust's independent auditors, and the implementation and operation of the Trust's valuation policy and procedures. This Committee is comprised of at least three independent trustees and currently has the following members: Kimberly S. Patmore (Chair), Michael J. Beer and J. Derek Penn. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Governance Committee reviews and makes recommendations to the Board regarding Trust governance-related matters, including but not limited to Board compensation practices, retirement policies and term limits, Board self-evaluations, the effectiveness and allocation of assignments and functions by the Board, the composition of Committees of the Board, and the training of trustees.

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The Governance Committee is responsible for selecting and nominating candidates to serve as trustees. The Governance Committee does not have a written policy with respect to consideration of candidates for trustee submitted by shareholders. However, if the Governance Committee determined that it would be in the best interests of the Trust to fill a vacancy on the Board, and a shareholder submitted a candidate for consideration by the Board to fill the vacancy, the Governance Committee would evaluate that candidate in the same manner as it evaluates nominees identified by the Governance Committee. Nominee recommendations may be submitted to the Secretary of the Trust at the Trust's principal business address. This Committee is comprised of at least three independent trustees and currently has the following members: David L. Mahoney (Chair), Robert W. Burns and Kimberly S. Patmore. The Committee met four times during the most recent fiscal year.

<sup>●</sup>

The Investment Oversight Committee reviews the investment activities of the Trust and the performance of the fund's investment adviser. This Committee is comprised of at least three trustees (at least two-thirds of whom shall be independent trustees) and currently has the following members: Jane P. Moncreiff (Chair), Robert W. Burns, Nancy F. Heller and David L. Mahoney. The Committee met four times during the most recent fiscal year.

#### Trustee Compensation
The following table provides trustee compensation for the fiscal year ended October 31, 2022, earned with respect to the fund in this SAI and the Fund Complex.

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| | | | |
|:---|:---|:---|:---|
| **Name of Trustee**  | **Aggregate Compensation <br> from the Fund in this SAI**  | **Pension or Retirement Benefits <br> Accrued as Part of Fund Expenses**  | **Total Compensation from the Fund <br> and Fund Complex Paid to Trustees**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| Walter W. Bettinger II |  | N/A  |  |
| Richard A. Wurster<sup>(1)</sup> |  | N/A  |  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| Michael J. Beer<sup>(1)</sup> | $318 | N/A  | $82500 |
| Robert W. Burns | $1373 | N/A  | $330000 |
| Nancy F. Heller | $1373 | N/A  | $330000 |
| David L. Mahoney | $1456 | N/A  | $350000 |
| Jane P. Moncreiff | $1456 | N/A  | $350000 |
| Kiran M. Patel <sup>(2)</sup> | $1456 | N/A  | $350000 |
| Kimberly S. Patmore | $1373 | N/A  | $330000 |
| J. Derek Penn | $1373 | N/A  | $330000 |

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<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

?

<sup>(2)</sup>

Mr. Patel retired from the Board effective December 31, 2022.

#### Securities Beneficially Owned by Each Trustee
The following table provides each trustee's equity ownership of the fund and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2022:

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| | | |
|:---|:---|:---|
| **Name of Trustee**  | **Dollar Range of Trustee Ownership of the Fund Included in the SAI**  | **Aggregate Dollar Range of Trustee <br> Ownership in the Family of <br> Investment Companies**  |
| **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  | **INTERESTED TRUSTEES**  |
| **Walter W. Bettinger II**  | Schwab International Opportunities Fund | Over $100,000  |
| **Richard A. Wurster<sup>(1)</sup>**  | Schwab International Opportunities Fund | Over $100,000  |
| **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  | **INDEPENDENT TRUSTEES**  |
| **Michael J. Beer<sup>(1)</sup>**  | Schwab International Opportunities Fund | Over $100,000  |
| **Robert W. Burns**  | Schwab International Opportunities Fund | Over $100,000  |
| **Nancy F. Heller**  | Schwab International Opportunities Fund | Over $100,000  |
| **David L. Mahoney**  | Schwab International Opportunities Fund | Over $100,000  |
| **Jane P. Moncreiff**  | Schwab International Opportunities Fund | Over $100,000  |
| **Kimberly S. Patmore**  | Schwab International Opportunities Fund | Over $100,000  |
| J. Derek Penn  | Schwab International Opportunities Fund |  |

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<sup>(1)</sup>

Mr. Beer and Mr. Wurster joined the Board effective October 1, 2022.

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As of December 31, 2022, none of the independent trustees or their immediate family members owned beneficially or of record any securities of Schwab Asset Management or Schwab or any subadvisers or the distributor of the fund, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Schwab Asset Management or Schwab or any subadvisers or the distributor of the fund.

#### Deferred Compensation Plan
Independent trustees may enter into a fee deferral plan. Under this plan, deferred fees will be credited to an account established by the Trust as of the date that such fees would have been paid to the trustee. The value of this account will equal the value that the account would have if the fees credited to the account had been invested in the shares of Schwab Funds selected by the trustee. Currently, none of the independent trustees has elected to participate in this plan.

#### Code of Ethics
The fund, the investment adviser and Schwab have adopted a Code of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Code of Ethics permits the trustees, directors, officers or advisory representatives of the fund or the investment adviser or the directors or officers of Schwab to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the fund. Securities transactions by some of these individuals may be subject to prior approval of the investment adviser's Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

In addition, each subadviser has adopted a Code of Ethics and, subject to certain conditions, each subadviser's Code of Ethics permits directors or officers of the subadviser to buy or sell securities for their own account, including securities that may be purchased or held by the fund. Securities transactions by some of these individuals may be subject to prior approval of the subadviser's chief compliance officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

#### CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2023, the officers and trustees of the Trust, as a group owned, of record or beneficially, less than 1% of the outstanding voting securities of the fund.

As of January 31, 2023, the following persons or entities owned, of record or beneficially, 5% or more of the outstanding voting securities of the fund (a shareholder's or an entity's address will be listed once at the first mention and not repeated for future entries):

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| | | |
|:---|:---|:---|
| **Fund**  | **Name and Address**  | **Percentage of <br> Ownership**  |
| Schwab International Opportunities Fund  | Charles Schwab & Co., Inc. <br> FBO Customers <br> Attn Schwab Funds Team N <br> 211 Main Street <br> San Francisco, CA 94105-1905  | 73.86% |
| Schwab International Opportunities Fund  | Schwab Target 2040 Fund <br> 211 Main Street <br> San Francisco, CA 94105 | 10.61%<sup>(1)</sup> |
| Schwab International Opportunities Fund  | National Financial Services LLC <br> For Exclusive Benefit of Customers <br> Attn Mutual Funds Dept 5th FL <br> 200 Liberty Street <br> 1 World Financial Center <br> New York, NY 10281-1003 | 9.18% |
| Schwab International Opportunities Fund  | Schwab Target 2030 Fund <br> 211 Main Street <br> San Francisco, CA 94105 | 7.55%<sup>(1)</sup> |
| Schwab International Opportunities Fund  | Schwab Balanced Fund <br> 211 Main Street <br> San Francisco, CA 94105 | 5.58%<sup>(1)</sup> |

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<sup>(1)</sup>

These shares are held within the Charles Schwab & Co., Inc. account listed elsewhere in the table.

Persons who beneficially own more than 25% of the fund may be deemed to control the fund. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of the fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.

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#### INVESTMENT ADVISORY AND OTHER SERVICES

#### Investment Adviser and Subadvisers
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 211 Main Street, San Francisco, CA 94105, serves as the fund's investment adviser and administrator pursuant to an investment advisory and administration agreement (Advisory Agreement) between it and the Trust. Schwab is an affiliate of Schwab Asset Management and is the Trust's distributor. Charles R. Schwab is the founder, Chairman and Director of CSC. As a result of his ownership of and interests in CSC, Mr. Schwab may be deemed to be a controlling person of Schwab Asset Management and Schwab.

#### Advisory Agreement
The continuation of the fund's Advisory Agreement must be specifically approved at least annually (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (independent trustees), cast in person, except to the extent permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, at a meeting called for the purpose of voting on such approval.

Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement between the Trust and Schwab Asset Management with respect to existing funds in the Trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Schwab Asset Management, as well as extensive data provided by third parties, and the independent trustees receive advice from counsel to the independent trustees.

The fund is actively managed by a team of dedicated investment professionals, led by Schwab Asset Management, who serves as the "manager of managers," and a team of subadvisers, each of which manages a portion of the assets of the fund. Schwab Asset Management oversees the advisory services provided to the fund. Schwab Asset Management also manages a portion of the fund's assets including the fund's cash position. Pursuant to separate sub-advisory agreements, and under the supervision of Schwab Asset Management and the fund's Board, a number of subadvisers are responsible for the day-to-day investment management of a discrete portion of the assets of the fund. The subadvisers also are responsible for managing their employees who provide services to the fund. Subject to Board review, Schwab Asset Management allocates and, when appropriate, reallocates the fund's assets among subadvisers, monitors and evaluates subadviser performance, and oversees subadviser compliance with the fund's investment objectives, policies and restrictions.

The following are the subadvisers for the fund.

**American Century Investment Management, Inc. (American Century)** serves as subadviser to the fund. American Century has been managing mutual funds since 1958. American Century's principal office is located at 4500 Main Street, Kansas City, MO 64111.

American Century is a wholly owned, direct subsidiary of American Century Companies, Inc. The Stowers Institute for Medical Research (SIMR) controls American Century Companies, Inc. by virtue of its beneficial ownership of more than 25% of the voting securities of American Century Companies, Inc. SIMR is part of a not-for-profit biomedical research organization dedicated to finding the keys to the causes, treatments and prevention of disease.

**Baillie Gifford Overseas Limited (Baillie Gifford)** serves as subadviser to the fund. Baillie Gifford is a wholly-owned subsidiary of Baillie Gifford & Co., which is generally engaged in the business of investment management. Baillie Gifford and Baillie Gifford & Co. are authorized and regulated in the U.K. by the Financial Conduct Authority. Its principal address is located at Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland.

**Harris Associates L.P. (Harris Associates)** serves as subadviser to the fund. Harris Associates is a limited partnership managed by its general partner, Harris Associates, Inc. (HAI). Harris Associates and HAI are wholly-owned subsidiaries of Natixis Investment Managers, LLC, which is an indirect subsidiary of Natixis Investment Managers, an international asset management group based in Paris, France. Natixis Investment Managers is owned by Natixis, a French investment banking and financial services firm that is principally owned by BPCE, France's second largest banking group. Together with its predecessor firms, Harris Associates has advised and managed mutual funds since 1976. The principal office of Harris Associates is located at 111 S. Wacker Drive, Suite 4600, Chicago, IL 60606.

**Mondrian Investment Partners Limited (Mondrian)** serves as a subadviser to the fund. Mondrian is a limited company organized under the laws of the United Kingdom. Mondrian is a wholly-owned subsidiary of Mondrian Investment Partners Holdings Limited and is controlled by members of Mondrian's management. Mondrian has managed assets since the firm's founding in 1990. Mondrian is 100% employee owned by its senior employees through Atlantic Value Investment Partnership LP. The principal office of Mondrian Investment Partners Limited is located at 60 London Wall, Floor 10, London EC2M 5TQ, United Kingdom.

As described below, Schwab Asset Management is entitled to receive from the fund a graduated annual fee, payable monthly, for its advisory and administrative services to the fund. The table below sets forth the advisory fees paid by the fund to Schwab Asset Management for the past three fiscal years ended October 31. The figures in the "net fees paid" row represent the actual amounts paid to Schwab Asset Management, which include the effect of any reductions due to the application of the fund's expense limitation (expense cap). The figures in the "gross fees reduced by" row represent the amount, if any, the advisory fees payable to Schwab Asset Management were reduced due to the application of the fund's expense cap.

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The expense cap is not intended to cover all fund expenses, and the fund's expenses may exceed the expense cap. For example, the expense cap does not cover investment-related expenses, such as brokerage commissions, interest, taxes and the fees and expenses of pooled investment vehicles, such as ETFs, REITs, and other investment companies, that are held by the fund, nor does it cover extraordinary or non-routine expenses, such as shareholder meeting costs.

The investment adviser pays the subadvisers their fees out of the amount it receives from the fund.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Fund and Advisory Fee Schedule**  | | **2022 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **2022 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **2021 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **2021 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **2020 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **2020 <br> (In dollars and <br> as a percent <br> of the fund's <br> average net assets)**  | **Expense <br> Limitation<sup>(2)</sup>**  |
| **Schwab International <br> Opportunities Fund <br> 0.63% of the fund's average daily net <br> assets<sup>(1)</sup>**  | Net fees paid to the investment adviser:  | $| 9562131 | $| 15294694 | $| 13206477 | 0.86% |
| **Schwab International <br> Opportunities Fund <br> 0.63% of the fund's average daily net <br> assets<sup>(1)</sup>**  | Gross fees reduced by: | $| 1020837 | $| 3205795 | $| 3278846 |  |
| **Schwab International <br> Opportunities Fund <br> 0.63% of the fund's average daily net <br> assets<sup>(1)</sup>**  | Fees paid to the subadvisers by the investment adviser:  | $| 5427754 | $| 7839181 | $| 6894649 |  |
| **Schwab International <br> Opportunities Fund <br> 0.63% of the fund's average daily net <br> assets<sup>(1)</sup>**  | Fees paid to the subadvisers by the investment adviser:  | 0.44%  | 0.44%  | 0.54%  | 0.54%  | 0.53%  | 0.53%  |  |

---

<sup>(1)</sup>

Prior to February 25, 2022, the advisory fee schedule was 1.29% of the fund's average daily net assets not in excess of $500 million, 1.275% of such net assets in excess of $500 million and less than $1 billion, and 1.25% of such net assets over $1 billion.

<sup>(2)</sup>

The investment adviser and its affiliates have agreed to limit the total annual fund operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, and certain non-routine expenses) of the fund to the percentage shown in this column for so long as the investment adviser serves as the adviser to the fund. Prior to February 25, 2022, the investment adviser and its affiliates had agreed to limit the total annual fund operating expenses (excluding interest, taxes, and certain non-routine expenses) of the fund to 1.25% of the fund's daily net asset value for so long as the investment adviser serves as the adviser to the fund. The agreement may only be amended or terminated with approval of the fund's Board.

#### Distributor
Pursuant to a Second Amended and Restated Distribution Agreement between Schwab and the Trust, Schwab, located at 211 Main Street, San Francisco, CA 94105, is the principal underwriter for shares of the fund and is the Trust's agent for the purpose of the continuous offering of the fund's shares. The fund pays for prospectuses and shareholder reports to be prepared and delivered to existing shareholders. Schwab pays such costs when the described materials are used in connection with the offering of shares to prospective investors and for supplemental sales literature and advertising. Schwab receives no fee under the Distribution Agreement; however, as described below in "Payments to Financial Intermediaries," Schwab Asset Management compensates Schwab, in its capacity as a financial intermediary and not in its capacity as distributor and principal underwriter for the fund, for providing certain additional services that may be deemed to be distribution-related.

#### Payments to Financial Intermediaries
Schwab Asset Management and its affiliates make payments to certain broker-dealers, banks, trust companies, insurance companies, retirement plan service providers, consultants and other financial intermediaries (Intermediaries) for services and expenses incurred in connection with certain activities or services which may educate financial advisors or facilitate, directly or indirectly, investment in the fund and other investment companies advised by Schwab Asset Management, including the Schwab ETFs. These payments are made by Schwab Asset Management or its affiliates at their own expense, and not from the assets of the fund. Although a portion of Schwab Asset Management's and its affiliates' revenue comes directly or indirectly in part from fees paid by the fund, these payments do not increase the expenses paid by investors for the purchase of fund shares, or the cost of owning the fund.

These payments may relate to educational efforts regarding the fund, or for other activities, such as marketing and/or fund promotion activities and presentations, educational training programs, conferences, data analytics and support, or the development and support of technology platforms and/or reporting systems. In addition, Schwab Asset Management or its affiliates make payments to certain Intermediaries that make shares of the fund available to their customers or otherwise promote the fund, which may include Intermediaries that allow customers to buy and sell fund shares without paying a commission or other transaction charge. Payments of this type are sometimes referred to as revenue-sharing or marketing support.

Payments made to Intermediaries may be significant and may cause an Intermediary to make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive. As a result, these payments could create conflicts of interest between an Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the fund over other investments.

As of February 27, 2023, Schwab Asset Management anticipates that Envestnet Asset Management, Inc., E\*TRADE Securities LLC, Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, Principal Life Insurance Company and Teachers Insurance and Annuity Association of America will receive these payments. Schwab Asset Management may enter into similar agreements with other FINRA member firms (or their affiliates) in

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the future. In addition to member firms of FINRA, Schwab Asset Management and its affiliates may also make these payments to certain other financial intermediaries, such as banks, trust companies, insurance companies, and plan administrators and consultants that sell fund shares or provide services to the fund and its shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments.

Schwab Asset Management also makes payments to Schwab for certain administrative, professional and support services provided by Schwab, in its capacity as an affiliated financial intermediary and not as distributor and principal underwriter of the fund. These payments reimburse Schwab for its charges, costs and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support and technology.

#### Shareholder Servicing Plan
The Trust's Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Schwab (together, service providers), of certain shareholder services to the current shareholders of the fund. Pursuant to the Plan, the fund is subject to an annual shareholder servicing fee, up to the amount set forth below:

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| | |
|:---|:---|
| **Fund**  | **Shareholder Servicing Fee**  |
| Schwab International Opportunities Fund | 0.20% |

---

Pursuant to the Plan, the fund may pay service providers (including Schwab) that, pursuant to written agreements with Schwab or the Trust, provide certain account maintenance, customer liaison and shareholder services to fund shareholders. The service providers may provide fund shareholders with the following shareholder services, among other shareholder services: (i) maintaining records for shareholders that hold shares of the fund; (ii) communicating with shareholders, including the mailing of regular statements and confirmation statements, distributing fund-related materials, mailing prospectuses and reports to shareholders, and responding to shareholder inquiries; (iii) communicating and processing shareholder purchase, redemption and exchange orders; (iv) communicating mergers, splits or other reorganization activities to fund shareholders; and (v) preparing and filing tax information, returns and reports.

The shareholder servicing fee paid to a particular service provider is calculated at the annual rate set forth in the chart above and is based on the average daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

The Plan shall continue in effect for the fund for so long as its continuance is specifically approved at least annually by a vote of the majority of both (i) the Board of the Trust and (ii) the Trustees of the Trust who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it (the Qualified Trustees). The Plan requires that Schwab or any person authorized to direct the disposition of monies paid or payable by the fund pursuant to the Plan furnish quarterly written reports of amounts spent under the Plan and the purposes of such expenditures to the Board of the Trust for review. All material amendments to the Plan must be approved by votes of the majority of both (i) the Board and (ii) the Qualified Trustees.

#### Transfer Agent
BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581, serves as the fund's transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the fund's shares.

#### Custodian and Fund Accountant
State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, MA 02111, serves as the fund's custodian and fund accountant.

The custodian is responsible for the daily safekeeping of securities and cash held by the fund. The fund accountant maintains all books and records related to the fund's transactions.

#### Independent Registered Public Accounting Firm
The fund's independent registered public accounting firm, Deloitte & Touche LLP (Deloitte), 1601 Wewatta Street, Suite 400, Denver, CO 80202, audits and reports on the annual financial statements of the fund and reviews certain regulatory reports. Deloitte or one of its affiliates also reviews the fund's federal income tax returns and performs other professional, accounting, auditing, tax and advisory services when engaged to do so by the Trust.

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#### Securities Lending Activities
The fund's securities lending agent is Goldman Sachs Bank USA (d/b/a Goldman Sachs Agency Lending). The securities lending agent provides services to the fund which include the following: locating borrowers, negotiating the loan terms, monitoring the value of loans and collateral on a daily basis, marking each loan to market on a daily basis, coordinating collateral movements, collecting income, monitoring and processing corporate actions, managing recalls of loaned securities and termination of loans, and recordkeeping.

The table below summarizes key information regarding the fund's securities lending activities to the extent the fund engaged in securities lending during the most recent fiscal year.

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| | |
|:---|:---|
| | **Schwab <br> International <br> Opportunities <br> Fund**  |
| **Gross income from securities lending activities** | $**9533** |
| Fees and/or compensation paid for securities lending activities and related services: |  |
| &nbsp;&nbsp;&nbsp; Fees paid to securities lending agent from a revenue split  | $598 |
| &nbsp;&nbsp;&nbsp; Fees paid for any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split  | $232 |
| &nbsp;&nbsp;&nbsp; Administrative fees not included in revenue split  |  |
| &nbsp;&nbsp;&nbsp; Indemnification fees not included in revenue split  |  |
| &nbsp;&nbsp;&nbsp; Rebates (paid to borrower)  | $645 |
| &nbsp;&nbsp;&nbsp; Other fees not included in revenue split  |  |
| **Aggregate fees/compensation paid for securities lending activities** | $**1475** |
| **Net income from securities lending activities<sup>(1)</sup>** | $**8058** |

---

<sup>(1)</sup>

"Net income from securities lending activities" may not match the fund's current financial statements, which may reflect certain accrual adjustments.

#### PORTFOLIO MANAGERS

#### Schwab Asset Management is responsible for monitoring and coordinating the overall management of the fund.
**Other Accounts.** In addition to the fund, each portfolio manager (collectively, referred to as the Portfolio Managers) is responsible for the day-to-day management of certain other accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of October 31, 2022.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br> (this amount does not include the fund in this SAI)**  | **Registered Investment Companies <br> (this amount does not include the fund in this SAI)**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| John Greves  | 0 | $0 | 0 | $0 | 0 | $0 |
| Tony Creasy  | 0 | $0 | 0 | $0 | 0 | $0 |
| Daniel Piquet  | 0 | $0 | 0 | $0 | 0 | $0 |
| Chuck Craig  | 13 | $60495401992 | 0 | $0 | 0 | $0 |
| David Rios | 13 | $60495401992 | 0 | $0 | 0 | $0 |

---

**Conflicts of Interest.** A Portfolio Manager's management of other accounts may give rise to potential conflicts of interest in connection with his or her management of the fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include separate accounts and other mutual funds advised by Schwab Asset Management (collectively, the Other Managed Accounts). The Other Managed Accounts might have similar investment objectives as the fund, track the same index the fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by the fund. While the Portfolio Managers' management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, Schwab Asset Management does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, Schwab Asset Management believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

*<u>Knowledge of the Timing and Size of Fund Trades.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' day-to-day management of the fund. Because of their positions with the fund, the Portfolio Managers know the size, timing, and possible market impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of the fund. However, Schwab Asset Management has adopted policies and procedures

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reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to index funds, which seek to track their respective benchmark indexes, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding separate accounts, with those of the fund. All aggregated orders are subject to Schwab Asset Management's aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account's order.

*<u>Investment Opportunities.</u>* A potential conflict of interest may arise as a result of the Portfolio Managers' management of the fund and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over the fund, which conflict of interest may be exacerbated to the extent that Schwab Asset Management or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the fund. Notwithstanding this theoretical conflict of interest, it is Schwab Asset Management's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, Schwab Asset Management has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for the fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for the fund in an effort to outperform its specific benchmark, such an approach might not be suitable for the fund given its investment objectives and related restrictions.

**Compensation.** During the most recent fiscal year, Portfolio Manager compensation consisted of a fixed annual (base) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual Portfolio Manager's overall performance such as the Portfolio Manager's contribution to the investment process, good corporate citizenship, risk management and mitigation, and functioning as an active contributor to the firm's success. The discretionary bonus is determined in accordance with the relevant Portfolio Manager Incentive Plan (the Plan) as follows:

There are two independent funding components for the Plan:

<sup>●</sup>

a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

<sup>●</sup>

a portion based on Corporate results

#### Investment Fund Performance
At the close of the year, the fund's performance will be determined by its 1-year, 1- and 2-year, or 1- and 3-year percentile standing (based on pre-tax return before expenses) within its designated benchmark, peer group, or category, depending on the strategy of the fund (i.e., whether the fund is passively or actively managed) using standard statistical methods approved by Schwab Asset Management senior management. Investment Fund Performance measurements may be changed or modified at the discretion of the Schwab Asset Management President and Schwab Asset Management Chief Operating Officer. As each participant may be a member of a team that manages and/or supports a number of funds, there may be several funds and/or Other Managed Accounts considered in arriving at the incentive compensation funding.

Portfolio Managers who are chief investment officers of the investment adviser are covered by a Plan that specifically includes a risk mitigation component in the funding determination.

#### Corporate Performance
The Corporate Bonus Plan is an annual bonus plan that provides discretionary awards based on the financial performance of CSC during the annual performance period. Quarterly advances may be paid for the first three quarters. Allocations are discretionary and aligned with CSC and individual performance. Funding for the Plan is determined at the conclusion of the calendar year. Funding will be capped at 200% of target.

#### Allocation of Discretionary Bonus
At year-end, funding for both components of discretionary bonus is allocated to Plan participants by Schwab Asset Management senior management based on their assessment of a variety of performance factors.

Factors considered in Schwab Asset Management senior management's allocation process will include objective and subjective factors that will take into consideration total performance and will include, but are not limited to:

<sup>●</sup>

Fund performance relative to performance measure

<sup>●</sup>

Risk management and mitigation

<sup>●</sup>

Individual performance against key objectives

<sup>●</sup>

Contribution to overall group results

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<sup>●</sup>

Functioning as an active contributor to the firm's success

<sup>●</sup>

Team work

<sup>●</sup>

Collaboration between Analysts and Portfolio Managers

<sup>●</sup>

Regulatory/Compliance management

The Portfolio Managers' compensation is not based on the value of the assets held in the fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares.** The following table shows the dollar amount range of the Portfolio Managers' "beneficial ownership" of shares of the fund, as of October 31, 2022. Dollar amount ranges disclosed are established by the SEC. "Beneficial ownership" is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (the 1934 Act).

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| | | |
|:---|:---|:---|
| **Portfolio Manager**  | **Fund**  | **Dollar Range of <br> Fund Shares Owned**  |
| John Greves | Schwab International Opportunities Fund |  |
| Tony Creasy | Schwab International Opportunities Fund | $100001-$500000  |
| Daniel Piquet | Schwab International Opportunities Fund | $1-$10000  |
| Chuck Craig | Schwab International Opportunities Fund |  |
| David Rios | Schwab International Opportunities Fund |  |

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#### Subadviser Portfolio Manager Disclosure

#### American Century
**Other Accounts.** In addition to the fund, Messrs. Gurwich, Laffan and Patel are also responsible for the day-to-day management of certain other accounts, as indicated in the following table. These accounts do not have an advisory fee based on the performance of the account. The information below is provided as of October 31, 2022.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Trevor Gurwich  | 3 | $947068411 | 9 | $1070318181 | 16 | $1791197897 |
| Federico Laffan  | 3 | $947068411 | 9 | $1070318181 | 16 | $1791197897 |
| Pratik Patel | 2 | $871433630 | 5 | $218276833 | 7 | $849798601 |

---

**Conflicts of Interest.** Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts include, for example, conflicts among investment strategies, such as one portfolio buying or selling a security while another portfolio has a differing, potentially opposite position in such security. This may include one portfolio taking a short position in the security of an issuer that is held long in another portfolio (or vice versa). Other potential conflicts may arise with respect to the allocation of investment opportunities, which are discussed in more detail below. American Century has adopted policies and procedures that are designed to minimize the effects of these conflicts.

Responsibility for managing American Century client portfolios is organized according to investment discipline. Investment disciplines include, for example, disciplined equity, global growth equity, global value equity, global fixed income, multi-asset strategies, exchange-traded funds, and Avantis Investors funds. Within each discipline are one or more portfolio teams responsible for managing specific client portfolios. Generally, client portfolios with similar strategies are managed by the same team using the same objective, approach, and philosophy. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest. In addition, American Century Investments maintains an ethical wall that restricts real time access to information regarding any portfolio's transaction activities and positions to team members that have responsibility for a given portfolio or are within the same equity investment discipline. The ethical wall is intended to aid in preventing the misuse of portfolio holdings information and trading activity in the other disciplines.

For each investment strategy, one portfolio is generally designated as the "policy portfolio." Other portfolios with similar investment objectives, guidelines and restrictions, if any, are referred to as "tracking portfolios." When managing policy and tracking portfolios, a portfolio team typically purchases and sells securities across all portfolios that the team manages. American Century's trading systems include various order entry programs that assist in the management of multiple portfolios, such as the ability to purchase or sell the same relative amount of one security across several funds. In some cases a tracking portfolio may have additional restrictions or limitations that cause it to be managed separately from the policy portfolio. Portfolio managers make purchase and sale decisions for such portfolios alongside the policy portfolio to the extent the overlap is appropriate, and separately, if the overlap is not.

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American Century may aggregate orders to purchase or sell the same security for multiple portfolios when it believes such aggregation is consistent with its duty to seek best execution on behalf of its clients. Orders of certain client portfolios may, by investment restriction or otherwise, be determined not available for aggregation. American Century has adopted policies and procedures to minimize the risk that a client portfolio could be systematically advantaged or disadvantaged in connection with the aggregation of orders. To the extent equity trades are aggregated, shares purchased or sold are generally allocated to the participating portfolios pro rata based on order size. Because initial public offerings (IPOs) are usually available in limited supply and in amounts too small to permit across-the-board pro rata allocations, American Century has adopted special procedures designed to promote a fair and equitable allocation of IPO securities among clients over time. A centralized trading desk executes all fixed income securities transactions for Avantis ETFs and mutual funds. For all other funds in the American Century complex, portfolio teams are responsible for executing fixed income trades with broker/dealers in a predominantly dealer marketplace. Trade allocation decisions are made by the portfolio manager at the time of trade execution and orders entered on the fixed income order management system. There is an ethical wall between the Avantis trading desk and all other American Century traders. The advisor's Global Head of Trading monitors all trading activity for best execution and to make sure no set of clients is being systematically disadvantaged.

Finally, investment of American Century's corporate assets in proprietary accounts may raise additional conflicts of interest. To mitigate these potential conflicts of interest, American Century has adopted policies and procedures intended to provide that trading in proprietary accounts is performed in a manner that does not give improper advantage to American Century to the detriment of client portfolios.

**Compensation.** American Century portfolio manager compensation is structured to align the interest of the portfolio manager with those of the shareholders whose assets they manage. As of October 31, 2022, the compensation includes the components described below, each of which is determined with reference to a number of factors such as overall performance, market competition, and internal equity.

*<u>Base Salary.</u>* Portfolio managers receive base pay in the form of a fixed annual salary.

*<u>Bonus.</u>* A significant portion of portfolio manager compensation takes the form of an annual incentive bonus which is determined by a combination of factors. One factor is mutual fund investment performance. For most American Century mutual funds, investment performance is generally measured by a combination of one-, three- and five-year pre-tax performance relative to various benchmarks and/or internally-customized peer groups. The performance comparison periods may be adjusted based on a fund's inception date or a portfolio manager's tenure on the fund. Custom peer groups are constructed using all the funds in the indicated categories as a starting point. Funds are then eliminated from the peer group based on a standardized methodology designed to result in a final peer group that is both more stable over the long term (i.e., has less peer turnover) and that more closely represents the fund's true peers based on internal investment mandates.

Portfolio managers may have responsibility for multiple American Century mutual funds. In such cases, the performance of each is assigned a percentage weight appropriate for the portfolio manager's relative levels of responsibility.

Portfolio managers also may have responsibility for other types of managed portfolios or ETFs. This is the case for the fund. If the performance of a managed account or ETF is considered for purposes of compensation, it is generally measured via the same criteria as an American Century mutual fund (i.e., relative to the performance of a benchmark and/or peer group). Performance of the fund is not separately considered in determining portfolio manager compensation.

A second factor in the bonus calculation relates to the performance of a number of American Century funds managed according to one of the following investment disciplines: global growth equity, global value equity, disciplined equity, global fixed-income, and multi-asset strategies. The performance of American Century ETFs may also be included for certain investment disciplines. Performance is measured for each product individually as described above and then combined to create an overall composite for the product group. These composites may measure one-year performance (equal weighted) or a combination of one-, three- and five- year performance (equal or asset weighted) depending on the portfolio manager's responsibilities and products managed and the composite for certain portfolio managers may include multiple disciplines. This feature is designed to encourage effective teamwork among portfolio management teams in achieving long-term investment success for similarly styled portfolios.

A portion of the portfolio managers' bonuses may be discretionary and may be tied to factors such as profitability, or individual performance goals, such as research projects and/or the development of new products.

*<u>Restricted Stock Plans.</u>* Portfolio managers are eligible for grants of restricted stock of American Century Companies, Inc. These grants are discretionary, and eligibility and availability can vary from year to year. The size of an individual's grant is determined by individual and product performance as well as other product-specific considerations such as profitability. Grants can appreciate/depreciate in value based on the performance of the American Century Companies, Inc. stock during the restriction period (generally three to four years).

*<u>Deferred Compensation Plans.</u>* Portfolio managers are eligible for grants of deferred compensation. These grants are used in limited situations, primarily for retention purposes. Grants are fixed and can appreciate/depreciate in value based on the performance of the American Century mutual funds in which the portfolio manager chooses to invest them.

**Ownership of Fund Shares.** As of October 31, 2022, Trevor Gurwich and Pratik Patel did not own any shares of the fund. However, Federico Laffan beneficially owned shares of the fund in the dollar range of $1-$10,000.

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#### Baillie Gifford
**Other Accounts.** In addition to the fund, the portfolio manager(s) below are responsible for the day-to-day management of certain other accounts, as listed below, as of October 31, 2022.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts (separate accounts)**  | **Other Accounts (separate accounts)**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Spencer Adair | 4 | $4388285318 | 17 | $13663663529 | 63 | $24634582236 |
| Lawrence Burns  | 6 | $30048683300 | 7 | $16853587459 | 38 | $10577454601 |
| Paulina Sliwinska  | 2 | $260353091 | 1 | $39228551 | 4 | $195849391 |

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Accounts where compensation is based on account performance.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts (separate accounts)**  | **Other Accounts (separate accounts)**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Spencer Adair | 2 | $3409796220 | 3 | $244335734 | 6 | $3916591008 |
| Lawrence Burns  | 3 | $27032929678 | 1 | $118761838 | 0 | $0 |
| Paulina Sliwinska  | 1 | $194523617 | 0 | $0 | 0 | $0 |

---

**Material Conflicts of Interest.** Baillie Gifford's individual portfolio managers may manage multiple accounts for multiple clients, including the fund. In addition to mutual funds, these other accounts may include separate accounts, collective investment schemes, or offshore funds. Baillie Gifford manages potential conflicts between the fund and other types of accounts through allocation policies and procedures, and internal review processes. Baillie Gifford has developed trade allocation systems and controls to ensure that no one client, regardless of type, is intentionally favored at the expense of another. Allocation policies are designed to address potential conflicts in situations where two or more funds or accounts participate in investment decisions involving the same securities.

**Compensation.** The remuneration for non-partner Investment Managers (Portfolio Managers and Researchers) at Baillie Gifford has three key elements (i) base salary, (ii) an Annual Performance Award and (iii) a Long-Term Profit Award. In addition, portfolio managers are eligible for the standard retirement benefits and health and welfare benefits available to all Baillie Gifford employees.

The Annual Performance Award (APA) for non-partner Investment Managers is measured and determined as follows:

<sup>●</sup>

80% of the APA arrangement is determined by the investment performance of the investment team, the Portfolio Construction Groups (PCGs), or a combination of both that the individual has been part of, over the specified investment time horizon, reflecting Baillie Gifford's emphasis on long term investing.

<sup>●</sup>

20% of the APA arrangement is determined by the firm's Net Promoter Score, emphasizing the importance of client service and the role all staff play in this.

Within the firm each Investment Team and the PCG have pre-determined performance targets. These targets, along with the relevant portfolios being measured, are established and agreed with by each Head of Department following consultation with the Remuneration Committee and the Investment Leadership Groups.

The Long-Term Profit Award (LTPA) element delivers a share of the firm's profitability to each member of staff. The level of award each individual receives is determined by their role and contribution to the long-term performance of the firm.

All Investment Managers defer between 20% and 40% of their total annual variable remuneration (both APA and LTPA elements). Awards deferred are held for a period of three years and are invested in a range of funds managed by Baillie Gifford that broadly reflect the firm's investment policy.

Partner remuneration comprises a fixed base salary and a share of the partnership profits. The profit share is calculated as a percentage of total partnership profits based on seniority, role within Baillie Gifford and length of service. The basis of the profit share is detailed in the Baillie Gifford Partnership Agreement. The main staff benefits, such as pension benefits, are not available to partners, who therefore provide for benefits from their own personal funds.

**Ownership of Fund Shares.** As of October 31, 2022, the portfolio manager(s) did not beneficially own any of the fund's shares.

#### Harris Associates
**Other Accounts.** In addition to the fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below, as of October 31, 2022. Harris Associates is manager to two accounts whose advisory fees are partially based on performance metrics.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| David G. Herro  | 12 | $25100000000 | 46 | $22900000000 | 25 | $4400000000 |
| Mike L. Manelli  | 8 | $22200000000 | 8 | $3000000000 | 13 | $1500000000 |

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Accounts where compensation is based on account performance.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts**  | **Other Accounts**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| David G. Herro  | 0 | $0 | 2 | $700000000 | 0 | $0 |
| Mike L. Manelli  | 0 | $0 | 0 | $0 | 0 | $0 |

---

**Material Conflicts of Interest.** Conflicts of interest may arise in the allocation of investment opportunities and the allocation of aggregated orders among the fund and the other accounts managed by the portfolio managers. A portfolio manager potentially could give favorable treatment to some accounts for a variety of reasons, including favoring larger accounts, accounts that have a different management fee arrangement (including any accounts that pay performance-based fees), accounts of affiliated companies, or accounts in which the portfolio manager has a personal investment. With respect to the allocation of investment opportunities, Harris Associates makes decisions to recommend, purchase, sell or hold securities for all of its client accounts, including the fund, based on the specific investment objectives, guidelines, restrictions and circumstances of each account. It is Harris Associates' policy to allocate investment opportunities to each account, including the fund, over a period of time on a fair and equitable basis relative to its other accounts. With respect to the allocation of aggregated orders, each account that participates in the aggregated order will participate at the average share price received from a broker-dealer, and where the order has not been completely filled, each institutional account, including the fund, will generally participate on a pro rata basis.

Harris Associates has compliance policies and procedures in place that it believes are reasonably designed to mitigate these conflicts. However, there is no guarantee that such procedures will detect each and every situation in which an actual or potential conflict may arise.

**Compensation.** Each of Harris Associates' portfolio managers are compensated solely by Harris Associates, the subadviser. Compensation for each of the portfolio managers is based on Harris Associates' assessment of the individual's long-term contribution to the investment success of Harris Associates. Each portfolio manager receives a base salary and participates in a discretionary bonus pool. In addition, most portfolio managers also participate in a long-term compensation plan that provides current compensation to certain key employees of Harris Associates and deferred compensation to both current and former key employees. The compensation plan consists of bonus units awarded to participants that vest and are paid out over a period of time.

The determination of the amount of each portfolio manager's base salary and discretionary bonus pool participation and, where applicable, participation in the long-term compensation plan is based on a variety of qualitative and quantitative factors. The factor given the most significant weight is the subjective assessment of the individual's contribution to the overall investment results of Harris Associates' domestic or international investment group, whether as a portfolio manager, a research analyst, or both.

The quantitative factors considered in evaluating the contribution of portfolio managers include the performance of the portfolios managed by that individual relative to benchmarks, peers and other portfolio managers, as well as the assets under management. Performance is measured in a number of ways, including by portfolio and by strategy, and is compared to one or more benchmarks, including: S&P 500, Russell Mid-Cap Value, Russell 1000 Value, Lipper Balanced, 60/40 S&P/Barclays (60% S&P 500 and 40% Barclays Bond Index), MSCI World Index, MSCI World ex U.S. Index, MSCI World ex-U.S. Small Cap Index and Harris Associates' approved lists of stocks, depending on whether the portfolio manager manages accounts in the particular strategy to which these benchmarks would be applicable. Performance is also measured over short- and long-term periods, including one year, three years, five years, ten years, since an account's inception or since the portfolio manager has been managing the account, as applicable. Performance is measured on a pre-tax and after-tax basis to the extent such information is available.

If a portfolio manager also serves as a research analyst, then his compensation is also based on the contribution made to Harris Associates in that role. Mr. Manelli also serves as a research analyst. The specific quantitative and qualitative factors considered in evaluating a research analyst's contributions include, among other things, new investment ideas, the performance of investment ideas covered by the analyst during the current year as well as over longer-term periods, the portfolio impact of the analyst's investment ideas, other contributions to the research process, and an assessment of the quality of analytical work. If a portfolio manager also serves as a research analyst, then such manager may participate in a long-term compensation plan that may provide future compensation upon vesting after a multi-year period. The plan consists of an award, based on a quantitative evaluation of the performance of the investment ideas covered by the analyst over the same multi-year period. In addition, an individual's other contributions to Harris Associates, such as a role in investment through leadership and management of Harris Associates, are taken into account in the overall compensation process.

**Ownership of Fund Shares.** As of October 31, 2022, the portfolio managers did not beneficially own any of the fund's shares.

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#### Mondrian
**Other Accounts.** In addition to the fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below, as of October 31, 2022. Neither portfolio manager is responsible for accounts to which the advisory fee is based on the performance of the account as of that date.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies**  | **Registered Investment Companies**  | **Other Pooled Investment Vehicles**  | **Other Pooled Investment Vehicles**  | **Other Accounts (separate accounts)**  | **Other Accounts (separate accounts)**  |
| <br> **Name**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  | **Number of Accounts**  | **Total Assets**  |
| Ormala Krishnan  | 0 | $0 | 2 | $2539000000 | 14 | $2719000000 |
| Aidan Nicholson  | 0 | $0 | 1 | $2448000000 | 7 | $704000000 |

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**Conflicts of Interest.** Mondrian has a fiduciary duty to its clients and as such must identify and take steps to mitigate potential conflicts of interest. A conflict of interest arises when Mondrian and/or its employees have a competing professional or personal interest which could affect their ability to act in the best interests of Mondrian's clients. A conflict could exist even if no unethical or improper act results from it. Mondrian has a culture which fully recognises the fiduciary duty we owe our clients and promotes the ethos of ensuring that clients' interests are put ahead of the firms. Mondrian has a number of committees which have a key role in ensuring that the management of conflicts of interest is embedded in the business processes.

The UK regulator, the Financial Conduct Authority, requires regulated firms to identify conflicts of interest (both between the firm and its clients and the firm's employees and its clients) and establish, implement and maintain an effective written conflicts of interest policy. Mondrian is also registered with the SEC which has similar requirements for the identification and management of conflicts of interest.

Mondrian maintains and operates various policies and procedures which are designed to prevent conflicts of interest materializing and adversely affecting the interests of our clients. Mondrian has a conflicts of interest policy that outlines Mondrian's approach to the identification, management, recording and where relevant, disclosure of conflict of interests.

Mondrian maintains a Conflicts of Interest Register that lists all potential conflicts of interest that have been identified. Any conflicts arising are logged immediately in the Conflicts of Interest Register.

Mondrian has written policies and procedures addressing each conflict identified in the Register. These policies and procedures are designed to manage the potential conflict so that the interests of clients are always put ahead of Mondrian or its employees.

Where a conflict has arisen, steps are taken to ensure that the conflict either does not arise again or is properly managed so that client interests remain paramount. These details are also recorded in the Register.

Mondrian has a comprehensive Compliance Monitoring Programme which is specifically designed to check that key conflicts have been properly managed. A large number of the different types of tests that are carried out each year include checks to ensure that conflicts have been properly managed.

Any apparent violations of the procedures designed to manage conflicts are investigated and reported to the Chief Compliance Officer, who will determine any action necessary. Any material matters would be reported to senior management and the Mondrian Compliance & Risk Committee and, where required, any relevant regulator.

**Compensation.** Mondrian's compensation program is designed to enable it to retain and motivate a team of high quality employees with both attractive shorter term remuneration and long-term equity incentives that are appropriately competitive, well-structured and which help align the aspirations of individuals with those of clients and the company. Compensation is not based on the performance of specific funds or accounts managed. Mondrian's compensation program includes:

 *Competitive Salary – All investment professionals are remunerated with a competitive base salary.* 

*Profit Sharing Bonus Pool –* All Mondrian staff, including portfolio managers and senior officers, qualify for participation in an annual profit sharing pool determined by the company's profitability (approximately 30% of profits).

*Equity Ownership –* Mondrian is 100% employee controlled. A high proportion of senior Mondrian staff (investment professionals and other support functions) are shareholders in the business. Equity value is built up over many years with long vesting periods and the value of any individual's equity is normally paid out in instalments over a number of years post an agreed retirement from the firm. This is a (very) long term incentive plan directly tied to the long term equity value of the firm.

Incentives (Bonus and Equity Programs) therefore focus on the key areas of a) research quality, b) long-term and short-term investment performance of securities that are bought or sold in the groups of portfolios for which the investment professional has research responsibility, c) teamwork, d) client service and e) marketing. As an individual's ability to influence these factors depends on that individual's position and seniority within the firm, so the allocation to these factors and of participation in these programs will reflect this.

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At Mondrian, the investment management of particular portfolios is not "star manager" based but uses a team system. This means that Mondrian's investment professionals are primarily assessed on their contribution to the team's effort and results, though with an important element of their assessment being focused on the quality of their individual research contribution.

*<u>Remuneration Committee:</u>* In determining the amount of bonus and equity awarded, Mondrian's Board of Directors consults with the company's Remuneration Committee, who will make recommendations based on a number of factors including investment research, investment performance contribution, organization management, team work, client servicing and marketing.

*Defined Contribution Pension Plan* – All portfolio managers are members of the Mondrian defined contribution pension plan where Mondrian pays a regular monthly contribution and the member may pay additional voluntary contributions if they wish. The plan is governed by trustees who have responsibility for the trust fund and payments of benefits to members. In addition, the plan provides death benefits for death in service and a spouse's or dependent's pension may also be payable.

*Mondrian Remuneration Philosophy* – The guiding principle of the company's compensation programs is to enable it to retain and motivate a team of high-quality employees with both attractive shorter-term remuneration and long-term equity incentives that are appropriately competitive, well-structured and which help align the aspirations of individuals with those of the company and its clients. Through widespread equity ownership, we believe that Mondrian as an owner operated business provides an excellent incentive structure that is highly likely to continue to attract, hold and motivate a talented team.

Approximately half of Mondrian employees are equity owners of the business. In determining whether an employee should become an owner, Mondrian has to date focused on senior management, investment professionals and senior client service and operations personnel. The equity owners represent those staff recognized as either a significant contributor currently or in the future and awards focus in particular on key investment professionals.

Mondrian believes that this compensation structure, coupled with the opportunities that exist within a successful and growing business, should enable us to attract and retain high-caliber employees.

**Ownership of Fund Shares.** As of October 31, 2022, the portfolio managers did not beneficially own any of the fund's shares.

#### BROKERAGE ALLOCATION AND OTHER PRACTICES

#### Portfolio Turnover
For reporting purposes, the fund's portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (short-term securities) are excluded.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, a fund with high turnover (such as 100% or more) tends to generate higher capital gains and transaction costs, such as brokerage commissions.

Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, and/or changes in the investment adviser's investment outlook.

The portfolio turnover rate for the fund for the past two fiscal years is as follows:

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| | | |
|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  |
| Schwab International Opportunities Fund | 81% | 59% |

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#### Portfolio Transactions
The investment adviser and subadvisers make decisions with respect to the purchase and sale of portfolio securities on behalf of the fund. The investment adviser and subadvisers are responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. Purchases and sales of securities on a stock exchange or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed-income securities may be transacted with the issuer, the issuer's underwriter, or a dealer. The fund does not usually pay brokerage commissions on purchases and sales of fixed-income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The price the fund pays to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the fund invests are traded primarily in the OTC market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the fund will primarily consist of dealer spreads and brokerage commissions.

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The investment adviser and subadvisers seek to obtain the best execution for the fund's portfolio transactions. The investment adviser or the subadvisers may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following: execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling; provision of additional brokerage or research services or products; whether a broker guarantees that the fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to "market-on-close" pricing aligns with fund objectives; or whether a broker guarantees that the fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser or the subadvisers believe that VWAP execution is in the fund's best interest. In addition, the investment adviser and the subadvisers have incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser and subadvisers may cause the fund to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser or a subadviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser and subadviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: company financial data and economic data (e.g., unemployment, inflation rates and GDP figures), stock quotes, last sale prices and trading volumes, research reports analyzing the performance of a particular company or stock, narrowly distributed trade magazines or technical journals covering specific industries, products, or issuers, seminars or conferences registration fees which provide substantive content relating to eligible research, quantitative analytical software and software that provides analyses of securities portfolios, trading strategies and pre/post trade analytics, discussions with research analysts or meetings with corporate executives which provide a means of obtaining oral advice on securities, markets or particular issuers, short-term custody related to effecting particular transactions and clearance and settlement of those trades, lines between the broker-dealer and order management systems operated by a third party vendor, dedicated lines between the broker-dealer and the investment adviser's order management system, dedicated lines providing direct dial-up service between the investment adviser and the trading desk at the broker-dealer, message services used to transmit orders to broker-dealers for execution, electronic communication of allocation instructions between institutions and broker-dealers, comparison services required by the SEC or another regulator (e.g., use of electronic confirmation and affirmation of institutional trades), exchange of messages among broker-dealers, custodians, and institutions related to a trade, post-trade matching of trade information, routing settlement instructions to custodian banks and broker-dealers' clearing agents, software that provides algorithmic trading strategies, and trading software operated by a broker-dealer to route orders to market centers or direct market access systems. The investment adviser or the subadvisers may use research services furnished by brokers or dealers in servicing all client accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser or subadviser may receive a service from a broker or dealer that has both a "research" and a "non-research" use. When this occurs, the investment adviser or subadviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions or spreads, while the investment adviser or a subadviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser or a subadviser faces a potential conflict of interest, but the investment adviser and subadvisers believe that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser and subadvisers may purchase for the fund, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser or subadvisers with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will provide research "credits" in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the 1934 Act.

The investment adviser and subadvisers may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable the fund to trade directly with other institutional holders. At times, this may allow the fund to trade larger blocks than would be possible trading through a single market maker.

The investment adviser and subadvisers may aggregate securities sales or purchases among two or more funds. The investment adviser and subadvisers will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of the fund are aggregated with other accounts managed by the investment adviser and subadvisers, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

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In determining when and to what extent to use Schwab or any other affiliated broker-dealer (including affiliates of the subadvisers) as its broker for executing orders for the fund on securities exchanges, the investment adviser and the subadvisers follow procedures, adopted by the fund's Board, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

#### Brokerage Commissions
For each of the last three fiscal years, the fund paid the following brokerage commissions. Variances in brokerage commissions paid by the fund from year to year are due to increases and decreases in portfolio turnover in response to asset flows.

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| | | | |
|:---|:---|:---|:---|
| **Fund**  | **2022**  | **2021**  | **2020**  |
| Schwab International Opportunities Fund | $706593 | $849697 | $937332 |

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#### Regular Broker-Dealers
During the fiscal year, the fund held securities issued by its respective "regular broker-dealers" (as defined in Rule 10b-1 under the 1940 Act), indicated below as of October 31, 2022.

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| | | |
|:---|:---|:---|
| **Fund**  | **Regular Broker-Dealer**  | **Value of Holdings**  |
| Schwab International Opportunities Fund | Credit Suisse Securities (USA) LLC | $4558938 |

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#### PROXY VOTING
The Board has delegated the responsibility for voting proxies to Schwab Asset Management, pursuant to the investment adviser's Proxy Voting Policy with respect to proxies voted on behalf of the various Schwab Funds' portfolios. A description of such Proxy Voting Policy is included in Appendix – Proxy Voting Policy.

The Trust is required to disclose annually the fund's complete proxy voting record on Form N-PX. The fund's proxy voting record for the most recent 12-month period ended June 30th is available by visiting the Schwab Funds' website at **www.schwabassetmanagement.com/schwabfunds_prospectus**. The fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

#### PORTFOLIO HOLDINGS DISCLOSURE
 **For this section only, the following disclosure relates to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust, Schwab Strategic Trust and Laudus Trust (collectively, the Trusts) and each series thereunder (each a fund and collectively, the funds).** 

The Trusts' Board has approved policies and procedures that govern the timing and circumstances regarding the disclosure of fund portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds' portfolio securities is in the best interests of fund shareholders, and include procedures to address conflicts between the interests of the funds' shareholders, on the one hand, and those of the funds' investment adviser, subadviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, subadviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a fund's subadviser, if applicable) to authorize the release of the funds' portfolio holdings prior to regular public disclosure (as outlined in the prospectus and below) or regular public filings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of the funds' policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities which were authorized to be provided "early disclosure" of the funds' portfolio holdings information and will periodically review any agreements that the Trusts have entered into to selectively disclose portfolio holdings.

Portfolio holdings may be made available on a selective basis to ratings agencies, certain industry organizations, consultants and other qualified financial professionals when the appropriate officer of the Trusts determines such disclosure meets the requirements noted above and serves a legitimate business purpose. Agreements entered into with such entities will describe the permitted use of portfolio holdings and provide that, among other customary confidentiality provisions: (i) the portfolio holdings will be kept confidential; (ii) the person will not trade on the basis of any material non-public information; and (iii) the information will be used only for the purpose described in the agreement.

The funds' service providers including, without limitation, the investment adviser, subadvisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser, counsel, auditor, proxy voting service provider, pricing information vendors, trade execution measurement vendors, portfolio management system providers, cloud database providers, securities lending agents,

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publisher, printer and mailing agent may receive disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Schwab Asset Management, any subadviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street and/or Brown Brothers Harriman & Co., as service providers to the funds, are currently receiving this information on a daily basis. Donnelley Financial Solutions, as a service provider to the funds, is currently receiving this information on a quarterly basis. Deloitte, the Transfer Agent, and the Distributor, as service providers to the funds, receive this information on an as-needed basis. Service providers are subject to a duty of confidentiality with respect to any portfolio holdings information they receive whether imposed by the confidentiality provisions of the service providers' agreements with the Trusts or by the nature of its relationship with the Trusts. Although certain of the service providers are not under formal confidentiality obligations in connection with disclosure of portfolio holdings, a fund will not continue to conduct business with a service provider who the fund believes is misusing the disclosed information.

To the extent that a fund invests in an unaffiliated acquired fund, the Trusts will, when required by Rule 12d1-4, promptly notify the acquired fund, upon causing a fund to acquire more than 3% of the acquired fund's outstanding shares.

The funds' policies and procedures prohibit the funds, the funds' investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

Generally, a complete list of a fund's portfolio holdings is published on the fund's website www.schwabassetmanagement.com on the "Prospectus & Reports" tab under "Portfolio Holdings" generally 60-80 days after a fund's fiscal quarter-end in-line with regulatory filings unless a different timing is outlined in the fund's prospectus.

Specifically for the Schwab ETFs (other than the Schwab Ariel ESG ETF), each Schwab ETF discloses its portfolio holdings each business day on its website before the opening of regular trading on the ETF's primary listing exchange in accordance with the requirements of Rule 6c-11 under the 1940 Act. Portfolio holdings information made available in connection with the process of purchasing or redeeming Creation Units for the Schwab ETFs may be provided to other entities that provided services to the funds in the ordinary course of business after it has been disseminated to the NSCC.

The Schwab Money Funds have an ongoing arrangement to make available information about the funds' portfolio holdings and information derived from the funds' portfolio holdings to iMoneyNet, a rating and ranking organization, which is subject to a confidentiality agreement. Under its arrangement with the funds, iMoneyNet, among other things, receives information concerning the funds' net assets, yields, maturities and portfolio compositions on a weekly basis, subject to a one business day lag.

On the website, the funds also may provide, on a monthly or quarterly basis, information regarding certain attributes of a fund's portfolio, such as a fund's top ten holdings, sector weightings, composition, credit quality and duration and maturity, as applicable. This information is generally updated within 5-25 days after the end of the period. This information on the website is publicly available to all categories of persons.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of a fund in connection with or relating to a fund or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases, commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning a fund. Commentary and analysis include, but are not limited to, the allocation of a fund's portfolio securities and other investments among various asset classes, sectors, industries, countries or other relevant category, the characteristics of the stock components and other investments of a fund, the attribution of fund returns by asset class, sector, industry, country or other relevant category, and the volatility characteristics of a fund.

#### DESCRIPTION OF THE TRUST
The fund is a series of Schwab Capital Trust, an open-end management investment company organized as a Massachusetts business trust on May 7, 1993.

The fund may hold special shareholder meetings, which may cause the fund to incur non-routine expenses. These meetings may be called for purposes such as electing trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon.

The bylaws of the Trust provide that one-third of shares present in person or represented by proxy and entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, or of the Declaration of Trust or of the bylaws permits or requires that (1) holders of any series shall vote as a series, then one-third of the aggregate number of shares of that series present in person or represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (2) holders of any class shall vote as a class, then one-third of the aggregate number of shares of that class present in person or

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represented by proxy and entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any meeting of shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date or time, whether or not a quorum is present. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. The Declaration of Trust specifically authorizes the Board to terminate the Trust (or any of its funds) by notice to the shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance, which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. There is a remote possibility that the fund could become liable for a misstatement in the prospectus or SAI about another fund.

As more fully described in the Declaration of Trust, the trustees may each year, or more frequently, distribute to the shareholders of each series accrued income less accrued expenses and any net realized capital gains less accrued expenses. Distributions of each year's income of each series shall be distributed pro rata to shareholders in proportion to the number of shares of each series held by each of them. Distributions will be paid in cash or shares or a combination thereof as determined by the trustees. Distributions paid in shares will be paid at the net asset value as determined in accordance with the bylaws.

Any series of the Trust may reorganize or merge with one or more other series of the Trust or of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the trustees and entered into by the relevant series in connection therewith. In addition, such reorganization or merger may be authorized by vote of a majority of the trustees then in office and, to the extent permitted by applicable law and the Declaration of Trust, without the approval of shareholders of any series.

#### PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES

#### Purchasing and Redeeming Shares of the Fund
The fund is open each day that the New York Stock Exchange (NYSE) is open. The NYSE's trading session is normally conducted from 9:30 a.m. until 4:00 p.m. Eastern Time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE's trading session closes early. The NYSE typically observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although it is expected that the same holidays will be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time. Orders that are received in good order by the fund's transfer agent no later than the time specified by the Trust will be executed that day at the fund's share price calculated that day. On any day that the NYSE closes early, the fund reserves the right to advance the time by which purchase, redemption and exchange orders must be received by the fund's transfer agent that day in order to be executed that day at that day's share price. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase, exchange and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

The fund has authorized one or more financial intermediaries, including Schwab, to accept on its behalf purchase, exchange and redemption orders. Such financial intermediaries have also been authorized to designate other intermediaries to accept purchase, exchange and redemption orders on the fund's behalf. The fund will be deemed to have received a purchase, exchange or redemption order when an authorized intermediary or, if applicable, an intermediary's authorized designee, receives such order. Such orders will be priced at the fund's net asset value per share next determined after such orders are received by an authorized intermediary or the intermediary's authorized designee.

As long as the fund or Schwab follow reasonable procedures to confirm that an investor's telephone or internet order is genuine, they will not be liable for any losses the investor may experience due to unauthorized or fraudulent instructions. These procedures may include requiring a form of personal identification or other confirmation before acting upon any telephone or internet order, providing written confirmation of telephone or internet orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab, other authorized financial intermediaries or, for direct shareholders, by the fund's transfer agent.

The Trust's Declaration of Trust provides that shares may be automatically redeemed if held by a shareholder in an amount less than the minimum required by the fund. The fund's minimum initial investments and minimum balance requirements, if any, are set forth in the prospectus. The minimums may be changed without prior notice.

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The fund has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of these limits may be paid, in whole or in part, in investment securities or in cash, as the Board may deem advisable. Payment will be made wholly in cash unless the Board believes that economic or market conditions exist that would make such payment a detriment to the best interests of the fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Pricing of Shares." A redeeming shareholder would normally incur transaction costs if he or she were to convert the securities to cash.

The fund is designed for long-term investing. Because short-term trading activities can disrupt the smooth management of the fund and increase its expenses, the fund reserves the right, in its sole discretion, to refuse any purchase or exchange order, including any purchase or exchange order which appears to be associated with short-term trading activities or "market timing." Because market timing decisions to buy and sell securities typically are based on an individual investor's market outlook, including such factors as the perceived strength of the economy or the anticipated direction of interest rates, it is difficult for the fund to determine in advance what purchase or exchange orders may be deemed to be associated with market timing or short-term trading activities. More information regarding the fund's policies regarding "market timing" is included in the prospectus.

In certain circumstances, shares of the fund may be purchased "in kind" (i.e., in exchange for securities, rather than for cash). The securities tendered as part of an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable as evidenced by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities accepted by the fund will be valued, as set forth in the fund's prospectus, as of the time of the next determination of net asset value after such acceptance. The shares of the fund that are issued to the shareholder in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of the fund and must be delivered to the fund by the investor upon receipt from the issuer. The fund will not accept securities in exchange for its shares unless such securities are, at the time of the exchange, eligible to be held by the fund and satisfy such other conditions as may be imposed by the fund's investment adviser.

#### Exchanging Shares of the Fund
Methods to purchase and redeem shares are set forth in the fund's prospectus. An exchange order involves the redemption of all or a portion of the shares of the fund and the simultaneous purchase of shares of another Schwab Fund. Exchange orders must meet the minimum investment and any other requirements of the fund or class purchased. Exchange orders may not be executed between shares of Sweep Investments<sup>®</sup> and shares of non-Sweep Investments. Shares of Sweep Investments may be bought and sold automatically pursuant to the terms and conditions of your Schwab account agreement. In addition, different exchange policies may apply to Schwab Funds that are bought and sold through third-party intermediaries and the exchange privilege between Schwab Funds may not be available through third-party intermediaries.

The fund and Schwab reserve certain rights with regard to exchanging shares of the fund. These rights include the right to: (i) refuse any purchase or exchange order that may negatively impact the fund's operations; (ii) refuse orders that appear to be associated with short-term trading activities; and (iii) materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders.

#### Delivery of Shareholder Documents
Typically once a year, an updated prospectus will be mailed or electronically delivered to shareholders describing the fund's investment strategies, risks and shareholder policies. Twice a year, financial reports will be mailed or electronically delivered (or a notice will be mailed and financial reports will be made available on the fund's designated website) to shareholders describing the fund's performance and investment holdings. In order to eliminate duplicate mailings of shareholder documents, each household may receive one copy of these documents, under certain conditions. This practice is commonly called "householding." If you want to receive multiple copies, you may write or call your fund at the address or telephone number on the front of this SAI or contact the financial intermediary through which you hold fund shares. Your instructions will be effective within 30 days of receipt by the fund or other date as communicated by the financial intermediary.

#### Pricing of Shares
Each business day, the fund calculates its share price, net asset value per share or NAV, as of the close of the NYSE (generally 4:00 p.m. Eastern Time). This means that NAVs are calculated using the values of the fund's portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available or that the investment adviser deems to be unreliable are required to be valued at fair value following procedures approved by the Board. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the fund reserves the right to treat such day as a business day and accept purchase and redemption orders and calculate its share price as of the normally scheduled close of regular trading on the NYSE for that day.

To the extent the fund invests in foreign securities, shareholders should be aware that because foreign markets are often open on weekends and other days when the fund is closed, the value of some of the fund's securities may change on days when it is not possible to buy or sell shares of the fund.

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The fund uses approved pricing sources (including pricing services) to provide values for its portfolio securities. Values are generally determined by the approved pricing sources as follows: generally, securities traded on stock exchanges, excluding the NASDAQ National Market System, are valued at the last-quoted sales price on the exchange on which such securities are primarily traded (closing values), or, lacking any sales, at the mean between the bid and ask prices; securities traded in the over-the-counter market are generally valued at an evaluated price using a mid-price supplied by an approved, independent pricing service. The mid-price is the mean of the bid and ask prices as calculated by the pricing service. Generally, securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the official closing price or last sales price on the exchange where the securities are primarily traded with these values then translated into U.S. dollars at the current exchange rate. Fixed-income securities normally are valued based on valuations provided by approved pricing services. Securities will be fair valued pursuant to procedures approved by the fund's Board when market quotations are not "readily available" or the investment adviser deems them unreliable. For example, the fund may fair value a security when a security is de-listed or its trading is halted or suspended; when a security's primary pricing source is unable or unwilling to provide a price; when a security's primary trading market is closed during regular market hours; or when a security's value is materially affected by events occurring after the close of the security's primary trading market. The Board has designated the investment adviser as the valuation designee (Valuation Designee) for the fund to perform the fair value determination relating to all fund investments. The Valuation Designee periodically provides reports to the Board on items related to its fair value of fund investments.

#### TAXATION
This discussion of federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

#### Federal Tax Information for the Fund
It is the fund's policy to qualify for taxation as a RIC by meeting the requirements of Subchapter M of the Internal Revenue Code. By qualifying as a RIC, the fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If the fund does not qualify as a RIC under the Internal Revenue Code, it will be subject to federal income tax on its net investment income and any net realized capital gains. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

The fund is treated as a separate entity for federal income tax purposes and is not combined with the Trust's other funds. The fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, the fund must, among other requirements, distribute annually to its shareholders an amount at least equal to the sum of 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and 90% of its net tax-exempt income. Among these requirements are the following: (i) at least 90% of the fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of the fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of the fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as "qualified publicly traded partnerships" for purposes of the Subchapter M diversification rules described above. To do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, the partnership must meet the 90% gross income requirements for the exception from treatment as a corporation with gross income other than income consisting of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Internal Revenue Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as defined in the Internal Revenue Code) for the calendar year plus 98.2% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, the fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year and certain amounts with

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respect to which estimated taxes are paid in such calendar year. The fund may in certain circumstances be required to liquidate fund investments to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser or subadviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of the fund to satisfy the requirements for qualification as a RIC.

The fund's transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Internal Revenue Code and are subject to special tax rules. In a given case, these rules may accelerate income to the fund, defer its losses, cause adjustments in the holding periods of the fund's assets, convert short term capital losses into long term capital losses or otherwise affect the character of the fund's income. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of the fund and its shareholders.

The fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked-to-market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. The fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. The fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund's fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon or other securities which are sold at original issue discount and thus do not make periodic cash interest payments, the fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any corresponding interest payments on such obligations during that period. Because the fund distributes all of its net investment income to its shareholders, the fund may have to sell fund securities to distribute such imputed income which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in the fund's prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of the fund. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in the fund.

Any dividends declared by the fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by the fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced rates to individuals as described below) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of the fund become ex-dividend with respect to such dividend (and the fund must also satisfy those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by the fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by the fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gains (if any) that are reported as capital gain dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of the fund. However, if you receive a capital gain dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gain dividend, be treated as a long-term capital loss.

The maximum individual rate applicable to "qualified dividend income" and long-term capital gains is generally either 15% or 20%, depending on whether the taxpayer's income exceeds certain threshold amounts.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gains distributions received from the fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the

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extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.

The fund will inform you of the amount of your ordinary income dividends and capital gains distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year. For corporate investors in the fund, dividend distributions the fund reports as dividends received from qualifying domestic corporations will be eligible for the 50% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by the fund also may be subject to state, local and foreign taxes, and their treatment under applicable tax laws may differ from the federal income tax treatment.

If the fund makes a distribution to a shareholder in excess of the fund's current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of the shareholder's tax basis in its shares, and thereafter, as capital gain. A return of capital is not taxable, but reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. To the extent that a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares.

The fund will be required in certain cases to withhold at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends and redemption proceeds paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the U.S. Internal Revenue Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to "backup withholding;" or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on taxable distributions derived from net investment income and short-term capital gains; provided, however, that U.S. source interest related dividends and short-term capital gain dividends generally are not subject to U.S. withholding taxes if the fund elects to make reports with respect to such dividends. Distributions to foreign shareholders of such short-term capital gain dividends and long-term capital gains, and any gains from the sale or other disposition of shares of the fund, generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Internal Revenue Code's definition of "resident alien" or (2) is physically present in the U.S. for 183 days or more per year. Foreign shareholders may also be subject to U.S. estate taxes with respect to shares in the fund. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Notwithstanding the foregoing, a portion of the income, if any, derived by the fund from investments in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) may be classified as "excess inclusion income." With respect to foreign shareholders, no exemption or reduction in withholding tax will apply to such excess inclusion income.

The fund is required to withhold U.S. tax (at a 30% rate) on payments of dividends made to certain non-U.S. entities that fail to comply with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the fund to enable the fund to determine whether withholding is required.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, the fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in the fund where, for example, (i) the fund invests in REITs that hold residual interests in REMICs or (ii) shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special rules and should consult their tax advisors. There are no restrictions preventing the fund from holding investments in REITs that hold residual interests in REMICs, and the fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

For taxable years beginning after 2017 and before 2026, non-corporate taxpayers generally may deduct 20% of "qualified business income" derived either directly or through partnerships or S corporations. For this purpose, "qualified business income" generally includes ordinary REIT dividends and income derived from MLP investments. The fund is permitted to pass through to shareholders the character of ordinary REIT dividends so as to allow non-corporate shareholders to claim this deduction. There currently is no mechanism for the fund to pass through to non-corporate shareholders the character of income derived from MLP investments. It is uncertain whether future legislation or other guidance will enable the fund to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

Income the fund receives from sources within various foreign countries may be subject to foreign income taxes withheld at the source. If the fund has more than 50% of its assets invested in foreign securities at the end of its taxable year, it may elect to "pass through" to its shareholders the ability to take either the foreign tax credit or the deduction for foreign taxes. Pursuant to this election, U.S. shareholders must include in

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gross income, even though not actually received, their respective pro rata share of foreign taxes, and may either deduct their pro rata share of foreign taxes (but not for alternative minimum tax purposes) or credit the tax against U.S. income taxes, subject to certain limitations described in Internal Revenue Code sections 901 and 904. A shareholder who does not itemize deductions may not claim a deduction for foreign taxes. It is expected that the fund will have more than 50% of the value of its assets invested in foreign securities at the close of its taxable years, and that it will be permitted to make this election.

The fund may invest in non-U.S. corporations, which could be treated as a passive foreign investment company (PFIC) or become a PFIC under the Internal Revenue Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent the fund does invest in PFICs, it may be eligible to elect to treat the PFIC as a "qualified electing fund" or mark-to-market its investments in PFICs annually. In either case, the fund may be required to distribute amounts in excess of realized income and gains. To the extent the fund does invest in foreign securities which are determined to be PFIC securities and are required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to the fund's shareholders. Therefore, the payment of this tax would reduce the fund's economic return from its PFIC shares, and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains.

Section 988 of the Internal Revenue Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by the fund. Under these rules, foreign exchange gain or loss realized by the fund with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. Foreign currency losses could result in distributions of ordinary income being reclassified as a return of capital for tax purposes.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC such as the fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in the fund.

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#### APPENDIX – PROXY VOTING POLICY
The Charles Schwab Family of Funds Schwab Investments Schwab Capital Trust Schwab Annuity Portfolios Laudus Trust Schwab Strategic Trust

### PROXY VOTING POLICY AS OF MARCH 2023
The Boards of Trustees (the "Board") of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Laudus Trust ("Schwab Funds") and Schwab Strategic Trust ("Schwab ETFs"; collectively with Schwab Funds, the "Funds") have delegated to the Funds' investment adviser, Charles Schwab Investment Management, Inc. ("CSIM"), the responsibility to vote proxies relating to the Funds' portfolio securities pursuant to CSIM's Proxy Voting Policy ("CSIM Proxy Policy"). On an annual basis, CSIM will report to the Board any changes to the CSIM Proxy Policy and on the implementation of the CSIM Proxy Policy.

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Charles Schwab Investment Management, Inc.

I. ### INTRODUCTION
Charles Schwab Investment Management, Inc. ("CSIM"), as an investment adviser, is responsible for voting proxies with respect to the securities held in accounts of investment companies and other clients that have delegated the authority to vote proxies to CSIM. CSIM's Proxy Committee exercises and documents CSIM's responsibility with regard to voting of client proxies, including the review and approval of the Proxy Voting Policy (the "Proxy Policy"). CSIM's Investment Stewardship Team has the primary responsibility to oversee that voting is carried out consistent with the Proxy Policy. The Investment Stewardship Team also conducts research into proxy issues and carries out engagement activities with companies. The Proxy Committee receives reports from the Investment Stewardship Team on these activities.

II. ### PHILOSOPHY
As a leading asset manager, it is CSIM's responsibility to use its proxy votes to encourage transparency, corporate governance structures, and the management of environmental, social and governance (ESG) issues that it believes protect and promote shareholder value.

Just as the investors in CSIM's equity funds generally have a long-term investment horizon, CSIM takes a long-term, measured approach to investment stewardship. CSIM's client-first philosophy drives all of its efforts, including its approach to decision making. In the investment stewardship context, that unfolds through CSIM's efforts to appropriately manage risk by encouraging transparency and focusing on corporate governance structures that will help protect or promote shareholder value. CSIM also recognizes that companies can conduct themselves in ways that have important environmental and social consequences. Therefore, CSIM's focus on maximizing long-term shareholder value includes consideration of potential environmental and social impacts that we believe are relevant to individual companies.

In general, CSIM believes corporate directors, as the elected representatives of all shareholders, are best positioned to oversee the management of their companies. Accordingly, CSIM typically supports a board of directors' and management's recommendations on proxy matters. However, CSIM will vote against management's recommendations when it believes doing so will protect or promote long-term shareholder value.

III. ### USE OF PROXY ADVISORS
To assist CSIM in its responsibility for voting proxies and the overall proxy voting process, CSIM has retained Glass, Lewis & Co., LLC ("Glass Lewis") as an expert in the proxy voting and corporate governance area. The services provided by Glass Lewis include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. CSIM has also retained Institutional Shareholder Services Inc. to conduct research and provide voting recommendations on certain topics and may retain additional experts in the proxy voting, corporate governance, and ESG areas in the future.

To support CSIM in efficiently executing its votes, Glass Lewis, simultaneously with issuing its voting recommendations, also automatically populates votes based on CSIM's custom voting guidelines, except for certain ballot items which CSIM elects to vote manually. CSIM's votes are executed just prior to the vote deadline, which allows CSIM the opportunity to incorporate changes in Glass Lewis voting recommendations or the receipt of additional information from the company or other parties.

IV. ### PROXY VOTING PRINCIPLES
CSIM invests on behalf of its clients in companies domiciled all over the world. Since corporate governance standards and best practices differ by country and jurisdiction, the market context is taken into account in the analysis of proposals. Furthermore, there are instances where CSIM may determine that voting is not in the best interests of its clients (typically due to costs or to trading restrictions) and will refrain from submitting votes.

The Proxy Committee reviews CSIM's proxy voting guidelines with input from the Investment Stewardship Team at least annually and evaluates them in light of the long-term best interests of shareholders. In addition, for U.S. companies, contested director elections, "vote no" campaigns, mergers and acquisitions, some executive compensation and election of director proposals, and many shareholder proposals, including ESG-related proposals, such as those requesting additional environmental, social and political disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

The following is a summary of CSIM's proxy voting principles which are grouped according to types of proposals usually presented to shareholders in proxy statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

DIRECTORS AND AUDITORS

i. <u>Directors</u>

As a starting point, CSIM expects the board to be composed of at least a majority of independent directors and to be responsive to shareholders. CSIM also expects directors that serve on a company's nominating, compensation or audit committee to be independent. CSIM believes that diversity of background, experience and skills, and personal characteristics, including gender, race, ethnicity and age, meaningfully contribute to a board's ability to make effective decisions on behalf of shareholders.

Factors that may result in a vote against one or more directors:

<sup>●</sup>

The board is not majority independent

<sup>●</sup>

A large-cap company board does not have at least two female directors, or a mid- or small-cap company does not have any female directors, and the board has not provided a reasonable explanation for its lack of gender diversity

<sup>●</sup>

A large-cap company board does not have at least one racially/ethnically diverse director, or has not provided explicit disclosure of director diversity and skills

<sup>●</sup>

Non-independent directors serve on the nominating, compensation or audit committees

<sup>●</sup>

A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

<sup>●</sup>

The directors approved executive compensation schemes that appear misaligned with shareholders' interests

<sup>●</sup>

A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to concerns of shareholders

<sup>●</sup>

The company has not provided explicit disclosure of board oversight of material risks, including environmental and social risks

ii. <u>Contested Director Elections</u>

A proxy contest is when a dissident shareholder (or group of shareholders) proposes outside nominees to compete against incumbent directors. A "Vote No" campaign is when an activist shareholder attempts to solicit votes against certain directors. CSIM evaluates proxy contests and Vote No campaigns on a case-by-case basis and votes for the outcome it believes will maximize long-term shareholder value. CSIM considers numerous factors when making its voting decision, including but not limited to the merit of the campaign, the qualifications of director nominees, long-term company performance compared to peers, board oversight of material risks, and, in the case of proxy contests, the dissident's and management's strategic plans for driving improvements.

iii. <u>Auditors</u>

CSIM typically supports the ratification of auditors unless CSIM believes that the auditors' independence may have been compromised.

Factors that may result in a vote against the ratification of auditors:

<sup>●</sup>

Audit-related fees are less than half of the total fees paid by the company to the audit firm

<sup>●</sup>

A recent material restatement of annual financial statements

<sup>●</sup>

A pattern of inaccurate audits or other behavior that may call into question an auditor's effectiveness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

BOARD MATTERS

i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

<sup>●</sup>

Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

<sup>●</sup>

Number of nominees is no more than 20% of current board (rounded down to nearest whole number)

<sup>●</sup>

Group size is capped at 20 shareholders

iv. <u>Separation of Chair and CEO role</u>

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CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring the separation of these roles unless certain circumstances are in place.

Factors that may result in a vote supporting a shareholder proposal requiring the separation of the Chair and CEO roles:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

<sup>●</sup>

Lack of robust lead independent director

v. <u>Independent Chair</u>

CSIM believes that the board is typically best positioned to determine its leadership structure. Therefore, CSIM will typically not support proposals requiring an independent chair unless CSIM has concerns regarding the board's accountability or responsiveness to shareholders.

Factors that may result in a vote supporting a shareholder proposal requiring an independent chair:

<sup>●</sup>

The board does not have a lead independent director

<sup>●</sup>

The board is not two-thirds independent

<sup>●</sup>

The company did not implement a shareholder proposal that was passed by shareholders at two previous shareholder meetings

<sup>●</sup>

The company nominated directors for election that did not receive a majority of shareholder support at the previous shareholder meeting

<sup>●</sup>

The company had material financial statement restatements

<sup>●</sup>

The company's board adopted a Shareholder Rights Plan during the past year and did not submit it to shareholders for approval

<sup>●</sup>

Ongoing executive compensation concerns

<sup>●</sup>

Ongoing financial underperformance

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

COMPENSATION

i. <u>Advisory Vote on Executive Compensation and Frequency</u>

CSIM generally supports advisory votes on executive compensation (which are proposed by management and are known as "Say-On-Pay") when the compensation scheme appears aligned with shareholder economic interests and lacks problematic features.

Factors that may result in a vote against a company's Say-On-Pay proposal:

<sup>●</sup>

Executive compensation is out of line with industry peers considering the company's performance over time

<sup>●</sup>

Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

<sup>●</sup>

Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

<sup>●</sup>

Compensation amounts are increased, or goals are lowered without providing a valid explanation

<sup>●</sup>

Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

CSIM typically supports annual advisory votes on executive compensation.

ii. <u>Equity Compensation Plans</u>

CSIM generally supports stock-based compensation plans when they do not overly dilute shareholders by providing participants with excessive awards and lack problematic features.

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Factors that may result in a vote against Equity Compensation Plans:

<sup>●</sup>

Plan's total potential dilution appears excessive

<sup>●</sup>

Plan's burn rate appears excessive compared to industry peers

<sup>●</sup>

Plan allows for the re-pricing of options without shareholder approval

<sup>●</sup>

Plan has an evergreen feature

iii. <u>Employee Stock Purchase Plans</u>

CSIM supports the concept of broad employee participation in a company's equity. Therefore, CSIM typically supports employee stock purchase plans when the shares can be purchased at 85% or more of the shares' market value.

iv. <u>Re-price/Exchange Option Plans</u>

CSIM generally only supports management proposals to re-price options when the plan excludes senior management and directors, does not excessively dilute shareholders, and the company has not significantly underperformed its industry peers over time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

ANTI-TAKEOVER

i. <u>Shareholder Rights Plans</u>

Shareholder Rights Plans constrain a potential acquirer's ability to buy shares in a company above a certain threshold without the approval of the company's board of directors. While such a plan may help a company in achieving a higher bid, it may also entrench the incumbent management and board. CSIM believes that shareholders should have the right to approve a Shareholder Rights Plan within a year of its adoption. CSIM generally votes against such plans if they do not have safeguards to protect shareholder interests.

Factors that may result in a vote against a Shareholder Rights Plan proposal:

<sup>●</sup>

Plan does not expire in a relatively short time horizon

<sup>●</sup>

Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

<sup>●</sup>

Plan automatically renews without shareholder approval

<sup>●</sup>

Company's corporate governance profile

ii. <u>Right to Call Special Meeting</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to call a special meeting unless the threshold to call a special meeting is 25% or more of shares outstanding to avoid wasting corporate resources.

iii. <u>Right to Act by Written Consent</u>

CSIM generally votes against shareholder proposals asking for shareholders to be given the right to act by written consent if the company already offers shareholders the right to call special meetings. CSIM expects appropriate mechanisms for implementation.

iv. <u>Supermajority Voting</u>

CSIM generally supports the concept of simple majority standards to pass proposals.

?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

i. <u>Increase in Authorized Common Shares</u>

CSIM typically supports proposals to increase the authorized shares unless the company does not sufficiently justify the need for the use of the proposed shares.

ii. <u>Preferred Shares</u>

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

iii. <u>Mergers and Acquisitions</u>

CSIM generally supports transactions that appear to maximize shareholder value. CSIM assesses these proposals on a case-by-case basis and considers the proposed transaction's strategic rationale, the offer premium, the board's oversight of the sales process, and other pertinent factors.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F.

ENVIRONMENTAL AND SOCIAL PROPOSALS

Effective oversight of material ESG risks relevant to a company and its business is an essential board function. In CSIM's view, appropriate risk oversight of environmental and social issues contributes to sustainable long-term value and companies should provide pertinent information on material risks common to their industry and specific to their business. CSIM evaluates, on a case-by-case basis, shareholder proposals regarding environmental and social issues, including those calling for additional disclosure of material risks to a company, with emphasis placed on those risks identified within the framework of the Sustainability Accounting Standards Board (SASB).

CSIM recognizes that financial performance can be impacted by a company's environmental, social and human capital management policies. CSIM's case-by-case evaluation of these proposals takes into consideration a company's current practices, level of reporting, disclosures by its peers, and the existence of controversies or litigation related to the issue.

CSIM believes that, in most instances, the board is best positioned to determine a company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

i. <u>Climate Change Proposals</u>

CSIM believes that companies should provide pertinent information on the management of potential climate change-related risks, with the understanding that the relevance of this disclosure for any specific company will vary depending on its industry and operations. For companies operating in carbon-intensive industries, we believe boards should be considering a range of energy demand scenarios. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

ii. <u>Corporate Political Activity Proposals</u>

CSIM expects the board of directors to have a stated oversight process for political contributions and lobbying activities. CSIM evaluates proposals asking for disclosure of a company's political contributions and lobbying activities and generally supports them if there is no evidence of board oversight or a company's disclosure is deficient and lags that of its peers.

V. ### ADMINISTRATION
?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A.

CONFLICTS OF INTERESTS

CSIM maintains the following practices that seek to prevent undue influence on its proxy voting activity. Such influence might arise from any relationship between the company holding the proxy (or any shareholder or board member of the company) and CSIM, CSIM's affiliates, a mutual fund or exchange-traded fund managed by CSIM ("Affiliated Fund"), an affiliate of such Fund, or a CSIM employee. The Proxy Committee has directed that Glass Lewis be instructed to vote any such proxies in the same proportion as the votes of all other shareholders in the fund (i.e., "echo vote").

With respect to proxies of an underlying Affiliated Fund, the Investment Stewardship Team will ensure that such proxies are "echo voted", unless otherwise required by law. When required by law or applicable exemptive order, the Investment Stewardship Team will also ensure the "echo voting" of an unaffiliated mutual fund or exchange traded fund. For example, certain exemptive orders issued to a fund by the Securities and Exchange Commission and Section 12(d)(1)(F) of the Investment Company Act of 1940, as amended, require the fund, under certain circumstances, to "echo vote" proxies of registered investment companies that serve as underlying investments of the fund.

In addition, with respect to holdings of The Charles Schwab Corporation ("CSC") (ticker symbol: SCHW), the Investment Stewardship Team will ensure such proxies are echo-voted, unless otherwise required by law.

Where the Proxy Committee has delegated an item to the Investment Stewardship Team, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

<sup>●</sup>

reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

<sup>●</sup>

defaulting to the standard CSIM Proxy Voting Policy.

In all other cases, proxy issues that present material conflicts of interest between CSIM, and/or any of its affiliates, and CSIM's clients, will be delegated to Glass Lewis to be voted in accordance with CSIM's Proxy Voting Guidelines which are set each year based on governance criteria and not influenced by any individual issuer or ballot item.

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Where CSIM's Investment Stewardship Team conducts an engagement meeting with a company, CSIM has taken certain steps to mitigate perceived or potential conflicts of interest, including, but not limited to, the following:

<sup>●</sup>

ensuring that no members of the Board of (i) CSC or (ii) an Affiliated Fund, that are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; B.

FOREIGN SECURITIES/SHAREBLOCKING

Voting proxies with respect to shares of foreign securities may involve significantly greater effort and corresponding cost than voting proxies with respect to domestic securities due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting. Problems voting foreign proxies may include the following:

<sup>●</sup>

proxy statements and ballots written in a foreign language,

<sup>●</sup>

untimely and/or inadequate notice of shareholder meetings,

<sup>●</sup>

restrictions of foreigner's ability to exercise votes,

<sup>●</sup>

requirements to vote proxies in person,

<sup>●</sup>

requirements to provide local agents with power of attorney to facilitate CSIM's voting instructions.

In consideration of the foregoing issues, CSIM, in conjunction with Glass Lewis, uses its best efforts to vote foreign proxies. As part of its ongoing oversight, the Proxy Committee will monitor the voting of foreign proxies to determine whether all reasonable steps are taken to vote foreign proxies. If the Proxy Committee determines that the cost associated with the attempt to vote outweighs the potential benefits clients may derive from voting, the Proxy Committee may decide not to attempt to vote. In addition, certain foreign countries impose restrictions on the sale of securities for a period of time before and/or after the shareholder meeting. To avoid these trading restrictions, the Proxy Committee instructs Glass Lewis not to vote such foreign proxies (share-blocking).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; C.

SECURITIES LENDING

Certain of the funds managed by CSIM enter into securities lending arrangements with lending agents to generate additional revenue for their portfolios. In securities lending arrangements, any voting rights that accompany the loaned securities generally pass to the borrower of the securities, but the lender retains the right to recall a security and may then exercise the security's voting rights. In order to vote the proxies of securities out on loan, the securities must be recalled prior to the established record date. CSIM will use its best efforts to recall a fund's securities on loan when deemed appropriate and in the best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; D.

SUB-ADVISORY RELATIONSHIPS

Where CSIM has delegated day-to-day investment management responsibilities to an investment sub-adviser, CSIM may (but generally does not) delegate proxy voting responsibility to such investment sub-adviser. In addition, CSIM may share proxy voting with an investment sub-adviser. Each sub-adviser to whom proxy voting responsibility has been delegated will be required to review all proxy solicitation material and to make voting decisions in the best interest of each investment company and its shareholders, or other client associated with the securities it has been allocated. Each sub-adviser to whom proxy voting has been delegated must inform CSIM of its voting decisions to allow CSIM to implement the votes or in the case of shared voting responsibility, potentially override the sub-adviser's vote recommendation. Prior to delegating the proxy voting responsibility, CSIM will review each sub-adviser's proxy voting policy to determine whether it believes that each sub-adviser's proxy voting policy is generally consistent with the maximization of the value of CSIM's clients' investments by protecting the long-term best interest of shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; E.

REPORTING AND RECORD RETENTION

CSIM will maintain, or cause Glass Lewis to maintain, records that identify the manner in which proxies have been voted (or not voted) on behalf of CSIM clients. CSIM will comply with all applicable rules and regulations regarding disclosure of its or its clients' proxy voting records and procedures.

CSIM will retain all proxy voting materials and supporting documentation as required under the Investment Advisers Act of 1940, as amended.

------

#### Schwab Capital Trust PEA No. 220

#### Part C: Other Information

#### ITEM 28.

#### EXHIBITS.

---

| | |
|:---|:---|
| (a) | [Amended and Restated Agreement and Declaration of Trust, dated November 29, 2005, is incorporated herein by reference to Exhibit (a) of Post-Effective Amendment No. 81 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on April 28, 2006 (hereinafter referred to as PEA No. 81).](https://www.sec.gov/Archives/edgar/data/904333/000095013406008289/f19559exv99wxay.txt) |
| (b) | [Second Amended and Restated Bylaws of the Registrant, adopted as of February 24, 2021, is incorporated herein by reference to Exhibit (b) of Post-Effective Amendment No. 208 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 25, 2021 (hereinafter referred to as PEA No. 208).](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exb.htm) |
| (c)(i) | [Article III, Section 5, Article V, Article VI, Article VIII, Section 4 and Article IX, Sections 1, 5 and 7 of the Amended and Restated Agreement and Declaration of Trust, dated November 29, 2005, referenced in Exhibit (a) above, are incorporated herein by reference to Exhibit (a) of PEA No. 81.](https://www.sec.gov/Archives/edgar/data/904333/000095013406008289/f19559exv99wxay.txt) |
| (c)(ii) | [Article 9 and Article 11 of the Second Amended and Restated Bylaws, are incorporated herein by reference to Exhibit (b) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exb.htm) |
| (d)(i) | [Investment Advisory and Administration Agreement between Registrant and Charles Schwab Investment Management, Inc. (the Investment Adviser or CSIM), dated June 15, 1994, is incorporated herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on December 17, 1997.](https://www.sec.gov/Archives/edgar/data/904333/0000950149-97-002227.txt) |
| (d)(i)(a) | [Amended Schedules A and B, dated February 25, 2022, to the Investment Advisory and Administration Agreement between Registrant and CSIM, dated June 15, 1994, is incorporated herein by reference to Exhibit (d)(i)(a) of Post-Effective Amendment No. 213 to Registrant's Registration Statement on Form N-1A (File No. 811-07704). electronically filed with the SEC on February 25, 2022 (hereinafter referred to as PEA No. 213).](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdia.htm) |
| (d)(i)(b) | [Amended and Restated Advisory Agreement between Registrant and CSIM, dated June 6, 2017, is incorporated herein by reference to Exhibit (d)(i)(b) of Post-Effective Amendment No. 175 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on June 16, 2017.](https://www.sec.gov/Archives/edgar/data/904333/000119312517205908/d268800dex99dib.htm) |
| (d)(i)(c) | [Amended Schedule A, dated February 25, 2021, to the Amended and Restated Advisory Agreement between Registrant and CSIM, dated June 6, 2017, is incorporated herein by reference to Exhibit (d)(i)(c) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exdic.htm) |
| (d)(ii) | [Administration Agreement between Registrant and CSIM, dated August 18, 2016, is incorporated herein by reference to Exhibit (d)(xxi) of Post-Effective Amendment No. 160 to the Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on August 17, 2016 (hereinafter referred to as PEA No. 160).](https://www.sec.gov/Archives/edgar/data/904333/000119312516683771/d203826dex99dxxi.htm) |
| (d)(ii)(a) | [Amendment No. 1, dated February 25, 2021, to the Administration Agreement between Registrant and CSIM, dated August 18, 2016, is incorporated herein by reference to Exhibit (d)(ii)(a) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exdiia.htm) |
| (d)(iii) | [Amended and Restated Investment Advisory and Administration Agreement between Registrant and CSIM, dated March 1, 2017, is incorporated herein by reference to Exhibit (d)(xxiv) of Post-Effective Amendment No. 166 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on April 20, 2017.](https://www.sec.gov/Archives/edgar/data/904333/000119312517130472/d370221dex99dxxiv.htm) |
| (d)(iv) | [Schedule A to the Amended and Restated Investment Advisory and Administration Agreement between Registrant and CSIM, dated December 1, 2017, is incorporated herein by reference to Exhibit (d)(iv) of Post-Effective Amendment No. 180 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on December 1, 2017).](https://www.sec.gov/Archives/edgar/data/904333/000119312517357634/d469497dex99div.htm) |
| (d)(iv)(a) | [Schedule B to the Amended and Restated Investment Advisory and Administration Agreement between Registrant and CSIM, dated December 20, 2018, is incorporated herein by reference to Exhibit (d)(iv)(a) of Post-Effective Amendment No. 190 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 28, 2019 (hereinafter referred to as PEA No. 190).](https://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99diva.htm) |
| (d)(v) | [Investment Sub-Advisory Agreement between the Investment Adviser and Harris Associates LP (Harris Associates), dated January 11, 2002, is incorporated herein by reference to Exhibit (d)(v) of Post-Effective Amendment No. 192 to the Registrant's Registration Statement on Form N-1A electronically filed with the SEC on April 26, 2019 (hereinafter referred to as PEA No. 192).](https://www.sec.gov/Archives/edgar/data/904333/000119312519120007/d896155dex99dv.htm) |
| (d)(v)(a) | [Amendment, dated March 26, 2003, to Investment Sub-Advisory Agreement between the Investment Adviser and Harris Associates is incorporated herein by reference to Exhibit (d)(xxii) of Post-Effective Amendment No. 60 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 26, 2004.](https://www.sec.gov/Archives/edgar/data/904333/000095014904000484/f95266ctexv99wxdyxxxiiy.txt) |
| (d)(v)(b) | [Amendment, dated December 2, 2004, to Investment Sub-Advisory Agreement between the Investment Adviser and Harris Associates is incorporated herein by reference to Exhibit (d)(xvii) of Post-Effective Amendment No. 106 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 25, 2011 (hereinafter referred to as PEA No. 106).](https://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwxvii.htm) |

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| | |
|:---|:---|
| (d)(v)(c) | [Amendment to Schedule A, dated February 1, 2006, to Investment Sub-Advisory Agreement between the Investment Adviser and Harris Associates is incorporated herein by reference to Exhibit (d)(v)(a) of PEA No. 190.](https://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99dva.htm) |
| (d)(v)(d) | [Amendment to Schedule B, dated December 10, 2021, to Investment Sub-Advisory Agreement between the Investment Adviser and Harris Associates is incorporated herein by reference to Exhibit (d)(v)(d) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdvd.htm) |
| (d)(vi) | [Investment Sub-Advisory Agreement between the Investment Adviser and Mondrian Investment Partners Limited (Mondrian), dated July 12, 2011, is incorporated herein by reference to Exhibit (d)(vi)(b) of PEA No. 190.](https://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99dvib.htm) |
| (d)(vi)(a) | [Amendment to Schedule B, dated December 10, 2021, to Investment Sub-Advisory Agreement between the Investment Adviser and Mondrian is incorporated herein by reference to Exhibit (d)(vi)(a) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdvia.htm) |
| (d)(vii) | [Investment Sub-Advisory Agreement between the Investment Adviser and American Century Investment Management, Inc. (American Century), dated June 3, 2010, is incorporated herein by reference to Exhibit (d)(x) of PEA No. 106.](https://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwx.htm) |
| (d)(vii)(a) | [Amendment, dated July 16, 2010, to Investment Sub-Advisory Agreement between the Investment Adviser and American Century is incorporated herein by reference to Exhibit (d)(xvi) of PEA No. 106.](https://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwxvi.htm) |
| (d)(vii)(b) | [Amendment to Schedule B, dated December 10, 2021, to Investment Sub-Advisory Agreement between the Investment Adviser and American Century is incorporated herein by reference to Exhibit (d)(vii)(b) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdviib.htm) |
| (d)(viii) | [Investment Sub-Advisory Agreement between the Investment Adviser and Baillie Gifford Overseas Limited, dated December 12, 2019, is incorporated herein by reference to Exhibit (d)(x) of Post-Effective Amendment No. 199 to the Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 28, 2020.](https://www.sec.gov/Archives/edgar/data/904333/000119312520053146/d813551dex99dx.htm) |
| (d)(ix) | [Expense Limitation Agreement by and between Registrant, the Investment Adviser and Charles Schwab & Co., Inc. (Schwab), dated July 1, 2009, is incorporated herein by reference to Exhibit (d)(xxi) of Post-Effective Amendment No. 100 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on December 10, 2009.](https://www.sec.gov/Archives/edgar/data/904333/000095012309069914/f54319cexv99wdwxxi.htm) |
| (d)(ix)(a) | [Schedule A, dated February 25, 2022, to the Expense Limitation Agreement by and between Registrant, the Investment Adviser and Schwab, dated July 1, 2009, is incorporated herein by reference to Exhibit (d)(ix)(a) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdixa.htm) |
| (d)(ix)(b) | [Expense Limitation Agreement among Registrant, the Investment Adviser and Schwab, dated August 18, 2016, is incorporated herein by reference to Exhibit (d)(xxii) of PEA No. 160.](https://www.sec.gov/Archives/edgar/data/904333/000119312516683771/d203826dex99dxxii.htm) |
| (d)(ix)(c) | [Schedule A, dated February 25, 2021, to the Expense Limitation Agreement among Registrant, the Investment Adviser and Schwab, dated August 18, 2016, is incorporated herein by reference to Exhibit (d)(xi)(c) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exdxic.htm) |
| (d)(ix)(d) | [Expense Limitation Agreement among Registrant, the Investment Adviser and Schwab, dated February 25, 2022, is incorporated herein by reference to Exhibit (d)(ix)(d) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdixd.htm) |
| (e)(i) | [Second Amended and Restated Distribution Agreement between Registrant and Schwab, dated December 11, 2015, is incorporated herein by reference to Exhibit (e) of Post-Effective Amendment No. 151 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 24, 2016 (hereinafter referred to as PEA No. 151).](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99e.htm) |
| (e)(i)(a) | [Amended Schedule A, dated February 25, 2021, to the Second Amended and Restated Distribution Agreement between Registrant and Schwab, dated December 11, 2015, is incorporated herein by reference to Exhibit (e)(i)(a) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exeia.htm) |
| (f) | Inapplicable. |
| (g)(i) | [Custodian Agreement between Registrant and Brown Brothers Harriman & Co. (Brown Brothers), dated April 1, 2007, is incorporated herein by reference to Exhibit (g)(i) of Post-Effective Amendment No. 123 to Registrant's Registration Statement Form N-1A (File No. 811-07704), electronically filed with the SEC on January 13, 2013.](https://www.sec.gov/Archives/edgar/data/904333/000119312513010885/d451327dex99gi.htm) |
| (g)(i)(a) | [Amended Schedule 1, dated February 25, 2021, to the Custodian Services Agreement between Registrant and Brown Brothers is incorporated herein by reference to Exhibit (g)(i)(a) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exgia.htm) |
| (g)(ii) | [Amended and Restated Master Custodian Agreement between Registrant and State Street Bank and Trust Company (State Street), dated October 17, 2005, is incorporated herein by reference to Exhibit (g)(ix) of Post-Effective Amendment No. 79 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 27, 2006 (hereinafter referred to as PEA No. 79).](https://www.sec.gov/Archives/edgar/data/904333/000095013406003828/f17617ctexv99wxgyxixy.txt) |
| (g)(ii)(a) | [Amended Appendix A and Appendix B, dated September 28, 2022, to the Amended and Restated Master Custodian Agreement between Registrant and State Street, is filed herein as Exhibit (g)(ii)(a).](tm233086d1_exgiia.htm) |
| (g)(iii) | [Global Custody Services Agreement between Registrant and Citibank, N.A., dated February 2, 2022, is incorporated herein by reference to Exhibit (g)(iii) of Post-Effective Amendment No. 215 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on June 22, 2022 (hereinafter referred to as PEA No. 215).](https://www.sec.gov/Archives/edgar/data/0000904333/000110465922073098/tm2218769-2_exgiii.htm) |
| (h)(i) | [License Agreement between Registrant and Standard & Poor's is incorporated herein by reference to Exhibit (h) of Post-Effective Amendment No. 32 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on February 26, 1999.](https://www.sec.gov/Archives/edgar/data/904333/0000950149-99-000334.txt) |
| (h)(ii) | [Transfer Agency and Service Agreement, dated November 12, 2020, between Registrant and BNY Mellon Investment Servicing (US) Inc., is incorporated herein by reference to Exhibit (h)(ii) of Post-Effective Amendment No. 209 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on April 28, 2021.](https://www.sec.gov/Archives/edgar/data/904333/000110465921055724/tm2113235d1_exhii.htm) |

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| | |
|:---|:---|
| (h)(iii) | [Amended and Restated Shareholder Servicing Plan, dated December 11, 2015, is incorporated herein by reference to Exhibit (h)(iv) of PEA No. 151.](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99hiv.htm) |
| (h)(iii)(a) | [Amended Schedule A, dated July 1, 2022, to the Amended and Restated Shareholder Servicing Plan, is filed herein as Exhibit (h)(iii)(a).](tm233086d1_exhiiia.htm) |
| (h)(iv) | [Master Fund Accounting and Services Agreement between Registrant and State Street, dated October 1, 2005, is incorporated herein by reference to Exhibit (g)(i) of PEA No. 79.](https://www.sec.gov/Archives/edgar/data/904333/000095013406003828/f17617ctexv99wxgyxiy.txt) |
| (h)(iv)(a) | [Amendment, dated September 28, 2022, to Appendix A and Appendix B of the Master Fund Accounting and Services Agreement between Registrant and State Street, dated October 1, 2005, is filed herein as Exhibit (h)(iv)(a).](tm233086d1_exhiva.htm) |
| (h)(v) | [Form of Fund of Funds Investment Agreement is incorporated herein by reference to Exhibit (h)(v) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exhv.htm)  |
| (i) | [Opinion and Consent of Counsel is filed herein as Exhibit (i).](tm233086d1_exi.htm) |
| (j)(i) | [Consent of Deloitte & Touche LLP is filed herein as Exhibit (j)(i).](tm233086d1_exji.htm) |
| (j)(ii) | [Power of Attorney executed by Walter W. Bettinger, II, dated January 1, 2016, is incorporated herein by reference to Exhibit (j)(ii) of PEA No. 151.](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jii.htm) |
| (j)(iii) | [Power of Attorney executed by Jonathan de St. Paer, dated April 1, 2019, is incorporated herein by reference to Exhibit (j)(iii) of PEA No. 192.](https://www.sec.gov/Archives/edgar/data/904333/000119312519120007/d896155dex99jiii.htm) |
| (j)(iv) | [Power of Attorney executed by Robert W. Burns, dated January 1, 2016, is incorporated herein by reference to Exhibit (j)(v) of PEA No. 151.](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jv.htm)  |
| (j)(v) | [Power of Attorney executed by David L. Mahoney, dated January 1, 2016, is incorporated herein by reference to Exhibit (j)(viii) of PEA No. 151.](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jviii.htm)  |
| (j)(vi) | [Power of Attorney executed by Kimberly S. Patmore, dated January 1, 2016, is incorporated herein by reference to Exhibit (j)(x) of PEA No. 151.](https://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jx.htm)  |
| (j)(vii) | [Power of Attorney executed by Nancy F. Heller, dated June 1, 2018, is incorporated herein by reference to Exhibit (j)(xi) of Post Effective Amendment No. 186 to the Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on June 26, 2018.](https://www.sec.gov/Archives/edgar/data/904333/000119312518203629/d600161dex99jxi.htm) |
| (j)(viii) | [Power of Attorney executed by Jane P. Moncreiff, dated January 28, 2019, is incorporated herein by reference to Exhibit (j)(xiii) of PEA No. 190.](https://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99jxiii.htm)  |
| (j)(ix) | [Power of Attorney executed by Dana S. Smith, dated January 11, 2023, is filed herein as Exhibit (j)(ix).](tm233086d1_exjix.htm) |
| (j)(x) | [Registrant, Certified Resolution regarding Powers of Attorney, dated June 10, 2020 is incorporated herein by reference to Exhibit (j)(xv) of Post-Effective Amendment No. 203 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on June 26, 2020.](https://www.sec.gov/Archives/edgar/data/904333/000119312520179306/d730999dex99jxv.htm) |
| (j)(xi) | [Power of Attorney executed by Jean Derek Penn, dated June 1, 2021, is incorporated herein by reference to Exhibit (j)(xiv) of Post-Effective Amendment No. 210 to Registrant's Registration Statement on Form N-1A (File No. 811-07704), electronically filed with the SEC on June 25, 2021 (hereinafter referred to as PEA No. 210).](https://www.sec.gov/Archives/edgar/data/904333/000110465921085243/tm2117253d1_exjxiv.htm) |
| (j)(xii) | [Power of Attorney executed by Michael J. Beer, dated September 26, 2022, is filed herein as Exhibit (j)(xii).](tm233086d1_exjxii.htm) |
| (j)(xiii) | [Power of Attorney executed by Richard A. Wurster, dated September 19, 2022, is filed herein as Exhibit (j)(xiii).](tm233086d1_exjxiii.htm) |
| (k) | Inapplicable. |
| (l) | Inapplicable. |
| (m) | Inapplicable. |
| (n) | Inapplicable. |
| (o) | Inapplicable. |
| (p)(i) | [Registrant, the Investment Adviser and Schwab Joint Code of Ethics, dated June 8, 2022, is incorporated herein by reference to Exhibit (p)(i) of PEA No. 215.](https://www.sec.gov/Archives/edgar/data/0000904333/000110465922073098/tm2218769-2_expi.htm) |
| (p)(ii) | [American Century Code of Ethics, dated August 31, 2022, is filed herein as Exhibit (p)(ii).](tm233086d1_expii.htm) |
| (p)(iii) | [Harris Associates Code of Ethics, dated December 3, 2021, is incorporated herein by reference to Exhibit (p)(iii) of PEA No. 213.](https://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_expiii.htm)  |
| (p)(iv) | [Mondrian Code of Ethics, dated May 1, 2020, is incorporated herein by reference to Exhibit (p)(v) of PEA No. 208.](https://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_expv.htm)  |
| (p)(v) | [Baillie Gifford Code of Ethics, dated October 2022, is filed herein as Exhibit (p)(v).](tm233086d1_expv.htm) |

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| EX-101 | Inline Interactive Data File - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| EX-101.INS | XBRL Taxonomy Instance Document |
| EX-101.SCH | XBRL Taxonomy Schema Document |
| EX-101.CAL | XBRL Taxonomy Calculation Linkbase Document |
| EX-101.DEF | XBRL Taxonomy Definition Linkbase Document |

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EX-101.LAB XBRL Taxonomy Label Linkbase Document <br> EX-101.PRE XBRL Taxonomy Presentation Linkbase Document

#### ITEM 29.

#### PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Board of Trustees of the Registrant is identical to the boards of trustees of The Charles Schwab Family of Funds, Schwab Investments, Schwab Strategic Trust, Schwab Annuity Portfolios, and Laudus Trust. Each such trust has Charles Schwab Investment Management, Inc. as its investment adviser. In addition, the officers of the Registrant are also identical to those of each such other trust. As a result, the above-named trusts may be deemed to be under common control with the Registrant. Nonetheless, the Registrant takes the position that it is not under common control with such other trusts because the power residing in the respective trusts' boards and officers arises as a result of an official position with each such trust.

#### ITEM 30.

#### INDEMNIFICATION.
Article VIII of Registrant's Amended and Restated Agreement and Declaration of Trust (Exhibit (a) hereto, which is incorporated by reference) provides in effect that Registrant will indemnify its officers and trustees against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees reasonably incurred by any such officer or trustee in connection with the defense or disposition of any action, suit, or other proceeding. However, in accordance with Sections 17(h) and 17(i) of the Investment Company Act of 1940, as amended (1940 Act), and its own terms, said Amended and Restated Agreement and Declaration of Trust does not protect any person against any liability to Registrant or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. In any event, Registrant will comply with 1940 Act Releases Nos. 7221 and 11330 respecting the permissible boundaries of indemnification by an investment company of its officers and trustees.

Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the 1933 Act), may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.

#### ITEM 31.

#### BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Registrant's investment adviser, Charles Schwab Investment Management, Inc., dba Schwab Asset Management™ a Delaware corporation, organized in October 1989 to serve as investment manager to Registrant, also serves as the investment manager to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust, each an open-end management investment company. The principal place of business of the Investment Adviser is 211 Main Street, San Francisco, California 94105. The only business in which the Investment Adviser engages is that of investment adviser and administrator to Registrant, The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and Schwab Strategic Trust, investment adviser of Laudus Trust and any other investment companies that Schwab may sponsor in the future, and an investment adviser to certain non-investment company clients.

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The business, profession, vocation or employment of a substantial nature in which each director and/or senior or executive officer of the Investment Adviser is or has been engaged during the past two fiscal years is listed below. The name of any company for which any director and/or senior or executive officer of the Investment Adviser serves as director, officer, employee, partner or trustee is also listed below.

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| | | |
|:---|:---|:---|
| **Name and Position with Adviser**  | **Name of Other Company**  | **Capacity**  |
| Peter B. Crawford, Director | The Charles Schwab Corporation | Managing Director and Chief Financial Officer |
|  | Charles Schwab & Co., Inc. | Director, Managing Director and Chief Financial Officer |
|  | Family Wealth Alliance, Inc. | Managing Director and Chief Financial Officer |
|  | TD Ameritrade Holding Corporation | Director |
|  | Schwab Holdings, Inc. | Director, Executive Vice President and Chief Financial Officer |
|  | Charles Schwab Global Holdings, Inc. | Executive Vice President and Chief Financial Officer  |
|  | Performance Technologies, Inc. | Executive Vice President and Chief Financial Officer  |
|  | Schwab (SIS) Holdings, Inc. I | Executive Vice President and Chief Financial Officer  |
|  | Schwab Technology Holdings, Inc. | Executive Vice President and Chief Financial Officer  |
| Richard A. Wurster, Director | The Charles Schwab Corporation | President |
|  | Schwab Holdings, Inc. | President |
|  | Charles Schwab & Co., Inc. | Director and President |
| Omar Aguilar, Chief Executive Officer and Chief Investment Officer  | Schwab Funds  | Vice President and Chief Investment Officer  |
| Omar Aguilar, Chief Executive Officer and Chief Investment Officer  | Laudus Trust | Vice President and Chief Investment Officer |
|  | Schwab ETFs | Vice President and Chief Investment Officer |
|  | Charles Schwab Investment Advisory, Inc. | Director, President and Chief Executive Officer |
| Jonathan de St. Paer, Director, President and Chief Operating Officer  | Charles Schwab & Co., Inc.  | Managing Director  |
| Jonathan de St. Paer, Director, President and Chief Operating Officer  | Schwab Funds | President and Chief Executive Officer |
| Jonathan de St. Paer, Director, President and Chief Operating Officer  | Laudus Trust | President and Chief Executive Officer |
|  | Schwab ETFs | President and Chief Executive Officer |
|  | Financial Passport, Inc. | Director and President |
|  | TD Ameritrade Investment Management, LLC | Manager |
| Brett Wander, Senior Vice President and Chief Investment Officer  | Schwab Funds  | Vice President and Chief Investment Officer  |
| Brett Wander, Senior Vice President and Chief Investment Officer  | Laudus Trust | Vice President and Chief Investment Officer |
|  | Schwab ETFs | Vice President and Chief Investment Officer |
| William P. McMahon, Jr., Senior Vice President and Chief Investment Officer  | Schwab Funds  | Vice President and Chief Investment Officer  |
| William P. McMahon, Jr., Senior Vice President and Chief Investment Officer  | Laudus Trust | Vice President and Chief Investment Officer |
|  | Schwab ETFs | Vice President and Chief Investment Officer |
| Michael Hogan, Senior Vice President and Chief Compliance Officer  | Schwab Funds  | Chief Compliance Officer  |
| Michael Hogan, Senior Vice President and Chief Compliance Officer  | Schwab ETFs | Chief Compliance Officer |
| Michael Hogan, Senior Vice President and Chief Compliance Officer  | Laudus Trust | Chief Compliance Officer |
|  | Charles Schwab & Co., Inc. | Managing Director and Chief Compliance Officer – Asset Management Compliance |
| Mark D. Fischer, Vice President and Chief Financial Officer  | Schwab Funds  | Chief Operating Officer  |
| Mark D. Fischer, Vice President and Chief Financial Officer  | Laudus Trust | Chief Operating Officer |
|  | Schwab ETFs | Chief Operating Officer |
| Catherine MacGregor, Vice President and Chief Legal Officer  | Charles Schwab & Co., Inc.  | Managing Director  |
| Catherine MacGregor, Vice President and Chief Legal Officer  | Schwab Funds | Secretary and Chief Legal Officer |
| Catherine MacGregor, Vice President and Chief Legal Officer  | Laudus Trust | Vice President, Chief Legal Officer and Clerk |
| | Schwab ETFs | Secretary and Chief Legal Officer |

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#### ITEM 32.

#### PRINCIPAL UNDERWRITERS.
&nbsp;&nbsp;&nbsp;&nbsp; (a) Schwab acts as principal underwriter and distributor of Registrant's shares. Schwab also acts as principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, and Schwab Annuity Portfolios and may act as such for any other investment company which Schwab may sponsor in the future.

&nbsp;&nbsp;&nbsp;&nbsp; (b) Information with respect to Schwab's directors and officers is as follows:

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| | | |
|:---|:---|:---|
| **Name**  | **Position and Offices with the Underwriter**  | **Position and Offices with the Registrant**  |
| Richard A. Wurster | President and Director | Trustee |
| Steven H. Anderson | Managing Director | None |
| Catherine M. Casey | Managing Director and Head of Human Resources | None |
| Jason C. Clague | Managing Director and Head of Operations | None |
| Bernard J. Clark | Managing Director and Head of Advisor Services | None |
| Jonathan M. Craig | Managing Director and Head of Investor Services and Marketing | None |
| Peter B. Crawford | Managing Director, Chief Financial Officer and Director | None |
| Catherine Golladay | Managing Director and Head of Workplace Services  | None |
| Neesha K. Hathi | Managing Director – Wealth and Advice Solutions | None |
| Timothy C. Heier | Managing Director and Chief Technology Officer | None |
| Dennis W. Howard | Managing Director and Chief Information Officer | None |
| Lisa Kidd Hunt | Managing Director and Head of International Services | None |
| Mitchell N. Mantua | Managing Director and General Auditor | None |
| Joseph R. Martinetto | Managing Director, Chief Operating Officer and Director | None |
| Peter J. Morgan III | Managing Director, General Counsel and Corporate Secretary | None |
| Nigel J. Murtagh | Managing Director and Chief Risk Officer | None |

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The principal business address of all directors and officers of Schwab is 211 Main Street, San Francisco, California 94105.

&nbsp;&nbsp;&nbsp;&nbsp; (c) None.

#### ITEM 33.

#### LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained pursuant to Section 31(a) of the 1940 Act, and the Rules thereunder are maintained at the offices of: Registrant and Registrant's investment adviser and administrator, Charles Schwab Investment Management, Inc., 211 Main Street, San Francisco, California 94105; Registrant's principal underwriter, Charles Schwab & Co., Inc., 211 Main Street, San Francisco, California 94105; Registrant's custodian for certain funds, including Schwab Fundamental Emerging Markets Large Company Index Fund, Citibank, N.A., 388 Greenwich Street, New York, NY 10013; Registrant's custodian for Schwab Fundamental Emerging Markets Large Company Index Fund, Brown Brothers Harriman & Co., 50 Post Office Square, Boston, Massachusetts 02110, Registrant's custodian for the balance of the funds and fund accountant, State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111; Registrant's transfer agent, BNY Mellon Investment Servicing (US) Inc., 4400 Computer Drive, Westborough, MA 01581; and Registrant's sub-advisors: American Century Investment Management, Inc., 4500 Main Street, Kansas City, MO 64111; Baillie Gifford Overseas Limited, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland; Harris Associates L.P., 111 S. Wacker Drive, Suite 4600, Chicago, IL 60606; Mondrian Investment Partners Limited, Fifth Floor, 10 Gresham Street, London EC2V 7JD. Terminated sub-advisors are required to hold all previously generated fund records in accordance with the 1940 Act.

#### ITEM 34.

#### MANAGEMENT SERVICES.
None.

#### ITEM 35.

#### UNDERTAKINGS.
Not applicable.

------

#### SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended, Registrant certifies that it meets all of the requirements for the effectiveness of this Post-Effective Amendment No. 220 to Registrant's Registration Statement on Form N-1A pursuant to Rule 485(b) under the 1933 Act and has duly caused this Post-Effective Amendment No. 220 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Washington in the District of Columbia, on the 24th day of February, 2023.

---

| |
|:---|
| **SCHWAB CAPITAL TRUST <br> Registrant** |
| Jonathan de St. Paer\* <br>Jonathan de St. Paer, President and Chief Executive Officer  |

---

Pursuant to the requirements of the 1933 Act, this Post-Effective Amendment No. 220 to Registrant's Registration Statement on Form N-1A has been signed below by the following persons in the capacities indicated this 24th day of February, 2023.

---

| | |
|:---|:---|
| **Signature**  | **Title**  |
| Walter W. Bettinger II\* <br>Walter W. Bettinger II  | Chairman and Trustee |
| Michael J. Beer\* <br>Michael J. Beer  | Trustee |
| Robert W. Burns\* <br>Robert W. Burns  | Trustee |
| Nancy F. Heller\* <br>Nancy F. Heller  | Trustee |
| David L. Mahoney\* <br>David L. Mahoney  | Trustee |
| Jane P. Moncreiff\* <br>Jane P. Moncreiff  | Trustee |
| Kimberly S. Patmore\* <br>Kimberly S. Patmore  | Trustee |
| J. Derek Penn\* <br>J. Derek Penn  | Trustee |
| Richard A. Wurster\* <br>Richard A. Wurster  | Trustee |
| Dana S. Smith\* <br>Dana S. Smith  | Treasurer and Chief Financial Officer |

---

---

| | |
|:---|:---|
| \*By: | /s/ Douglas P. Dick <br>Douglas P. Dick, Attorney-in-Fact <br> Pursuant to Power of Attorney  |

---

------

## Ex-99.(G)(Ii)(A)

**Exhibit 99.(g)(ii)(a)**

September 28, 2022

State Street Bank and Trust Company

1 Lincoln St. 10th Floor

Boston, MA 02110

Attention: Kathy MacVarish, Senior Vice President

RE: Schwab Strategic Trust

Ladies and Gentlemen:

Reference is made to the Amended and Restated Master Custodian Agreement between us dated as of October 17, 2005, as amended and supplemented (the "<u>Agreement</u>"). Pursuant to the Agreement, this letter is to provide notice of the creation of the following additional Schwab ETF, as defined in the Amendment to the Agreement dated as of October 8, 2009 (the "<u>Amendment</u>"):

Schwab Municipal Bond ETF

In accordance with Section 18.6 of the Amendment, we request that you act as Custodian with respect to the Schwab Municipal Bond ETF. A current Appendix A to the Agreement and Appendix B to the Amendment are attached hereto. In connection with such request, the Trust, on behalf of the Schwab Municipal Bond ETF, hereby confirms to you, as of the date hereof, the representations and warranties set forth in Section 18.7 of the Agreement.

Please indicate your acceptance of the foregoing by executing two copies of this letter, returning one to us and retaining one copy for your records.

***[Signature page follows]***

**SCHWAB STRATEGIC TRUST**

---

| | | |
|:---|:---|:---|
| By: |  | /s/ Jonathan de St Paer |
|  | Name: | Jonathan de St Paer |
|  | Title: | President |

---

Accepted:

**STATE STREET BANK AND TRUST COMPANY**

---

| | | |
|:---|:---|:---|
| By: |  | /s/ Stephen V. Russo |
|  | Name: | Stephen V. Russo |
|  | Title: | Vice President |

---

**Appendix A**

**to THE**

**AMENDED AND RESTATED Master Custodian Agreement**

**As of September 28, 2022**

**THE CHARLES SCHWAB FAMILY OF FUNDS**

Schwab Value Advantage Money Fund

Schwab Government Money Fund

Schwab U.S. Treasury Money Fund

Schwab Municipal Money Fund

Schwab California Municipal Money Fund

Schwab New York Municipal Money Fund

Schwab AMT Tax-Free Money Fund

Schwab Treasury Obligations Money Fund

Schwab Variable Share Price Money Fund

Schwab Retirement Government Money Fund

**SCHWAB INVESTMENTS**

Schwab 1000 Index Fund

Schwab Tax-Free Bond Fund

Schwab California Tax-Free Bond Fund

Schwab Treasury Inflation Protected Securities Fund

Schwab U.S. Aggregate Bond Index Fund

Schwab Short-Term Bond Index Fund

Schwab Opportunistic Municipal Bond Fund

**SCHWAB CAPITAL TRUST**

Schwab Core Equity Fund

Schwab International Opportunities Fund

Schwab Balanced Fund

Schwab Fundamental US Small Company Index Fund

Schwab Fundamental US Large Company Index Fund

Schwab Monthly Income Fund – Target Payout (formerly Schwab Monthly Income Fund – Moderate Payout)

Schwab Monthly Income Fund – Flexible Payout (formerly Schwab Monthly Income Fund – Enhanced Payout)

Schwab Monthly Income Fund – Income Payout (formerly Schwab Monthly Income Fund – Maximum Payout)

Schwab International Core Equity Fund

Schwab U.S. Large-Cap Value Index Fund

Schwab U.S. Large-Cap Growth Index Fund

Schwab U.S. Mid-Cap Index Fund

**SCHWAB ANNUITY PORTFOLIOS**

Schwab Government Money Market Portfolio

**SCHWAB STRATEGIC TRUST**

Schwab U.S. Broad Market ETF

Schwab U.S. Large-Cap ETF

Schwab U.S. Large-Cap Growth ETF

Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF

Schwab International Equity ETF

Schwab International Small-Cap Equity ETF

Schwab Emerging Markets Equity ETF

Schwab U.S. TIPS ETF

Schwab Short-Term U.S. Treasury ETF

Schwab Intermediate-Term U.S. Treasury ETF

Schwab U.S. REIT ETF

Schwab U.S. Mid-Cap ETF

Schwab U.S. Aggregate Bond ETF

Schwab U.S. Dividend Equity ETF

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company Index ETF

Schwab 1000 Index ETF

Schwab 1-5 Year Corporate Bond ETF

Schwab 5-10 Year Corporate Bond ETF

Schwab Long-Term U.S. Treasury ETF

Schwab International Dividend Equity ETF

Schwab Ariel ESG ETF

Schwab Crypto Thematic ETF

Schwab Municipal Bond ETF

**Appendix B**

**to THE AMENDMENT TO**

**AMENDED AND RESTATED Master Custodian Agreement**

**As of September 28, 2022**

**List of Schwab ETFs**

**SCHWAB STRATEGIC TRUST**

Schwab U.S. Broad Market ETF

Schwab U.S. Large-Cap ETF

Schwab U.S. Large-Cap Growth ETF

Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF

Schwab International Equity ETF

Schwab International Small-Cap Equity ETF

Schwab Emerging Markets Equity ETF

Schwab U.S. TIPS ETF

Schwab Short-Term U.S. Treasury ETF

Schwab Intermediate-Term U.S. Treasury ETF

Schwab U.S REIT ETF

Schwab U.S. Mid-Cap ETF

Schwab U.S. Aggregate Bond ETF

Schwab U.S. Dividend Equity ETF

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company Index ETF

Schwab 1000 Index ETF

Schwab 1-5 Year Corporate Bond ETF

Schwab 5-10 Year Corporate Bond ETF

Schwab Long-Term U.S. Treasury ETF

Schwab International Dividend Equity ETF

Schwab Ariel ESG ETF

Schwab Crypto Thematic ETF

Schwab Municipal Bond ETF

## Ex-99.(H)(Iii)(A)

**Exhibit 99.(h)(iii)(a)**

**SCHWAB CAPITAL TRUST**

**SCHWAB INVESTMENTS**

**Schedule A**

**to the Amended and Restated Shareholder Servicing Plan**

**dated July 1, 2022**

**<u>Schwab Capital Trust</u>**

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Fund** | &nbsp;&nbsp;**Shareholder Service Fee** |
| &nbsp;&nbsp;Schwab Large-Cap Growth Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Core Equity Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Dividend Equity Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Small-Cap Equity Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Hedged Equity Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Health Care Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Balanced Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab International Core Equity Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2010 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2015 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2020 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2025 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2030 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2035 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2040 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;Schwab MarketTrack Growth Portfolio | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab MarketTrack Balanced Portfolio | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab MarketTrack Conservative Portfolio | &nbsp;&nbsp;An annual fee, payable monthly, of twenty-five one-hundredths of one percent (0.25%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab International Opportunities Fund | &nbsp;&nbsp;An annual fee, payable monthly, of twenty one-hundredths of one percent (0.20%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Monthly Income Fund – Moderate Payout | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Monthly Income Fund – Enhanced Payout | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Monthly Income Fund – Maximum Payout | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2045 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2050 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2055 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2060 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Target 2065 Fund | &nbsp;&nbsp;An annual fee, payable monthly, of zero percent (0.00%) of the Fund's average daily net assets |

---

**<u>Schwab Investments</u>**

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Fund** | &nbsp;&nbsp;**Shareholder Service Fee** |
| &nbsp;&nbsp;Schwab Tax-Free Bond Fund | &nbsp;&nbsp;An annual fee, payable monthly, of fifteen one-hundredths of one percent (0.15%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab California Tax-Free Bond Fund | &nbsp;&nbsp;An annual fee, payable monthly, of fifteen one-hundredths of one percent (0.15%) of the Fund's average daily net assets |
| &nbsp;&nbsp;Schwab Global Real Estate Fund | &nbsp;&nbsp;An annual fee, payable monthly, of fifteen one-hundredths of one percent (0.15%) of the Fund's average daily net assets |

---

## Ex-99.(H)(Iv)(A)

**Exhibit 99.(h)(iv)(a)**

September 28, 2022

State Street Bank and Trust Company

1 Lincoln St. 10th Floor

Boston, MA 02110

Attention: Kathy MacVarish, Senior Vice President

Re: Schwab Strategic Trust (the "<u>Trust</u>")

Ladies and Gentlemen:

Reference is made to the Master Fund Accounting and Services Agreement between us dated as of October 1, 2005, as amended and supplemented (the "<u>Agreement</u>"). Pursuant to the Agreement, this letter is to provide notice of the creation of the following additional Schwab ETF, as defined in the Amendment to the Agreement dated as of October 8, 2009 (the "<u>Amendment</u>"):

Schwab Municipal Bond ETF

In accordance with Section 3 of the Amendment, we request that you act as Accounting Agent with respect to the Schwab Municipal Bond ETF. A current Appendix A to the Agreement and Appendix B to the Amendment are attached hereto. In connection with such request, the Trust, on behalf of each of the Schwab Municipal Bond ETF, hereby confirms to you, as of the date hereof, the representations and warranties set forth in Section 4(b) of the Agreement.

Please indicate your acceptance of the foregoing by executing two copies of this letter, returning one to us and retaining one copy for your records.

***[Signature page follows]***

**SCHWAB STRATEGIC TRUST**

---

| | | |
|:---|:---|:---|
| By: |  | /s/ Jonathan de St Paer |
|  | Name: | Jonathan de St Paer |
|  | Title: | President |

---

Accepted:

**STATE STREET BANK AND TRUST COMPANY**

---

| | | |
|:---|:---|:---|
| By: |  | /s/ Stephen V. Russo |
|  | Name: | Stephen V. Russo |
|  | Title: | Vice President |

---

**Appendix A**

**to**

**Master FUND ACCOUNTING AND SERVICES Agreement**

**As of September 28, 2022**

*MANAGEMENT INVESTMENT COMPANIES AND PORTFOLIOS THEREOF, IF ANY*

**THE CHARLES SCHWAB FAMILY OF FUNDS**

Schwab Value Advantage Money Fund

Schwab Government Money Fund

Schwab U.S. Treasury Money Fund

Schwab Municipal Money Fund

Schwab California Municipal Money Fund

Schwab New York Municipal Money Fund

Schwab AMT Tax-Free Money Fund

Schwab Treasury Obligations Money Fund

Schwab Variable Share Price Money Fund

Schwab Retirement Government Money Fund

**SCHWAB INVESTMENTS**

Schwab 1000 Index Fund

Schwab Tax-Free Bond Fund

Schwab California Tax-Free Bond Fund

Schwab Treasury Inflation Protected Securities Index Fund

Schwab Global Real Estate Fund

Schwab U.S. Aggregate Bond Index Fund

Schwab Short-Term Bond Index Fund

Schwab Opportunistic Municipal Bond Fund

**SCHWAB CAPITAL TRUST**

Schwab International Index Fund

Schwab Small-Cap Index Fund

Schwab MarketTrack Growth Portfolio

Schwab MarketTrack Balanced Portfolio

Schwab MarketTrack Conservative Portfolio

Schwab MarketTrack All Equity Portfolio

Schwab S&P 500 Index Fund

Schwab Dividend Equity Fund

Schwab Small-Cap Equity Fund

Schwab Large-Cap Growth Fund

Schwab Total Stock Market Index Fund

Schwab Health Care Fund

Schwab Target 2010 Fund

Schwab Target 2015 Fund

Schwab Target 2020 Fund

Schwab Target 2025 Fund

Schwab Target 2030 Fund

Schwab Target 2035 Fund

Schwab Target 2040 Fund

Schwab Target 2045 Fund

Schwab Target 2050 Fund

Schwab Target 2055 Fund

Schwab Target 2060 Fund

Schwab Target 2065 Fund

Schwab Target 2010 Index Fund

Schwab Target 2015 Index Fund

Schwab Target 2020 Index Fund

Schwab Target 2025 Index Fund

Schwab Target 2030 Index Fund

Schwab Target 2035 Index Fund

Schwab Target 2040 Index Fund

Schwab Target 2045 Index Fund

Schwab Target 2050 Index Fund

Schwab Target 2055 Index Fund

Schwab Target 2060 Index Fund

Schwab Target 2065 Index Fund

Schwab Core Equity Fund

Schwab International Opportunities Fund

Schwab Balanced Fund

Schwab Fundamental US Small Company Index Fund

Schwab Fundamental US Large Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental Emerging Markets Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Monthly Income Fund – Target Payout (formerly Schwab Monthly Income Fund – Moderate Payout)

Schwab Monthly Income Fund – Flexible Payout (formerly Schwab Monthly Income Fund – Enhanced Payout)

Schwab Monthly Income Fund – Income Payout (formerly Schwab Monthly Income Fund – Maximum Payout)

Schwab International Core Equity Fund

Schwab Fundamental Global Real Estate Index Fund

Schwab U.S. Large-Cap Growth Index Fund

Schwab U.S. Large-Cap Value Index Fund

Schwab U.S. Mid-Cap Index Fund

**SCHWAB ANNUITY PORTFOLIOS**

Schwab Government Money Market Portfolio

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

**SCHWAB STRATEGIC TRUST**

Schwab U.S. Broad Market ETF

Schwab U.S. Large-Cap ETF

Schwab U.S. Large-Cap Growth ETF

Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF

Schwab International Equity ETF

Schwab International Small-Cap Equity ETF

Schwab Emerging Markets Equity ETF

Schwab U.S. TIPS ETF

Schwab Short-Term U.S. Treasury ETF

Schwab Intermediate-Term U.S. Treasury ETF

Schwab U.S. REIT ETF

Schwab U.S. Mid-Cap ETF

Schwab U.S. Aggregate Bond ETF

Schwab U.S. Dividend Equity ETF

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company Index ETF

Schwab 1000 Index ETF

Schwab 1-5 Year Corporate Bond ETF

Schwab 5-10 Year Corporate Bond ETF

Schwab Long-Term U.S. Treasury ETF

Schwab International Dividend Equity ETF

Schwab Ariel ESG ETF

Schwab Crypto Thematic ETF

Schwab Municipal Bond ETF

**Appendix B**

**to Master FUND ACCOUNTING AND SERVICES Agreement**

**As of September 28, 2022**

**List of Schwab ETFs**

**SCHWAB STRATEGIC TRUST**

Schwab U.S. Broad Market ETF

Schwab U.S. Large-Cap ETF

Schwab U.S. Large-Cap Growth ETF

Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF

Schwab International Equity ETF

Schwab International Small-Cap Equity ETF

Schwab Emerging Markets Equity ETF

Schwab U.S. TIPS ETF

Schwab Short-Term U.S. Treasury ETF

Schwab Intermediate-Term U.S. Treasury ETF

Schwab U.S. REIT ETF

Schwab U.S. Mid-Cap ETF

Schwab U.S. Aggregate Bond ETF

Schwab U.S. Dividend Equity ETF

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company Index ETF

Schwab 1000 Index ETF

Schwab 1-5 Year Corporate Bond ETF

Schwab 5-10 Year Corporate Bond ETF

Schwab Long-Term U.S. Treasury ETF

Schwab International Dividend Equity ETF

Schwab Ariel ESG ETF

Schwab Crypto Thematic ETF

Schwab Municipal Bond ETF

## Ex-99.(I)

**Exhibit 99.(i)**

---

| | |
|:---|:---|
| ![](tm233086d1_exiimg001.jpg) | 1900 K Street, NW<br> Washington, DC 20006<br> +1 202 261 3300 Main<br> +1 202 261 3333 Fax <br> www.dechert.com |

---

February 24, 2023

Schwab Capital Trust

211 Main Street

San Francisco, CA 94105

Dear Ladies and Gentlemen:

We have acted as counsel for Schwab Capital Trust (the "Trust"), a trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts, in connection with Post-Effective Amendment No. 220 to the Trust's Registration Statement on Form N-1A, together with all Exhibits thereto (the "Registration Statement"), under the Securities Act of 1933, as amended ("1933 Act"), and Amendment No. 221 to the Registration Statement under the Investment Company Act of 1940, as amended. We have examined such governmental and corporate certificates and records as we deemed necessary to render this opinion and we are familiar with the Trust's Amended and Restated Agreement and Declaration of Trust and its Second Amended and Restated Bylaws, each as amended to date.

Based upon the foregoing, we are of the opinion that the shares proposed to be sold pursuant to the Registration Statement, when paid for as contemplated in the Registration Statement, will be legally and validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to be filed with the U.S. Securities and Exchange Commission, and to the use of our name in the Trust's Registration Statement to be dated on or about February 27, 2023 and in any revised or amended versions thereof. In giving such consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act and the rules and regulations thereunder.

Very truly yours,

<u>/s/ Dechert LLP</u>

## Ex-99.(J)(I)

**Exhibit 99.(j)(i)**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in this Post-Effective Amendment to Registration Statement No. 033-62470 on Form N-1A of our reports dated December 16, 2022, relating to the financial statements and financial highlights of Schwab International Index Fund, Schwab Small-Cap Index Fund, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio, Schwab MarketTrack All Equity Portfolio, Schwab S&P 500 Index Fund, Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Small-Cap Equity Fund, Schwab Large-Cap Growth Fund, Schwab Total Stock Market Index Fund, Schwab Health Care Fund, Schwab International Opportunities Fund, Schwab Balanced Fund, Schwab Fundamental US Large Company Index Fund, Schwab Fundamental US Small Company Index Fund, Schwab Fundamental International Large Company Index Fund, Schwab Fundamental Emerging Markets Large Company Index Fund, Schwab Fundamental International Small Company Index Fund, Schwab International Core Equity Fund, Schwab Target 2010 Fund, Schwab Target 2020 Fund, Schwab Target 2030 Fund, Schwab Target 2040 Fund, Schwab Target 2050 Fund, Schwab Target 2060 Fund, Schwab Target 2015 Fund, Schwab Target 2025 Fund, Schwab Target 2035 Fund, Schwab Target 2045 Fund, Schwab Target 2055 Fund, Schwab Target 2065 Fund, Schwab U.S. Large-Cap Growth Index Fund, Schwab U.S. Large-Cap Value Index Fund, Schwab U.S. Mid-Cap Index Fund, each a series of Schwab Capital Trust (the "Trust"), appearing in the Annual Reports on Form N-CSR of the Trust for the year ended October 31, 2022, and to the references to us under the headings "Financial Highlights" in the Prospectuses and "Independent Registered Public Accounting Firm" and "Portfolio Holdings Disclosure" in the Statements of Additional Information, which are part of such Registration Statement.

/s/ DELOITTE & TOUCHE LLP

Denver, Colorado

February 22, 2023

## Ex-99.(J)(Ix)

**Exhibit 99.(j)(ix)**

THE CHARLES SCHWAB FAMILY OF FUNDS

SCHWAB ANNUITY PORTFOLIOS

SCHWAB INVESTMENTS

SCHWAB CAPITAL TRUST

LAUDUS TRUST

SCHWAB STRATEGIC TRUST

POWER OF ATTORNEY

I, the undersigned trustee and/or officer of The Charles Schwab Family of Funds, Schwab Annuity Portfolios, Schwab Investments, Schwab Capital Trust and Laudus Trust, each a Massachusetts business trust, and Schwab Strategic Trust, a Delaware statutory trust (each a "Trust"), do hereby constitute and appoint Catherine M. MacGregor, Alexandra O. Riedel, Robin R. Nesbitt, Douglas P. Dick, Adam T. Teufel, and Stephen T. Cohen, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me and in my name and the capacity listed below, any and all amendments to the Registration Statement on Form N-1A of each Trust, and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully as to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.

WITNESS my hand on the date set forth below.

---

| | |
|:---|:---|
| /s/ Dana S. Smith | Date: January 11, 2023 |

---

Dana S. Smith

Chief Financial Officer and Treasurer

## Ex-99.(J)(Xii)

**Exhibit 99.(j)(xii)**

THE CHARLES SCHWAB FAMILY OF FUNDS

SCHWAB ANNUITY PORTFOLIOS

SCHWAB INVESTMENTS

SCHWAB CAPITAL TRUST

LAUDUS TRUST

SCHWAB STRATEGIC TRUST

POWER OF ATTORNEY

I, the undersigned trustee and/or officer of The Charles Schwab Family of Funds, Schwab Annuity Portfolios, Schwab Investments, Schwab Capital Trust and Laudus Trust, each a Massachusetts business trust, and Schwab Strategic Trust, a Delaware statutory trust (each a "Trust"), do hereby constitute and appoint Catherine M. MacGregor, Alexandra O. Riedel, Robin R. Nesbitt, Douglas P. Dick, Adam T. Teufel, and Stephen T. Cohen, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me and in my name and the capacity listed below, any and all amendments to the Registration Statement on Form N-1A of each Trust, and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully as to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.

WITNESS my hand on the date set forth below.

---

| | |
|:---|:---|
| /s/ Michael J. Beer | Date: September 26, 2022 |

---

Michael J. Beer

Trustee

## Ex-99.(J)(Xiii)

**Exhibit 99.(j)(xiii)**

THE CHARLES SCHWAB FAMILY OF FUNDS

SCHWAB ANNUITY PORTFOLIOS

SCHWAB INVESTMENTS

SCHWAB CAPITAL TRUST

LAUDUS TRUST

SCHWAB STRATEGIC TRUST

POWER OF ATTORNEY

I, the undersigned trustee and/or officer of The Charles Schwab Family of Funds, Schwab Annuity Portfolios, Schwab Investments, Schwab Capital Trust and Laudus Trust, each a Massachusetts business trust, and Schwab Strategic Trust, a Delaware statutory trust (each a "Trust"), do hereby constitute and appoint Catherine M. MacGregor, Alexandra O. Riedel, Robin R. Nesbitt, Douglas P. Dick, Adam T. Teufel, and Stephen T. Cohen, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me and in my name and the capacity listed below, any and all amendments to the Registration Statement on Form N-1A of each Trust, and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully as to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.

WITNESS my hand on the date set forth below.

---

| | |
|:---|:---|
| /s/ Richard A. Wurster | Date: September 19, 2022 |

---

Richard A. Wurster

Trustee

## Ex-99.(P)(Ii)

**Exhibit 99.(p)(ii)**

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**Applicable Entities / Rules**

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| | |
|:---|:---|
| &nbsp;&nbsp;*Applicable Entities:* | &nbsp;&nbsp;Enterprise wide policy, including American Century Investment Management, Inc., Registered Investment Companies, Schedule A, American Century Investment Services, Inc., American Century Services, LLC |
| &nbsp;&nbsp;*Statutory/Regulatory:* | &nbsp;&nbsp;Investment Company Act § 17(j), Rule 17j-1; Investment Advisers Act § 204A, 206, Rule 204A-1 and 204-2(12) |
| &nbsp;&nbsp;*Effective Date(s):* | &nbsp;&nbsp;October 29, 1999, Last Revised August 31, 2022 |
| &nbsp;&nbsp;***Policy or Summary:*** | &nbsp;&nbsp;**Policy** |
| &nbsp;&nbsp;***Related Summary:*** | &nbsp;&nbsp;**Code of Ethics Policies and Procedures** |
| &nbsp;&nbsp;*Related Documents:* | &nbsp;&nbsp;Business Code of Conduct; Insider Trading Policy |

---

**Table of Contents**

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| | | |
|:---|:---|:---|
| Snapshot of the Policy | Snapshot of the Policy | 2 |
| Requirements for All Employees | Requirements for All Employees | 2 |
| Requirements for Access, Investment and Portfolio Persons | Requirements for Access, Investment and Portfolio Persons | 2 |
| Trading Prohibitions for Investment and Portfolio Persons | Trading Prohibitions for Investment and Portfolio Persons | 2 |
| I. | Purpose of Code | 3 |
| II. | Why Do We Have a Code of Ethics? | 3 |
| III. | Does the Code of Ethics Apply to You? | 4 |
| IV. | Restrictions on Personal Investing Activities | 6 |
| V. | Reporting Requirements | 10 |
| VI. | Can there be any exceptions to the restrictions? | 14 |
| VII. | Confidential Information | 15 |
| VIII. | Conflicts of Interest | 15 |
| IX. | What happens if you violate the rules in the Code of Ethics? | 16 |
| X. | ACI's Quarterly Report to Fund Directors/Trustees | 17 |
| APPENDIX 1: DEFINITIONS | APPENDIX 1: DEFINITIONS | 18 |
| APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"? | APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"? | 22 |
| APPENDIX 3: CODE-EXEMPT AND PROHIBITED SECURITIES | APPENDIX 3: CODE-EXEMPT AND PROHIBITED SECURITIES | 25 |
| APPENDIX 4: HOW THE PRECLEARANCE PROCESS WORKS | APPENDIX 4: HOW THE PRECLEARANCE PROCESS WORKS | 27 |
| APPENDIX 5: ACCOUNT REPORTING INSTRUCTIONS | APPENDIX 5: ACCOUNT REPORTING INSTRUCTIONS | 30 |
| SCHEDULE A: BOARD APPROVAL DATES | SCHEDULE A: BOARD APPROVAL DATES | 34 |
| SCHEDULE B: SUBADVISED FUNDS | SCHEDULE B: SUBADVISED FUNDS | 35 |
| SCHEDULE C: BROKERS | SCHEDULE C: BROKERS | 37 |

---

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 1

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**Snapshot of the Policy**

The Code of Ethics is a comprehensive policy which provides the standards for personal investing by American Century Investments (ACI) employees. Each employee has a Code of Ethics classification based on their job responsibilities and the ability to access nonpublic information about ACI client portfolios' security holdings and trading activities. The restrictions on personal investing contained in the Code vary by classification. The Code of Ethics also applies to accounts and securities that ACI employees beneficially own (i.e., owned by immediate family sharing your household, your domestic partner, or accounts for which you have trading authority or power of attorney, etc.).

It is important that you understand the Code and the restrictions on personal investing. These restrictions may include preclearance of trades and reporting of transactions and holdings, including for exchange traded funds (ETFs) and reportable mutual funds. This page contains a summary of the Code requirements. Please review the full text of the Code to fully understand your responsibilities. Contact Compliance if you have questions about the policy and how it applies to your situation. ComplianceAlpha is the primary tool for performing your duties under the Code. All reporting and preclearance activities are performed in ComplianceAlpha.

**Requirements for All Employees** 

*Non-Access Persons, Access Persons, Investment Persons, and Portfolio Persons must* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Place our client's interest first

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Comply with federal securities laws

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Report violations to Compliance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Acknowledge that you have read and understand the Code of Ethics

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Link reportable brokerage accounts and reportable mutual fund accounts in ComplianceAlpha

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Comply with short-term trading restrictions for ACI client portfolios

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Obtain written approval to enter into an arrangement or agreement that could create a conflict of interest with ACI activities (i.e.
serving on the board of directors of a publicly traded company)

**Requirements for Access, Investment and Portfolio Persons** 

*Access Persons, Investment Persons, Portfolio Persons must* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose holdings within 10 days of designation and annually, thereafter

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose personal security transactions on a quarterly basis

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose conflicts of interest annually

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Obtain approval (preclearance) to trade in reportable securities

· Obtain approval to transact in an affiliated, self-indexed ETF if you are a member of the Global Analytics team or the Index Governance
Committee (including non-voting members)

**Trading Prohibitions for Investment and Portfolio Persons** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Investment Persons and Portfolio Persons cannot participate in an Initial Public Offering.

· Investment Persons and Portfolio Persons cannot profit on short-term reportable security trades within 60 calendar days.

· Portfolio Persons cannot trade in a security within seven days before and after transactions of a client portfolio you manage.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 2

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Portfolio Persons cannot sell a security which is held by your assigned client portfolio or buy a security held as a short position
in your assigned funds.

· Portfolio Persons that manage a Semi-Transparent Active Exchange Traded Fund (STA ETF) are required to obtain pre-approval prior to
trading in shares of the STA ETF. They are restricted from selling shares of a STA ETF that they manage within 30 days after purchase.

**I.** **Purpose of Code** 

The Code of Ethics guides the personal investment activities of American Century Investments (ACI) employees (including full and part-time employees, contract and temporary employees, officers and directors), and members of their immediate family.<sup>1</sup> The Code of Ethics aids in the elimination and detection of personal securities transactions by employees that might be viewed as fraudulent or might conflict with the interests of our client portfolios. Such transactions may include, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the misuse of client trading information for personal benefit (including so-called "front-running"),

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the misappropriation of investment opportunities that may be appropriate for client portfolios, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· excessive personal trading that may affect our ability to provide services to our clients.

Violations of this Code must be promptly reported to the Chief Compliance Officer.

<sup>1</sup> The directors or trustees of Fund Clients who are not "interested persons" (the "Independent Directors") are covered under a separate Code applicable only to them.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 3

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**II.** **Why Do We Have a Code of Ethics?** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Investors have placed their trust in ACI** 

As an investment adviser, ACI is entrusted with the assets of our clients for investment purposes. Our employees' personal trading activities and the administration of the Code are governed by these general fiduciary principles:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The interests of our clients must be placed before our own.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Any personal securities transactions must be conducted consistent with this Code and in a manner as to avoid even the appearance of
a conflict of interest.

Complying with these principles is how we earn and keep our clients' trust. To protect this trust, we will hold ourselves to the highest ethical standards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **ACI wants to give you flexible investing options** 

Management believes that ACI's own mutual funds, ETFs and other pooled investment vehicles provide a broad range of investment alternatives in virtually every segment of the securities market. We encourage ACI employees to use these vehicles for their personal investments. We do not encourage active trading by our employees. We recognize, however, that individual needs differ and that there are other attractive investment opportunities. As a result, this Code is intended to give you and your family flexibility to invest, without jeopardizing relationships with our clients.

Our employees are able to undertake personal transactions in stocks and other individual securities subject to the terms of this Code. All employees are required to report their personal transactions in securities owned by them and in beneficially owned securities under this Code. Additionally, Portfolio, Investment and Access Persons are required to receive preclearance of transactions and further limitations are placed on the transactions of Portfolio and Investment Persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Federal law requires that we have a Code of Ethics** 

The Investment Company Act of 1940 and the Investment Advisers Act of 1940 require that we have safeguards in place to prevent personal investment activities that might take inappropriate advantage of our fiduciary position. These safeguards are embodied in this Code of Ethics.<sup>2</sup>

<sup>2</sup> Rule 17j-1 under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940 serve as a basis for much of what is contained in this Code of Ethics.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 4

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**III.**  **Does the Code of Ethics Apply to You?** 

*Yes!* All ACI employees and contract personnel must observe the principles contained in this Code of Ethics. This Code applies to your personal investments, as well as those for which you are a beneficial owner. However, there are different requirements for different categories of employees. The category in which you have been placed generally depends on your job function, although circumstances may prompt us to place you in a different category. The range of categories is as follows:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;*Fewest <br> Restrictions* | ![](tm225671d1_expiiimg0003.jpg) | *Most <br> Restrictions* |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Non-Access Person** | &nbsp;&nbsp;**Access Person** | &nbsp;&nbsp;**Investment Person** | &nbsp;&nbsp;**Portfolio Person** |

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The standard profile for each of the categories is described below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Portfolio Persons** 

Portfolio Persons include portfolio managers and equity investment analysts and any other Investment Persons (as defined below) with authority to enter purchase/sale orders on behalf of client portfolios.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Investment Persons** 

Investment Persons include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any persons that are involved in or have access to client portfolio securities trading, securities recommendations, or portfolio holdings
or are involved in making securities recommendations that are nonpublic, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any officers and directors of an investment adviser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Access Persons** 

Access Persons are persons who, in connection with their regular function and duties, consistently obtain information regarding current purchase and sale recommendations and daily transaction and holdings information concerning client portfolios. Examples of persons that may be considered Access Persons include

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• persons who are directly involved in the execution, clearance, and settlement of purchases and sales of securities (e.g. certain investment
operations personnel),

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• persons whose function requires them to evaluate trading activity on a real-time basis (e.g. attorneys, accountants, portfolio compliance
personnel),

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 5

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• persons who assist in the design, implementation, and maintenance of investment management technology systems (e.g. certain I/T personnel,
including contractors),

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• support staff and supervisors of the above if they are required to obtain such information as a part of their regular function and
duties,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• officers or "interested" director of our Fund Clients, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• members of the Index Governance Committee for affiliated ETFs (including non-voting members).

Single, infrequent, or inadvertent instances of access to current recommendations or real-time trading information or the opportunity to obtain such information through casual observance or bundled data security access may not be sufficient to qualify you as an Access Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Non-Access Persons** 

If you are an ACI officer, director, or employee and you do not fit into any of the above categories, you are a Non-Access Person. Contractors and temporary employees may be considered Non-Access Persons depending on their role. While your trading is not subject to preclearance and other restrictions applicable to Portfolio, Investment, and Access Persons, you are still subject to the remaining provisions of the Code.

**IV.** **Restrictions on Personal Investing Activities** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Principles of Personal Investing** 

All ACI employees, officers, and directors, and members of their immediate family, must comply with the federal securities laws and other governmental rules and regulations, and maintain ACI's high ethical standards when making personal securities transactions. You must not misuse nonpublic information about client security holdings or contemplated, pending, or completed portfolio transactions for your personal benefit or the benefit of others. Likewise, you may not cause a client portfolio to take action, or fail to take action, for your personal benefit.

In addition, investment opportunities appropriate for client portfolios should not be retained for the personal benefit of yourself or others. Investment opportunities arising as a result of ACI investment management activities must first be considered for inclusion in our client portfolios.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Trading on Inside Information** 

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 6

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Federal law prohibits you from trading based on material nonpublic information received from any source or communicating this information to others. This could include confidential information received by employees regarding securities that are, or maybe considered as potential portfolio investments. You are expected to abide by the highest ethical and legal standards in conducting your personal investment activities. For more information regarding what to do when you believe you are in possession of material nonpublic information, please consult ACI's **Insider Trading Policy**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Trading in ACI Open-End Mutual Funds** 

Excessive, short-term trading of ACI open-end mutual funds and other abusive trading practices (such as time zone arbitrage) may disrupt portfolio management strategies and harm fund performance. These practices can cause funds to maintain higher-than-normal cash balances and incur increased trading costs. Short-term and other abusive trading strategies can also cause unjust dilution of shareholder value if such trading is based on information not accurately reflected in the price of the fund.

You may not engage in short-term trading or other abusive trading strategies with respect to any ACI open-end mutual fund client portfolio. For purposes of this Code, "ACI open-end mutual fund client portfolios" include any open-end mutual fund or variable annuity, advised or subadvised by ACI.<sup>3</sup>

*Seven-Day Holding Period*. You will be deemed to have engaged in short-term trading if you have purchased shares or otherwise invested in a variable-priced (non-money market) ACI open-end mutual fund client portfolio and redeem shares or otherwise withdraw assets from that portfolio within seven days. In other words, if you make an investment in an ACI open-end mutual fund client portfolio, you may not redeem shares from that fund before the completion of the seventh day following the purchase date.

*Limited Trading Within 30 Days*. We realize that abusive trading is not limited to a seven-day window. As a result, we may deem the sale of all or a substantial portion of an employee's purchase in an ACI open-end mutual fund client portfolio to be abusive if the sale is made within 30 days, and it happens more than once every rolling twelve months.

These trading restrictions are applicable to any account for which you have the authority to direct trades or of which you are a beneficial owner, including brokerage accounts, ACI Personal Financial Solutions (PFS) accounts, retirement plans, subadvised accounts, or accounts held through an intermediary.

*Transactions NOT Subject to Limitations*. Automatic investments such as AMIs, dividend reinvestments, employer plan contributions, and payroll deductions are not considered

<sup>3</sup> See <u>Schedule A</u> for a list of Fund Clients. See <u>Schedule B</u> for a list of <u>subadvised funds</u>.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 7

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transactions for purposes of the holding requirements. Redemptions in variable-priced funds that allow check writing privileges or trusts used as cash instruments in the retirement plan will not be considered redemptions for purposes of the holding requirements.

*Information to be Provided*. You may be required to provide certain information regarding mutual fund accounts beneficially owned by you and transactions in reportable mutual funds. See the Reporting Requirements for your applicable Code of Ethics classification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Preclearance of Personal Securities Transactions<br> [Portfolio, Investment, and Access Persons]** 

Preclearance of personal securities transactions allows ACI to prevent certain trades that may conflict with client trading activities. The nature of securities markets makes it impossible to predict all conflicts. As a consequence, even trades that are precleared can result in potential conflicts between your trades and those affected for client portfolios. You are responsible for avoiding such conflicts with any client portfolios for which you make investment recommendations. You have an obligation to ACI and its clients to avoid even a perception of a conflict of interest with respect to personal trading activities.

All Portfolio, Investment, and Access Persons must comply with the following preclearance procedures prior to entering into (i) the purchase or sale of a security for your own account or (ii) the purchase or sale of a security for an account for which you are a beneficial owner.<sup>4</sup>

All preclearance request should be submitted in ComplianceAlpha. Refer to "Appendix 4: How the preclearance process works." for more information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Is the security a "Code-Exempt Security" or a "Prohibited Security" listed in Appendix 3?

If the security is listed on the Code-Exempt Security list, you may execute the transaction without preclearance.

If the security is listed on the Prohibited Security list, you may not execute the transaction.

If the security is not on either list, then you must obtain preclearance (Proceed to Step 2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Submit a Preclearance Request in ComplianceAlpha. You will be required to provide the following **:** 

<sup>4</sup> See <u>Appendix 2</u> for an explanation of beneficial ownership.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 8

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Security identifier (Ticker symbol, CUSIP, etc.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Broker and account number used for the transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transaction type

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Quantity (number of shares or par value)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Price

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dollar value

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The request will be reviewed through our preclearance process. You will receive an e-mail informing you of your approval or denial.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. If you receive preclearance for the transaction, <sup>5
</sup> you may execute the approved transaction the day your preclearance is granted and the following business day (the "Preclearance
Period"). For example, if preclearance is granted at 3:00 p.m. on Wednesday, you have until the close of the market on Thursday
to execute the trade. If you do not execute the approved transaction within the Preclearance Period, you must repeat the preclearance
procedure prior to executing the transaction.

ACI reserves the right to restrict the purchase or sale by Portfolio, Investment, and Access Persons of any security at any time. Such restrictions are imposed through the use of a Restricted List that will cause ComplianceAlpha to deny the approval of preclearance to transact in the security. Securities may be restricted for a variety of reasons including without limitation the possession of material nonpublic information by ACI or its employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Additional Trading Restrictions<br> [Portfolio and Investment Persons]** 

Participation in the investment management of a client portfolio or participation on a Committee that reviews certain types of information potentially increases the risk of a conflict of interest between an employee's personal trading and the use of client information. The following additional trading restrictions mitigate this risk. Preclearance should be submitted in ComplianceAlpha following the instructions in Appendix 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Initial Public Offerings.</u> You may not acquire securities issued in an initial public offering.

<sup>5</sup> See Appendix 4 for a description of the preclearance process.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 9

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Private Placements.</u> Before you acquire any securities in a private placement, you must obtain approval from the Chief Investment
Officer. Request preclearance by entering your request in ComplianceAlpha. While your preclearance request is pending or if you own or
beneficially own the privately-placed security, you may not participate in any consideration of an investment in securities of the private
placement issuer for any client portfolios.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>60-Day Rule (Short-Term Trading Profits).</u> You may not profit from any purchase and sale, or sale and purchase, of the same
(or equivalent) securities other than code-exempt securities within sixty (60) calendar days.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.** **Seven-Day Blackout Period<br> [Portfolio Persons]** 

If you are a Portfolio Person, you may not purchase or sell a security other than a code exempt security during the seven (7) calendar days before and after the day it has been traded in a client portfolio that you manage (i.e., if a client portfolio transacts in a security on Monday, the Portfolio Persons managing the client portfolio must not personally trade in the security from the Monday before until the Monday after the client portfolio transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.** **Securities Held in Your Funds** 

**[Portfolio Persons]**

Personally investing in the same securities held by the client portfolios you manage may result in a conflict of interest. To mitigate this risk, you may not sell a security in which your client portfolio has a long position or purchase a security in which your client portfolio has a short position without an exemption from this Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.** **Trading in Semi-Transparent Active ETFs (STA ETF) that You Manage** 

**[Portfolio Persons]**

Trading shares of an ACI STA ETF while in possession of information regarding STA ETF security transactions not fully disseminated in the market is prohibited. As a result, you are required to obtain preclearance to transact in the STA ETFs for which you have portfolio manager or trade order authority assigned through the order-trade system. You will only be allowed to execute the trade on the day following your approved preclearance. In addition, you are limited from selling shares of the STA ETF for 30 calendar days after your last purchase.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** **Trading in Affiliated Self-Indexed ETFs** 

**[Certain Members of the Global Analytics Team and the IndexGovernance Committee]**

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Trading shares of an ACI Self-Indexed ETF while in possession of nonpublic information about the index is prohibited. If you are member of the Global Analytics Team responsible for creating indexes or the Index Governance Committee (including non-voting members), you are required to preclear your transactions in an affiliated Self-Indexed ETF. You will only be allowed to execute the trade on the sixth business day after your preclearance request.

**V.** **Reporting Requirements** 

You are required to file complete, accurate, and timely reports of all required information under this Code. All reported information is subject to review for indications of abusive trading, misappropriation of information, or failure to adhere to the requirements of this Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Reporting Requirements Applicable to All Employees** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Code Acknowledgement

Upon employment, any amendment of the Code, and not less than annually thereafter, you will be required to acknowledge that you have received, read, and will comply with this Code. Compliance will notify you when you must provide this information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Brokerage Accounts and Duplicate Confirmations

You are required to report <u>ALL</u> reportable brokerage accounts in ComplianceAlpha. Reportable brokerage accounts include both brokerage accounts maintained by you and brokerage accounts maintained by a person whose trades you must report because you are a beneficial owner. (Refer to Appendix 5 Account Reporting Instructions). Compliance will use your account information to obtain trade confirmations for the activity in your account.

To aid with required recordkeeping requirements and streamline operations, employees may be required to hold all reportable brokerage accounts at a firm that provides electronic trade confirmations to ComplianceAlpha. Through reporting your account information, you are consenting to receipt by Compliance of electronic trade confirmations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Reporting of American Century Managed Mutual Fund Accounts

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)** **Employee-owned ACI Personal Financial Solutions (PFS) and ACI Retirement Plans** 

You are not required to report ACI PFS and ACI Retirement Plan accounts held under your own Social Security number. Trading in these accounts will

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be monitored based on information contained on our transfer agency and retirement plan systems.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)** **Beneficially-Owned ACI PFS Accounts** (**Portfolio and Investment Persons Only)** 

You must report all ACI PFS open-end mutual fund accounts that are owned by your immediate family members and other accounts you beneficially-own.

Compliance will obtain trading activity in these accounts which will be monitored for short-term and abusive trading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)** **Certain third-party accounts invested in funds managed by ACI** 

You are required to report other accounts invested in funds managed by ACI such as those invested in (i) any subadvised fund (see Schedule B of this Code for a list of subadvised funds); and (ii) non-ACI retirement plan, unit investment trust, variable annuity, or similar accounts in which you own or beneficially own reportable mutual funds.

In addition, you must provide either account statements or confirmations of all trading activity in reportable third-party accounts to Compliance within 30 calendar days of the end of each calendar quarter.

Refer to Appendix 5: Account Reporting Instructions for the process to report your accounts in the ComplianceAlpha.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Additional Reporting Requirements [Portfolio, Investment, and Access Persons]** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Holdings Report

Within ten (10) calendar days of becoming a Portfolio, Investment, or Access Person, and annually, thereafter, you must submit a Holdings Report. You will be sent an email from ComplianceAlpha with a link to the compliance system where you will complete your report. The information submitted must be current as of a date no more than 45 calendar days before the report is filed and include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A list of all securities, other than certain code-exempt securities <sup>6</sup> ,
that you own or in which you have a beneficial ownership interest. This listing must include the financial institution, account number,
security identifier and

<sup>6</sup> See Appendix 3 for a listing of code-exempt securities that must be reported.

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description, number of shares, currency, and principal amount of each covered security. If you are using an Approved Electronic Broker (AEB) through the Direct or Aggregation Feed on ComplianceAlpha, your holdings will be imported into ComplianceAlpha for you. For securities held in accounts listed as Manual in ComplianceAlpha, you will be required to import or manually add your holdings prior to the reporting deadline.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Portfolio and Investment Persons must also provide a list of all reportable mutual fund holdings owned or in which they have a beneficial
ownership interest. This list must include investments held through ACI PFS in accounts that are beneficially-owned, investments in any
subadvised fund, holdings in a reportable brokerage account, and holdings in
non-ACI retirement plans, unit investment trusts, variable annuity, or similar accounts. ACI PFS reportable mutual fund holdings held
under an employee's tax payer identification number are not required to be listed in ComplianceAlpha. Compliance will obtain the
information from ACI PFS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A summary of your relationships that may conflict with the interests of ACI, such as outside employment, relationships with competitors,
suppliers, vendors, independent contractors or consultants of ACI, or relationships with directors or trustees in outside organizations
other than community charitable activities, education activities, or dissimilar family business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Quarterly Transactions Report

Within 30 calendar days of the end of each calendar quarter, all Portfolio, Investment, and Access Persons must submit a Quarterly Transactions Report. Compliance will notify you of the dates and requirements for filing the report. A report of the transactions for which we have received your trade confirmations during the quarter will be provided for your review in ComplianceAlpha. It is your responsibility to review the completeness and accuracy of this report, provide any necessary changes, and certify its contents when submitted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) The Quarterly Transactions Report must contain the following information about each personal securities transaction undertaken during
the quarter other than those in certain code exempt securities:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The financial institution's name and account number in which the transaction was executed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The date of the transaction, the security identifier and description and number of shares or the principal amount of each security
involved;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The nature of the transaction, that is, purchase, sale, or any other type of acquisition or disposition; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The transaction price, currency, and amount.

In addition, information regarding accuracy and completeness of your reportable brokerage and other accounts should be verified at this time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Portfolio and Investment Persons are also required to report transactions in reportable mutual funds held through a brokerage account.
The Quarterly Transactions Report for such persons must contain the following information about each transaction during the quarter:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The date of the transaction, the fund identifier and description and number of shares or units of each trade involved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The nature of the transaction, that is, purchase, sale, or any other type of acquisition or disposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The transaction price, and amount; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The financial institution's name and account number in which the trade was executed.

Transactions of reportable mutual funds that do not need to be reported by Portfolio and Investment Persons on the Quarterly Transaction Report include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reinvested dividends;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transactions in ACI open-end mutual funds through the ACI retirement plan accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transactions in ACI open-end mutual funds held through ACI PFS accounts under your Social Security number;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transactions in ACI open-end mutual funds in beneficially-owned ACI PFS accounts if the account has been linked to ComplianceAlpha
through the Aggregation Feed; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transactions in reportable third-party accounts for which the account statements or confirmations are provided to Compliance within
30 days of the end of the calendar quarter in which the transactions took place.

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**VI.** **Can there be any exceptions to the restrictions?** 

*Yes.* The Chief Compliance Officer or their designee may grant limited exemptions to specific provisions of the Code on a case-by-case basis. Exemptions are requested in ComplianceAlpha (see Appendix 6: Requesting an Exemption).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Factors Considered** 

In considering your request, the Chief Compliance Officer or their designee may grant your exemption request if they are satisfied of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your request addresses an undue personal hardship imposed on you by the Code of Ethics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your
 situation is not in conflict with the Code; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your
 exemption, if granted, would be consistent with the achievement of the objectives of the
 Code of Ethics.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Exemption Reporting** 

All exemptions must be reported to the Boards of Directors/Trustees of our Fund Clients at the next regular meeting following the initial grant of the exemption. Subsequent grants of an exemption of a type previously reported to the Boards may be affected without reporting. The Boards of Directors/Trustees may choose to delegate the task of receiving and reviewing reports to a committee comprised of Independent Directors/Trustees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Thirty-Day Denial Exemption on Sales** 

An exemption may be requested when a request to sell a security has been denied once a week over a 30-day timeframe. The covered person must be able to verify that they have periodically entered a preclearance request to sell a security in ComplianceAlpha at least four times throughout a period of time that is at least 30 days. The Chief Compliance Officer or their designee will review the request and determine if the exemption is warranted. If approval is granted, compliance will designate a short trading window during which the sale can take place.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Non-volitional Transaction Exemption** 

Certain non-volitional purchase and sale transactions are exempt from the preclearance requirements of the Code. These transactions include stock splits, stock dividends, exchanges and conversions, mandatory tenders, pro rata distributions to all holders of a class of securities, receipt of securities as gifts, the giving of securities, inheritances, margin/ maintenance calls (where the securities to be sold are not directed by the covered person), dividend reinvestment plans, and employer sponsored payroll deduction plans.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Blind Trust/Managed Account Exemption** 

An exemption from the preclearance and reporting requirements of the Code may be requested for securities that are held in a blind or quasi-blind trust arrangement or a managed (discretionary) account. For the exemption to be available, you or a member of your immediate family must not have authority to advise or direct securities transactions of the trust or managed account. You must provide a copy of the trust document or management agreement when requesting the exemption. The request will only be granted once the covered person and/or the investment adviser for the trust or managed account certify that the covered person or members of their immediate family will not advise or direct transactions. ACI may require that statements or trade confirmations be received for the trust or managed account. The employee and/or adviser may be requested by Compliance to re-certify the trust arrangement.

**VII.** **Confidential Information** 

All information about clients' securities transactions and portfolio holdings is confidential. You must not disclose, except as required by the duties of your employment, actual or contemplated securities transactions, portfolio holdings, portfolio characteristics or other nonpublic information about Clients, or the contents of any written or oral communication, study, report or opinion concerning any security. Employees should consult the Portfolio Holdings and Characteristics Disclosure and the Confidential Information Asset Security policies before disseminating information to individuals that otherwise do not have access to the information. Employees should not disseminate information about clients' securities transactions and portfolio holdings to employees or contract personnel that are Non-Access Persons or elicit material nonpublic information from any independent directors/trustee of a managed fund who also serves as a director trustee, officer, consultant, or employee of, or has similar affiliation with, another business entity that issues publicly traded securities. This does not apply to information which has already been publicly disclosed.

**VIII.** **Conflicts of Interest** 

You must receive prior written approval from ACI's General Counsel or their designee, as appropriate, to do any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Negotiate
 or enter into any agreement on a client's behalf with any business concern doing or
 seeking to do business with the client if you, or a person related to you, has a substantial
 interest in the business concern;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Enter
 into an agreement, negotiate or otherwise do business on the client's behalf with a
 personal friend or a person related to you; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Serve
 on the board of directors of, or act as consultant to, any publicly traded corporation. Please
 note that ACI's Business Code of Conduct also contains limitations on outside employment
 and directorships.

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**IX.** **What happens if you violate the rules in the Code of Ethics?** 

If you violate the requirements of the Code of Ethics, you may be subject to serious penalties. Violations of the Code and proposed sanctions are documented by Compliance and submitted to the Code of Ethics Review Committee. The Committee consists of representatives of the investment adviser and the Compliance and Legal departments of ACI. The Committee is responsible for determining the materiality of Code violations and appropriate sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Materiality of Violation** 

In determining the materiality of a violation, the Committee considers:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evidence
 of violation of law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Indicia
 of fraud, neglect, or indifference to Code provisions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Frequency
 of violations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Monetary
 value of the violation in question; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level
 of influence of the violator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Penalty Factors** 

In assessing the appropriate penalties, the Committee will consider the foregoing in addition to any other factors they deem applicable, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Extent
 of harm to client interests;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Extent
 of unjust enrichment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Tenure
 and prior record of the violator;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The
 degree to which there is a personal benefit from unique knowledge obtained through employment
 with ACI;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The
 level of accurate, honest and timely cooperation from the covered person; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any
 mitigating circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **The penalties which may be imposed include, but are not limited to:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Non-material
 violation

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Warning
 (notice sent to manager) and/or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Attendance
 at a Code of Ethics training session and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Suspension
 of trading privileges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Penalties
 for material or more frequent non-material violations will be based on the circumstances
 of the violation. These penalties could include, but are not limited to

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Suspension
 of trading privileges and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Suspension
 or termination of employment.

In addition, you may be required to surrender to ACI any profit realized from any transaction(s) in violation of this Code of Ethics.

X. ACI's Quarterly Report to Fund Directors/Trustees

ACI will prepare a quarterly report to the Board of Directors/Trustees of each Fund Client of any material violation of this Code of Ethics.

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**APPENDIX 1: DEFINITIONS**

---

| | |
|:---|:---|
| **1.** | **"Automatic Investment Plan"** |
|  | "Automatic investment plan" means a program in which regular periodic purchases, exchanges or redemptions are made automatically in or from investment accounts in accordance with a predetermined schedule and allocation including dividend reinvestment plans. |
| **2.** | **"Beneficial Ownership" or "Beneficially Owned"** |
|  | See "Appendix 2: What is Beneficial Ownership?" |
| **3.** | **"Code-Exempt Security"** |
|  | A "code-exempt security" is a security in which you may invest without preclearing the transaction with ACI. The list of code-exempt securities appears in Appendix 3. Code-exempt securities may require reporting of transactions and holdings. |
| **4.** | **"Federal Securities Law"** |
|  | "Federal securities law" means the Securities Act of 1933, the Securities Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted by the Commission or the Department of Treasury. |
| **5.** | **"Fund Clients"** |
|  | Fund clients includes each Fund Client listed on Schedule A. |
| **6.** | **"Initial Public Offering"** |
|  | "Initial public offering" means an offering of securities for which a registration statement has not previously been filed with the SEC and for which there is no active public market. |
| **7.** | **"Investment Adviser"** |
|  | "Investment adviser" includes each investment adviser listed on Schedule A |
| **8.** | **"Member of Your Immediate Family"** |
|  | A "member of your immediate family" means any of the following: |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your
 spouse or domestic partner;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your
 minor children; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A
 relative who shares your home.

---

| | |
|:---|:---|
|  | For the purpose of determining whether any of the foregoing relationships exist, a legally adopted child of a person is considered a child of such person. |
| **9.** | **"Private Placement"** |
|  | "Private placement" means an offering of securities in which the issuer relies on an exemption from the registration provisions of the Federal Securities Laws, and usually involves a limited number of sophisticated investors and a restriction on resale of the securities. |

---

---

| | |
|:---|:---|
| **10.** | **"Prohibited Security"** |
|  | "Prohibited Security" is a security for which trading has been prohibited for Portfolio, Investment and Access Persons. |

---

---

| | |
|:---|:---|
| **11.** | **"Reportable Brokerage Accounts"** |
|  | A "reportable brokerage account" includes any account in which securities are held for the direct or indirect benefit of any person subject to this Code of Ethics. |
| **12.** | **"Reportable Mutual Fund"** |
|  | A "reportable mutual fund" includes any mutual fund issued by a Fund Client (as listed on Schedule A) and any subadvised funds (as listed on Schedule B). |
| **13.** | **"Security"** |
|  | A "security" includes a large number of investment vehicles. However, for purposes of this Code of Ethics, "security" (or "securities") includes but is not limited to any of the following: |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Note;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Stock,
 (including stock acquired in private placements and restricted stock in nonpublic companies
 received through an employee stock ownership program);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Treasury
 stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bond;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Debenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Derivative;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exchange
 traded fund (ETFs) or similar vehicles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Unit
 Investment Trusts (UIT);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Shares
 of open-end mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Shares
 of closed-end mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evidence
 of indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Certificate
 of interest or participation in any profit-sharing agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Collateral-trust
 certificate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Preorganization
 certificate or subscription;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transferable
 share;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investment
 contract;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Voting-trust
 certificate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Certificate
 of deposit for a security;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Interests
 in private investment companies, hedge funds, or other unregistered collective investment
 vehicles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fractional
 undivided interest in oil, gas or other mineral rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any
 put, call, straddle, option, future, or privilege on any security or other financial instrument
 (including a certificate of deposit) or on any group or index of securities (including any
 interest therein or based on the value thereof), including stock options received from an
 employer or through a retirement plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any
 put, call, straddle, option, future, or privilege entered into on a national securities exchange
 relating to foreign currency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In
 general, any interest or instrument commonly known as a "security;" or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any
 certificate of interest or participation in, temporary or interim certificate for, receipt
 for, guarantee of, future on or warrant or right to subscribe to or purchase, any of the
 foregoing.

**14.** **"Subadvised Fund"** 

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A "subadvised fund" means any mutual fund or portfolio listed on Schedule B.

---

| | |
|:---|:---|
| **15.** | **"Supervised Person"** |
|  | A "supervised person" means any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of an investment adviser and is subject to the supervision and control of the investment adviser. |

---

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 22

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**APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"?**

A "beneficial owner" of a security is any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares in the opportunity, directly or indirectly, to profit or share in any profit derived from a purchase or sale of the security.

**1.** **Are securities held by immediate family members or domestic partners "beneficially owned" by me?** 

*Yes.* As a general rule, you are regarded as the beneficial owner of securities held in the name of

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A
 member of your immediate family OR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any
 other person IF you obtain from such securities benefits substantially similar to those of
 ownership. For example, if you receive or benefit from some of the income from the securities
 held by your spouse, or domestic partner, you are the beneficial owner; OR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You
 hold an option or other contractual rights to obtain title to the securities now or in the
 future.

**2.** **Must I report accounts for which I am listed as a joint owner or have power of attorney?** 

*Yes.* As a general rule, you are regarded as an owner of any accounts for which you are listed as a joint owner or have power of attorney.

**3.** **Am I deemed to beneficially own securities in accounts owned by a relative not living in my household for whom I am listed as beneficiary upon death?** 

 

*Probably not.* Unless you have power of attorney to transact in such accounts or are listed as a joint owner, you likely do not beneficially own the account or securities contained in the account until ownership has been passed to you.

**4.** **Are securities held by a company I own an interest in also "beneficially owned" by me?** 

 

*Probably not.* Owning the securities of a company does not mean you "beneficially own" the securities that the company itself owns. *However,* you will be deemed to "beneficially own" the securities owned by the company if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You
 directly or beneficially own a controlling interest in or otherwise control the company;
 OR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The
 company is merely a medium through which you, members of your immediate family, or others
 in a small group invest or trade in securities and the company has no other substantial business.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 23

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**5.** **Are securities held in trust "beneficially owned" by me?** 

 

*Maybe.* You are deemed to "beneficially own" securities held in trust if you or a member of your immediate family are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A
 trustee; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Have
 a vested interest in the income or corpus of the trust; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A
 settlor or grantor of the trust and have the power to revoke the trust without obtaining
 the consent of all the beneficiaries.

A blind trust exemption from the preclearance and reporting requirements of the Code may be requested if you or members or your immediate family do not have authority to advise or direct securities transactions of the trust.

**6.** **Are securities in pension or retirement plans "beneficially owned" by me?** 

*Maybe.* Beneficial ownership does not include indirect interest by any person in portfolio securities held by a pension or retirement plan of a company whose employees generally are the beneficiaries of the plan.

However, your participation in a pension or retirement plan is considered beneficial ownership of the portfolio securities if you can withdraw and trade the securities without withdrawing from the plan or you can direct the trading of the securities within the plan (IRAs, 401(k)s, etc.).

**7.** **Examples of Beneficial Ownership** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Securities
 Held by Family Members or Domestic Partners

*Example 1:* Tom and Mary are married. Although Mary has an independent source of income from a family inheritance and segregates her funds from those of her husband, Mary contributes to the maintenance of the family home. Tom and Mary have engaged in joint estate planning and have the same financial adviser. Since Tom and Mary's resources are clearly significantly directed towards their common property, they shall be deemed to be the beneficial owners of each other's securities.

*Example 2:* Mike's adult son David lives in Mike's home. David is self-supporting and contributes to household expenses. Mike is a beneficial owner of David's securities.

*Example 3:* Joe's mother Margaret lives alone and is financially independent. Joe has power of attorney over his mother's estate, pays all her bills and manages her investment affairs. Joe borrows freely from Margaret without being required to pay back funds with interest, if at all. Joe takes out personal loans from Margaret's bank in Margaret's name, the interest from such loans being paid from Margaret's account. Joe is a beneficial owner of Margaret's estate.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 24

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*Example 4:* Bob and Nancy are in a relationship. The house they share is still in Nancy's name only. They have separate checking accounts with an informal understanding that both individuals contribute to the mortgage payments and other common expenses. Nancy is the beneficial owner of Bob's securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Securities
 Held by a Company

*Example 5:* ABC Company is a holding company with five shareholders owning equal shares in the company. Although ABC Company has no business of its own, it has several wholly-owned subsidiaries that invest in securities. Stan is a shareholder of ABC Company. Stan has a beneficial interest in the securities owned by ABC Company's subsidiaries.

*Example 6:* XYZ Company is a large manufacturing company with many shareholders. Stan is a shareholder of XYZ Company. As a part of its cash management function, XYZ Company invests in securities. Neither Stan nor any members of his immediate family are employed by XYZ Company. Stan does not beneficially own the securities held by XYZ Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Securities
 Held in Trust

*Example 7:* John is trustee of a trust created for his two minor children. When both of John's children reach 21, each shall receive an equal share of the corpus of the trust. John is a beneficial owner of any securities owned by the trust.

*Example 8:* Jane placed securities held by her in a trust for the benefit of her church. Jane can revoke the trust during her lifetime. Jane is a beneficial owner of any securities owned by the trust.

*Example 9:* Jim is trustee of an irrevocable trust for his 21-year-old daughter (who does not share his home). The daughter is entitled to the income of the trust until she is 25 years old and is then entitled to the corpus. If the daughter dies before reaching 25, Jim is entitled to the corpus. Jim is a beneficial owner of any securities owned by the trust.

*Example 10:* Joan's father (who does not share her home) placed securities in an irrevocable trust for Joan's minor children. Neither Joan nor any member of her immediate family is the trustee of the trust. Joan is a beneficial owner of the securities owned by the trust. She may, however, be eligible for the blind trust exemption to the preclearance and reporting of the trust securities.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 25

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**APPENDIX 3: CODE-EXEMPT AND PROHIBITED SECURITIES**

Because they do not pose a likelihood for abuse, code-exempt securities are exempt from the Code's preclearance requirements. However, confirmations of transactions in reportable brokerage accounts are required in all cases and some code-exempt securities must also be disclosed on your Quarterly Transactions, Initial, and Annual Holdings Reports. Certain securities have been prohibited. Portfolio, Investment and Access Persons are not allowed to trade in a Prohibited Security.

**1.** **Code-Exempt Securities Not Subject to Disclosure on your Quarterly Transactions, Initial and Annual Holdings Reports:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Open-end
 mutual funds that are not considered a reportable mutual fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reportable
 mutual funds (Access Persons only);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reportable
 mutual fund shares purchased through an automatic investment plan (including reinvested dividends);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Money
 market mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bank
 Certificates of Deposit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S.
 government Treasury and Government National Mortgage Association securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Commercial
 paper;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bankers
 acceptances;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• High
 quality short-term debt instruments, including repurchase agreements. A "high quality
 short-term debt instrument" means any instrument that has a maturity at issuance of
 less than 366 days and that is rated in one of the two highest rating categories by a nationally
 recognized rating organization.

**2.** **Code-Exempt Securities Subject to Disclosure on your Quarterly Transactions, Initial and Annual Holdings Reports:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reportable
 mutual fund shares purchased other than through an automatic investment plan (Portfolio and
 Investment Persons only)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exchange
 Traded Products\*, Closed-End Funds and Unit Investment Trusts

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Securities
 which are acquired through an employer-sponsored automatic payroll deduction plan (only the
 acquisition of the security is exempt, NOT the sale)

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 26

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Securities
 other than open-end mutual funds purchased through dividend reinvestment programs (only the
 re-investment of dividends in the security is exempt, NOT the sale or other purchases)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Futures
 contracts on the following:

Large Cap Indices including, but not limited to Standard & Poor's 500 or 100 Index, NASDAQ 100 Index, DOW 30 Industrials, FTSE All World Index, MSCI Indices (ACWI, EAFE, World), Russell 2000 and 3000, Wilshire 5000 . Futures contracts on non-Large Cap Indices and for other financial instruments are not code-exempt. Please contact Compliance to confirm that an index not listed is exempt from preclearance.

Commodity futures contracts for agricultural products (corn, soybeans, wheat, etc.) only. Futures contracts on precious metals or energy resources are ***not*** Code-exempt.

\*ACI STA ETF transactions require preclearance by the Portfolio Persons who have been granted portfolio manager or trade order access in the order-trade system (See Restrictions on Personal Investing Section H). [Portfolio Persons only]

**3.** **Prohibited Securities (Portfolio, Investment, Access Persons)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Options Contract (Calls, Covered Calls, Puts, Naked Calls or Puts)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Single Stock ETFs

We may modify this list of securities at any time. Please contact Compliance to request the most current list.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 27

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**APPENDIX 4: HOW THE PRECLEARANCE PROCESS WORKS**

Preclearance Requests are submitted in ComplianceAlpha (<u>https://www.compliancealpha.com/auth/login</u>). To submit a request:

&nbsp;&nbsp;&nbsp;&nbsp;1. From
 the ComplianceAlpha Dashboard, click on the "Submit Trade Request" link under
 Quick Links.

&nbsp;&nbsp;&nbsp;&nbsp;2. Click
 "Trade", the select the appropriate template:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Preclearance
 Request

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Municipal
 Bond Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Corporate
 Bond Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Convertible
 Corporate Bond Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Private
 Placement Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. ACI
 STA ETF (Portfolio Persons assigned to an ACI STA ETF only)

g. Self-Indexed ETF (members of the Index Governance Committee and certain members of Global Analytics Team who are responsible for creating
indexes only)

&nbsp;&nbsp;&nbsp;&nbsp;3. Once
 the preclearance process is complete, you will receive an email indicating if the request
 is approved or denied.

After you've entered a Preclearance Request on ComplianceAlpha, your equity transaction is subject to the following tests.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Step** | **1:** | **Restricted Security List** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Is
 the security on any Restricted Security list?

*If "YES",* the system will send a message to you DENYING the personal trade request.

*If "NO",* then your request is subject to Step 2.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Step** | **2:** | ***De Minimis* Transaction Test (per security per day)** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Is
 the security issuer's market capitalization less than $1 billion and the value of the
 employee's requests in the security equal to or less than $5,000 per day?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Is
 the security issuer's market capitalization between $1billion and $7.5 billion and
 the value of the employee's requests in the security equal to or less than $10,000
 per day?

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Is
 the security issuer's market capitalization greater than $7.5 billion and the value
 of the employee's requests in the security equal to or less than $25,000 per day?

*If the answer to any of these questions is "NO",* then your request is subject to Step 3.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 28

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---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Step** | **3:** | **Client Trades Test** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Have
 there been any transactions in the past 24 hours or is there an open order for that security
 for any Client?

*If "YES",* the system will send a message to you DENYING the personal trade request.

*If "NO",* then your request is Approved. You will receive an email with the approval and trading window.

**The preclearance request process can be changed at any time to ensure that the goals of this Code of Ethics are met.**

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 29

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Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 30

**APPENDIX 5: ACCOUNT REPORTING INSTRUCTIONS**

**Reportable brokerage accounts**

All employees are required to link their reportable accounts in ComplianceAlpha. ACI has contracted with frequently used brokers to obtain secure electronic trade confirmations and position files for your trading activity and holdings information, listed on Schedule C Approved Electronic Brokers (AEB). Using an AEB is the preferred method for linking your accounts to ComplianceAlpha. However, if you choose to use a broker that is not an AEB, you will be required to link your accounts through ComplianceAlpha's Aggregation Feed. This process requires you to securely provide your log-in credentials so that ComplianceAlpha can obtain your trading and position information. Your log-in information will not be available to Compliance or ComplianceAlpha support staff. By linking your accounts to ComplianceAlpha, you are consenting for Compliance to obtain electronic trade confirmations and position information for your account.

Certain brokers may not be used due to their inability to consistently provide electronic transactions and holdings information. Please review Schedule C for a list of Prohibited Brokers.

Finally, account information, trading history, and position information may be provided manually. This option is not available for most brokerage accounts and is only available for special circumstances, such as a spouse's stock purchase plan, a trust account, or international brokers for which an Account Exemption must be requested (see Appendix 6: Requesting an exemption).

Follow these steps to link your accounts to ComplianceAlpha:

&nbsp;&nbsp;&nbsp;&nbsp;1. Log-in
 to ComplianceAlpha at <u>https://www.compliancealpha.com/auth/login</u> <u>.</u> 

&nbsp;&nbsp;&nbsp;&nbsp;2. From
 the Employee Dashboard, click on "Create Brokerage Account".

&nbsp;&nbsp;&nbsp;&nbsp;3. Use
 the **Direct Feed** tile to link Approved Electronic Brokers (listed on Schedule C of
 this policy).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Select
 your broker.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Provide
 your account details (Account Name, Account #s); Click "Next"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Provide
 Date Opened, Account Owner Type, and Investment Discretion.

&nbsp;&nbsp;&nbsp;&nbsp;4. Use
 the **Aggregation Feed** tile to link accounts for brokers that are not an AEB. Before
 using the Aggregation Feed, ensure that your account cannot be linked through the Direct
 Feed (step 3). The Aggregation Feed requires that you and your family member's account
 log-in credentials are provided to link your account to ComplianceAlpha.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Click
 on your broker or click "Search Here" to find your broker.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Provide
 your broker account's Username and Password. Your information is immediately encrypted
 and passed along to the broker feed provider to connect your account and pull back your holdings
 and transactions.

&nbsp;&nbsp;&nbsp;&nbsp;5. Use
 the **Manual** tile for accounts that cannot be linked through the Direct Feed or Aggregation
 Feed. Note, you may be required to move these accounts to a firm that can be accessed through

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 31

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a Direct Feed or Aggregation Feed unless you have a special circumstance to maintain the account through a manual feed. If you are required to move the account, it must be completed within 90 days of your hire date. See "Appendix 6: Requesting an exemption" to request an Account Exemption.

**Beneficially-owned ACI PFS Accounts (Portfolio and Investment Persons only)**

You are required to report your beneficially-owned accounts in ACI open-end mutual funds held at ACI PFS. Use the **Aggregation Feed** tile to link ACI PFS accounts that are beneficially-owned. The Aggregation Feed requires that you and your family member's account log-in credentials are provided to link your account to ComplianceAlpha.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Click
 on your broker or click "Search Here" to find your American Century Investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Provide
 your broker account's Username and Password. Your information is immediately encrypted
 and passed along to the broker feed provider to connect your account and pull back your holdings
 and transactions. Compliance and ComplianceAlpha do not have access to the log-in credentials.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 32

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**APPENDIX 6: REQUESTING AN EXEMPTION**

The Code of Ethics policy allows for limited exemptions. Exemption requests are submitted in ComplianceAlpha using the following process:

**Trading Exemptions:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Log-in
 to ComplianceAlpha at <u>https://www.compliancealpha.com/auth/login</u> <u>.</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. From
 the Employee Dashboard, click on the "Submit Trade Request" link under Quick
 Links or click on the Green Action Button and click "Create Request or Disclosure".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Select
 "Trade" at "What type of request or disclosure would you like to set up?"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Select
 the type of exemption you are requesting (contact Compliance if you are uncertain of the
 correct form to use):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. 30-Day
 Denial Exemption for Sells (used when you have been denied on a sell request at least four
 times over a 30-day period)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. PM
 Sell Exemption (used by Portfolio Persons when they have a special circumstance that requires
 selling a security, owned personally, which is also held in their assigned funds). Portfolio
 Persons may be required to go through a 30-day denial exemption before requesting a PM Sell
 Exemption.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Inheritance
 Exemption (used when trying to sell a portfolio of securities that were recently inherited).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Employee
 Stock Plan (used to sell a security that is held in a previous employee or beneficially owned
 stock purchase plan which has trading restrictions or to exercise employee stock options).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Financial
 Hardship Exemption (used when selling securities due to a financial hardship).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Complete
 the required fields on the request form and submit the form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Compliance
 will review your request. If your request is approved, Compliance will assign a one-day trading
 window for you to complete your transaction. The trading window will typically be the day
 following the approval of the exemption. You will be notified by email.

**Account Exemptions:**

A Managed Account or Blind Trust account exemption may be requested for accounts for which you or your immediate family members do not have discretionary trading authority.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 33

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An Account Exemption Request may be requested to continue to hold an account which cannot be linked to ComplianceAlpha through the Direct Feed or Aggregation Link (i.e. Manual Accounts). A special circumstance must be in place for the Account Exemption to be approved.

Exemption requests are submitted in ComplianceAlpha using the following process:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Log-in
 to ComplianceAlpha at <u>https://www.compliancealpha.com/auth/login</u> <u>.</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. From
 the Employee Dashboard, click on the green action button.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Click
 "Create Request or Disclosure".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Click
 on "Other"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Select
 the appropriate template (Managed/Trust Account or Account Exemption) and click continue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Complete
 the requested information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Attaching
 supporting documentation as required (i.e. Management Agreement or Discretionary Account
 Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Click
 Submit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Compliance
 will review the request and determine if the exemption can be approved. You will be notified
 of the completion of the review through an email.

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 34

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**SCHEDULE A: BOARD APPROVAL DATES**

This Code of Ethics was most recently approved by the Board of Directors/Trustees of the following Companies as of the dates indicated:

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Investment Adviser** | &nbsp;&nbsp;**Most Recent Approval Date** |
| &nbsp;&nbsp;American Century Investment Management, Inc. | &nbsp;&nbsp;January 1, 2018 |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Principal Underwriter** | &nbsp;&nbsp;**Most Recent Approval Date** |
| &nbsp;&nbsp;American Century Investment Services, Inc. | &nbsp;&nbsp;January 1, 2018 |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Fund Clients** | &nbsp;&nbsp;**Most Recent Approval Date** |
| &nbsp;&nbsp;American Century Asset Allocation Portfolios, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century California Tax-Free and Municipal Funds | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Capital Portfolios, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century ETF Trust | &nbsp;&nbsp;December 20, 2017 |
| &nbsp;&nbsp;American Century Government Income Trust | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Growth Funds, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century International Bond Funds | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Investment Trust | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Municipal Trust | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Mutual Funds, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century Quantitative Equity Funds, Inc. | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Strategic Asset Allocations, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century Target Maturities Trust | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century Variable Portfolios, Inc. | &nbsp;&nbsp;December 1, 2017 |
| &nbsp;&nbsp;American Century Variable Portfolios II, Inc. | &nbsp;&nbsp;December 14, 2017 |
| &nbsp;&nbsp;American Century World Mutual Funds, Inc. | &nbsp;&nbsp;December 1, 2017 |

---

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 35

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**SCHEDULE B: SUBADVISED FUNDS**

***(Last updated August 31, 2022)***

The following funds are subject to the Code of Ethics, as well as any other funds for which American Century Investment Management, Inc. serves as an investment adviser. This list of affiliated funds will be updated on a regular basis.

---

| |
|:---|
| &nbsp;&nbsp;ABN AMRO Funds: ABN AMRO Funds European Sustainable Equities Mandate 10 |
| &nbsp;&nbsp;American Beacon Funds – American Beacon International Equity Fund |
| &nbsp;&nbsp;Bridge Builder Trust – Bridge Builder Small /Mid Cap Value Fund |
| &nbsp;&nbsp;CIBC Global Equity Growth Pool |
| &nbsp;&nbsp;CIBC International Small Companies Fund |
| &nbsp;&nbsp;CIBC U.S. Equity Value Pool |
| &nbsp;&nbsp;Columbia Funds Variable Series Trust II: CTIVP-American Century Diversified Bond Fund |
| &nbsp;&nbsp;EQ Advisors Trust: EQ/American Century Mid Cap Value Portfolio |
| &nbsp;&nbsp;EQ Advisors Trust / American Century Moderate Growth Allocation Fund |
| &nbsp;&nbsp;FP Brunel Pension Partnership ACS – Global Small Cap Equities |
| &nbsp;&nbsp;GuideStone Funds: Defensive Market Strategies Fund |
| &nbsp;&nbsp;GuideStone Funds: Small Cap Equity Fund |
| &nbsp;&nbsp;GuideStone Funds: Value Equity Fund |
| &nbsp;&nbsp;Learning Quest 529 Education Savings Program |
| &nbsp;&nbsp;LGT Select Funds – LGT Select Equity Global |
| &nbsp;&nbsp;Lincoln Variable Insurance Products Trust – LVIP American Century Select Mid Cap Managed Volatility Fund |
| &nbsp;&nbsp;MainStay VP Funds Trust: MainStay VP American Century Sustainable Equity Portfolio |
| &nbsp;&nbsp;MassMutual Select Funds: MassMutual Mid-Cap Value Fund |
| &nbsp;&nbsp;MassMutual Select Funds: MassMutual Small Company Value Fund |
| &nbsp;&nbsp;Mercer Funds: Mercer Non-U.S. Core Equity Fund |
| &nbsp;&nbsp;Mercer Global Investments Canada Limited: Mercer International Equity Fund |
| &nbsp;&nbsp;MML Series Investment Fund: MML Mid Cap Value Fund |
| &nbsp;&nbsp;MML Series Investment Fund: MML Small Company Value Fund  |
| &nbsp;&nbsp;MML Series Investment Fund: MML Sustainable Equity Fund |
| &nbsp;&nbsp;Nationwide Mutual Funds: Nationwide American Century Small Cap Income Fund |
| &nbsp;&nbsp;Nationwide Variable Insurance Trust: American Century NVIT Multi Cap Value Fund |
| &nbsp;&nbsp;NN(L): NN(L) US High Dividend |
| &nbsp;&nbsp;Nomura – ACI Advanced Medical Impact Investment Mother Fund |
| &nbsp;&nbsp;Nomura – ACI ESG Global REIT Mother Fund  |
| &nbsp;&nbsp;Nomura – ACI ESG Global Small Cap Equity Mother Fund  |
| &nbsp;&nbsp;Nomura – ACI Global REIT Mother Fund |

---

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 36

![](tm225671d1_expiiimg0001.jpg)

---

| |
|:---|
| &nbsp;&nbsp;Nomura Institutional Fund Select – American Century Global Growth Fund |
| &nbsp;&nbsp;Nomura U.S. Municipal General Obligation Bond Mother Fund  |
| &nbsp;&nbsp;Nomura U.S. Value Strategy Mother Fund  |
| &nbsp;&nbsp;Nomura Currency Fund – U.S. Growth Equity Fund |
| &nbsp;&nbsp;Northwestern Mutual Series Fund, Inc.: Inflation Protection Portfolio |
| &nbsp;&nbsp;Northwestern Mutual Series Fund, Inc.: Large Company Value Portfolio  |
| &nbsp;&nbsp;Northwestern Mutual Series Fund, Inc.: Mid Cap Value Portfolio |
| &nbsp;&nbsp;Optimum Fund Trust: Optimum Large Cap Growth Fund |
| &nbsp;&nbsp;Pacific SelectFund: Value Portfolio |
| &nbsp;&nbsp;Penn Series Funds, Inc.: Mid Core Value Fund |
| &nbsp;&nbsp;PrivilEdge: American Century Emerging Markets Equity |
| &nbsp;&nbsp;Renaissance Private Pools – Renaissance Global Equity Private Pool |
| &nbsp;&nbsp;Renaissance U.S. Equity Income Fund |
| &nbsp;&nbsp;Schwab Capital Trust: Schwab International Opportunities Fund |
| &nbsp;&nbsp;Seasons Series Trust: SA Multi-Managed Large Cap Value Portfolio |
| &nbsp;&nbsp;Stichting Blue Sky Active Equity Emerging Markets Global Fund: Blue Sky Active Equity Emerging Markets Global Fund |
| &nbsp;&nbsp;Voya Partners, Inc.: VY American Century Small-Mid Cap Value Portfolio |

---

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 37

![](tm225671d1_expiiimg0001.jpg)

**SCHEDULE C: BROKERS**

***(Last updated August 31, 2022)***

Compliance has contracted with Approved Electronic Brokers to obtain a secure electronic transfer of transactions and holdings information for the brokers listed on the Approved Electronic Broker list. Additionally, employees can link their accounts using ComplianceAlpha's aggregation feed if the broker is not listed on our Prohibited Broker list.

Due to the inability to obtain electronic trade confirmations and holdings from some brokers, maintaining a broker account is prohibited with the firms listed under Prohibited Brokers.

**PROHIBITED BROKERS**

The use of the following brokers is prohibited due to the broker's inability to provide electronic trade confirmations and holdings.

Robinhood

**APPROVED ELECTRONIC BROKERS**

The following brokers have entered into an agreement with ACI to provide trade confirmations electronically.

Alliance Bernstein

American Century Brokerage (through Pershing)

American Century Private Client Group (through Pershing)

Ameriprise Financial

Charles Schwab - Investments

Chase – Investments

Citi Private Wealth

Citibank - Investments

DriveWealth (Health Savings Account through WealthCare Savers)

Edward Jones

E\*TRADE

Fidelity Investments

Goldman Sachs Wealth Management

GW & Wade Asset Management (through National Financial Services)

Interactive Brokers

JP Morgan Private Client

LPL Financial

MML Investors (through National Financial Services)

Merrill Lynch – MyMerrill Investments

Morgan Stanley - ClientServ

Northern Trust Securities

Northwestern Mutual (thru National Financial Services)

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 38

![](tm225671d1_expiiimg0001.jpg)

Oppenheimer

Raymond James

Royal Bank of Canada Wealth Management (RBC)

Roundtable (through National Financial Services)

Stifel Nicholas

TD Ameritrade, Inc.

UBS

US Trust

Vanguard Investments

Wells Fargo Advisors

Policy updated: August 31, 2022 <br> COMPANY CONFIDENTIAL -©2022 American Century Proprietary Holdings, Inc. 39

## Ex-99.(P)(V)

**Exhibit 99.(p)(v)**

![](tm233086d1_expvimg0001.jpg)

CODE OF ETHICS 2022

---

| | | |
|:---|:---|:---|
| **Index of Updates** | **Index of Updates** | **3** |
| **1. Introduction** | **1. Introduction** | **6** |
| &nbsp;&nbsp;&nbsp;**1.1** | &nbsp;&nbsp;&nbsp;**Application** | 6 |
| &nbsp;&nbsp;&nbsp;**1.2** | &nbsp;&nbsp;&nbsp;**Scope** | 6 |
| &nbsp;&nbsp;&nbsp;**1.3** | &nbsp;&nbsp;&nbsp;**Purpose** | 6 |
| &nbsp;&nbsp;&nbsp;**1.4** | &nbsp;&nbsp;&nbsp;**Staff Obligations** | 6 |
| &nbsp;&nbsp;&nbsp;**1.5** | &nbsp;&nbsp;&nbsp;**Violations** | 7 |
| &nbsp;&nbsp;&nbsp;**1.6** | &nbsp;&nbsp;&nbsp;**Interpretation and Waiver** | 7 |
| &nbsp;&nbsp;&nbsp;**1.7** | &nbsp;&nbsp;&nbsp;**Monitoring** | 7 |
| &nbsp;&nbsp;&nbsp;**1.8** | &nbsp;&nbsp;&nbsp;**Material Changes** | 7 |
| **2. Ethical Principles** | **2. Ethical Principles** | **8** |
| &nbsp;&nbsp;&nbsp;**2.1** | &nbsp;&nbsp;&nbsp;**Introduction** | 8 |
| &nbsp;&nbsp;&nbsp;**2.2** | &nbsp;&nbsp;&nbsp;**Guiding Ethical Principles** | 8 |
| &nbsp;&nbsp;&nbsp;**2.3** | &nbsp;&nbsp;&nbsp;**Resolving Ethical Issues** | 10 |
| **3. Conflicts of Interest** | **3. Conflicts of Interest** | **10** |
| &nbsp;&nbsp;&nbsp;**3.1** | &nbsp;&nbsp;&nbsp;**Introduction** | 10 |
| &nbsp;&nbsp;&nbsp;**3.2** | &nbsp;&nbsp;&nbsp;**Identification and Types of Conflict of Interest** | 10 |
| &nbsp;&nbsp;&nbsp;**3.3** | &nbsp;&nbsp;&nbsp;**Duty to Disclose** | 11 |
| &nbsp;&nbsp;&nbsp;**3.4** | &nbsp;&nbsp;&nbsp;**Outside Business Interests and Personal Associations** | 12 |
| **4. Personal Account Dealing Policy** | **4. Personal Account Dealing Policy** | **16** |
| &nbsp;&nbsp;&nbsp;**4.1** | &nbsp;&nbsp;&nbsp;**High Level Overview** | 16 |
| &nbsp;&nbsp;&nbsp;**4.2** | &nbsp;&nbsp;&nbsp;**General Rule on PA dealing** | 16 |
| &nbsp;&nbsp;&nbsp;**4.3** | &nbsp;&nbsp;&nbsp;**Application of Personal Account Dealing Policy** | 17 |
| &nbsp;&nbsp;&nbsp;**4.4** | &nbsp;&nbsp;&nbsp;**Prohibited and Exempt Securities and Transactions** | 18 |
| &nbsp;&nbsp;&nbsp;**4.5** | &nbsp;&nbsp;&nbsp;**Procedures for Obtaining Permission** | 19 |
| &nbsp;&nbsp;&nbsp;**4.6** | &nbsp;&nbsp;&nbsp;**Practical procedures to be followed in special circumstances** | 20 |
| &nbsp;&nbsp;&nbsp;**4.7** | &nbsp;&nbsp;&nbsp;**Reporting Requirements** | 21 |
| &nbsp;&nbsp;&nbsp;**4.8** | &nbsp;&nbsp;&nbsp;**Summary table of Security Types and Pre-Clearance and Reporting Requirements** | 21 |
| **5. Inducements Policy** | **5. Inducements Policy** | **23** |
| &nbsp;&nbsp;&nbsp;**5.1** | &nbsp;&nbsp;&nbsp;**Guidelines** | 23 |
| &nbsp;&nbsp;&nbsp;**5.2** | &nbsp;&nbsp;&nbsp;**Restrictions in Connection with the Sale of Package Products, i.e. OEICs** | 27 |
| &nbsp;&nbsp;&nbsp;**5.3** | &nbsp;&nbsp;&nbsp;**Packaged Products Guidance on Reasonable Indirect Benefits** | 28 |
| &nbsp;&nbsp;&nbsp;**5.4** | &nbsp;&nbsp;&nbsp;**FINRA Specific Requirements for Registered Persons of BGFS** | 29 |
| &nbsp;&nbsp;&nbsp;**5.5** | &nbsp;&nbsp;&nbsp;**Specific Requirements for BGA(HK)** | 29 |
| **6. Acknowledgement and Certification** | **6. Acknowledgement and Certification** | **30** |
| &nbsp;&nbsp;&nbsp;**6.1** | &nbsp;&nbsp;&nbsp;**Receipt and Acknowledgement of the Code** | 30 |
| &nbsp;&nbsp;&nbsp;**6.2** | &nbsp;&nbsp;&nbsp;**Annual Report to Baillie Gifford Boards** | 30 |

---

CODE OF ETHICS 2022

**Index of Updates**

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;<u>Date</u> | &nbsp;&nbsp;<u>Reason for change</u> | &nbsp;&nbsp;<u>Material<br> Change</u> | &nbsp;&nbsp;<u>Regulatory<br> Requirement</u> |
| &nbsp;&nbsp;October 2017 | &nbsp;&nbsp;Changes made to reflect MiFID II requirements. New requirements on Inducements relating to MiFID, equivalent third country or optional exemption business under FCA COBS 2.3A for firms which make personal recommendations to a retail client in the UK and, in particular, rules on inducements relating to the provision of investment services and ancillary services that the FCA will adopt under new FCA COBS 2.3A 5R. Chapter 5 updated with minor housekeeping changes throughout. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;May 2018 | &nbsp;&nbsp;4.5.1. Separate broker notification letter for BGFS representatives no longer required.<br> 4.5.1. New paragraph added about broker confirmations.<br> 4.8. Minor updates to description of unlisted investments in the summary table.<br> Minor housekeeping changes throughout the policy to change all references to holdings reports to Code of Ethics Declarations. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;August 2018 | &nbsp;&nbsp;Minor updates to summary table in section 4.8 to include references to cryptocurrencies and structured deposits. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;September 2018 | &nbsp;&nbsp;Removal of references to Baillie Gifford Life Limited. This entity is no longer carrying out insurance business and has applied for the cancellation of all its regulatory permissions. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;October 2018 | &nbsp;&nbsp;New Guidance for partners and staff considering external appointments section added to the Conflicts of Interest chapter of the Code of Ethics Policy, plus a link to the guidance note. Not a material change as this is the publication of guidance and not a Code of Ethics Policy change. Summary table in section 4.8 updated to consolidate the two rows relating to exchange traded funds into one row. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;November 2018 | &nbsp;&nbsp;Housekeeping update to the PA dealing policy following changes to the workplace pension arrangements. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;January 2019 | &nbsp;&nbsp;Additional client requirement added to the list of clients with specific requirements link in section 5.1.15.<br> Change of job title for Lindsay Gold from Head of Compliance to Compliance Director (Page 5).<br> Reference to CFTC added in Section 6.0.<br> Changes to ensure BGE is covered by the policy. | &nbsp;&nbsp;No<br> No<br> No<br> No | &nbsp;&nbsp;No<br> No<br> Yes<br> No |
| &nbsp;&nbsp;March 2019 | &nbsp;&nbsp;Updates to summary table in section 4.8 to reflect the 3 security types added. Certificate of Deposit, Fixed Term Deposit and Fixed Term Bond. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;April 2019 | &nbsp;&nbsp;Changed Lindsay Gold's title from Head of Compliance to Compliance Director and changed Monitoring, Ethics Conduct and Assurance team name to Monitoring and Ethics team. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;July 2019 | &nbsp;&nbsp;Update political contributions sections to confirm that pre-clearance can be obtained from US based Compliance Counsel and the Code of Ethics team, rather than the Compliance Director. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;September 2019 | &nbsp;&nbsp;Updates made to reference the new FCA Conduct Rules introduced under SMCR and make enhancements to the Outside Business Interests section. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;September 2019 | &nbsp;&nbsp;OBI section of the policy updates to include a new table of examples and a new streamlined process which consolidates the pre-existing Code of Ethics policy and the HR OBI and Employment Policy which has since been decommissioned. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No |
| &nbsp;&nbsp;September 2019 | &nbsp;&nbsp;Whistleblowing Policy removed (now standalone), BGA(HK) semi-annual declaration process referenced and various housekeeping amendments. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;March 2020 | &nbsp;&nbsp;Additional conflict disclosure requirements for investment decision makers to reflect an increased industry focus in this area. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No. |
| &nbsp;&nbsp;December 2020 | &nbsp;&nbsp;Housekeeping changes to change 'unlisted investments' to 'private companies' and clarifying personal associations | &nbsp;&nbsp;No | &nbsp;&nbsp;No |

---

CODE OF ETHICS 2022

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;January 2021 | &nbsp;&nbsp;Alastair Maclean replaces Lindsay Gold, as Director, Group Compliance and Legal. | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;May 2021 | &nbsp;&nbsp;Addition of section 3.4.3 Disclosure Procedures for External Board/Committee Appointments.<br> Minor housekeeping updates to clarify the policy which included: adding ETFs to the section in 4.3; FX and cryptocurrency in 4.4.2.1; Automatic sales for fees in 4.4.2.2; updating various links throughout the policy; updating the Group Compliance and Legal Director title throughout. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;August 2021 | &nbsp;&nbsp;Housekeeping changes: No change to process, tidying up policy wording and making it clearer. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;January 2022 | &nbsp;&nbsp;References to: 1) Compliance Monitoring and Ethics Team updated to Compliance Code of Ethics Team; and 2) Head of Compliance Monitoring and Ethics updated to Head of Group Compliance Staff Regulatory Responsibilities. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;March 2022 | &nbsp;&nbsp;Post-Brexit updates made for UK/EU MiFID references throughout the policy. Name change for the Policies Training & Reporting team to Events & Global Registrations team. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;May 2022 | &nbsp;&nbsp;Following a query from an Investment Trust Board, we have decided to tighten up the language around PA dealing during BG Investment Trust share buy-backs. New section 4.4.5. added.<br>Various minor housekeeping updates. | &nbsp;&nbsp;No<br>No | &nbsp;&nbsp;No<br>No |
| &nbsp;&nbsp;October 2022 | &nbsp;&nbsp;Additional language added to clarify the definition of 'immediate family member' and 'known close associate' regarding the subject of Politically Exposed Appointments in section 3.4.1 Types of Outside Business Interests. | &nbsp;&nbsp;No | &nbsp;&nbsp;No |

---

CODE OF ETHICS 2022

Letter from the Joint Senior Partner and Group Compliance, Legal and Governance Services Director

Dear Colleagues,

The Code of Ethics Policy is a very important area for us because our clients have put a great deal of trust in Baillie Gifford to manage their assets in their long-term interests. For us to respect that trust there are two things that we must focus on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Firstly,
 making sure that we put clients' interests at the heart of everything that we do; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Secondly,
 making sure that we identify and manage any conflicts of interest between our interests and
 those of the client.

The compliance culture and ethics of a firm are vitally important to clients and regulators alike. Our clients refer to the Code of Ethics Policy as the "window on the culture of the firm". They are interested in adherence with the policy and often ask for information on code violations as an indicator of the overall culture of the firm.

Regulators have also put 'culture' and 'conduct' at the centre of their agenda. Culture is regarded as the DNA of the business; shaping behaviours and ethics. At Baillie Gifford we have built our reputation by our conduct as individuals, acting with integrity and in the interests of our clients.

The Code of Ethics Policy sets out the processes, procedures and principles in this area and we ask you to give it your full attention. If you have any questions, please do not hesitate to contact a member of the Compliance Code of Ethics team or email CodeofEthicsQueries@bailliegifford.com.

Thank you.

Andrew Telfer Alastair Maclean <br> Joint Senior Partner of Baillie Gifford & Co Director, Group Compliance, Legal and Governance Services

CODE OF ETHICS 2022

1. Introduction

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.1** **Application** 

The Code of Ethics applies to

&nbsp;&nbsp;&nbsp;&nbsp;· All
 employees of Baillie Gifford entities

&nbsp;&nbsp;&nbsp;&nbsp;· Partners

&nbsp;&nbsp;&nbsp;&nbsp;· Fixed
 term, temporary and agency staff

&nbsp;&nbsp;&nbsp;&nbsp;· Interns
 and summer students

&nbsp;&nbsp;&nbsp;&nbsp;· Secondees

&nbsp;&nbsp;&nbsp;&nbsp;· Individuals
 providing services via Personal Service Companies

&nbsp;&nbsp;&nbsp;&nbsp;· Contractors
 (with systems access)

Each of these individuals and in some specified cases, persons who are connected to the individual, are required to comply with the Code of Ethics which forms part of the 'Personal Responsibilities' section of the Group Compliance Manual (located via the Landing Page on the Loop) and their employment contract. These individuals are known as 'access persons' for the purposes of US securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.2** **Scope** 

The Code covers all firms within the Baillie Gifford Group and has been adopted by the relevant Boards of Baillie Gifford regulated entities within the Group and the Group's Compliance Committee. It is designed to ensure compliance with relevant regulatory requirements applicable to the Baillie Gifford Group and in particular UK FCA, CBI and US SEC requirements.

The Code of Ethics covers:

&nbsp;&nbsp;&nbsp;&nbsp;· the
 FCA Conduct Rules which apply to the vast majority of staff<sup>11</sup>

&nbsp;&nbsp;&nbsp;&nbsp;· guiding
 ethical principles which apply to all staff

&nbsp;&nbsp;&nbsp;&nbsp;· managing
 conflicts of interest which may occur between Baillie Gifford and the personal interests
 of members of staff

&nbsp;&nbsp;&nbsp;&nbsp;· personal
 dealings in shares

&nbsp;&nbsp;&nbsp;&nbsp;· receiving
 and giving of gifts, hospitality and other forms of inducement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.3** **Purpose** 

At Baillie Gifford we have a fiduciary duty to our clients when acting as their investment manager or adviser. This requires us at all times to act in the best interests of our clients and to treat them fairly. We must avoid situations where we place our own interests ahead of the interests of clients. The Code of Ethics is designed to assist us in ensuring we meet these fiduciary standards when acting for clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.4** **Staff Obligations** 

As a member of staff, you are obliged to comply with your regulatory obligations under the various regulatory systems to which the Group is subject, including applicable federal securities laws. You are required to:

&nbsp;&nbsp;&nbsp;&nbsp;· Read
 and adhere to the Code of Ethics. If you have any questions, please email <u>CodeofEthicsQueries@bailliegifford.com</u> (secure mailbox) ; and

<sup>1</sup> The Conduct Rules do not apply to 'ancillary staff' not performing a financial services role. This would cover our mailroom staff, security guards, cleaning and catering staff.

CODE OF ETHICS 2022

&nbsp;&nbsp;&nbsp;&nbsp;· Complete
 and submit a Code of Ethics Declaration and submit a Certificate of Compliance on first becoming
 a member of staff and annually thereafter.

You will be provided with details of any changes to the Code at the time these are made. Training will be provided on the terms of the Code as part of your staff induction and annually thereafter, or more frequently in the event of a material change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.5** **Violations** 

Failure on the part of members of staff or their Connected Persons (where applicable) to follow these procedures will be taken seriously and regarded as a disciplinary matter under the rules and procedures set out in the Staff Handbook. If it is determined that gross misconduct has taken place, the member of staff may be subject to instant dismissal without payment in lieu of notice.

In addition, any conduct by a member of staff that violates the Code of Ethics, including the Ethical Principles, will be considered from an FCA Conduct Rule Breach perspective (see section 2.1 below for details of the FCA Conduct Rules). If it is deemed that a Code of Ethics violation is significant in nature (e.g. evidence of intent; client materially affected; trend of repeated violations etc.), it may be escalated within Baillie Gifford to be assessed further by senior members of the HR, Compliance and Business Risk departments. Depending on the severity of the case, a formal Conduct Rule Breach may subsequently be reported to the FCA in accordance with regulatory reporting timelines.

Any member of staff who becomes aware of a violation of the Code of Ethics must promptly report that violation to the Group Compliance, Legal and Governance Services Director , who may, at his discretion, refer the violation to the Legal and Compliance Partner as well as the relevant Board and Compliance Committee for resolution in terms of section 1.6 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.6** **Interpretation and Waiver** 

With respect to matters of interpretation or dispute arising under the Code of Ethics, the Group Compliance, Legal and Governance Services Director may refer to the Compliance Committee of Baillie Gifford who may, exercising their reasonable judgment, make determinations as to the meaning and effect of the Code of Ethics. The Group Compliance, Legal and Governance Services Director may, in consultation with the Compliance Committee, grant written waivers of the provisions of the Code in appropriate instances. However, waivers will be granted only in rare instances and some provisions of the Code that are mandated by law or regulation cannot be waived. The Group Compliance, Legal and Governance Services Director is responsible for maintaining appropriate records of and preparing any reports required with respect to, any waivers of provisions of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.7** **Monitoring** 

Adherence by staff to the terms of the Code will be monitored by the Compliance Department. The issue, receipt and content of Code of Ethics Declarations and Certificates will be co-ordinated and monitored by that Department. Regular monitoring of personal account dealing, gifts and entertainment records and other forms of inducements will also be undertaken to ensure there are no actions which are contrary to our regulatory obligations and that we always act in the best interests of clients. The results of this monitoring will be reported to the relevant Boards and Compliance Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.8** **Material Changes** 

Material changes to the Code of Ethics must be ratified by the relevant Boards of the SEC regulated firms and investment companies within the Group and the Group's Compliance Committee.

CODE OF ETHICS 2022

2. Ethical Principles

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1** **Introduction** 

Baillie Gifford's reputation and success is based upon its professional conduct and maintenance of high ethical standards. It is expected and indeed demanded from our clients that we adhere to robust ethical standards in all aspects of our activities.

This section of the Code of Ethics sets out guiding principles which apply to all staff relating to ethical conduct. It also provides some guidance on addressing and resolving ethical issues.

In addition, many individuals within the Group will be subject to ethical principles and codes of conduct which are adopted by various professional organisations to which they are members. Baillie Gifford's Code of Ethics is designed to be complementary to, and consistent, with these other standards.

The FCA's Senior Managers and Certification Regime (SMCR) introduces a set of Conduct Rules which reflect the core standards expected of staff who work within the Financial Services industry. These can be found in the FCA's Code of Conduct sourcebook (COCON) and are composed of nine rules, five of which are applicable to all staff (other than 'ancillary staff' referred to earlier) and four additional rules applicable only to Senior Managers. The five Conduct Rules which are applicable to all staff are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;1. You must
 act with integrity;

&nbsp;&nbsp;&nbsp;&nbsp;2. You must
 act with due care, skill and diligence;

&nbsp;&nbsp;&nbsp;&nbsp;3. You must
 be open and cooperative with the FCA, PRA and other regulators;

&nbsp;&nbsp;&nbsp;&nbsp;4. You must
 pay due regard to the interests of customers and treat them fairly; and

&nbsp;&nbsp;&nbsp;&nbsp;5. You
 must observe proper standards of market conduct.

These conduct rules compliment Baillie Gifford's own guiding ethical principles and are embedded within these. The four additional rules applicable only to Senior Managers are covered separately in the SMCR Policy.

The Code of Ethics cannot cover every ethical situation that might arise at Baillie Gifford. After having read and understood the content of the Code of Ethics Policy, all members of staff will be responsible for complying not only with its letter, but also with its spirit and principles. These are set out in the Guiding Ethical Principles below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2** **Guiding Ethical Principles** 

Each member of staff must follow these guiding principles:

2.2.1. Fairness

To act fairly at all times when dealing with clients and counterparties of Baillie Gifford. Fairness requires impartiality, objectivity, and honesty.

For example, when communicating with clients you should make every reasonable effort to provide full, fair and accurate information and should avoid withholding any relevant information.

A non-exhaustive list of other examples of conduct that might breach the fairness principle is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;· Misleading
 a client about the risks of an investment;

&nbsp;&nbsp;&nbsp;&nbsp;· Misleading
 a client about the likely performance of a product by providing inappropriate projections
 of future returns; or

&nbsp;&nbsp;&nbsp;&nbsp;· Failing
 to acknowledge, or seek to resolve, mistakes in dealing with clients.

CODE OF ETHICS 2022

2.2.2. Honesty
 and integrity

To act honestly and with integrity in fulfilling the responsibilities of your role and seek to avoid any acts or omissions or business practices which damage Baillie Gifford's reputation or which are deceitful, oppressive, or improper.

For example, Baillie Gifford should only employ fair methods to win or retain business for the firm. Staff should avoid offering unduly lavish or overly frequent gifts and hospitality and should avoid 'pay to play' practices, i.e. making political contributions to those in a position to influence the selection of Baillie Gifford. Baillie Gifford is committed to carrying on business fairly, honestly and openly and has a zero-tolerance approach to bribery.

A non-exhaustive list of other examples of conduct that might breach the honesty and integrity principle is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Falsifying
 documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Providing
 false or inaccurate information to a client, regulator, auditor, Baillie Gifford itself or
 a third party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Mismarking
 the value of investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Misleading
 others in Baillie Gifford about the nature of risks being accepted; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Failing
 to disclose personal dealing activity; receipt or provision of gifts and entertainment; political
 contributions or other outside business interests as required by the Code of Ethics.

2.2.3. Adherence
 to law and regulation

To observe applicable law, regulations and professional conduct standards when carrying out your activities and to interpret and apply them to the best of your knowledge and ability according to these guiding ethical principles. To be open and cooperative with Baillie Gifford's regulators.

For example, you must familiarise yourself with, and adhere to at all times, the requirements contained in the: Anti-Financial Crime Policy; the Anti-Money Laundering, Counter-Terrorist Financing & Sanctions Policy; the Anti-Bribery & Corruption Policy; the Code of Ethics Policy; the Market Abuse and Insider Dealing Policy; Data Protection Policy; and Information Security & Electronic Communications Policy. These policies set out your personal compliance responsibilities and are available to all staff in the 'Personal Responsibilities' section of the Group Compliance Manual.

A non-exhaustive list of conduct that might breach the open and cooperative with regulators principle is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;· Providing
 false or inaccurate information to regulators;

&nbsp;&nbsp;&nbsp;&nbsp;· Failing
 to supply a regulator with appropriate documents or information when requested or required
 to do so and within the time limits attaching to that request or requirement; or

&nbsp;&nbsp;&nbsp;&nbsp;· Failing
 to attend an interview or answer questions put by a regulator.

2.2.4. Market conduct

When executing transactions or engaging in any form of market dealings, to observe the standards of market integrity, good practice and conduct required by, or expected of, participants in that market. To comply with relevant market codes and exchange rules.

2.2.5. Loyalty
 to clients

To place the interests of our clients ahead of your own interests and to manage fairly and effectively, and to the best of your ability, any relevant conflict of interest. To the extent feasible, conflicts of interest should be avoided or at least appropriately managed and disclosed in accordance with Baillie Gifford's conflicts procedures.

Baillie Gifford's investment recommendations and other proprietary information are for the exclusive use of our clients. We should not use this proprietary information for personal benefit. If in doubt, refer to the Compliance Department for guidance.

2.2.6. Maintaining
 confidentiality

To respect the confidentiality of information on current, former and prospective clients which is obtained through your work and refrain from using or disclosing this for unethical purposes or illegal advantage.

CODE OF ETHICS 2022

For example, you must be extremely careful when sharing confidential client data with an outside party and should only do so if it is absolutely necessary. Authorisation may be required from your Head of Department for this. If in doubt, you should refer to the Information Security and Electronic Communications Policy (located in the Staff Handbook on the Loop) which includes the three levels of data security classification and rules on how to handle this data.

2.2.7. Transparency

If you are in any doubt that you may have a conflict of interest, or if you think that there could be a perception of one, you should disclose the details to your Head of Department, to the Compliance Department or to the relevant chairperson of the board, committee or group concerned, as appropriate.

 

For example, consider the situation where you have a personal shareholding in a company and you are contributing to an investment discussion on whether to buy or sell this company for clients. It is essential to disclose this potential conflict to the chairperson and other members of that decision-making group. Please see section 3.3 for further details on additional disclosure requirements for investment decision makers (investors and CD staff on Portfolio Construction Groups).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.3** **Resolving Ethical Issues** 

In business life we will be confronted from time to time with ethical issues to determine. In dealing with these an important consideration is any impact the decision may have on clients. Also, has the process of coming to the decision been fair, with full consideration of the facts, issues and alternatives? Has it involved all stakeholders with an interest? Have you identified any competing interests or conflicts of interest? These questions would be relevant where considering whether to accept a gift or entertainment, and also considering the implications of an incident.

3. Conflicts of Interest

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1** **Introduction** 

Inherent throughout the Code of Ethics is the principle that all members of staff have a responsibility to place the interests of the Group's clients ahead of their own and resolve conflicts in favour of the Group's clients. In order to achieve this, all activities undertaken by members of staff must be conducted in such a manner as to avoid any actual or potential conflicts of interest or any abuse of an individual's position of trust and responsibility. Furthermore, all action taken by staff must be undertaken in a manner which does not interfere with the interests of Baillie Gifford's clients or take unfair advantage of Baillie Gifford's relationship with its clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.2** **Identification and Types of Conflict of Interest** 

3.2.1. What is
 a conflict of interest?

A conflict of interest arises when personal matters or obligations interfere with business activities and influence the decisions made by members of staff, which have or could have a detrimental effect on the firm's clients. When considering conflicts of interest, it is important to consider how the situation would be viewed by an independent party.

3.2.2. Identification
 of conflicts of interest

Conflicts of interests which require to be identified by members of staff are those which arise between:

&nbsp;&nbsp;&nbsp;&nbsp;· the
 Group, its connected persons and a client of the Group; or

&nbsp;&nbsp;&nbsp;&nbsp;· one
 client of the Group and another client of the Group.

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3.2.3. Types of
 conflicts of interest

When identifying whether a conflict of interest arises in the course of business and whether the existence of this conflict may adversely affect the interests of a client, staff should consider whether the individual, firm or certain persons connected with the firm:

&nbsp;&nbsp;&nbsp;&nbsp;· are
 likely to make a financial gain or avoid a financial loss at the expense of a client;

&nbsp;&nbsp;&nbsp;&nbsp;· has
 an interest in the outcome of the service provided to the client or of a transaction carried
 out on behalf of the client;

&nbsp;&nbsp;&nbsp;&nbsp;· has
 a financial or other incentive to favour the interest of another client or group of clients
 over the interests of the client;

&nbsp;&nbsp;&nbsp;&nbsp;· carries
 on the same business as the client; or

&nbsp;&nbsp;&nbsp;&nbsp;· receives
 or will receive from a person (other than the client) an inducement in relation to the service
 provided, in the form of monies, goods or services, other than the standard commission or
 fee.

The Group Compliance Manual (located via the Landing Page on the Loop) contains Baillie Gifford's conflicts policy and matrix. This matrix details potential and actual conflicts of interest which have been recognised by the firm. Please refer to this document for further information regarding the types of conflict which have been identified.

If you are in doubt about whether a conflict has arisen please consult the Group Compliance, Legal and Governance Services Director.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.3** **Duty to Disclose** 

All members of staff have in the first instance an obligation to manage or avoid all conflicts of interest. If it is not possible to manage or avoid a conflict of interest, then the potential or actual conflict which may impair your objectivity when undertaking your daily activities must be disclosed. All disclosures should be made to your Head of Department and the Group Compliance, Legal and Governance Services Director.

Baillie Gifford does not prohibit investors from investing in the same stocks as our clients. Nevertheless, there is an inherent conflict of interest risk that needs to be carefully managed should investors choose to do this.

Additional disclosure requirements for investment decision makers.

Investment decision makers should make the following protective disclosures where appropriate:

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
 decision makers should declare any pre-existing personal shareholdings in a company if they
 are contributing to an investment discussion on whether to trade in that company for clients.
 This potential conflict must be disclosed to the chairperson of the relevant decision-making
 group, whom failing another member of that decision-making group. On occasion, it may be
 prudent for an investment decision maker to step out of an investment discussion if it is
 felt that a conflict, or perception of a conflict, cannot be managed effectively. Such a
 course of action should be determined on a case by case basis.

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
 decision makers must also declare any personal trading activity in a company held by clients
 if they have been, or will be, involved in an investment discussion concerning that company.
 This disclosure requirement is regardless of whether the company is being traded for clients
 at the time. Again, this potential conflict must be disclosed to the chairperson of the relevant
 decision-making group, whom failing another investment decision maker in that decision-making
 group.

For both scenarios above, Investors have the option of retaining their own contemporaneous record of any disclosures made or notifying the Compliance Department who will record the protective disclosure in the Code of Ethics System. Notifications to Compliance should be emailed to <u>CodeofEthicsQueries@bailliegifford.com</u> (secure mailbox). An audit trail record would be beneficial in the event of any retrospective enquiry.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.4** **Outside Business Interests and Personal Associations** 

A personal conflict of interest can arise in relation to certain outside business interests or personal associations. Members of staff must ensure that they do not engage in any activities that would detract, divert from or conflict with, the proper performance of their Baillie Gifford employment or would conflict with the interests of the firm or our clients. Members of staff must also ensure that any personal association does not affect, or reasonably appear to affect, our conduct or actions in Baillie Gifford and therefore conflict with our duties to clients or the firm.

To ensure that we comply with the requirements of global regulation, we require members of staff and Partners to inform Compliance at <u>CodeofEthicsQueries@bailliegifford.com</u> of any external interests at any time during employment.

*3.4.1 Types of Outside Business Interests*

The following table is a non-exhaustive list of potential outside business interests. If you have any other interests or activities that you think may need to be disclosed, please contact the Compliance Code of Ethics team for guidance at <u>CodeofEthicsQueries@bailliegifford.com</u> (secure mailbox).

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| | |
|:---|:---|
| &nbsp;&nbsp;***Outside Business Interest*** | &nbsp;&nbsp;***Disclosure Requirements*** |
| &nbsp;&nbsp;**Paid work out with Baillie Gifford.** | &nbsp;&nbsp;In general, all regular paid work outwith Baillie Gifford should be disclosed to Compliance (email to <br> <u>CodeofEthicsQueries@bailliegifford.com</u>). In addition, such work should also be agreed with your line manager and/or head of department as appropriate.<br>Discretion can be used for any ad hoc paid work that is de minimis in nature and has no obvious connection to Baillie Gifford business. Such paid work is unlikely to require disclosure.<br>|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Business related external directorships, non-executive directorships or other external board/committee appointments (e.g. nominations committee or board observer positions).**<br>Business related would include:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Listed companies;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Private companies in which Baillie Gifford invests or is likely to invest;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Trade bodies or professional bodies;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Clients;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Suppliers etc.<br>**Non-business related external directorships or non-executive directorships.**<br>Non-business related would include:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Private family run businesses;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· One-person limited companies;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Charitable organisations or not for <br> Profit organisations (where not a client).<br>| &nbsp;&nbsp;All such positions must be disclosed to<br> Compliance (email to<br> <u>CodeofEthicsQueries@bailliegifford.com</u>).<br>Additional disclosure and approval requirements <br> are outlined in section 3.4.3.<br>All such appointments must be disclosed to<br> Compliance (email to <br> <u>CodeofEthicsQueries@bailliegifford.com</u>).<br>No additional approval is required.<br>|

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| | |
|:---|:---|
| &nbsp;&nbsp;**External investment or finance related roles at educational, charitable, religious or social organisations.**<br>Investment or finance related roles would include:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· investment adviser;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· trustee;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· treasurer etc.<br>| &nbsp;&nbsp;All investment adviser related roles should be <br> disclosed to Compliance (email to<br> <u>CodeofEthicsQueries@bailliegifford.com</u>).<br>In addition, such roles should also be agreed with your line manager and/or Head of Department as appropriate.<br>|
| &nbsp;&nbsp;**Politically exposed appointments** | &nbsp;&nbsp;A politically exposed person, or 'PEP', is an individual who is or has, at any time in the preceding year, been entrusted with prominent public functions, or is an immediate family member, or a known close associate of such a person), whether paid or unpaid.<br>An "immediate family member" of a PEP includes a spouse or civil partner of the PEP. Parents and children of the PEP, and the children's spouses, are also covered.<br>A "known close associate" of a PEP means an individual either:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Known to have joint beneficial ownership of a legal entity or legal arrangement, or any other close business relationship, with a PEP; or<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Who has sole beneficial ownership of a legal entity or legal arrangement that is known to have been set up for the PEP's benefit.<br> This broadly relates to business/commercial relationships with the PEP rather than social relationships – it would include trustees of trusts for the benefit of the PEP; individuals who are co-trustees with, in partnership with, joint owners of a company or business with, or in any other close business relationship with, the PEP.<br>All such appointments must be disclosed to Compliance (email to <u>CodeofEthicsQueries@bailliegifford.com</u>).<br>In addition, such roles should also be disclosed to your line manager and/or Head of Department as appropriate.<br>|

---

*3.4.2 Outside Business Interests disclosure procedures*

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The Compliance Code of Ethics team are the central hub for all outside business interest disclosures. This team will disseminate relevant information as appropriate to the Human Resources Department, Group Governance Services Department and the Events & Global Registrations and Anti-Financial Crime teams.

Outside business interest disclosures should be emailed to the Compliance Code of Ethics team (<u>CodeofEthicsQueries@bailliegifford.com</u>) at the earliest opportunity. Where possible, this should be prior to the commencement of any role or appointment. Disclosures should contain the following information:

&nbsp;&nbsp;&nbsp;&nbsp;· Date
 the outside business interest commenced or ceased;

&nbsp;&nbsp;&nbsp;&nbsp;· Name
 of the external company/organisation and brief description of what they do;

&nbsp;&nbsp;&nbsp;&nbsp;· Brief
 description of your role/involvement;

&nbsp;&nbsp;&nbsp;&nbsp;· Details
 of any remuneration if applicable;

&nbsp;&nbsp;&nbsp;&nbsp;· Details
 of any connection to Baillie Gifford (e.g. client or prospective client, investee company,
 broker, supplier etc.).

If applicable, the Compliance Code of Ethics team will obtain approval from the Group Compliance, Legal and Governance Services Director on your behalf and will either confirm that this has been received or will request further information if required.

Please note that Partners or Chief Executive Officers of Baillie Gifford subsidiary companies who require to seek approval from the joint Senior Partners for external appointments, must seek this approval themselves.

In addition to the above:

**Requirements for FCA Regulated Roles**

The Firm is required to ensure that individuals in FCA regulated roles are fit and proper to perform the activities for which they are regulated and that they do not engage in any activities which could conflict with the performance of their role. In addition to the above requirements, individuals in regulated roles must inform Compliance when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o they
 become aware that a company, partnership or unincorporated association of which the individual
 has been controller, director, senior manager, partner or company secretary (either during
 the time they held the position or within one year of such involvement) has:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o been
 put into liquidation, wound up, ceased trading, had a receiver or administrator appointed
 or entered into a voluntary arrangement with its creditors

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o been
 adjudged by a court liable for any fraud, misfeasance, wrongful trading or misconduct

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o been
 investigated or been involved in an investigation by an inspector appointed under companies
 or any other legislation, or required to produce documents to the Secretary of State, or
 any other authority, under any such legislation

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o been
 convicted of any criminal offence, censured, disciplined or publicly criticised, by any inquiry,
 by the Takeover Panel or any governmental or statutory authority, or any other regulatory
 body

**Specific Requirements for BGFS**

Registered Persons of BGFS are required to obtain prior written approval from the Chief Compliance Officer of BGFS for any Contractor, Director, Office or Partner appointments or any work for which they expect to receive compensation outside of their Baillie Gifford employment. Please note that this supersedes the requirement to obtain approval from the Group Compliance, Legal and Governance Services Director.

**Specific Requirements for BGA(HK)**

Licensed Persons of BGA(HK) are required to obtain prior written approval from the Compliance Officer of BGA(HK) for any Director appointments or any work for which they will receive compensation outside of their Baillie Gifford employment.  ****The Compliance Code of Ethics team will co-ordinate this. In addition to the above, there are also SFC Notification requirements relating to any directorships, partnerships or proprietorships taken on by a licenced representative. The BGA(HK) Compliance Officer will advise on the relevant steps to take with regards to this notification.

*3.4.3 Disclosure and Approval Requirements Procedures for Business-related External Positions*

From time to time, Investors or other relevant Baillie Gifford staff may be invited to take up a business-related external position (see section 3.4.1 for details). Such roles may be linked to public or private company in which our

CODE OF ETHICS 2022

clients have a shareholding interest and are often offered to the largest shareholders. This type of opportunity is in alignment with our long term investment approach and our stewardship policy for greater engagement with our investee companies on corporate governance, long term incentives and performance matters.

Whilst there are benefits to accepting such positions, there are also potential conflicts of interest that need to be carefully managed. Each business-related external position needs to be considered on a case by case basis to ensure participation in such a role would not conflict with the duties owed to Baillie Gifford's clients. The disclosure and approval requirements for such positions are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;· All
 business-related external positions must be approved by the Director of Group Compliance, Legal and Governance Services for approval. Where deemed
appropriate, the Director will discuss the case with the Chair of the Equity Leadership Group and the Management Committee will be informed
for noting. The factors taken into consideration when assessing each opportunity will include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Scope,
 time commitment and any remuneration

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The
 likelihood of receiving Material Non-Public Information ("MNPI")

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Any
 potential conflicts of interest

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Committee
 on Foreign Investment in the United States ("CFIUS") requirements
 if applicable (legal advice may be required).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· In
 addition, prior approval must also be sought from the individual's Head of Department.
 For Partners and Chief Executive Officers of Baillie Gifford subsidiary companies should
 seek prior approval from the joint Senior Partners.

*3.4.4 Personal Associations*

We also must take steps to ensure that any personal interest or personal association does not affect, or reasonably appear to affect, our conduct or actions in Baillie Gifford and therefore conflict with our duties to clients or the firm. Any Significant Relationship with another person working in a relevant business connected to Baillie Gifford may need to be disclosed by email to the Compliance Department (<u>CodeofEthicsQueries@bailliegifford.com</u>).

Relevant businesses would include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Investment
 managers

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Brokers

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Clients
 of Baillie Gifford

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Consultants/advisers
 to clients of Baillie Gifford or investors in Baillie Gifford funds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Companies
 in which Baillie Gifford invests on behalf of our clients

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Other
 organisations with which Baillie Gifford has a contractual relationship.

A relationship with another person would be deemed significant if an independent third party might reasonably consider that it could affect your actions or those of a personal associate (whether or not it does so affect your conduct). If you have a relationship with an associated person that could potentially give rise to a conflict of interest, or the perception of one, then this should be disclosed to the Compliance Department. The Compliance Department will determine if the relationship needs to be recorded and whether any action needs to be taken to manage the conflict.

Please note that personal associations can go further than our definition of connected person under PA Dealing, i.e. this disclosure requirement is not limited to immediate family members living in your household. Some examples of potential personal associations that may need to be disclosed/recorded are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· A
 personal friend works at a supplier and is directly involved in the Baillie Gifford account
 and/or you are directly involved in the appointment of that supplier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· A
 close friend works at an audit firm and is directly involved in an external review of your
 department.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· An
 extended family member works at a company that Baillie Gifford invests in for clients, in
 a role where they are likely to have access to sensitive business information.

Please note that none of the personal association examples above would fall under our definition of connected persons for PA Dealing purposes, however potentially would be disclosable under this section of the Code of Ethics.

However, please also note that not every instance of the above would necessarily have to be recorded. Each scenario would be considered on a case-by-case basis to establish what, if any, conflict risk there is.

These disclosures are designed to ensure that our work is carried out on behalf of clients in an environment that is free from any suggestion of improper influence. If you are in any doubt as to whether a business interest or personal association or relationship needs to be disclosed, please contact a member of the Compliance Department for guidance.

*3.4.5 Record Keeping and Annual Certification*

A record of all Outside Business Interests and Personal Associations disclosed to Compliance will be maintained in the Code of Ethics System. These will form part of your personal Annual Code of Ethics Declaration. Updates can be made to these disclosures when completing your annual declaration, or alternately at any point throughout the year by emailing the details to Compliance (<u>CodeofEthicsQueries@bailliegifford.com</u>).

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4. Personal Account Dealing Policy

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1** **High Level Overview** 

Baillie Gifford's first priority is in ensuring that in all circumstances, the firm's clients' interests are placed first and each client obtains the best execution of trades which we can arrange on their behalf. In order to ensure that this priority is consistently met, all staff have a responsibility to ensure that in no circumstances will clients be disadvantaged by employee PA Dealing.

The basic premise of Baillie Gifford's PA Dealing Policy is that PA Dealing is permitted subject to a number of restrictions. Baillie Gifford therefore gives general permission to all members of staff and to their Connected Persons (defined later) to carry out investment transactions in designated investments in accordance with the following procedures. All staff must ensure that undertaking PA Dealing activities does not distract them from their day-to-day responsibilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2** **General Rule on PA dealing** 

A member of staff or their Connected Persons are prohibited from

1. Entering into
 a PA deal where

&nbsp;&nbsp;&nbsp;&nbsp;a) that person
 is prohibited from entering into it under the law and regulations governing market abuse
 and insider dealing as set out in the Baillie Gifford Market Abuse Policy. The Policy requires
 that no member of staff make personal use of material non-public information or engage in
 a securities transaction available only by reason of his or her position within Baillie Gifford.
 If a member of staff is aware that an investment opportunity is being actively considered
 by Baillie Gifford, they must first ensure that this is made available to Baillie Gifford
 before taking personal advantage of the opportunity. It is the personal responsibility of
 the member of staff to ensure that they are familiar with the provisions of that Policy.

&nbsp;&nbsp;&nbsp;&nbsp;b) it involves
 the misuse or improper disclosure of confidential or proprietary information relating to
 clients or transactions for clients; or

&nbsp;&nbsp;&nbsp;&nbsp;c) it conflicts or is likely to conflict with an obligation under Europe's Markets in Financial Instruments Directive II (MiFID II) /
the UK's MiFID Org Regulation, the UK version of Europe's Markets in Financial Instruments Directive II (MiFID II) or other regulatory
obligations which Baillie Gifford owes to its clients.

2. Advising, recommending
 or procuring any other person to enter into a transaction which would be precluded under
 1 above.

3. Disclosing any
 information or opinion to any other person where it is reasonably likely that the result
 of that disclosure will lead to an activity precluded under 1 or 2 above.

&nbsp;&nbsp;&nbsp;&nbsp;a) Entering
 into a PA deal or purchasing a contract of insurance, the purpose of which is to hedge away
 the risk of any downward adjustment in deferred remuneration which that member of staff may
 be entitled to receive under the firm's remuneration policy.

A person will be considered to have undertaken such personal hedging if:

&nbsp;&nbsp;&nbsp;&nbsp;a) The staff
 member enters into a contract with a third party; and

&nbsp;&nbsp;&nbsp;&nbsp;b) The contract requires the third party to make payments directly or
 indirectly to the staff member that are linked to or commensurate with the amounts by which
 the staff member's variable remuneration has been reduced.

Failure on the part of members of staff or their Connected Persons to follow these procedures will be regarded as a disciplinary matter under the rules and procedures set out in the Code. If it is determined that gross misconduct has taken place, the member of staff may be subject to instant dismissal without payment in lieu of notice (If you are in

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any doubt as to whether an intended transaction for yourself or for a Connected Person is subject to the rules of the Policy you should check with the Compliance Department beforehand).

The remainder of this policy details the following information:

&nbsp;&nbsp;&nbsp;&nbsp;4.3 Application
 of Personal Account Dealing Policy

&nbsp;&nbsp;&nbsp;&nbsp;4.4 Prohibited
 and Exempt Securities and Transactions

&nbsp;&nbsp;&nbsp;&nbsp;4.5 Practical Procedures
 for Obtaining Permission

&nbsp;&nbsp;&nbsp;&nbsp;4.6 Practical Procedures
 to be followed in Special Circumstances

&nbsp;&nbsp;&nbsp;&nbsp;4.7 Reporting Requirements

&nbsp;&nbsp;&nbsp;&nbsp;4.8 Summary
 table of Security Types and Pre-Clearance and Reporting Requirements

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3** **Application of Personal Account Dealing Policy** 

The PA dealing rules apply to the following:

&nbsp;&nbsp;&nbsp;&nbsp;· All
 those listed in section 1.1 of this Policy

And 'Connected Persons' which include:

&nbsp;&nbsp;&nbsp;&nbsp;· Immediate
 family (immediate family includes spouses, co-habitees, children under the age of 18 and
 immediate family members sharing the same household. It would also include parents/in-laws
 or other persons where decision making as to their investments is taken by them under advice
 from the member of staff);

&nbsp;&nbsp;&nbsp;&nbsp;· Organisations
 for whom members of staff have an active investment advisory input (this could include charities,
 churches, clubs etc);

&nbsp;&nbsp;&nbsp;&nbsp;· Trusts where as trustee the member of staff
 exercises investment influence (i.e. as sole trustee or a trustee exercising a considerable influence. In this case the trust must
 be made aware of the connection with Baillie Gifford & Co and must be requested to report transactions in securities of
 companies under our management to the member of staff serving as a trustee. He should then report the transaction to the Group
 Compliance, Legal and Governance Services Director); and

&nbsp;&nbsp;&nbsp;&nbsp;· Syndicates
 where friends/family group together for the purpose of purchasing shares

Throughout this Policy, the above categories are referred to as *Connected Persons*.

The Policy applies to the following types of instruments ("covered securities"):

&nbsp;&nbsp;&nbsp;&nbsp;· equities

&nbsp;&nbsp;&nbsp;&nbsp;· bonds;

&nbsp;&nbsp;&nbsp;&nbsp;· ETFs

&nbsp;&nbsp;&nbsp;&nbsp;· derivatives;

&nbsp;&nbsp;&nbsp;&nbsp;· BG
 OEICS;

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
 Trusts and other close end vehicles;

&nbsp;&nbsp;&nbsp;&nbsp;· private
 companies; and

&nbsp;&nbsp;&nbsp;&nbsp;· spread
 betting on financial instruments.

It also applies to any investment in any of the above instruments through a wrapper product such as an ISA, SIPP, share plan, Variable Insurance Product or the Baillie Gifford workplace pension available through Aegon's ARC platform.

The table in section 4.8 sets out various security types and transactions and whether they are covered by the Personal Account Dealing Policy, Preclearance and Reporting Requirements.

If a member of staff is in any doubt as to whether an instrument is included or not in the Policy they should contact the Compliance Code of Ethics Team or email <u>CodeofEthicsQueries@bailliegifford.com</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.4** **Prohibited and Exempt Securities and Transactions** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.1. Prohibited
 securities and transactions

No member of staff is permitted to purchase or sell, directly or indirectly, any security in which he or she acquires any direct or indirect personal holding and which, to his or her knowledge, is currently being purchased or sold by Baillie Gifford or which, to his or her knowledge, Baillie Gifford is actively considering recommending for purchase or sale. These prohibitions shall continue until the time that Baillie Gifford decides not to recommend such purchase or sale, or if this recommendation is made, until the time that Baillie Gifford completes, or decides not to enter into, the recommended purchase or sale. These prohibitions also apply to any purchase and sale by any member of staff of any convertible security, option, warrant or other derivative security, or any private placement of any issuer whose underlying securities are being actively considered for recommendation to, or are currently being purchased or sold by, Baillie Gifford. Any profits realised on trades made by members of staff within the proscribed period may require to be disgorged, particularly where the member of staff had, or was in a position to have had, knowledge of the fact that securities were being purchased or sold on behalf of Baillie Gifford's clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.2. Exempt
 securities and transactions

4.4.2.1 Securities exempt from pre-clearance requirements

The pre-clearance and reporting obligations shall not apply to the following exempt securities:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) purchases
 or sales of securities that are direct obligations of the government of the United States
 or United Kingdom, bankers' acceptances, bank certificates of deposit, commercial paper,
 high-quality short-term debt instruments (including repurchase agreements);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) shares of
 money market mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) shares of
 registered open-end management investment companies other than the Baillie Gifford sponsored
 OEICS and mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) shares of
 US unit investment trusts (i.e. variable insurance contracts that are funded by insurance
 company separate accounts organised as unit investment trusts) that are invested exclusively
 in one or more registered investment companies. Please note that UK Investment Trusts are
 not exempt securities and that pre-clearance requirements apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) FX or cryptocurrency
 transactions

The pre-clearance requirements shall not apply to the following transactions (although revised holdings will need to be disclosed in your Annual Code of Ethics Declaration):-

4.4.2.2 Transactions exempt from pre-clearance requirements

&nbsp;&nbsp;&nbsp;&nbsp;a) purchases
 effected upon the exercise of rights (e.g. automatic reinvestment of dividends) provided
 by an issuer pro rata to all holders of a class of its securities to the extent such rights
 were acquired from such issuer, and sales of such rights so acquired;

&nbsp;&nbsp;&nbsp;&nbsp;b) personal
 transactions effected under a discretionary portfolio management service where there is no
 prior communication in connection with the transaction between the portfolio manager and
 the relevant member of staff or other person for whose account the transaction is executed;

&nbsp;&nbsp;&nbsp;&nbsp;c) personal
 transactions in any default fund available in Baillie Gifford's workplace pension available
 through Aegon's ARC platform;

&nbsp;&nbsp;&nbsp;&nbsp;d) ongoing
 monthly transactions in an automatic investment plan, where permission was obtained for the
 initial investment and there has been no change to the standing instruction thereafter;

&nbsp;&nbsp;&nbsp;&nbsp;e) sales automatically
 placed by the broker to cover ongoing management fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.3. Prohibition
 on short-term profits

No member of staff may engage in the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 60 calendar days. All profits realised on such short-term trades will normally require to be disgorged. Subject to pre-clearance a securities transaction which occurs within the 60-day period as a result of a change in personal circumstances which takes place or becomes known during the period may not be considered a violation of this section or subject to the disgorgement rule upon review and approval of the Group Compliance, Legal and Governance Services Director.

CODE OF ETHICS 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.4. Investor
 PA trades ("Blackout Period")

Investment Personnel are not permitted to PA trade in the seven calendar day period after a fund/strategy that they are involved in has traded in the same security.

 

In addition, Investment Personnel are not permitted to PA trade in the seven calendar day period before a fund/strategy that they are involved in trades in the same security, where they were aware, at the point of requesting permission to trade and at the point of placing their PA dealing instruction, that a client order in that security was pending.

All profits realised on trades by Portfolio Managers within the proscribed period will normally require to be disgorged.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.5. Baillie Gifford Investment Trust share buy-backs

If a member of staff has specific knowledge about a Baillie Gifford Investment Trust share buy-back, i.e. specific knowledge around the price, timing and volume of the transaction, they should refrain from any PA dealing in that Investment Trust until such times as the share buy-back is complete. A general awareness of share buy-backs or share buy-back programmes would not preclude a member of staff from PA dealing in that Investment Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.5** **Procedures for Obtaining Permission** 

Prior to undertaking a PA Deal, members of staff are required to:

&nbsp;&nbsp;&nbsp;&nbsp;· obtain
 permission to use their desired broker (it is only necessary to follow this procedure on
 the first occasion of using a particular stockbroker); and

&nbsp;&nbsp;&nbsp;&nbsp;· to
 obtain internal pre-clearance from the Code of Ethics System (every time a PA deal is undertaken).

It is important that members of staff take all reasonable steps to ensure that these procedures are followed by whoever is dealing. The onus is on the member of staff to obtain permission and ensure that contract notes are sent to the Head of Group Compliance Staff Regulatory Responsibilities where the dealing is for a Connected Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.1. Procedures
 for obtaining broker permission

Before a member of staff or a Connected Person begins to effect a transaction with a particular firm of stockbroker's permission must be obtained to use that broker. It should be noted that this also applies to on-line dealing. The reason for this permission is to inform the Broker that the member of staff works for Baillie Gifford and to ensure that brokers supply to the Head of Group Compliance Staff Regulatory Responsibilities , no later than 30 days after the end of the quarter in which the trading activity occurred, duplicate copies of confirmations of all personal securities transactions. Such confirmations may also contain a statement declaring that the reporting or recording of any such transaction shall not be construed as an admission that the member of staff making the report has any direct or indirect beneficial ownership in the security.

Each confirmation received from the broker shall be treated confidentially and will be maintained on file by the Compliance Department. The reports are, however, available for inspection by authorised members of the staff of regulatory authorities supervising Baillie Gifford's investment business.

**Note**: No broker confirmation letters are required for transactions undertaken in an automatic investment plan, including the Baillie Gifford workplace pension available through Aegon's ARC platform. Furthermore, no Non–Executive Director of a Baillie Gifford company shall be required to report or provide broker confirmation unless the Director knew or should have known that during the 15 calendar days before and after such Director's transaction in any security, Baillie Gifford purchased or sold the same security, or Baillie Gifford considered purchasing or selling the same security.

In addition, broker confirmation letters may not be required if your broker operates a transaction data feed to Baillie Gifford's Code of Ethics System (although your broker may require a separate declaration for this). Should, for whatever reason, a broker be unable to provide duplicate copies of personal transactions directly to Baillie Gifford,

CODE OF ETHICS 2022

the staff member must promptly provide copies of their trade confirmations directly to the Code of Ethics team. This should be provided in email format to the secure team mailbox.

Please contact <u>CodeofEthicsQueries@bailliegifford.com</u> for further details.

Every member of staff must (for their own dealing and that of a Connected Person):

&nbsp;&nbsp;&nbsp;&nbsp;· Notify
 the firm of stockbrokers that they work at Baillie Gifford & Co;

&nbsp;&nbsp;&nbsp;&nbsp;· Not
 accept or request any credit or special dealing facilities in connection with his dealings (The only exception to this rule is that the
Management Committee may give special dispensation for members of staff to agree on rates. Where this permission is given the details
must be supplied to the Group Compliance, Legal and Governance Services Director);

&nbsp;&nbsp;&nbsp;&nbsp;· Notify
 the Head of Group Compliance Staff Regulatory Responsibilities that they or their Connected
 Person proposes to deal with the particular firm of stockbrokers and obtain his permission
 to do so;

&nbsp;&nbsp;&nbsp;&nbsp;· Prepare
 the relevant Broker Authorisation letter (either member of staff letter or Connected Person).
 Take two copies of the letter, both copies must be signed by the Head of Group Compliance
 Staff Regulatory Responsibilities with one being sent to the stockbroker and the other copy
 sent to the Head of Group Compliance Staff Regulatory Responsibilities ; and

&nbsp;&nbsp;&nbsp;&nbsp;· Ensure
 that a copy of the contract note is sent by the stockbroker to the Group Compliance, Legal and Governance Services Director or an electronic
confirmation if provided through an on-line dealing service.

The 'quick guide' document sets out the procedures for <u>obtaining broker consent via a data feed through the Code of Ethics System.</u>

Click on the appropriate link below to obtain a copy of the Baillie Gifford Broker Notification Letter, required for brokers without a data feed:

<u>Letter 1 (Broker authorisation for member of staff)</u>

<u>Letter 2 (Broker authorisation for Connected Persons)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.2. Procedures
 for obtaining internal permission

In addition to broker permission being obtained, members of staff are also required to obtain electronic internal pre-clearance from the Code of Ethics System. Pre-clearance of a PA deal will remain valid until close of business on the next business day from the time permission is obtained. If the proposed transaction is not completed during the period in which the pre-clearance is granted, the member of staff must seek additional pre-clearance prior to completing the transaction. In the case of postal deals (e.g. deals that require an application form or instruction form to be completed, i.e. dealing is not direct through a broker); your dealing instruction should be sent within this pre-clearance period, although the trade itself does not have to be executed.

The 'quick guide' video sets out the procedures for <u>submitting Trade Requests through the Code of Ethics System.</u>

PA Dealing information will be reviewed and monitored by the Compliance Department. Should the monitoring conducted by the Compliance Department detect a potential violation of this Code or any apparent trading irregularity, that Department shall take whatever steps deemed appropriate under the circumstances to investigate said potential violation or trading irregularity. If the Compliance Department reasonably believes a violation or trading irregularity to exist, said violation or trading irregularity shall be reported to the Group Compliance, Legal and Governance Services Director.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.6** **Practical procedures to be followed in special circumstances** 

**Remote Access to the Code of Ethics System**: Remote access is available on all Baillie Gifford devices. If a member of staff is away from the office (e.g. on business or on holiday), trade requests can be submitted through all BG devices.

CODE OF ETHICS 2022

**Maternity/Parental Leave:** If you are out of the office on maternity leave, or a period of flexible parental leave exceeding four weeks, there is no requirement for you to obtain PA dealing permission for any trades conducted by you (or a Connected Person) during this leave. If applicable, shareholdings in the Code of Ethics System can be amended upon your return to the office.

**Limit Orders:** The use of buy or sell limit orders is not prohibited under this policy, however, these must be carefully managed by members of staff as pre-clearance is only valid until close of business on the next business day from the time permission is obtained. If, upon expiry of the permission period, the limit price has not been met, the member of staff must obtain fresh permission via the Code of Ethics System or ensure the limit instruction is cancelled.

**Stop Loss Orders:** As for limit orders, stop loss orders (i.e. instruction to automatically sell securities if the share price reaches a pre-determined minimum price) are not prohibited under this policy, however, these must be carefully managed by members of staff as pre-clearance is only valid until close of business on the next business day from the time permission is obtained. If you wish to maintain a stop loss instruction beyond the permission period, fresh permission must be obtained via the Code of Ethics System.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.7** **Reporting Requirements** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7.1. Initial
 reporting requirements

All new members of staff are required to disclose all personal securities holdings in which they have any direct or indirect holdings to the Compliance Department, within 10 days of commencing employment. The information provided must be current and no more than 45 days prior to the date the person joined the firm. Initial Code of Ethics Declarations must be submitted to Compliance via the Code of Ethics System.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7.2. Annual
 reporting requirements

Each member of staff is also required to file an annual report disclosing all personal securities holdings by 1 February of each year. The information must be current as of a date no more than 45 days prior to the date the report was submitted. Annual Code of Ethics Declarations must be submitted electronically via the Code of Ethics System. The 'quick guide' video sets out the procedures for <u>submitting an Annual Declaration via the Code of Ethics System.</u>

**Note**: Declarations must include shares owned through an automatic investment plan. Each declaration may also contain a statement declaring that the reporting or recording of any such transaction shall not be construed as an admission that the member of staff making the report has any direct or indirect beneficial ownership in the security. Non–Executive Directors of Baillie Gifford companies are not required to provide initial or annual Code of Ethics Declarations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7.3. Specific
 Requirements for BGA(HK)

Semi-Annual Holdings Disclosure – This requirement applies to all BGA(HK) employees, licenced persons, Managers-in-Charge, Directors, other than non-executive directors and it is in addition to the annual declaration. Each member of staff is required to file a report disclosing all personal securities holdings semi-annually in January and July each year. The information must be current and no more than 45 days prior to the date the report is submitted. Holdings reports must include shares owned through an automatic investment plan. This semi-annual exercise is coordinated and managed by the Compliance Department.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.8** **Summary table of Security Types and Pre-Clearance and Reporting Requirements** 

This list is not all inclusive and may be updated from time to time. Please contact the Compliance Code of Ethics team for guidance as needed or email <u>CodeofEthicsQueries@bailliegifford.com</u>.

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Security Type** | &nbsp;&nbsp;**Covered by<br> Code of<br> Ethics Policy<br> ("Covered<br> Security")?** | &nbsp;&nbsp;**Pre-clearance<br> Required?** | &nbsp;&nbsp;**Include in<br> Code of<br> Ethics<br> Declaration?** |
| &nbsp;&nbsp;Equity securities (publicly traded) | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |

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CODE OF ETHICS 2022

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;Derivatives (futures and options) | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Corporate Bonds | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Government securities | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;BG managed Investment Trusts | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Non-BG managed Investment Trusts | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;BG managed OEICs | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Non-BG managed OEICs, Unit Trusts, mutual funds or other open-end vehicles | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Private companies:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· New issues, IPOs, private placements;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Equity Crowd funding. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Venture Capital Trusts ("VCTs"), Enterprise Investment Scheme ("EIS"), business angel investments. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Spread betting on a covered security | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Spread betting on financial markets or non-financial instruments | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;ETFs ("Exchange traded fund") | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Cash ISAs | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Cryptocurrencies | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Structured Deposits in instruments covered by the Policy, e.g. shares, corporate bonds etc. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Structured Deposits in instruments not covered by the Policy, e.g. indices, exchange rates etc. | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Certificate of Deposit | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Fixed Term Deposit | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Fixed Term Bond | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Peer-to-peer lending | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Default fund(s) investments held within Baillie Gifford's workplace pension (ARC) | &nbsp;&nbsp;No | &nbsp;&nbsp;No | &nbsp;&nbsp;No |
| &nbsp;&nbsp;Covered securities held within Baillie Gifford's workplace pension (ARC) | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Investments within the Baillie Gifford Select SIPP | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Covered securities held within an ISA, SIPP, share plan or Variable Insurance Product. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Covered securities held within a discretionary portfolio management service | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Covered securities acquired as a result of a corporate action\*:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Bonus (or Scrip) issues;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Rights issues;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Takeovers;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Reorganisations;<br> \*w*here the member of staff has no influence over the timing and/or it is a set price (note: any subsequent sale of these securities would require pre-clearance).* | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Sale of nil-paid rights or the part sale of nil-paid rights to fund a partial take up of new shares. | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Free shares acquired as a result of de-mutualisation (note: any subsequent sale of these securities would require pre-clearance). | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes |
| &nbsp;&nbsp;Employee Incentive Share Schemes (Connected Persons):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Putting money aside for the future purchase of shares;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Buying shares at a set date and price;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Any subsequent sale of these shares | &nbsp;&nbsp; <br> No<br> Yes<br> Yes | &nbsp;&nbsp; <br> No<br> No<br> Yes | &nbsp;&nbsp; <br> No<br> Yes<br> Yes |
| &nbsp;&nbsp;Monthly direct debit investments (in covered securities):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Initial monthly investment;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Ongoing monthly investments (if no change to initial instruction);<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Change to initial instruction (increase, decrease, cancel, switch). | &nbsp;&nbsp; <br> Yes<br> Yes<br> Yes | &nbsp;&nbsp; <br> Yes<br> No<br> Yes | &nbsp;&nbsp; <br> Yes<br> Yes<br> Yes |
| &nbsp;&nbsp;Transfer of covered security:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· from one person to another;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· from one product to another;<br> where there is no change to the underlying holding (excluding shares sold to cover fees).<br> \* *you will need to inform Compliance of the new account where the shares will be held.* | &nbsp;&nbsp;Yes | &nbsp;&nbsp;No | &nbsp;&nbsp;Yes\* |

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CODE OF ETHICS 2022

5. Inducements Policy

An area where a conflict of interest may arise is in the context of the giving or receipt of a gift or hospitality which may be viewed as a form of inducement.

Baillie Gifford must take reasonable steps to ensure that it and any person acting on its behalf does not pay or accept any fee or commission or provide or receive any non-monetary benefit if it is likely to conflict to a material extent with any duty that Baillie Gifford owes to its customers or any duty which the recipient firm owes to its customers.

This Inducements Policy sets out the principles and procedures which all members of staff within Baillie Gifford must adhere to with regard to the giving or receipt of a gift or hospitality or anything else which may be viewed as an inducement, such as donations or political contributions.

The overriding principle is that all members of staff should not accept gifts, favours, entertainment, hospitality or other inducements of material value that could be seen as likely to influence their decision-making or make them feel beholden to a person or other firm.

Similarly, Baillie Gifford and its members of staff should not offer gifts, favours, entertainment, hospitality or other inducements of value that could be viewed as overly generous or aimed at influencing decision-making or making the recipient feel beholden to Baillie Gifford or that member of staff.

**Note**: These general principles apply in addition to the more specific guidelines set out below. However, the guidelines do not attempt to cover every situation and must be interpreted in the light of the particular circumstances of each case. If you are in any doubt about any particular situation, you should consult with your Head of Department or the Compliance Department.

The remainder of this policy details the following information:

&nbsp;&nbsp;&nbsp;&nbsp;5.1 Guidelines
 for Gifts & Entertainment, Donations and Political Contributions.

&nbsp;&nbsp;&nbsp;&nbsp;5.2 Restrictions
 in Connection with the Sale of Packaged Products, i.e. OEICs.

&nbsp;&nbsp;&nbsp;&nbsp;5.3 Packaged Products
 Guidance on Reasonable Indirect Benefits

&nbsp;&nbsp;&nbsp;&nbsp;5.4 FINRA Specific
 Requirements for Registered Persons of BGFS

&nbsp;&nbsp;&nbsp;&nbsp;5.5 Specific Requirements
 for BGA(HK)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1** **Guidelines** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.1. Application
 to all staff

The general principles and guidelines apply to all staff within Baillie Gifford irrespective of whether they are in direct contact with clients or potential clients or not.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.2. Application
 to all third parties

Whilst the FCA and CBI requirements relate to managing or minimising conflicts which affect the services provided to our clients and to firms who in turn are advising clients, our principles also apply to other third parties who supply goods or services, whether these are supplied to clients or on the clients' behalf or are supplied to Baillie Gifford itself. This ensures that the standards set are consistently applied by all staff and for all relationships.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.3. No Solicitation

Baillie Gifford expressly prohibits staff from soliciting for themselves or for members of their family or for the firm itself, gifts, hospitality, entertainment or anything of value from a client, potential client, supplier or any other entity with which Baillie Gifford does business (other than fees and expenses properly due and payable).

CODE OF ETHICS 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.4. No Cash
 Gifts

No member of staff may give or accept any financial instruments, including cash gifts to or from a client, potential client, or any entity that does business with or on behalf of Baillie Gifford. This applies equally to the giving or receiving of promotional competition prizes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.5. Donations

As a general rule, no cash donations should be made in connection with our clients or prospective clients. Donations of non-cash prizes are acceptable, providing they meet the criteria in the Inducements policy. Cash donations are more likely to be viewed as giving rise to a conflict and our general policy is that these should be avoided. Any cash donations which are proposed, as an exception to the general rule, should be pre-cleared with the Group Compliance, Legal and Governance Services Director. For example, it may be permissible to make a cash donation to a charity on the death of a long standing contact as a client, although the amount of the donation should be carefully considered.

Please note that this does not affect charitable donations, approved via our Sponsorship Committee, which are not connected with our clients or prospects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.6. Political
 Contributions Policy

Political contributions by financial services firms and their personnel have come under increased regulatory scrutiny in the US. Regulators have expressed concern that some in the financial services industry are inappropriately influencing the awarding of business for state and local government entities by making political contributions to officials holding or running for office. These 'pay-to-play' activities are now restricted by numerous federal, state, and local laws. The Securities and Exchange Commission (SEC) has enacted a pay-to-play rule for investment advisors. This rule restricts the political contributions and political fundraising activities that may be engaged in by investment advisors and their personnel. The consequences for violations of the SEC rule and other state and local laws are significant. In the event of a violation, Baillie Gifford could be prohibited or restricted from doing business with certain government entities.

Given the scale of our activities in the US, the following procedures apply to all staff within Baillie Gifford, irrespective of whether they are in direct contact with clients or potential clients or not, and to their 'connected persons' (see section 4.3 of the Code of Ethics for a definition of connected persons). There will also be additional reporting obligations for US based staff. The requirements are as follows:

1. All members
 of staff are required to obtain preclearance from the Compliance Department before either
 they or a connected person:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· make any political contributions, either directly or indirectly, to US federal, state or local officials; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· participate in any political fund-raising activity in the US.

Preclearance requests should be submitted by email to Baillie Gifford's US based Compliance Counsel and the Code of Ethics Team.

2. All
 members of staff must confirm on an annual basis, that they have disclosed to the Compliance
 Department any political contributions made to US federal, state or local officials and any
 political fund-raising activity in the US. This disclosure will form part of the Annual
 Code of Ethics Declaration that staff submit via the Code of Ethics System.

3. In
 addition to requirement (2) above, US based staff must confirm on a quarterly basis that
 they have disclosed to the Compliance Department any political contributions made to US federal,
 state or local officials and any political fund-raising activity in
 the US. The disclosure should be submitted via the Code of Ethics System upon request from
 the Compliance Department.

4. Upon joining
 the firm, all new members of staff must disclose to the Compliance Department any political
 contributions made to US federal, state or local officials and any political fund-raising
 activity in the US within the previous two years. This disclosure will form part of the existing
 Personal Compliance Responsibilities Certificate that all new staff are required to submit
 upon joining the firm.

Whilst strictly speaking the above requirements apply to US political contributions only, members of staff should also give due consideration to all other political contributions (UK or otherwise) from a general conflict of interest and

CODE OF ETHICS 2022

transparency perspective. Staff should disclose to the Compliance Department, any political contributions that may give rise to an actual conflict of interest, a potential conflict of interest or the perception of one.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.7. De Minimis
 Gifts

Gifts given or received which are of a de minimis nature due to their characteristics or likely cost are unlikely to give grounds for suggestions of undue influence and are therefore exempt. Typical examples of de minimis gifts would include umbrellas, diaries and pens with advertising logos for the donor company.

The Compliance Department should be consulted in any questionable situation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.8. Gifts which
 are not De Minimis

All gifts given or received which are not de minimis must be recorded in the Code of Ethics System. It is generally acceptable for members of staff to retain gifts received that are below £50 in value (or equivalent in another currency), provided this is not with undue frequency. In the case of gifts received above £50 in value (or equivalent in another currency), the member of staff concerned should consult with their Head of Department as to the appropriate course of action. In the majority of cases gifts above £50 (or equivalent in another currency) which are received should be:

&nbsp;&nbsp;&nbsp;&nbsp;· surrendered
 to the Events Team for use for charitable purposes or distribution as part of the firm's
 annual Christmas raffle;

&nbsp;&nbsp;&nbsp;&nbsp;· returned
 to the third party concerned; or

&nbsp;&nbsp;&nbsp;&nbsp;· distributed
 amongst the Department in the case of perishable gifts, e.g. hampers.

Where the member of staff wishes to retain a gift above £50 (or equivalent in another currency), then he or she should pay for the estimated cost of the gift above this limit and this amount should be given to the Finance Department for use for charitable purposes.

Similarly, gifts above £50 in value (or equivalent in another currency) should generally not be given by a member of staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.9. Promotional
 Competition/Prizes

In offering any promotional competition or prizes, the member of staff responsible should:

&nbsp;&nbsp;&nbsp;&nbsp;· consider
 the likely impact or influence the prize would have on the recipient; and

&nbsp;&nbsp;&nbsp;&nbsp;· consult
 with a Partner or the relevant Board on the likely impact of the competition on the brand
 of Baillie Gifford.

In all cases the prize offered should be of reasonable value, i.e. it should not be excessive or inappropriate.

Any competition prizes won by a member of staff at a business-related event, e.g. a conference or seminar, should be recorded for transparency in the Code of Ethics System.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.10. Business
 Lunches/ Dinners

The establishment and maintenance of strong relationships with our clients, suppliers, intermediaries and consultants is integral to our ability to provide effective investment management services. Routine business lunches or dinners are good mechanisms for building and maintaining relationships and are unlikely to give grounds for suggestion of undue influence unless they become overly frequent or are unduly lavish.

Routine business lunches and dinners given do not require to be reported. These should be recorded in Baillie Gifford's expenses system. The Business Expense Claims procedure will provide an adequate control over the magnitude of costs incurred by Baillie Gifford when giving such lunches and dinners.

Many of Baillie Gifford's clients (particularly those covered by ERISA) are subject to specific reporting requirements regarding their acceptance of business lunches and dinners. In order for Baillie Gifford to ensure that it is able to

CODE OF ETHICS 2022

provide clients with their required information, the following additional information should be recorded on the Business Expense Claim Form, with respect to any clients for whom we have hosted a business lunch or dinner:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The
 name of the client being entertained;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The
 names of the individuals being entertained;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The
 total cost of the lunch or dinner.

Generally, routine business lunches and dinners received do not need to be reported. The exception to this is business lunches and dinners received from UK or European financial institution or intermediary that provides advice or portfolio management services to retail clients (UK/EU MiFID firms). Such lunches and dinners do need to be recorded in the Code of Ethics System.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.11. Entertainment/Hospitality
 Given

All members of staff must exercise discretion in offering hospitality. Members of staff should not provide extravagant or excessive entertainment to a client, prospective client, or any person or entity that does or seeks to do business with or on behalf of Baillie Gifford or our clients. Similarly, a member of staff should not provide entertainment to such parties with undue frequency.

With the exception of occasions where the client is a UK/EU MiFID firm (see below), members of staff may provide entertainment or hospitality, such as a dinner (unconnected with business), sporting, charitable or cultural event of reasonable value provided that the person or Baillie Gifford is present at the event. If the person or Baillie Gifford is not present, then the entertainment becomes a gift and the procedures in section 5.1.8 apply, i.e. gifts above £50 (or equivalent in another currency) should generally not be given by a member of staff.

In considering the hospitality or entertainment event, you should note that attending expensive or exclusive sporting or cultural events can draw criticism. Invitations should not be offered if they could be construed as being unusual or risk creating a sense of obligation to the host or bias in their favour.

In situations of any doubt, consult with your Head of Department.

**All entertainment or hospitality must be recorded in the Code of Ethics System.**

In many cases the value of an event will not be clear. Here, you should give your best estimate of the value at the time the decision is taken, considering the street value of the event in the eyes of a third party.

An acceptable minor non-monetary benefit is one which is capable of enhancing the quality of service provided to the client and consists of hospitality of a reasonable de minimis value such as food and drink during a business meeting, conference, seminar or training event. Baillie Gifford have set a de minimis limit of £100 (or equivalent in another currency) per head to allow a reasonable level of hospitality at business events. "Standalone" hospitality that is not directly linked to a business event, e.g. sporting events, is no longer permitted. These restrictions apply to hospitality provided to UK/EU MiFID firms only and not to hospitality provided to UK or Overseas segregated clients or suppliers).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.12. Entertainment/Hospitality
 Received

All members of staff must exercise discretion in accepting hospitality. Members of staff should not accept extravagant or excessive entertainment from a client, prospective client, a business in which Baillie Gifford invests, or any person or entity that does or seeks to do business with or on behalf of Baillie Gifford or our clients. Similarly, a member of staff should not accept entertainment from such parties with undue frequency.

Members of staff may accept entertainment or hospitality, such as a dinner (unconnected with business), sporting, charitable or cultural event of reasonable value provided that the person or firm providing the entertainment is present at the event. If the person or firm is not present, then the entertainment becomes a gift and the procedures in section 5.1.8 apply, i.e. gifts above £50 (or equivalent in another currency) should generally not be accepted by a member of staff.

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It is the policy of the firm not to accept standalone hospitality from broker firms. For this purpose, standalone hospitality would include invitations to and attendance at sporting or cultural events and any associated travel, accommodation, drinks and meals. This policy would not affect routine business lunches or dinners, or reasonable hospitality attached to conferences or other educational events or social events which are distributed widely and of a de minimis nature (i.e. under £100 (or equivalent in another currency) per head). This covers by way of example a broker drinks evening at which the broader asset management community is invited.

In considering the hospitality or entertainment event, you should note that attending expensive or exclusive sporting or cultural events can draw criticism. Invitations should not be accepted if they could be construed as being unusual or risk creating a sense of obligation to the host or bias in their favour.

In situations of any doubt, consult with your Head of Department.

All entertainment or hospitality must be recorded in the Code of Ethics System.

In many cases the value of an event will not be clear. Here, you should give your best estimate of the value at the time the decision is taken, considering the street value of the event in the eyes of a third party.

Do not hesitate to ask the host for further information about the event (e.g. cost) in order to reach a decision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.13. Travel/Accommodation
 Costs

In the case of a member of staff receiving hospitality or entertainment, travel and accommodation costs should be paid for by that member of staff or a request made to the organiser of the event that the individual member of staff be invoiced for these costs. Where the third party has arranged a discounted hotel rate or other reduction in the cost of the accommodation or travel, it is reasonable for the member of staff to accept this reduced rate. Likewise, where the host provides communal transport which is not excessive or unduly lavish, for example the use of a mini bus.

In the case of Baillie Gifford offering hospitality, travel expenses will ordinarily be paid for by the recipient of the entertainment or hospitality. However, there may be occasions where reasonable accommodation costs can be provided by Baillie Gifford subject to this meeting the general principles of this Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.14. Disclosure

A key aspect of Baillie Gifford's Inducements Policy is disclosure. Under our procedures, all gifts (other than de minimis) and hospitality which are given or received are recorded in the Code of Ethics System. Disclosures should be made to your normal gifts and entertainment representatives for Trading, Investors and Clients Department, and Compliance for all other departments.

Likewise, all members of staff should consider if an inducement which has been offered or received should be disclosed to a client, or potential client. This will depend upon the circumstances of each case. As an example, where a fee is paid to a third-party consultant in order to place details of Baillie Gifford on a consultant database, we should disclose this payment to any potential client of the consultant who considers us for an investment mandate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.15. Client
 Specific Code of Ethics Requirements

A small number of Baillie Gifford's clients have specific code of ethics requirements which go beyond Baillie Gifford's Inducements Policy. Members of staff, and Client Contacts in particular, should consider these additional requirements when giving gifts and/or entertainment to these clients.

For record keeping purposes, Compliance maintain a list of clients with specific Code of Ethics requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2** **Restrictions in Connection with the Sale of Package Products, i.e. OEICs** 

If a firm is required to disclose commission (or commission equivalent) (under COBS 6.4) to a client in relation to the sale of a packaged product, a member of staff should not enter into any of the following arrangements:

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&nbsp;&nbsp;&nbsp;&nbsp;· volume
 overrides where commission (or commission equivalent) paid in respect of several transactions
 is more than a simple multiple of the commission (or commission equivalent) payable in respect
 of one transaction of the same kind; and

&nbsp;&nbsp;&nbsp;&nbsp;· an
 agreement to indemnify the payment of commission (or commission equivalent) on terms that
 would or might confer an additional financial benefit on the recipient in the event of the
 commission (or commission equivalent) becoming repayable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.3** **Packaged Products Guidance on Reasonable Indirect Benefits** 

The general principles at the beginning of this section are particularly important in relation to packaged products. Staff must not pay or accept any fee or commission or provide or receive any non-monetary benefit if it is likely to conflict to a material extent with any duty the firm owes to its customers or any duty which the recipient firm (which includes independent intermediaries) owes to its customers.

In relation to the sale of packaged products, we are only able to provide minor non-monetary benefits if they are designed to enhance the quality of service to the client. The list below indicates the kind of benefits that are capable of enhancing the quality of the service provided to a client and, depending on the circumstances, are capable of being given or received without conflicting with client's best interests. However, these need to be considered on a case by case basis.

Benefits are unlikely to give rise to conflicts if they are:

&nbsp;&nbsp;&nbsp;&nbsp;· reasonable
 and proportionate,

&nbsp;&nbsp;&nbsp;&nbsp;· of
 a limited scale and nature,

&nbsp;&nbsp;&nbsp;&nbsp;· do
 not need to be relied upon by the intermediary,

&nbsp;&nbsp;&nbsp;&nbsp;· could
 reasonably not be expected to result in the channelling of business from the intermediary
 to Baillie Gifford, and

&nbsp;&nbsp;&nbsp;&nbsp;· do
 not result in the intermediary recovering more than its reasonable costs.

The list below summarises the kind of reasonable non-monetary benefits which the provider firm can give or receive. This list is summary only and any member of staff should contact the Compliance Department for further guidance before deciding whether to give or accept the benefit (\* = only if available to independent intermediaries generally):

1. Gifts, hospitality
 and promotional competition prizes of a reasonable value. Gifts and corporate hospitality
 given to intermediaries must not exceed an aggregate limit of £1,000 (or equivalent
 in another currency) per intermediary firm, per calendar year. This limit applies to gifts
 and corporate hospitality only and excludes conferences, seminars and training events. For
 large intermediary firms, the £1,000 (or equivalent in another currency) limit can
 be applied at regional office level. In addition, events must be designed for business purposes
 that result in advisers being able to provide a better service to their customers.

2. A
 product provider can assist another firm to promote its packaged products so that the quality
 of its service to clients is enhanced.

Points (3) to (6) in relation to joint marketing exercises:

3. Generic product
 literature (letter heading, leaflets, forms and envelopes) as long as the literature enhances
 the quality of the service to the client and is not primarily of promotional benefit to the
 product provider, and the distribution cost is borne by the intermediary.

4. Freepost envelopes\*

5. Product specific
 literature (for example, key features, minimum information) subject to specific conditions.

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6. Draft articles,
 news items and financial promotions for publication in the intermediary's magazine
 as long as any cost borne by the provider firm is not more than market rate and excludes
 any distribution costs.

7. Take part or
 pay towards the cost of seminars and conferences organised by another firm as long as it
 is:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· For
 a genuine business purpose

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Reasonable
 and proportionate.

Any costs paid should be associated with the level of Baillie Gifford's participation and by reference to the time that Baillie Gifford staff have played an active role. Baillie Gifford should not be paying all an advisory firm's costs incurred in running a seminar or conference.

8. Freephone link
 \*

9. Technical services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Quotations
 and projections relating to its packaged products and advice on completion of forms or other
 documents

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Access
 to data processing facilities or to data related to the firm's business

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Access
 to 3rd party electronic dealing or quotation systems

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Software
 giving information about the firm's packaged products. Any payments to an intermediary
 that go beyond that which is required to operate software supplied by Baillie Gifford would
 not be permitted. Likewise, any payments to develop an intermediary's general IT systems
 would not be permitted.

10. Generic technical
 information in writing, not necessarily related to the firm's business\* or if it is
 of a specialist nature is made available to a particular class of intermediary.

11. Training facilities
 (lectures, venues, written material, software) \*

If Baillie Gifford is giving an advisory firm training on the features and benefits of its products or services, the training should be made reasonably available to all advisory firms that could recommend Baillie Gifford's products, even if only on a first-come, first-served basis.

Please note, that whilst this section applies to packaged products, the arrangements in (12) above can also be applied to our institutional business, although consideration must be given to overseas clients with specific code of ethics requirements on inducements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.4** **FINRA Specific Requirements for Registered Persons of BGFS** 

Registered persons of BGFS are not permitted to give or receive any gifts of value in excess of $100 per individual per year to another FINRA member's registers persons.

Small gifts of less than $100 per year per recipient are aggregated toward the annual gift limit. For further information on BGFS's Gifts and Entertainment policy, please see the BGFS Written Supervisory Procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.5** **Specific Requirements for BGA(HK)** 

Employees and Licensed Representatives of BGA(HK) are bound by the HKD equivalent (on a day to day basis) of all GBP values quoted within this policy.

As such, employees and Licensed Representatives are not permitted to give or receive any gift of value in excess of the HKD equivalent of £50.

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6. Acknowledgement and Certification

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1** **Receipt and Acknowledgement of the Code** 

All members of staff are required to receive a copy of the Code of Ethics and any amendments to the Code of Ethics. All members of staff are required to complete an annual certification, confirming that they have read the Code of Ethics and acknowledging that they are subject to its requirements. Further, all members of staff confirm through the annual certification that they have complied with the Code and that they have disclosed or reported all information required to be disclosed or reported according to the requirements of the Code.

All certifications of receipt of the Code shall be filed with the Compliance Department by submitting a Certificate of Compliance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2** **Annual Report to Baillie Gifford Boards** 

The Group Compliance, Legal and Governance Services Director will prepare and submit to the appropriate Baillie Gifford Boards an annual report which:

&nbsp;&nbsp;&nbsp;&nbsp;· certifies
 that the firm or investment company as appropriate has adopted procedures designed to prevent
 Access Persons from violating the Code;

&nbsp;&nbsp;&nbsp;&nbsp;· identifies
 any violations of the current procedures for personal securities investing and management's
 recommended response; and

&nbsp;&nbsp;&nbsp;&nbsp;· makes
 any recommended changes in the procedures, as appropriate, based on operating experience
 under the Code, evolving industry practices or amendments to applicable laws or regulations.

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Baillie Gifford & Co Head Office

Calton Square, 1 Greenside Row, Edinburgh EH1 3AN

Telephone <sup>+</sup>44 (0)131 275 2000 www.bailliegifford.com