# EDGAR Filing Document

**Accession Number:** 0000904333
**File Stem:** 0000884546-26-000149
**Filing Date:** 2026-4
**Character Count:** 769386
**Document Hash:** 6fea9b9f8f1bd457073b8e47f03e46db
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000884546-26-000149.hdr.sgml**: 20260428

**ACCESSION NUMBER**: 0000884546-26-000149

**CONFORMED SUBMISSION TYPE**: 485BPOS

**PUBLIC DOCUMENT COUNT**: 35

**FILED AS OF DATE**: 20260428

**DATE AS OF CHANGE**: 20260427

**EFFECTIVENESS DATE**: 20260428

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SCHWAB CAPITAL TRUST
- **CENTRAL INDEX KEY:** 0000904333

**ORGANIZATION NAME:**
- **EIN:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031
- **LEGAL ENTITY IDENTIFIER:** 549300PEK1H7N1HLC797

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1940 Act
- **SEC FILE NUMBER:** 811-07704
- **FILM NUMBER:** 26902315

**BUSINESS ADDRESS:**
- **STREET 1:** 425 MARKET STREET
- **STREET 2:** SUITE 1700
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 800-650-9744

**MAIL ADDRESS:**
- **STREET 1:** 425 MARKET STREET
- **STREET 2:** SUITE 1700
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SCHWAB CAPITAL TRUST
- **CENTRAL INDEX KEY:** 0000904333

**ORGANIZATION NAME:**
- **EIN:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031
- **LEGAL ENTITY IDENTIFIER:** 549300PEK1H7N1HLC797

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-62470
- **FILM NUMBER:** 26902314

**BUSINESS ADDRESS:**
- **STREET 1:** 425 MARKET STREET
- **STREET 2:** SUITE 1700
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 800-650-9744

**MAIL ADDRESS:**
- **STREET 1:** 425 MARKET STREET
- **STREET 2:** SUITE 1700
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105

## Series and Classes Contracts Data

### Schwab Monthly Income Fund - Target Payout (Series ID: S000021072)

| Class ID   | Class Name                                 | Ticker Symbol   |
|:---|:---|:---|
| C000059932 | Schwab Monthly Income Fund - Target Payout | SWJRX           |

### Schwab Monthly Income Fund - Flexible Payout (Series ID: S000021073)

| Class ID   | Class Name                                   | Ticker Symbol   |
|:---|:---|:---|
| C000059933 | Schwab Monthly Income Fund - Flexible Payout | SWKRX           |

### Schwab Monthly Income Fund - Income Payout (Series ID: S000021074)

| Class ID   | Class Name                                 | Ticker Symbol   |
|:---|:---|:---|
| C000059934 | Schwab Monthly Income Fund - Income Payout | SWLRX           |

?xml version='1.0' encoding='ASCII'?

As filed with the Securities and Exchange Commission on April 28, 2026

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. 239 ☒

#### and

### REGISTRATION STATEMENT

#### UNDER

#### THE INVESTMENT COMPANY ACT OF 1940

#### Amendment No. 240 ☒

## SCHWAB CAPITAL TRUST

#### (Exact Name of Registrant as Specified in Charter)

#### 425 Market Street, Suite 1700

#### San Francisco, CA 94105

#### (Address of Principal Executive Offices)
(800) 648-5300

#### (Registrant's Telephone Number, including Area Code)

#### Catherine M. MacGregor, Esq.

#### 425 Market Street, Suite 1700

#### San Francisco, CA 94105

#### (Name and Address of Agent for Service)

#### Copies of communications to:

---

| | |
|:---|:---|
| **Douglas P. Dick, Esq.**<br>**Dechert LLP**<br>**1900 K Street, N.W.**<br>**Washington, DC 20006** | **Gregory C. Davis, Esq.**<br>**Ropes & Gray LLP**<br>**Three Embarcadero Center**<br>**San Francisco, CA 94111-4006** |

---

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.

------

---

| | | |
|:---|:---|:---|
| ![](img_30dab9de48b84f2.jpg) | **Prospectus \|**  | April 28, 2026 |
| ![](img_30dab9de48b84f2.jpg) |  |  |
| ![](img_30dab9de48b84f2.jpg) | Schwab Funds<sup>®</sup> | Schwab Funds<sup>®</sup> |

---

## Schwab <sup>®</sup> Monthly Income Funds

---

| | |
|:---|:---|
| Schwab<sup>®</sup> Monthly Income Fund — Target Payout | **SWJRX** |
| Schwab<sup>®</sup> Monthly Income Fund — Flexible Payout | **SWKRX** |
| Schwab<sup>®</sup> Monthly Income Fund — Income Payout | **SWLRX** |

---

<br> 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 Monthly Income Funds

#### **Table of Contents**

---

| | |
|:---|:---|
| &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;&nbsp;&nbsp;&nbsp;[**Fund Summaries**](#xxToc256000000x2) | &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;&nbsp;&nbsp;&nbsp;[**Fund Summaries**](#xxToc256000000x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Schwab Monthly Income Fund – Target Payout](#xxToc256000001x2) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [1](#xxToc256000001x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Schwab Monthly Income Fund – Flexible Payout](#xxToc256000002x2) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [6](#xxToc256000002x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Schwab Monthly Income Fund – Income Payout](#xxToc256000003x2) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [11](#xxToc256000003x2) |
| &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;&nbsp;&nbsp;&nbsp;[**About the Funds**](#xxToc256000004x2) | [16](#xxToc256000004x2) |
| &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;&nbsp;&nbsp;&nbsp;[**Fund Details**](#xxToc256000005x2) | [17](#xxToc256000005x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Portfolio Holdings](#xxToc256000006x2) | [25](#xxToc256000006x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Financial Highlights](#xxToc256000007x2) | [26](#xxToc256000007x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[The Funds' Investments in Asset Classes and Sub-Asset Classes](#xxToc256000008x2) | [29](#xxToc256000008x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Description of Underlying Funds](#xxToc256000009x2) | [30](#xxToc256000009x2) |
| &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;&nbsp;&nbsp;&nbsp;[**Fund Management**](#xxToc256000010x2) | [33](#xxToc256000010x2) |
| &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;&nbsp;&nbsp;&nbsp;[**Investing in the Funds**](#xxToc256000011x2) | [34](#xxToc256000011x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investing Through a Financial Intermediary](#xxToc256000012x2) | [34](#xxToc256000012x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investing Directly with the Funds](#xxToc256000013x2) | [35](#xxToc256000013x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Share Price](#xxToc256000014x2) | [35](#xxToc256000014x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Additional Policies Affecting Your Investment](#xxToc256000015x2) | [35](#xxToc256000015x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Distributions and Taxes](#xxToc256000016x2) | [38](#xxToc256000016x2) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Additional Information About the Funds' Composite Indices](#xxToc256000017x2) | [40](#xxToc256000017x2) |

---

------

---

| |
|:---|
| Schwab<sup>®</sup> Monthly Income Fund — Target Payout |
| **Ticker Symbol: SWJRX** |

---

**Investment Objective**

The fund seeks to provide current income and, as a secondary investment objective, 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)** | **Shareholder Fees (fees paid directly from your investment)** |  |
| **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)** | **Annual Fund Operating Expenses (expenses that you pay each year as a % <br> of the value of your investment)** |
| Management Fees | Management Fees |  |
| Distribution (12b-1) fees  | Distribution (12b-1) fees  |  |
| Other Expenses | Other Expenses | 0.19 |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.21 |
| *Total annual fund operating expenses<sup>(1)</sup>* | *Total annual fund operating expenses<sup>(1)</sup>* | 0.40 |
| Less expense reduction | Less expense reduction | (0.19) |
| **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | 0.21  |
| <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. | 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** |  |  |
| **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| $22 | $68 | $118 | $268 |

---

#### 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**

The fund seeks to achieve its investment objective by investing primarily in a combination of Schwab Funds<sup>®</sup> and Schwab<sup>®</sup> ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, and money market funds and exchange-traded funds (ETFs).

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed income securities as well as other unaffiliated mutual funds or ETFs, and cash and cash equivalents (including money market funds).

The fund intends to allocate investments among various asset classes such as equity, fixed income and cash and cash equivalents (including money market funds). The fund has its own distinct asset allocation strategy that is designed to accommodate the fund's targeted annual payout percentage while taking into account the fund's specific risk tolerances and desired level of capital appreciation. The fund's target asset allocation is not fixed, and the fund has the flexibility to move within the following asset allocation ranges (under normal market conditions) at the discretion of the investment adviser: 30%-70% equity; 30%-70% fixed income; and 0%-12% cash and cash equivalents (including money market funds). Market appreciation or depreciation may cause the fund to be temporarily outside these ranges.

The fund is designed to offer shareholders an annual payout of approximately 5% during most market environments. However, the fund's actual annual payout could be higher or lower based on the market environment during that year. The fund intends to make twelve monthly distributions to shareholders at the end of each month. The amounts distributed to shareholders may not be the same each month. The amount of the fund's distributions in respect of any period may exceed the amount of the fund's income and gains for that period. In that case, some or all of the fund's distributions may constitute a return of capital to shareholders.

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

<br> Schwab Monthly Income Fund — Target Payout \| Fund Summary 1

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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:

**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, tariffs, 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.

**Structural Risk** — The fund's monthly income payments will be made from fund assets and will reduce the amount of assets available for investment by the fund. Even if the fund's capital grows over time, such growth may be insufficient to enable the fund to maintain the amount of its targeted annual payout and targeted monthly income payments. The fund's investment losses may reduce the amount of future cash income payments an investor will receive from the fund. The dollar amount of the fund's monthly income payments could vary substantially from one year to the next and over time depending on several factors, including the performance of the financial markets in which the fund invests, the allocation of fund assets across different asset classes and investments, the performance of the fund's investment strategies, and the amount and timing of prior distributions by the fund. It is also possible for payments to go down substantially from one year to the next and over time depending on the timing of an investor's investments in the fund. Any redemptions will proportionately reduce the amount of future cash income payments to be received from the fund. There is no guarantee that the fund will make monthly income payments to its shareholders or, if made, that the fund's monthly income payments to shareholders will remain at a fixed amount.

**Managed Payout Risk** — Because the fund is expected to make monthly payments regardless of investment performance, the amount of the fund's distributions in respect of any period often will exceed the amount of the fund's income and gains for that period. In that case, some or all of the fund's distributions may constitute a return of capital to shareholders. It is possible for the fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its payments to shareholders under the managed payout policy. In addition, in order to make the payments called for under the fund's managed payout policy, the fund may have to sell portfolio securities at a time when it would not otherwise do so.

A return of capital distribution generally will not be taxable but will decrease the shareholder's cost basis in the shares of the fund and will result in a higher capital gain or lower capital loss when those shares on which the distribution was received are sold. Once a shareholder's cost basis is reduced to zero, further distributions will be treated as capital gain, if the shareholder holds shares of the fund as capital assets. A distribution constituting a return of capital is not a distribution of income or capital gains earned by the fund, and should not be confused with the fund's "yield" or "income."

**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.

**Portfolio Turnover Risk** — High portfolio turnover may result in the fund paying higher levels of transaction costs and may generate greater tax liabilities for shareholders. Portfolio turnover risk may cause the fund's performance to be less than expected.

**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.

<br> 2 Schwab Monthly Income Fund — Target Payout \| Fund Summary

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• ***Management Risk*** — Certain underlying funds may be an actively managed mutual fund. Any actively managed mutual fund is subject to the risk that its investment adviser (or sub-adviser(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.

• ***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.

• ***Concentration Risk*** — To the extent that an underlying fund's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector 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 or asset class.

• ***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.

• ***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 or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged, resulting in the dollar value of an underlying fund's investment being adversely affected.

• ***High-Yield Risk*** — An underlying fund's investments in high-yield securities and unrated securities of similar credit quality (junk bonds) are subject to greater levels of credit and liquidity risks, and may be more volatile than higher-rated securities. High-yield securities are considered predominately speculative with respect to the issuer's continuing ability to make principal and interest payments.

• ***Floating Rate Loan Risk*** — Transactions involving floating rate loans may have significantly longer settlement periods than more traditional bond investments (settlement can take longer than 7 days) and often involve borrowers whose financial condition is troubled or highly leveraged, which increases the risk that the underlying fund may not receive its proceeds in a timely manner and that the underlying fund may incur unexpected losses in order to pay redemption proceeds to its shareholders. In addition, loans are not registered or regulated under the federal securities laws like most stocks and bonds, so investors in loans have less protection against improper practices than investors in registered securities. While a loan assignment typically transfers all legal and economic rights to the buyer, a loan participation typically allows the seller to maintain legal title to the loan, meaning the buyer of a loan participation generally has no direct rights against the borrower and is exposed to credit risk of both the borrower and seller of the participation.

• ***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.

• ***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

<br> Schwab Monthly Income Fund — Target Payout \| Fund Summary 3

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securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• ***Money Market Fund Risk*** — The fund may invest in underlying money market funds that seek to maintain a stable $1.00 net asset value. Although an underlying 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. In addition, money market funds are not designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares under certain circumstances.

• ***Tracking Error and Correlation Risk*** — An underlying fund may seek to track the performance of its benchmark index, although it may not be successful in doing so. Further, there can be no guarantee that the underlying fund will achieve a high degree of correlation between the underlying fund's performance and that of its index. The correlation between the performance of an underlying fund and that of its benchmark 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.

• ***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.

• ***Exchange-Traded Fund (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.

• ***Securities Lending Risk*** — Certain underlying funds engage in securities lending, which 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.

• ***Real Estate Investment Risk*** — An underlying fund in which the fund may invest may have a policy of concentrating its investments in real estate companies and companies related to the real estate industry. As such, an underlying fund is subject to risks associated with the direct ownership of real estate securities and the fund's investment in such an underlying fund is subject to risks associated with the direct ownership of real estate securities and an investment in the underlying fund will be closely linked to the performance of the real estate markets. 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.

• ***Real Estate Investment Trusts (REITs) Risk*** — An underlying fund may invest in REITs. An underlying 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, 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 may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

• ***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 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/prospectus.**

On September 12, 2022, the fund's investment strategy changed. The performance history of the fund prior to that date is attributable to the former investment strategy.

**Annual Total Returns** (%) as of 12/31<br>

![PerformanceBarChartData(2016:4.58, 2017:10.8, 2018:-6.31, 2019:16.41, 2020:5.32, 2021:9.23, 2022:-12.85, 2023:8.58, 2024:4.0292527, 2025:12.172722)](img_971b3d4e366e4f2.jpg)

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| |
|:---|
| **Best Quarter:** 8.86% Q2 2020 |
| **Worst Quarter:** (12.37%) Q1 2020 |

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<br> 4 Schwab Monthly Income Fund — Target Payout \| Fund Summary

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| | | | | |
|:---|:---|:---|:---|:---|
| **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** |  |  |
|  |  | **1 Year** | **5 Years** | **10 Years** |
| Before taxes | Before taxes | 12.17% | 3.82% | 4.85% |
| After taxes on distributions | After taxes on distributions | 10.51% | 2.24% | 3.39% |
| After taxes on distributions and sale | After taxes on distributions and sale |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | 7.56% | 2.48% | 3.35% |
| **Comparative Indices (reflects no** | **Comparative Indices (reflects no** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) |  |  |  |
| S&P 500<sup>®</sup> Index | S&P 500<sup>®</sup> Index | 17.88% | 14.42% | 14.82% |
| Bloomberg US Aggregate Bond Index | Bloomberg US Aggregate Bond Index | 7.30% | (0.36%) | 2.01% |
| Target Payout Composite Index<sup>(1)</sup> | Target Payout Composite Index<sup>(1)</sup> | 11.66% | 3.79% | 5.86% |
| <sup>(1)</sup> | The Target Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Target Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Target Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Target Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. |

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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<sup>®</sup>

**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.

**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). In addition, due to the nature of its managed payout program, the fund may make distributions that are treated as a return of capital. Shareholders who receive periodic distributions consisting of a return of capital may be under the impression that they are receiving net profits when they are not. A return of capital is a distribution from the shareholder's investment principal, rather than net profits from the fund's returns. Shareholders should not assume that the source of a distribution from the fund is net profit.

**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.

<br> Schwab Monthly Income Fund — Target Payout \| Fund Summary 5

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| |
|:---|
| Schwab<sup>®</sup> Monthly Income Fund — Flexible Payout |
| **Ticker Symbol: SWKRX** |

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**Investment Objective**

The fund seeks to provide current income and, as a secondary investment objective, 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.**

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| | | |
|:---|:---|:---|
| **Shareholder Fees (fees paid directly from your investment)** | **Shareholder Fees (fees paid directly from your investment)** |  |
| **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)** | **Annual Fund Operating Expenses (expenses that you pay each year as a % <br> of the value of your investment)** |
| Management Fees | Management Fees |  |
| Distribution (12b-1) fees  | Distribution (12b-1) fees  |  |
| Other Expenses | Other Expenses | 0.12 |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.21 |
| *Total annual fund operating expenses<sup>(1)</sup>* | *Total annual fund operating expenses<sup>(1)</sup>* | 0.33 |
| Less expense reduction | Less expense reduction | (0.12) |
| **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | 0.21  |
| <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. | 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. |

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#### 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** |  |  |
| **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| $22 | $68 | $118 | $268 |

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#### 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 25% 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 Schwab Funds<sup>®</sup> and Schwab<sup>®</sup> ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, and money market funds and exchange-traded funds (ETFs).

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed income securities as well as other unaffiliated mutual funds or ETFs, and cash and cash equivalents (including money market funds).

The fund intends to allocate investments among various asset classes such as equity, fixed income and cash and cash equivalents (including money market funds). The fund has its own distinct asset allocation strategy that is designed to accommodate the fund's targeted annual payout percentage while taking into account the fund's specific risk tolerances and desired level of capital appreciation. The fund's target asset allocation is not fixed, and the fund has the flexibility to move within the following asset allocation ranges (under normal market conditions) at the discretion of the investment adviser: 30%-70% equity; 30%-70% fixed income; and 0%-12% cash and cash equivalents (including money market funds). Market appreciation or depreciation may cause the fund to be temporarily outside these ranges.

The fund is designed to offer shareholders an annual payout of 4-6% during most market environments. In addition, the fund seeks to maximize the annual payout while also maintaining or growing the level of investment over the long term. However, the fund's actual annual payout could be higher or lower based on the underlying fund yields and market environment during that year and other forward-looking factors. The fund intends to make twelve monthly distributions to shareholders at the end of each month. The amounts distributed to shareholders may not be the same each month. The amount of the fund's distributions in respect of any period may exceed the amount of the fund's income and gains for that period. In that case, some or all of the fund's distributions may constitute a return of capital to shareholders.

<br> 6 Schwab Monthly Income Fund — Flexible Payout \| Fund Summary

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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 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:

**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, tariffs, 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.

**Structural Risk** — The fund's monthly income payments will be made from fund assets and will reduce the amount of assets available for investment by the fund. Even if the fund's capital grows over time, such growth may be insufficient to enable the fund to maintain the amount of its targeted annual payout and targeted monthly income payments. The fund's investment losses may reduce the amount of future cash income payments an investor will receive from the fund. The dollar amount of the fund's monthly income payments could vary substantially from one year to the next and over time depending on several factors, including the performance of the financial markets in which the fund invests, the allocation of fund assets across different asset classes and investments, the performance of the fund's investment strategies, and the amount and timing of prior distributions by the fund. It is also possible for payments to go down substantially from one year to the next and over time depending on the timing of an investor's investments in the fund. Any redemptions will proportionately reduce the amount of future cash income payments to be received from the fund. There is no guarantee that the fund will make monthly income payments to its shareholders or, if made, that the fund's monthly income payments to shareholders will remain at a fixed amount.

**Managed Payout Risk** — Because the fund is expected to make monthly payments regardless of investment performance, the amount of the fund's distributions in respect of any period often will exceed the amount of the fund's income and gains for that period. In that case, some or all of the fund's distributions may constitute a return of capital to shareholders. It is possible for the fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its payments to shareholders under the managed payout policy. In addition, in order to make the payments called for under the fund's managed payout policy, the fund may have to sell portfolio securities at a time when it would not otherwise do so.

A return of capital distribution generally will not be taxable but will decrease the shareholder's cost basis in the shares of the fund and will result in a higher capital gain or lower capital loss when those shares on which the distribution was received are sold. Once a shareholder's cost basis is reduced to zero, further distributions will be treated as capital gain, if the shareholder holds shares of the fund as capital assets. A distribution constituting a return of capital is not a distribution of income or capital gains earned by the fund, and should not be confused with the fund's "yield" or "income."

**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.

**Portfolio Turnover Risk** — High portfolio turnover may result in the fund paying higher levels of transaction costs and may generate greater tax liabilities for shareholders. Portfolio turnover risk may cause the fund's performance to be less than expected.

**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

<br> Schwab Monthly Income Fund — Flexible Payout \| Fund Summary 7

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is no guarantee that an underlying fund will be able to achieve its objective.

• ***Management Risk*** — Certain underlying funds may be an actively managed mutual fund. Any actively managed mutual fund is subject to the risk that its investment adviser (or sub-adviser(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.

• ***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.

• ***Concentration Risk*** — To the extent that an underlying fund's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector 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 or asset class.

• ***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.

• ***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 or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged, resulting in the dollar value of an underlying fund's investment being adversely affected.

• ***High-Yield Risk*** — An underlying fund's investments in high-yield securities and unrated securities of similar credit quality (junk bonds) are subject to greater levels of credit and liquidity risks, and may be more volatile than higher-rated securities. High-yield securities are considered predominately speculative with respect to the issuer's continuing ability to make principal and interest payments.

• ***Floating Rate Loan Risk*** — Transactions involving floating rate loans may have significantly longer settlement periods than more traditional bond investments (settlement can take longer than 7 days) and often involve borrowers whose financial condition is troubled or highly leveraged, which increases the risk that the underlying fund may not receive its proceeds in a timely manner and that the underlying fund may incur unexpected losses in order to pay redemption proceeds to its shareholders. In addition, loans are not registered or regulated under the federal securities laws like most stocks and bonds, so investors in loans have less protection against improper practices than investors in registered securities. While a loan assignment typically transfers all legal and economic rights to the buyer, a loan participation typically allows the seller to maintain legal title to the loan, meaning the buyer of a loan participation generally has no direct rights against the borrower and is exposed to credit risk of both the borrower and seller of the participation.

• ***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.

• ***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

<br> 8 Schwab Monthly Income Fund — Flexible Payout \| Fund Summary

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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.

• ***Money Market Fund Risk*** — The fund may invest in underlying money market funds that seek to maintain a stable $1.00 net asset value. Although an underlying 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. In addition, money market funds are not designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares under certain circumstances.

• ***Tracking Error and Correlation Risk*** — An underlying fund may seek to track the performance of its benchmark index, although it may not be successful in doing so. Further, there can be no guarantee that the underlying fund will achieve a high degree of correlation between the underlying fund's performance and that of its index. The correlation between the performance of an underlying fund and that of its benchmark 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.

• ***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.

• ***Exchange-Traded Fund (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.

• ***Securities Lending Risk*** — Certain underlying funds engage in securities lending, which 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.

• ***Real Estate Investment Risk*** — An underlying fund in which the fund may invest may have a policy of concentrating its investments in real estate companies and companies related to the real estate industry. As such, an underlying fund is subject to risks associated with the direct ownership of real estate securities and the fund's investment in such an underlying fund is subject to risks associated with the direct ownership of real estate securities and an investment in the underlying fund will be closely linked to the performance of the real estate markets. 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.

• ***Real Estate Investment Trusts (REITs) Risk*** — An underlying fund may invest in REITs. An underlying 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, 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 may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

• ***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 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/prospectus.**

On September 12, 2022, the fund's investment strategy changed. The performance history of the fund prior to that date is attributable to the former investment strategy.

<br> Schwab Monthly Income Fund — Flexible Payout \| Fund Summary 9

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**Annual Total Returns** (%) as of 12/31<br>

![PerformanceBarChartData(2016:3.69, 2017:8.19, 2018:-4.2, 2019:13.79, 2020:6.11, 2021:5.73, 2022:-12.5, 2023:8.5, 2024:4.0460087, 2025:12.1356228)](img_3e3d5d2977984f2.jpg)

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| |
|:---|
| **Best Quarter:** 8.64% Q4 2023 |
| **Worst Quarter:** (7.69%) Q1 2020 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** |  |  |
|  |  | **1 Year** | **5 Years** | **10 Years** |
| Before taxes | Before taxes | 12.14% | 3.21% | 4.27% |
| After taxes on distributions | After taxes on distributions | 10.49% | 1.65% | 2.86% |
| After taxes on distributions and sale | After taxes on distributions and sale |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | 7.53% | 2.00% | 2.87% |
| **Comparative Indices (reflects no** | **Comparative Indices (reflects no** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) |  |  |  |
| S&P 500<sup>®</sup> Index | S&P 500<sup>®</sup> Index | 17.88% | 14.42% | 14.82% |
| Bloomberg US Aggregate Bond Index | Bloomberg US Aggregate Bond Index | 7.30% | (0.36%) | 2.01% |
| Flexible Payout Composite Index<sup>(1)</sup> | Flexible Payout Composite Index<sup>(1)</sup> | 11.66% | 3.19% | 5.01% |
| <sup>(1)</sup> | The Flexible Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Flexible Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Flexible Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Flexible Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. |

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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<sup>®</sup>

**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.

**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). In addition, due to the nature of its managed payout program, the fund may make distributions that are treated as a return of capital. Shareholders who receive periodic distributions consisting of a return of capital may be under the impression that they are receiving net profits when they are not. A return of capital is a distribution from the shareholder's investment principal, rather than net profits from the fund's returns. Shareholders should not assume that the source of a distribution from the fund is net profit.

**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.

<br> 10 Schwab Monthly Income Fund — Flexible Payout \| Fund Summary

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| |
|:---|
| Schwab<sup>®</sup> Monthly Income Fund — Income Payout |
| **Ticker Symbol: SWLRX** |

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**Investment Objective**

The fund seeks to provide current income and, as a secondary investment objective, 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.**

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| | | |
|:---|:---|:---|
| **Shareholder Fees (fees paid directly from your investment)** | **Shareholder Fees (fees paid directly from your investment)** |  |
| **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)** | **Annual Fund Operating Expenses (expenses that you pay each year as a % <br> of the value of your investment)** |
| Management Fees | Management Fees |  |
| Distribution (12b-1) fees  | Distribution (12b-1) fees  |  |
| Other Expenses | Other Expenses | 0.13 |
| Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | Acquired fund fees and expenses (AFFE)<sup>(1)</sup> | 0.18 |
| *Total annual fund operating expenses<sup>(1)</sup>* | *Total annual fund operating expenses<sup>(1)</sup>* | 0.31 |
| Less expense reduction | Less expense reduction | (0.13) |
| **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | **Total annual fund operating expenses (including AFFE) after expense reduction<sup>(1)(2)</sup>** | 0.18  |
| <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. | 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. |

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#### 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** |  |  |
| **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| $18 | $58 | $101 | $230 |

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#### 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 25% 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 Schwab Funds<sup>®</sup> and Schwab<sup>®</sup> ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, and money market funds and exchange-traded funds (ETFs).

The fund intends to invest in a combination of underlying funds; however, the fund may invest directly in equity and fixed income securities as well as other unaffiliated mutual funds or ETFs, and cash and cash equivalents (including money market funds).

The fund intends to allocate investments among various asset classes such as equity, fixed income and cash and cash equivalents (including money market funds). The fund has its own distinct asset allocation strategy that is designed to accommodate the fund's annual payout percentage while taking into account the fund's specific risk tolerances and desired level of capital appreciation. The fund's target asset allocation is not fixed, and the fund has the flexibility to move within the following asset allocation ranges (under normal market conditions) at the discretion of the investment adviser: 10%-50% equity; 50%-90% fixed income; and 0%-12% cash and cash equivalents (including money market funds). Market appreciation or depreciation may cause the fund to be temporarily outside these ranges.

The fund is designed to offer shareholders an annual payout based on underlying fund yields and the market environment. The fund's anticipated annual payout is expected to be 0-3% during a low interest rate environment, 3-5% during a normal interest rate environment, and 5+% during a high interest rate environment. However, the fund's actual annual payout could be higher or lower based on the interest rate environment and other market factors occurring during that year. The fund intends to make twelve monthly distributions to shareholders at the end of each month. The fund seeks to keep the monthly payout as consistent as possible. However, the amounts distributed to shareholders may not be the same each month. Although it cannot be guaranteed by the fund, the fund does not expect to make distributions that will be treated as return of capital.

<br> Schwab Monthly Income Fund — Income Payout \| Fund Summary 11

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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 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:

**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, tariffs, 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.

**Structural Risk** — The fund's monthly income payments will be made from fund assets and will reduce the amount of assets available for investment by the fund. Even if the fund's capital grows over time, such growth may be insufficient to enable the fund to maintain the amount of its targeted annual payout and targeted monthly income payments. The fund's investment losses may reduce the amount of future cash income payments an investor will receive from the fund. The dollar amount of the fund's monthly income payments could vary substantially from one year to the next and over time depending on several factors, including the performance of the financial markets in which the fund invests, the allocation of fund assets across different asset classes and investments, the performance of the fund's investment strategies, and the amount and timing of prior distributions by the fund. It is also possible for payments to go down substantially from one year to the next and over time depending on the timing of an investor's investments in the fund. Any redemptions will proportionately reduce the amount of future cash income payments to be received from the fund. There is no guarantee that the fund will make monthly income payments to its shareholders or, if made, that the fund's monthly income payments to shareholders will remain at a fixed amount.

**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.

**Portfolio Turnover Risk** — High portfolio turnover may result in the fund paying higher levels of transaction costs and may generate greater tax liabilities for shareholders. Portfolio turnover risk may cause the fund's performance to be less than expected.

**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*** — Certain underlying funds may be an actively managed mutual fund. Any actively managed mutual fund is subject to the risk that its investment adviser (or sub-adviser(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.

• ***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

<br> 12 Schwab Monthly Income Fund — Income Payout \| Fund Summary

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other types of investments, an underlying fund's performance could be impacted.

• ***Concentration Risk*** — To the extent that an underlying fund's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector 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 or asset class.

• ***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.

• ***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 or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged, resulting in the dollar value of an underlying fund's investment being adversely affected. These risks may be heightened in connection with investments in emerging markets or securities of issuers that conduct their business in emerging markets.

• ***High-Yield Risk*** — An underlying fund's investments in high-yield securities and unrated securities of similar credit quality (junk bonds) are subject to greater levels of credit and liquidity risks, and may be more volatile than higher-rated securities. High-yield securities are considered predominately speculative with respect to the issuer's continuing ability to make principal and interest payments.

• ***Floating Rate Loan Risk*** — Transactions involving floating rate loans may have significantly longer settlement periods than more traditional bond investments (settlement can take longer than 7 days) and often involve borrowers whose financial condition is troubled or highly leveraged, which increases the risk that the underlying fund may not receive its proceeds in a timely manner and that the underlying fund may incur unexpected losses in order to pay redemption proceeds to its shareholders. In addition, loans are not registered or regulated under the federal securities laws like most stocks and bonds, so investors in loans have less protection against improper practices than investors in registered securities. While a loan assignment typically transfers all legal and economic rights to the buyer, a loan participation typically allows the seller to maintain legal title to the loan, meaning the buyer of a loan participation generally has no direct rights against the borrower and is exposed to credit risk of both the borrower and seller of the participation.

• ***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.

• ***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.

• ***Money Market Fund Risk*** — The fund may invest in underlying money market funds that seek to maintain a stable $1.00 net asset value. Although an underlying 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. In addition, money market funds are not designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares under certain circumstances.

• ***Tracking Error and Correlation Risk*** — An underlying fund may seek to track the performance of its benchmark index, although it may not be successful in doing so. Further, there can be no guarantee that the underlying fund will achieve a high degree of correlation between the underlying fund's performance and

<br> Schwab Monthly Income Fund — Income Payout \| Fund Summary 13

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that of its index. The correlation between the performance of an underlying fund and that of its benchmark 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.

• ***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.

• ***Exchange-Traded Fund (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.

• ***Securities Lending Risk*** — Certain underlying funds engage in securities lending, which 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.

• ***Real Estate Investment Risk*** — An underlying fund in which the fund may invest may have a policy of concentrating its investments in real estate companies and companies related to the real estate industry. As such, an underlying fund is subject to risks associated with the direct ownership of real estate securities and the fund's investment in such an underlying fund is subject to risks associated with the direct ownership of real estate securities and an investment in the underlying fund will be closely linked to the performance of the real estate markets. 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.

• ***Real Estate Investment Trusts (REITs) Risk*** — An underlying fund may invest in REITs. An underlying 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, 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 may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

• ***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 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/prospectus.**

On September 12, 2022, the fund's investment strategy changed. The performance history of the fund prior to that date is attributable to the former investment strategy.

**Annual Total Returns** (%) as of 12/31<br>

![PerformanceBarChartData(2016:2.97, 2017:5.64, 2018:-2.31, 2019:11.18, 2020:6.93, 2021:2.33, 2022:-12.5, 2023:7.81, 2024:3.9708444, 2025:9.8457087)](img_c0568a85c9944f2.jpg)

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| |
|:---|
| **Best Quarter:** 7.80% Q4 2023 |
| **Worst Quarter:** (6.46%) Q3 2022 |

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<br> 14 Schwab Monthly Income Fund — Income Payout \| Fund Summary

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| | | | | |
|:---|:---|:---|:---|:---|
| **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** | **Average Annual Total Returns as of 12/31/25** |  |  |
|  |  | **1 Year** | **5 Years** | **10 Years** |
| Before taxes | Before taxes | 9.85% | 1.97% | 3.37% |
| After taxes on distributions | After taxes on distributions | 8.02% | 0.50% | 2.05% |
| After taxes on distributions and sale | After taxes on distributions and sale |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of shares | 6.04% | 1.00% | 2.12% |
| **Comparative Indices (reflects no** | **Comparative Indices (reflects no** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deduction for fees, expenses, or <br> taxes) |  |  |  |
| S&P 500<sup>®</sup> Index | S&P 500<sup>®</sup> Index | 17.88% | 14.42% | 14.82% |
| Bloomberg US Aggregate Bond Index | Bloomberg US Aggregate Bond Index | 7.30% | (0.36%) | 2.01% |
| Income Payout Composite Index<sup>(1)</sup> | Income Payout Composite Index<sup>(1)</sup> | 9.67% | 2.00% | 3.83% |
| <sup>(1)</sup> | The Income Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 4.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 5.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Income Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 4.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 5.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Income Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 4.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 5.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. | The Income Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 4.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 5.0% Morningstar LSTA US Performing Loans Index. Prior to April 29, 2025, the index had a different composition. See "Additional Information About the Funds' Composite Indices" for additional detail. |

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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<sup>®</sup>

**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.

**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.

<br> Schwab Monthly Income Fund — Income Payout \| Fund Summary 15

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About the Funds

The Schwab Monthly Income Funds (the funds) share the same investment approach: each seeks to achieve its investment objective by investing primarily in a combination of Schwab Funds<sup>®</sup> and Schwab<sup>®</sup> ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, money market funds, and exchange-traded funds (ETFs). The funds are designed to generate monthly income payments and appreciate capital over the long term. The funds may be appropriate for investors who are seeking monthly income payments and who are willing to accept the risks associated with the funds' asset allocation strategies. Because the funds invest in other funds, each fund is considered a "fund of funds."

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. In particular, the funds may be appropriate for investors seeking current income and the opportunity for future growth potential.

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| | |
|:---|:---|
| **Schwab Monthly Income Fund – Target Payout:** | The fund is designed to offer shareholders an annual payout of approximately 5% during most market environments. |
| **Schwab Monthly Income Fund – Flexible Payout:** | The fund is designed to offer shareholders an annual payout of 4-6% during most market environments and seeks to maximize annual payout while also maintaining or growing the level of the investment over the long term. |
| **Schwab Monthly Income Fund – Income Payout:** | The fund is designed to offer shareholders an annual payout based on underlying fund yields and the market environment. The fund's anticipated annual payout is expected to be 0-3% during a low interest rate environment, 3-5% during a normal interest rate environment, and 5+% during a high interest rate environment. |

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A fund reserves the right to modify its targeted annual payout should circumstances warrant a change.

#### Who may want to invest in the funds?
The funds may be a suitable investment for investors:

• seeking funds that combine the potential for income and capital appreciation

• seeking 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

<br> 16 Schwab Monthly Income Funds \| About the Funds

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Fund Details

#### Investment Objectives
Each fund seeks to provide current income and, as a secondary investment objective, capital appreciation.

Except with respect to the Schwab Monthly Income Fund — Flexible Payout, each fund's investment objective is not fundamental and therefore may be changed by the fund's board of trustees without shareholder approval.

#### Investment Strategies
Each fund seeks to achieve its investment objective by investing primarily in a combination of Schwab Funds<sup>®</sup> and Schwab<sup>®</sup> ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, money market funds, and ETFs.

Each fund intends to invest in a combination of underlying funds; however, each fund may invest directly in equity and fixed income securities as well as other unaffiliated mutual funds or ETFs, and cash and cash equivalents (including money market funds).

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.

#### Description of Asset Allocation Strategies
Each fund intends to allocate investments among various asset classes such as equity, fixed income, cash and cash equivalents (including money market funds). Each fund has its own distinct asset allocation strategy that is designed to accommodate the fund's targeted annual payout percentage while taking into account the fund's specific risk tolerances and desired level of capital appreciation.

Each fund's target asset allocation is not fixed, and each fund has the flexibility to move within the asset allocation ranges set forth below at the discretion of the investment adviser:

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| | | | |
|:---|:---|:---|:---|
| **Asset Class (Target Allocation Range — Under Normal Market Conditions)\*** | | | |
| **Fund** | **Equity** | **Fixed Income** | **Cash and Cash Equivalents** |
| Schwab Monthly Income Fund – Target Payout | 30%-70 | 30%-70 | 0%-12 |
| Schwab Monthly Income Fund – Flexible Payout | 30%-70 | 30%-70 | 0%-12 |
| Schwab Monthly Income Fund – Income Payout | 10%-50 | 50%-90 | 0%-12 |

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\* Market appreciation or depreciation may cause a fund to be temporarily outside the ranges identified in the table.

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| | |
|:---|:---|
| **Description of Distribution Goals** | |
| Each fund's distribution goal is to provide a targeted annual payout of income to shareholders. The targeted annual payout for each fund is as follows: | Each fund's distribution goal is to provide a targeted annual payout of income to shareholders. The targeted annual payout for each fund is as follows: |
|  | **Targeted Annual Payout** |
| Schwab Monthly Income Fund – Target Payout | 5% |
| Schwab Monthly Income Fund – Flexible Payout | 4%-6 |
| Schwab Monthly Income Fund – Income Payout | 3%-5 |

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A fund's actual annual payout could be higher or lower than the targeted annual payout based on market environment during that year.

As mentioned above, each fund's actual annual payout may be higher or lower than the fund's targeted annual payout. There is no guarantee that a fund will be able to achieve its distribution goal during any given year. In addition to the interest rate environment discussed above, a fund's actual annual payout could also be affected by a number of other factors, including, without limitation, the performance of the financial markets in which the fund invests, the allocation of fund assets across different asset classes and investments, the performance of the fund's investment strategies, and the amount and timing of prior distributions by the fund.

<br> Schwab Monthly Income Funds \| Fund Details 17

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These distributions are typically paid at the end of each month. Each fund seeks to tailor the amount of its monthly income payments in order to moderate fluctuations in the amounts distributed to shareholders over the course of the year. Although each fund attempts to moderate fluctuations, the amounts distributed to shareholders are not fixed and may not be the same each month. Further, there is no guarantee that a fund will make monthly income payments to its shareholders. Each fund may make an additional distribution at the end of the year in order to comply with applicable law. This additional distribution may include an income component that may be higher or lower than a fund's regular monthly income payment.

Although it cannot be guaranteed, the Income Payout Fund does not expect to make distributions that will be treated as return of capital. The amount of the distributions made by each of the Target Payout Fund and the Flexible Payout Fund in respect of any period may exceed the amount of the fund's income and gains for that period. In that case, some or all of the distributions made by the Target Payout Fund and the Flexible Payout Fund may constitute a return of capital to shareholders. At the end of the year, the funds may be required under applicable law to recharacterize distributions for the year among ordinary income, capital gains, and return of capital (if any) for purposes of tax reporting to shareholders.

#### 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 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, tariffs, 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 financial markets, the value of an investment in a fund will fluctuate, which means that an investor could lose money over short or long periods.

**Exchange-Traded Fund (ETF) Risk** — When a 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.

**Managed Payout Risk Risk** — Because the Target Payout and Flexible Payout Funds are expected to make monthly payments regardless of investment performance, the amount of each fund's distributions in respect of any period often will exceed the amount of the fund's income and gains for that period. In that case, some or all of the fund's distributions may constitute a return of capital to shareholders. It is possible for the funds to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its payments to shareholders under the managed payout policy. In addition, in order to make the payments called for under the funds' managed payout policy, the funds may have to sell portfolio securities at a time when it would not otherwise do so.

A return of capital distribution generally will not be taxable but will decrease the shareholder's cost basis in the shares of the fund and will result in a higher capital gain or lower capital loss when those shares on which the distribution was received are sold. Once a shareholder's cost basis is reduced to zero, further distributions will be treated as capital gain, if the shareholder holds shares of the fund as capital assets. A distribution constituting a return of capital is not a distribution of income or capital gains earned by the fund, and should not be confused with the funds' "yield" or "income."

**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,

<br> 18 Schwab Monthly Income Funds \| Fund Details

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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 Style Risk*** — Some underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Each underlying fund follows these stocks during upturns as well as downturns. Because of their indexing strategy, the 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. 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. A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the 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.

• ***Management Risk*** — Certain underlying funds may be an actively managed mutual fund. Any actively managed mutual fund is subject to the risk that its investment adviser (or sub-adviser(s)) will select investments or allocate assets in a manner 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 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, the equity market tends 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.

• ***Exchange-Traded Fund (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

<br> Schwab Monthly Income Funds \| Fund Details 19

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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.

• ***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.

• ***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 or the anticipation of 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 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.

• ***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

<br> 20 Schwab Monthly Income Funds \| Fund Details

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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.

• ***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.

• ***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 "Underlying Fund Investment Risk" above, an investment by a fund in an underlying money market fund has risks. A fund may invest in underlying money market funds that seek to maintain a stable $1.00 net asset value. Although an underlying 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. In addition, money market funds are not 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 under certain circumstances.

• ***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.

• ***Variable Interest Entities (VIEs) Risk*** — An underlying fund may gain exposure to certain operating companies in China through legal structures known as 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

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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, which may limit the quality and availability of financial information, 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 underlying funds in which a fund may invest may have a policy of concentrating its 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 (or income generated by) real estate; risks related to general and local economic conditions; the attractiveness, type and location of property; 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, including for real estate and related services and technology; reduced demand for commercial and office space along with increased maintenance or tenant improvement costs to convert properties for other uses; increases in property taxes and operating expenses; changes in zoning regulations and related costs; 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; demographic trends, such as population shifts or changing tastes, preferences (such as remote work arrangements) and values; and changes in interest rates. In addition, the real estate industry has historically been sensitive to economic downturns and other events that limit demand for real estate, which would adversely impact the value of real estate investments. If an underlying fund's real estate-related investments are concentrated in one geographic area or in

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one property type, the fund will be particularly subject to the risks associated with that area or property type or related real estate conditions.

• ***Real Estate Investment Trusts (REITs) Risk*** — Certain underlying funds in which a fund may invest may 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. 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.

• ***High-Yield Risk*** — An underlying fund that invests 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.

• ***Floating Rate Loan Risk*** — Floating rate loans often have contractual restrictions on resale. These restrictions can delay or impede the underlying fund's ability to sell loans and may adversely affect the price that can be obtained. Loans and unlisted securities are typically less liquid than securities traded on national exchanges. The secondary market for loans may be subject to irregular trading activity and extended settlement periods, and the liquidity of bank loans can vary significantly over time. For example, if the credit quality of a bank loan unexpectedly declines significantly, secondary market trading in that floating rate loan can also decline. During periods of infrequent trading, valuing a bank loan can be more difficult and buying or selling a loan at an acceptable price may not be possible or may be delayed. A delay in selling a floating rate loan can result in a loss and cause the underlying fund's price to decline. When the underlying fund purchases a loan as an assignment, it will be subject to the credit risk of the borrower. When the underlying fund purchases a loan as a participation interest, it does not have any direct claim on the loan or its collateral, or any rights of set-off against the borrower. As a result, the underlying fund will be subject not only to the credit risk of the borrower but also to the credit risk of the lender or participant who sold the participation interest to the underlying fund. In the event of the insolvency of the lender selling a participation interest, the underlying fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. Unlike registered securities, such as most stocks and bonds, loans are not registered or regulated under the federal securities laws. As a result, investors in loans have less protection against fraud and other improper practices than investors in registered securities because investors in loans may not be entitled to rely on the protection of the federal securities laws.

• ***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, forward contracts 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 forward contract is an over-the-counter derivative transaction between two parties to buy or sell a specified amount of an underlying reference at a specified price (or rate) on a specified date in the future. A forward foreign currency contract is a derivative (forward contract) in which the underlying reference is a country's or region's currency. 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 derivatives, that are subject to regulation by the Commodity Futures Trading Commission (CFTC), could cause a fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

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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 liquidity risk, credit risk, leverage risk, market risk, and management 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, tax risk, and operational 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 the underlying fund to realize higher amounts of short-term capital gains. Operational risk is the risk related to operational issues, including documentation issues, settlement issues, systems failures, inadequate controls, and human error.. An underlying fund's use of derivatives could reduce the underlying fund's performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. 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. 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 the underlying fund to greater risk. In a reverse repurchase agreement, the 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. 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.

• ***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.

• ***Securities Lending Risk*** — Certain of the underlying funds may lend their 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 may pay lending fees to a party arranging the loan. An underlying fund will also bear the risk of any decline in the value of securities acquired with cash collateral.

• ***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's investments in illiquid securities may reduce the returns of the fund because the underlying fund may be unable to sell the illiquid securities at an advantageous time or price. 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 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, which could reduce the performance of the underlying fund.

• ***Redemption Risk*** — An underlying money market fund may experience periods of heavy redemptions that could cause the underlying 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.

• ***Tracking Error and Correlation Risk*** — Certain underlying funds may seek to track the performance of their benchmark index, although they may not be successful in doing so. The divergence between the performance of an underlying fund and its benchmark 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 benchmark 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

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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 underlying fund calculates its NAV based on fair value prices, the underlying fund's performance may diverge from that of its index. In addition, cash flows into and out of an underlying fund, timing variations, 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. Lastly, differences between an underlying fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the underlying fund but not to the index impact correlation between the performance of the underlying fund and that of its index.

#### Risk Spectrum
Each fund's risk is relative to the fund's asset allocation. The Flexible Payout Fund and the Target Payout Fund are expected to be less volatile than the S&P 500 Index. The Income Payout Fund is expected to be less volatile than the S&P 500 Index and more volatile than the Bloomberg US Aggregate Bond Index. The S&P 500 Index and the Bloomberg US Aggregate Bond Index are generally considered as reflective of the overall equity market performance and bond market performance, respectively.

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/prospectus** (under "Portfolio Holdings") as of month end. This list is generally updated 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 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.

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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 has been audited by the funds' independent registered public accounting firm, Deloitte & Touche LLP (Deloitte). Deloitte's full report is included in each fund's annual holdings and financial statements, which are included in each fund's Form N-CSR (see back cover).

**Schwab Monthly Income Fund — Target Payout**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **1/1/25-<br>12/31/25** | **1/1/24-<br>12/31/24** | **1/1/23-<br>12/31/23** | **1/1/22-<br>12/31/22** | **1/1/21-<br>12/31/21** |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $9.85 | $9.94 | $9.62 | $11.99 | $11.38 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss)<sup>(1)</sup> | 0.48 | 0.45 | 0.41 | 0.30 | 0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net realized and unrealized gains (losses) | 0.69 | (0.05) | 0.39 | (1.83) | 0.81 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total from investment operations | 1.17 | 0.40 | 0.80 | (1.53) | 1.05 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net investment income | (0.47) | (0.46) | (0.42) | (0.30) | (0.37) |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net realized gains  |  |  |  | (0.54) | (0.07) |
| Tax return of capital | (0.03) | (0.03) | (0.06) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total distributions | (0.50) | (0.49) | (0.48) | (0.84) | (0.44) |
| Net asset value at end of period | $10.52 | $9.85 | $9.94 | $9.62 | $11.99 |
| Total return | 12.17% | 4.03% | 8.58% | (12.85%) | 9.23% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net expenses<sup>(2)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(3)</sup> | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total expenses<sup>(2)</sup> | 0.19% | 0.27% | 0.28% | 0.21%<sup>(3)</sup> | 0.18% |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss) | 4.66% | 4.51% | 4.27% | 2.79% | 1.99% |
| Portfolio turnover rate | 27% | 14% | 9% | 82% | 11% |
| Net assets, end of period (x 1,000,000) | $53 | $34 | $36 | $40 | $53 |

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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 Monthly Income Fund — Flexible Payout**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **1/1/25-<br>12/31/25** | **1/1/24-<br>12/31/24** | **1/1/23-<br>12/31/23** | **1/1/22-<br>12/31/22** | **1/1/21-<br>12/31/21** |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $10.05 | $10.12 | $9.79 | $12.02 | $11.82 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss)<sup>(1)</sup> | 0.48 | 0.46 | 0.42 | 0.31 | 0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net realized and unrealized gains (losses) | 0.72 | (0.05) | 0.39 | (1.81) | 0.44 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total from investment operations | 1.20 | 0.41 | 0.81 | (1.50) | 0.68 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net investment income | (0.48) | (0.47) | (0.46) | (0.29) | (0.34) |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net realized gains  |  |  |  | (0.44) | (0.14) |
| Tax return of capital |  | (0.01) | (0.02) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total distributions | (0.48) | (0.48) | (0.48) | (0.73) | (0.48) |
| Net asset value at end of period | $10.77 | $10.05 | $10.12 | $9.79 | $12.02 |
| Total return | 12.14% | 4.05% | 8.50% | (12.50%) | 5.73% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net expenses<sup>(2)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(3)</sup> | 0.00% |
| Total expenses<sup>(2)</sup> | 0.12% | 0.16% | 0.18% | 0.15%<sup>(3)</sup> | 0.10% |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss) | 4.60% | 4.52% | 4.33% | 2.88% | 1.99% |
| Portfolio turnover rate | 25% | 14% | 7% | 78% | 20% |
| Net assets, end of period (x 1,000,000) | $74 | $63 | $65 | $68 | $100 |

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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 Monthly Income Fund — Income Payout**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **1/1/25-<br>12/31/25** | **1/1/24-<br>12/31/24** | **1/1/23-<br>12/31/23** | **1/1/22-<br>12/31/22** | **1/1/21-<br>12/31/21** |
| **Per-Share Data** |  |  |  |  |  |
| Net asset value at beginning of period | $9.18 | $9.27 | $8.97 | $10.72 | $10.80 |
| Income (loss) from investment operations: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss)<sup>(1)</sup> | 0.44 | 0.42 | 0.37 | 0.26 | 0.22 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net realized and unrealized gains (losses) | 0.45 | (0.06) | 0.31 | (1.59) | 0.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total from investment operations | 0.89 | 0.36 | 0.68 | (1.33) | 0.25 |
| Less distributions: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net investment income | (0.45) | (0.45) | (0.38) | (0.22) | (0.26) |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions from net realized gains  |  |  |  | (0.20) | (0.07) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total distributions | (0.45) | (0.45) | (0.38) | (0.42) | (0.33) |
| Net asset value at end of period | $9.62 | $9.18 | $9.27 | $8.97 | $10.72 |
| Total return | 9.85% | 3.97% | 7.81% | (12.50%) | 2.33% |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Ratios to average net assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net expenses<sup>(2)</sup> | 0.00% | 0.00% | 0.00% | 0.00%<sup>(3)</sup> | 0.00% |
| Total expenses<sup>(2)</sup> | 0.13% | 0.14% | 0.17% | 0.14%<sup>(3)</sup> | 0.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;Net investment income (loss) | 4.65% | 4.51% | 4.16% | 2.74% | 1.99% |
| Portfolio turnover rate | 25% | 8% | 5% | 68% | 25% |
| Net assets, end of period (x 1,000,000) | $66 | $55 | $63 | $71 | $113 |

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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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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 table shows which underlying funds may be used within each asset class and style class and each fund's target asset allocation to each underlying fund 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 Monthly Income Fund – Target Payout** | **Schwab Monthly Income Fund – Flexible Payout** | **Schwab Monthly Income Fund – Income Payout** |
| **U.S. Stocks** | Large-Cap | 20% | 20% | 13% |
| **International Stocks** | Developed | 20% | 20% | 11% |
| **Global Real Estate** | Global REITs | 7% | 7% | 4% |
| **Fixed Income** | Intermediate-Term Bonds | 20% | 20% | 35% |
|  | Short-Term Bonds | 0% | 0% | 8% |
|  | Long-Term Government Bonds | 7% | 7% | 6% |
|  | High Yield Bonds | 11% | 11% | 9% |
|  | Floating Rate Loans | 6% | 6% | 5% |
|  | Preferred | 7% | 7% | 7% |
| **Cash and Cash Equivalents**<br>**(including Money Market Funds)** |  | 2% | 2% | 2% |
|  |  | 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/prospectus**.

<br> Schwab Monthly Income Funds \| The Funds' Investments in Asset Classes and Sub-Asset Classes 29

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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.

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| | |
|:---|:---|
| **Asset Class & Underlying Fund** | **Investment Objective and Principal Investment Strategy** |
| **EQUITY FUNDS** |  |
| **Schwab U.S. Dividend Equity ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100TM Index. The fund generally invests in stocks that are included in the Dow Jones U.S. Dividend 100 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 stocks included in the index. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in the index. |
| **EQUITY FUNDS – GLOBAL REAL ESTATE** |  |
| **Schwab<sup>®</sup> Global Real Estate Fund** | Seeks capital growth and income consistent with prudent investment management. The fund invests, under normal circumstances, 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. |
| **EQUITY FUNDS – INTERNATIONAL** |  |
| **Schwab<sup>®</sup> International Dividend Equity ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of an index composed of high dividend yielding stocks issued by companies outside the United States. The fund generally invests in stocks that are included in the Dow Jones International Dividend 100 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 stocks included in the index. Under normal circumstances, the fund may invest up to 20% of its net assets in securities not included in the index. |
| **FIXED INCOME FUNDS – INTERMEDIATE-TERM BOND** |  |
| **Schwab<sup>®</sup> U.S. Aggregate Bond Index Fund** | The fund's goal is 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. 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, including TBA transactions, as defined in the fund's prospectus. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in the index. |

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<br> 30 Schwab Monthly Income Funds \| Description of Underlying Funds

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| | |
|:---|:---|
| **Asset Class & Underlying Fund** | **Investment Objective and Principal Investment Strategy** |
| **FIXED INCOME FUNDS – INTERMEDIATE-TERM BOND** |  |
| **Schwab<sup>®</sup> 5-10 Year Corporate Bond ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the intermediate-term U.S. corporate bond market. The fund generally invests in securities that are included in the Bloomberg US 5-10 Year Corporate Bond 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 the index. |
| **FIXED INCOME FUNDS – SHORT-TERM CORPORATE BOND** |  |
| **Schwab<sup>®</sup> 1-5 Year Corporate Bond ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the short-term U.S. corporate bond market. The fund generally invests in securities that are included in the Bloomberg US 1-5 Year Corporate Bond 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 the index. |
| **FIXED INCOME FUNDS – LONG-TERM GOVERNMENT BOND** |  |
| **Schwab<sup>®</sup> Long-Term U.S. Treasury ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the long-term U.S. Treasury bond market. The fund generally invests in securities that are included in the Bloomberg US Long Treasury 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 the index. |
| **FIXED INCOME FUNDS – HIGH YIELD** |  |
| **Schwab<sup>®</sup> High Yield Bond ETF** | The fund's goal is to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of U.S. dollar denominated below investment grade corporate debt. The fund generally invests in securities that are included in the ICE BofA US Cash Pay High Yield Constrained Index. ICE BofA US Cash Pay High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt (junk bonds), currently in a coupon paying period, that is publicly issued in the U.S. domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody's, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million. In addition, qualifying securities must have risk exposure to countries that are members of the FX-G10, Western Europe or territories of the U.S. and Western Europe. The FX-G10 includes all Euro members, the U.S., Japan, the United Kingdom, Canada, Australia, New Zealand, Switzerland, Norway and Sweden. |
| **FIXED INCOME FUNDS – FLOATING RATE LOANS** |  |
| T. Rowe Price Institutional Floating Rate Fund | Seeks high current income and, secondarily, capital appreciation. The fund will normally invest at least 80% of its net assets (including any borrowings for investment purposes) in floating rate loans and floating rate debt securities. The fund may also invest up to 20% of its total assets in non-U.S. dollar-denominated investments. |

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<br> Schwab Monthly Income Funds \| Description of Underlying Funds 31

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| | |
|:---|:---|
| **Asset Class & Underlying Fund** | **Investment Objective and Principal Investment Strategy** |
| **FIXED INCOME FUNDS – PREFERRED STOCK** |  |
| **Cohen & Steers Preferred Securities and Income Fund, Inc.** | Seeks total return (high current income and capital appreciation). Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in a portfolio of preferred and debt securities issued by U.S. and non-U.S. companies, including traditional preferred securities; hybrid preferred securities that have investment and economic characteristics of both preferred stock and debt securities; floating rate preferred securities; corporate debt securities; convertible securities; contingent capital securities; and securities of other open-end, closed-end or exchange-traded funds that invest primarily in preferred and/or debt securities. |
| **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> 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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<br> 32 Schwab Monthly Income Funds \| Description of Underlying Funds

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Fund Management

The investment adviser for the funds is Charles Schwab Investment Management, Inc., dba Schwab Asset Management, 425 Market Street, Suite 1700, San Francisco, CA 94105. The investment adviser was founded in 1989 and as of February 28, 2026, managed approximately $1.6 trillion in assets.

The investment adviser oversees the asset management and administration of the funds. The investment adviser does not receive a fee for the services it performs for each fund. However, the investment adviser 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 2025 semiannual holdings and financial statements, which are included in each fund's Form N-CSR and covers the period of January 1, 2025 through June 30, 2025.

**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).

**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 sub-advisers, 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.

<br> Schwab Monthly Income Funds \| Fund Management 33

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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.

<br> 34 Schwab Monthly Income Funds \| Investing in the Funds

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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 (NAV) per share, 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 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 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.

<br> Schwab Monthly Income Funds \| Investing in the Funds 35

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#### 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 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 and Trade Activity Monitoring
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.

<br> 36 Schwab Monthly Income Funds \| Investing in the Funds

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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 domestic 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 of the security's primary trading market, 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" by 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. 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. 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.

#### 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.

<br> Schwab Monthly Income Funds \| Investing in the Funds 37

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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**.

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. Although it cannot be guaranteed, the Income Payout Fund does not expect to make distributions that will be treated as return of capital. The Target Payout Fund and Flexible Payout Fund may make distributions that are treated as a return of capital. Each fund may make an additional distribution at the end of the year in order to comply with applicable law. This additional distribution may include an income component that may be higher or lower than a fund's regular monthly income payment. The funds expect to distribute their net capital gains, if any, 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**. At the end of the year, the funds may be required under applicable law to recharacterize distributions for the year among ordinary income, capital gains, and return of capital (if any) for purposes of tax reporting to shareholders.

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 a 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 are taxable to shareholders even if they are paid from income or gain earned by the fund before a shareholder's investment (and thus were included in the price the shareholder paid). Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

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 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 a return of capital distribution exceeds a shareholder's adjusted basis, the distribution will be treated as gain from the sale of shares, if the shareholder holds shares of the fund as capital assets. Shareholders who receive periodic distributions consisting of a return of capital may be under the impression that they are receiving net profits when they are not. A return of capital is a distribution from the shareholder's investment principal, rather than net profits from the fund's returns.

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.

<br> 38 Schwab Monthly Income Funds \| Investing in the Funds

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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.

If you are investing through a taxable account and purchase shares of a fund before it declares a distribution, you may receive a portion of your investment back as a taxable distribution. This is because when a fund makes a distribution, the share price is reduced by the amount of the distribution.

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.

<br> Schwab Monthly Income Funds \| Investing in the Funds 39

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Additional Information About the Funds' Composite Indices

Effective September 12, 2022, the Moderate Payout Composite Index changed its name to Target Payout Composite Index. The Target Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. From September 13, 2022 to April 28, 2025 the Target Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net),10.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% Bloomberg US High Yield 2.0% Issuer Cap Index, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 3.0% Morningstar LSTA US Performing Loans Index. From January 29, 2019, to September 12, 2022, the Target Payout Composite Index is composed of 28.5% S&P 500<sup>®</sup> Index, 11.9% MSCI EAFE Index (Net), 7.1% FTSE EPRA/NAREIT Global Index (Net), 50.5% Bloomberg US Aggregate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. From April 1, 2013, to January 29, 2019, the Target Payout Composite Index is composed of 28.5% S&P 500<sup>®</sup> Index, 11.9% MSCI EAFE Index (Net), 7.1% FTSE EPRA/NAREIT Global Index (Net), 30.3% Bloomberg US Aggregate Bond Index, 20.2% Bloomberg US Aggregate Intermediate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to April 1, 2013, the Target Payout Composite Index was composed of 40.0% S&P 500<sup>®</sup> Index, and 60.0% Bloomberg US Aggregate Bond Index. Percentages listed may not total to 100% due to rounding.

Effective September 12, 2022, the Enhanced Payout Composite Index changed its name to Flexible Payout Composite Index. The Flexible Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 7.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 6.0% Morningstar LSTA US Performing Loans Index. From September 13, 2022 to April 28, 2025 the Flexible Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 20.0% Dow Jones U.S. Dividend 100 Index, 20.0% Dow Jones International Dividend 100 Index (Net), 10.0% FTSE EPRA/NAREIT Global Index (Net), 17.0% Bloomberg US Aggregate Bond Index, 3.0% Bloomberg US 5-10 Year Corporate Bond Index, 7.0% Bloomberg US Treasury Long Index, 11.0% Bloomberg US High Yield 2.0% Issuer Cap Index, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 3.0% Morningstar LSTA US Performing Loans Index. From January 29, 2019, to September 12, 2022, the Flexible Payout Composite Index was composed of 19.5% S&P 500<sup>®</sup> Index, 8.1% MSCI EAFE Index (Net), 4.9% FTSE EPRA/NAREIT Global Index (Net), 65.5% Bloomberg US Aggregate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. From April 1, 2013, to January 29, 2019, the Flexible Payout Composite Index was composed of 19.5% S&P 500<sup>®</sup> Index, 8.1% MSCI EAFE Index (Net), 4.9% FTSE EPRA/NAREIT Global Index (Net), 39.3% Bloomberg US Aggregate Bond Index, 26.2% Bloomberg US Aggregate Intermediate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to April 1, 2013, the Flexible Payout Composite Index was composed of 25.0% S&P 500<sup>®</sup> Index, and 75.0% Bloomberg US Aggregate Bond Index. Percentages listed may not total to 100% due to rounding.

Effective September 12, 2022, the Maximum Payout Composite Index changed its name to Income Payout Composite Index. The Income Payout Composite Index is a custom blended index developed by Schwab Asset Management based on a comparable portfolio asset allocation. Effective April 29, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 4.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% ICE BofA US Cash Pay High Yield Constrained, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 5.0% Morningstar LSTA US Performing Loans Index. From September 13, 2022 to April 28, 2025, the Income Payout Composite Index is composed of 2.0% Bloomberg US Treasury Bills 1-3 Month Index, 13.0% Dow Jones U.S. Dividend 100 Index, 11.0% Dow Jones International Dividend 100 Index (Net), 6.0% FTSE EPRA/NAREIT Global Index (Net), 26.0% Bloomberg US Aggregate Bond Index, 9.0% Bloomberg US 5-10 Year Corporate Bond Index, 8.0% Bloomberg US 1-5 Year Corporate Bond Index, 6.0% Bloomberg US Treasury Long Index, 9.0% Bloomberg US High Yield 2.0% Issuer Cap Index, 7.0% ICE BofA Fixed Rate Preferred Securities Index, and 3.0% Morningstar LSTA US Performing Loans Index. From January 29, 2019, to September 12, 2022, the Income Payout Composite Index is composed of 10.5% S&P 500<sup>®</sup> Index, 4.4% MSCI EAFE Index (Net), 2.6% FTSE EPRA/NAREIT Global Index (Net), 80.5% Bloomberg US Aggregate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. From April 1, 2013, to January 29, 2019, the Income Payout Composite Index was composed of 10.5% S&P 500<sup>®</sup> Index, 4.4% MSCI EAFE Index (Net), 2.6% FTSE EPRA/NAREIT Global Index (Net), 48.3% Bloomberg US Aggregate Bond Index, 32.2% Bloomberg US Aggregate Intermediate Bond Index, and 2.0% Bloomberg US Treasury Bills 1-3 Month Index. Prior to April 1, 2013, the Income Payout Composite Index was composed of 10.0% S&P 500<sup>®</sup> Index, and 90.0% Bloomberg US Aggregate Bond Index. Percentages listed may not total to 100% due to rounding.

<br> 40 Schwab Monthly Income Funds \| Additional Information About the Funds' Composite Indices

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| |
|:---|
| **Prospectus \| April 28, 2026** |
| Schwab Monthly Income Funds |

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#### 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:

Additional information about a fund's investments is available in the fund's **annual and semiannual reports** to shareholders, which are sent to current investors, and in Form N-CSR. In a fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. In Form N-CSR, you will find a fund's annual and semiannual financial statements.

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, to request other information, or ask questions about the funds, call 1-877-824-5615. In addition, you may visit **www.schwabassetmanagement.com/prospectus** for a free copy of these documents.

The SAI, annual and semiannual reports, holdings and financial statements, 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.

<br> SEC File NumberSchwab Capital Trust 811-07704 REG40716-21

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| | | |
|:---|:---|:---|
| ![](img_270e29b718d24f3.jpg) | **Statement of Additional Information \|**  | April 28, 2026 |
| ![](img_270e29b718d24f3.jpg) |  |  |
| ![](img_270e29b718d24f3.jpg) | Schwab Funds<sup>®</sup> | Schwab Funds<sup>®</sup> |

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| | |
|:---|:---|
| Schwab<sup>®</sup> Monthly Income Fund – Target Payout | **SWJRX** |
| Schwab<sup>®</sup> Monthly Income Fund – Flexible Payout | **SWKRX** |
| Schwab<sup>®</sup> Monthly Income Fund – Income Payout | **SWLRX** |

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The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with each fund's prospectus dated April 28, 2026 (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' [Form N-CSR](http://www.sec.gov/ix?doc=/Archives/edgar/data/904333/000119312526088519/d36158dncsr.htm) for the fiscal year ended December 31, 2025, are incorporated by reference into this SAI.

For a free copy of any of these documents, to request other information, or ask questions about the funds, call 1-877-824-5615. For TDD service, call 1-800-345-2550. In addition, you may visit **www.schwabassetmanagement.com/prospectus** for a free copy of these documents.

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<sup>®</sup>, is the investment adviser to the funds (investment adviser).

REG41328-24

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#### **Table of Contents**

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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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investment Objectives](#xxToc256000000x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [1](#xxToc256000000x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investment Strategies, Securities and Risks](#xxToc256000001x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [1](#xxToc256000001x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investment Limitations and Restrictions](#xxToc256000002x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [35](#xxToc256000002x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management of the Funds](#xxToc256000003x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [37](#xxToc256000003x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Control Persons and Principal Holders of Securities](#xxToc256000004x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [44](#xxToc256000004x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investment Advisory and Other Services](#xxToc256000005x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [45](#xxToc256000005x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Portfolio Managers](#xxToc256000006x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [48](#xxToc256000006x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Brokerage Allocation and Other Practices](#xxToc256000007x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [51](#xxToc256000007x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Voting](#xxToc256000008x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [54](#xxToc256000008x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Portfolio Holdings Disclosure](#xxToc256000009x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [55](#xxToc256000009x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Description of the Trust](#xxToc256000010x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [57](#xxToc256000010x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Purchase, Redemption, Delivery of Shareholder Documents and Pricing of Shares](#xxToc256000011x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [58](#xxToc256000011x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Taxation](#xxToc256000012x3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [61](#xxToc256000012x3) |
| &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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Appendix – Proxy Voting Policy](#xxToc256000013x3) |  |

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Investment Objectives

Each fund seeks to provide current income and, as a secondary investment objective, capital appreciation. There is no guarantee the funds will achieve their investment objectives.

#### Change of Investment Objective
Except with respect to the Schwab Monthly Income Fund - Flexible Payout, 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.

Investment Strategies, Securities, and Risks

#### Investment Strategies
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.

Each fund seeks to achieve its investment objective by investing primarily in a combination of Schwab mutual funds and Schwab ETFs (the underlying funds) in accordance with its target asset allocation. The investment adviser will allocate assets among the underlying funds, which will include equity funds, fixed income funds, money market funds and exchange-traded funds (ETFs).

Each fund intends to invest in a combination of underlying funds; however, each fund may invest directly in equity and fixed income securities as well as other unaffiliated mutual funds or ETFs, and 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.

The underlying funds will include equity funds, fixed income funds, and money market funds. In general, the Schwab Monthly Income Fund — Target Payout's allocation will be approximately 30 – 70% equities, 30 – 70% fixed income and 0 – 12% cash and cash equivalents (including money market funds); Schwab Monthly Income Fund — Flexible Payout's allocation will be approximately 30 – 70% equities, 30 – 70% fixed income and 0 – 12% cash and cash equivalents (including money market funds); Schwab Monthly Income Fund — Income Payout's allocation will be approximately 10 – 50% equities, 50 – 90% fixed income and 0 – 12% cash and cash equivalents (including money market funds).

These investments and the risks normally associated with these investments are discussed below.

**Mutual Funds** (open-end mutual funds) are registered investment companies, which may 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 in order 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.

**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

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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. For descriptions of the underlying equity funds that the funds may currently invest, please see the funds' prospectus. An equity fund's other investments and use of investment techniques also will affect its performance and portfolio value.

**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 securities of foreign issuers. Some international equity and global equity funds invest exclusively in foreign securities. Some of these funds 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. For a description of the underlying international and global equity funds that the funds may currently invest, please see the funds' prospectus. For a more detailed discussion of the risks of international equities, 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. For a description of the underlying fixed income funds that the funds may currently invest, please see the funds' 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 the sale of shares under certain circumstances. For a more detailed discussion of the risks of money market securities, please refer to "Money Market Securities".

#### Investments, Securities and Risks
The different types of investments that the funds or their underlying funds typically may invest in, the investment techniques they may use and the risks normally associated with these investments are discussed below. Each fund also may invest in securities other than shares of underlying funds, such as stocks, bonds and cash and cash equivalents (including money market funds), and engage in certain investment techniques, which are outlined below. A fund's direct investment in securities is subject to the same or similar risks as those described for an underlying fund's investment in the same security.

Not all securities or techniques discussed below are eligible investments for each underlying fund. A fund will make investments in the underlying funds that are intended to help achieve its investment objective. In this section, any reference to the term "fund" may mean a Monthly Income Fund, or an underlying fund, unless the context otherwise requires.

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 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.

**Asset-Backed Securities** are securities that are backed by the loans or accounts receivable of an entity, such as a bank or credit card company. These securities are obligations that the issuer intends to repay using the assets backing them (once collected). Therefore, repayment may depend largely on the cash flows generated by the assets backing the securities. The rate of principal payments on asset-backed securities generally depends on the rate of principal payments received on the underlying assets, which in turn may be affected by a

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variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict with precision, and actual yield to maturity may be more or less than the anticipated yield to maturity.

Sometimes the credit quality of these securities is limited to the support provided by the underlying assets, but in other cases additional credit support also may be provided by a third party via a letter of credit or insurance guarantee. Such credit support falls into two classes: liquidity protection and protection against ultimate default on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that scheduled payments on the underlying pool are made in a timely fashion. Protection against ultimate default ensures payment on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained from third parties, through various means of structuring the transaction or through a combination of such approaches. The degree of credit support provided on each issue is based generally on historical information respecting the level of credit risk associated with such payments. Delinquency or loss in excess of that anticipated could adversely affect the return on an investment in an asset-backed security.

For purposes of a fund's concentration policy, the fund will determine the industry classification of asset-backed securities based upon the investment adviser's evaluation of the risks associated with an investment in the underlying assets. For example, asset-backed securities whose underlying assets share similar economic characteristics because, for example, they are funded (or supported) primarily from a single or similar source or revenue stream will be classified in the same industry sector. In contrast, asset-backed securities whose underlying assets represent a diverse mix of industries, business sectors and/or revenue streams will be classified into distinct industries based on their underlying credit and liquidity structures. A fund will limit its investments in each identified industry to less than 25% of its total assets.

**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 (NAV) 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.

**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 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 or an underlying fund holds Build America Bonds, a fund or an underlying 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 a fund or an underlying 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 or an underlying fund, a fund or an underlying fund may elect to pass through to its shareholders any tax credits from those bonds that otherwise would be allowed to a fund or an underlying fund. These tax credits can generally be used to offset 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. Each fund will not concentrate its investments in a particular industry or group of industries, unless its underlying funds' investments are so concentrated.

**Conflicts of Interest** may arise because the fees the investment adviser receives from various affiliated and unaffiliated funds are higher than those 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 a fund. However, the investment adviser is a fiduciary to the funds and is legally obligated to act in the funds' best interests when selecting underling funds.

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**Credit and Liquidity Supports or Enhancements** may be employed to reduce the credit risk of securities held by a fund. Credit supports include letters of credit, insurance, total return and credit swap agreements and guarantees provided by foreign and domestic financial institutions. Liquidity supports include puts, demand features and lines of credit. Most of these arrangements move the credit risk of an investment from the issuer of the security to the support provider. The investment adviser may rely on its evaluation of the credit and liquidity support provider in determining whether to purchase or hold a security enhanced by such a support. Changes in the credit quality of a support provider could cause losses to a fund.

**Cyber Security Risk** — As the use of technology, including cloud-based technology, and the frequency of cyber attacks in the market has become more prevalent, the funds are potentially more susceptible to operational and information security risks resulting from breaches in cybersecurity that may lead to financial losses. A breach in cybersecurity refers to both intentional and unintentional events that may, among other things, cause a fund to lose proprietary information, suffer data corruption and/or destruction or lose operational capacity, or otherwise disrupt normal business operations. This in turn could adversely affect a fund and its shareholders by, among other things, interfering with the processing of shareholder transactions; impeding a fund's ability to calculate its NAV; causing the release or misuse of confidential fund information or private shareholder information (which may violate privacy and other laws, including those related to identity theft). A cyber attack may cause financial losses by impeding trading, causing reputational damage, and subjecting a fund to regulatory penalties, fines, reimbursement or other compensation costs. Additional compliance costs could be associated with corrective measures and/or cybersecurity risk management. Cybersecurity breaches may involve unauthorized access to a fund's digital information systems (e.g., through "hacking" or malicious software coding), and may come from multiple sources, including from outside attacks such as denial-of-service attacks (i.e., efforts to make network services unavailable to intended users) or cyber extortion, including exfiltration of data held for ransom and/or "ransomware" attacks that render systems inoperable until ransom is paid, or insider actions (e.g., intentionally or unintentionally harmful acts of adviser personnel). In addition, cybersecurity breaches involving a fund's third-party service providers (e.g., the funds' custodian and transfer agent), trading counterparties or issuers in which a fund invests can also subject a fund to many of the same risks associated with direct cybersecurity breaches or extortion of data. Recently, geopolitical tensions may have increased the scale and sophistication of deliberate cybersecurity attacks, particularly those from nation-states or from entities with nation-state backing.

Cybersecurity failures or breaches may result in financial losses to a fund and its shareholders. For example, cybersecurity failures or breaches involving trading counterparties or issuers in which a fund invests could adversely impact such counterparties or issuers and cause a fund's investment to lose value.

Although the investment adviser has business continuity plans and risk management systems designed to reduce the risks associated with cybersecurity, there are inherent limitations in these plans and systems, including the possibility that certain risks have not been identified, in large part because different or unknown threats may emerge in the future. As such, there is no guarantee that such efforts will succeed, especially because the funds do not directly control the cybersecurity systems of issuers in which a fund may invest, trading counterparties or third-party service providers to the funds. Such entities have experienced cyber attacks and other attempts to gain unauthorized access to systems from time to time, and there is no guarantee that efforts to prevent or mitigate the effects of such attacks or other attempts to gain unauthorized access will be successful. There is also a risk that cybersecurity breaches may not be detected. There can be no assurance that the funds will not suffer losses relating to cyber attacks on the funds, their service providers, trading counterparties or the issuers in which a fund invests.

**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. Debt securities may also experience price changes when interest rates are anticipated to change. 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

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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.

*<u>Corporate bonds</u>* 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.

**Delayed-Delivery Transactions** include purchasing and selling securities on a delayed-delivery or when-issued basis. These transactions involve a commitment to buy or sell specific securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. When purchasing securities on a delayed-delivery basis, a fund assumes the rights and risks of ownership, including the risk of price and yield fluctuations. Typically, no interest will accrue to a fund until the security is delivered. When a fund sells a security on a delayed-delivery basis, a fund does not participate in further gains or losses with respect to that security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, a fund could suffer losses.

**Delayed Funding Loans and Revolving Credit Facilities** — A fund may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring a fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid).

A fund may invest in delayed funding loans and revolving credit facilities with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a result, a fund may be unable to sell such investments at an opportune time or may have to resell them at less than fair market value. A fund currently intends to treat delayed funding loans and revolving credit facilities for which there is no readily available market as illiquid for purposes of a fund's limitation on illiquid investments. For a further discussion of the risks involved in investing in Loan Participations and other forms of direct indebtedness see "Loan Participations and Assignments." Participation interests in revolving credit facilities will be subject to the limitations discussed in "Loan Participations and Assignments." Delayed funding loans and revolving credit facilities are considered to be debt obligations for purposes of the Trust's investment restriction relating to the lending of funds or assets by a fund.

**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), which 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

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(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 or underlying fund's investment objective and permitted by a fund's or underlying fund's investment limitations, operating policies and applicable regulatory authorities.

A fund or underlying fund's derivative 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 derivative 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. To the extent allowed by applicable securities laws, a fund or underlying 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.

Each fund and underlying fund must maintain a small portion of its assets in cash to process shareholder transactions and to pay its expenses. In order to reduce the effect this otherwise uninvested cash would have on its performance, a fund or underlying fund may purchase futures contracts. Such transactions allow a fund's or underlying fund's cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. A fund or underlying fund may purchase or sell futures contracts on a

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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 or underlying fund may enter into a futures contract for other reasons as well.

When buying or selling futures contracts, a fund or underlying 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 fluctuate. This process is known as "marking-to-market." The initial margin amount will be returned to the fund or underlying 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 or underlying fund may purchase and sell futures contracts in order to simulate full investment in their respective indices, there are risks associated with these transactions. Adverse market movements could cause a fund or underlying 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 or underlying 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 or an underlying fund incurs transaction costs (i.e. brokerage fees) when engaging in futures trading. To the extent a fund or underlying 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 or underlying 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 or underlying fund may attempt, through the purchase of futures contracts, to secure better rates or prices than might later be available in the market when they affect anticipated purchases. Similarly, a fund or underlying fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and their portfolio securities that are denominated in that currency. A fund or underlying 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 or underlying 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 or underlying fund seeks to close out a futures position. If a fund or an underlying fund is unable to close out its position and prices move adversely, the fund or underlying fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund or an underlying 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 or an underlying fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund or an underlying 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 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. Under current regulatory requirements, all put options a fund or an underlying fund writes will be covered, which means that a fund or an underlying fund will earmark or segregate cash, U.S. government securities or other liquid securities with a value at least equal to the exercise price of the put option, or will otherwise "cover" its position as required by current regulatory guidance under the 1940 Act (e.g., the fund will hold a put option on the same underlying security with the same or higher strike price). The purpose of writing such options is to generate additional income for a fund or an underlying 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 or an underlying 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 or an underlying fund's attempt to exercise the put, a fund or an underlying fund may have to treat the security's final maturity as its effective maturity. If that

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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 or an underlying fund. This also could lengthen a fund's or an underlying fund's overall average effective maturity. Standby commitments are types of puts.

A fund or an underlying 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 or underlying fund may purchase and sell foreign currency options and foreign currency futures contracts and related options. A fund or an underlying 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 or an underlying 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 or an underlying 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 or an underlying 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 or an underlying 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 or an underlying 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 or an underlying fund, does not exceed 5% of its net assets.

*<u>Derivatives Regulatory Matters</u>* — In October 2020, the SEC adopted a 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

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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 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>Spread Transactions</u>* may be used for hedging or managing risk. A fund may purchase covered spread options from securities dealers. Such covered spread options are not presently exchange-listed or exchange-traded. The purchase of a spread option gives the fund the right to put, or sell, a security that it owns at a fixed dollar spread or fixed yield spread in relation to another security that the fund does not own, but which is used as a benchmark. The risk to the fund in purchasing covered spread options is the cost of the premium paid for the spread option and any transaction costs. In addition, there is no assurance that closing transactions will be available. The purchase of spread options will be used to protect the fund against adverse changes in prevailing credit quality spreads, i.e., the yield spread between high quality and lower quality securities. Such protection is only provided during the life of the spread option.

*<u>Structured Notes</u>* are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities include structured notes as well as securities other than debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities may be very volatile. The terms of the structured and indexed securities may provide that in certain circumstances no principal is due at maturity and therefore, may result in a loss of invested capital. Structured and indexed securities may be positively or negatively indexed, so that appreciation of the reference may produce an increase or a decrease in the interest rate or the value of the structured or indexed security at maturity may be calculated as a specified multiple of the change in the value of the reference; therefore, the value of such security may be very volatile. Structured and indexed securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference. Structured or indexed securities may also be more volatile, less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities.

*<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 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. For swap agreements that are not traded through a futures commission merchant and cleared through a central clearinghouse, 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

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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 a fund's investment policies and restrictions (as stated in the prospectuses 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.

**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.

**Duration** was developed as a more precise alternative to the concept of "maturity." Traditionally, a debt obligation's maturity has been used as a proxy for the sensitivity of the security's price to changes in interest rates (which is the "interest rate risk" or "volatility" of the security). However, maturity measures only the time until a debt obligation provides its final payment, taking no account of the pattern of the security's payments prior to maturity. In contrast, duration incorporates a bond's yield, coupon interest payments, final maturity, call and put features and prepayment exposure into one measure. Duration is the magnitude of the change in the price of a bond relative to a given change in market interest rates. Duration management is one of the fundamental tools used by the investment adviser.

Duration is a measure of the expected life of a debt obligation on a present value basis. Duration takes the length of the time intervals between the present time and the time that the interest and principal payments are scheduled or, in the case of a callable bond, the time the principal payments are expected to be received, and weights them by the present values of the cash to be received at each future point in time. For debt obligations with interest payments occurring prior to the payment of principal, duration will usually be less than maturity. In general, all else being equal, the lower the stated or coupon rate of the interest of a fixed-income security, the higher the duration of the security; conversely, the higher the stated or coupon rate of a fixed-income security, the lower the duration of the security.

Holding long futures or call option positions will increase the duration of a fund's portfolio. Holding short futures or put options will lower the duration of a fund's portfolio.

A swap agreement on an asset or group of assets may affect the duration of the portfolio depending on the attributes of the swap. For example, if the swap agreement provides a fund with a floating rate of return in exchange for a fixed rate of return, the duration of the fund would be modified to reflect the duration attributes of a similar security that the fund is permitted to buy.

The above discussion provides a general overview of the concept of duration. Application and calculation of duration may be slightly different or become more complex when applied to other types of debt obligations, which may require different assessments to determine and/or calculate duration. For example, for floating- and variable-rate securities the interest rate exposure and duration correspond to the frequency of the coupon reset. For mortgage-backed securities and certain asset-backed securities, calculating duration requires projecting future interest rates and the associated pace of repayment of the underlying instruments. Finally, the duration of the debt obligation may vary over time in response to changes in interest rates and other market factors.

**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 the imposition of sanctions, trade barriers, confiscations, exchange or currency controls, managed adjustments in relative currency values and other protectionist measures or retaliatory actions imposed or negotiated by the countries with which they trade. Countries with emerging or developing securities markets may additionally experience problems with share registration, settlement and custody, which may result in losses to the fund.

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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 nor have they been tested in court and it is not clear that the contracts are enforceable or that the structures will otherwise work as intended. As a result, investors face the risk that future actions by the Chinese government, at any time and without advance notice, 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 or otherwise determine that the contractual arrangements as part of the VIE structure are unenforceable or contravene applicable law or regulations. If the Chinese government takes these or similar actions 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 (i.e., such investments could become worthless) with no recourse available.

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

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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.

The Chinese government has historically exercised substantial control over the Chinese economy and China-based operating companies, such as through administrative regulation, state ownership and/or other forms of involvement. Actions of the Chinese central and local government authorities continue to have a substantial effect on economic conditions in China and operations of certain China-based operating companies. In addition, the Chinese government has actively intervened in Chinese companies' operations and structures and taken (and may continue to take) actions that impact such companies' structures and operations. Also, such governmental action may include ownership or control directly or indirectly by the central, provincial or municipal governments of the People's Republic of China or by the People's Liberation Army (the military arm of the Chinese Communist Party) and, thus, a fund's investments in Chinese companies are subject to increased risks of political changes, social instability and/or regulatory developments. In general, investments in China involve risk of a total loss due to government action or inaction or other adverse circumstances.

There is the potential of increased tariffs and restrictions on trade between the United States and the PRC. An increase in tariffs or trade restrictions, or even the threat of such developments, could lead to a significant reduction in international trade, which could have a negative impact on PRC companies and a commensurately negative impact on a fund. In addition, the U.S. and other nations and international organizations may impose economic sanctions or take other actions that may adversely affect issuers located in certain countries, including China. See "Market Disruptions Risk" and "Foreign Securities" risk.

**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, 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", 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. 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.

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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.

**Real Estate Investment Trusts** (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

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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 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

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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 NAV (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' NAV. Market prices of ETF shares will fluctuate, sometimes rapidly and materially, in response to various factors including changes in the ETF's NAV, 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 NAV, 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 NAV. An ETF's investment results are based on the ETF's daily NAV. Investors transacting in ETF shares in the secondary market, where market prices may differ from NAV, may experience investment results that differ from results based on the ETF's daily NAV. 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

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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.

**Exchange-Traded Notes** (ETNs) generally are senior, unsecured, unsubordinated debt securities issued by a sponsor. They are designed to provide investors a different way to gain exposure to the returns of market benchmarks, particularly those in the natural resource and commodity markets. An ETN's returns are based on the performance of a market index minus fees and expenses. ETNs are not equity investments or investment companies, but they do share some characteristics of those investment vehicles. As with equities, ETNs can be shorted, and as with ETFs and index funds, they are designed to track the total return performance of a benchmark index. Like ETFs, ETNs are traded on an exchange and can be bought and sold on the listed exchange. However, unlike an ETF, an ETN can be held until the ETN's maturity, at which time the issuer will pay a return linked to the performance of the market index to which the ETN is linked minus certain fees. Unlike regular bonds, ETNs do not make periodic interest payments and principal is not protected.

The market value of an ETN is determined by supply and demand, the current performance of the market index to which the ETN is linked, and the credit rating of the ETN issuer. The market value of ETN shares may differ from their NAV. This difference in price may be due to the fact that the supply and demand in the market for ETN shares at any point in time is not always identical to the supply and demand in the market for the securities/commodities/instruments underlying the index that the ETN seeks to track. The value of an ETN may also change due to a change in the issuer's credit rating. As a result, there may be times when an ETN share trades at a premium or discount to its NAV.

**Event-Linked Bonds** — A fund may invest up to 5% of its net assets in "event-linked bonds," which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific "trigger" event, such as a hurricane, earthquake, or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as "catastrophe bonds." If a trigger event occurs, a fund may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose a fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds may also be subject to liquidity risk.

**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

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purposes. To the extent a foreign currency transaction involves a derivative instrument, the risks discussed under "Derivative 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 NAV 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. A fund's investments in foreign securities may include securities of issuers domiciled in a foreign jurisdiction but which are listed on a U.S. exchange and included in the fund's index, as well as securities generally available in foreign markets. 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

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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. Unilateral actions by a foreign government may also impact a fund's ability to operate in full conformity with required U.S. regulations. As a result, such restrictions may limit a fund's ability to meet a large number of shareholder redemption requests.

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.

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.

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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 NAV 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 NAV 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.

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.

**Indexing Strategies** involve tracking the securities represented in, and therefore the performance of, an index. An underlying index fund normally will invest primarily in the securities of its index. Moreover, the underlying index fund seeks to invest so that its portfolio performs similarly to that of its index. Correlation for an underlying index fund is calculated using daily returns, according to a mathematical formula which measures correlation between a fund's portfolio and index returns. An underlying index fund may rebalance its holdings in order to track its index more closely. A perfect correlation of 1.0 is unlikely as the funds incur operating and trading expenses unlike their indices.

There can be no guarantee that the performance of an underlying index fund will achieve a high degree of correlation with that of its index. A number of factors may affect an underlying index 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 an underlying 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 the underlying index fund's portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the underlying index fund but not to the index.

**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.

**Index Participations** and index participation contracts provide the equivalent of a position in the securities comprising an index, with each security's representation equaling its index weighting. Moreover, their holders are entitled to payments equal to the dividends paid by the underlying index securities. Generally, the value of an index participation or index participation contract will rise and fall along with the value of the related index. The funds will invest in index participation contracts only if a liquid market for them appears to exist.

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**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. A fund may also invest in other inflation-protected 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.

Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by the U.S. Internal Revenue Service (IRS) to be taxable income in the year it occurs. A fund's distributions to shareholders 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 a fund needs to make its required annual distributions to shareholders in amounts that exceed the cash received. As a result, the 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/portfolios. 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.

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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 Redemption 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.

**Loan Interests,** and other direct debt instruments or interests therein, may be acquired by a fund. A loan interest is typically originated, negotiated, and structured by a U.S. or foreign commercial bank, insurance company, finance company, or other financial institution (Agent) for a lending syndicate of financial institutions. The Agent typically administers and enforces the loan on behalf of the other lenders in the syndicate. In addition, an institution, typically but not always the Agent (Collateral Bank), holds collateral (if any) on behalf of the lenders. When a Collateral Bank holds collateral, such collateral typically consists of one or more of the following asset types: inventory, accounts receivable, property, plant and equipment, intangibles, common stock of subsidiaries or other investments. These loan interests may take the form of participation interests in, assignments of or novations of a loan during its second distribution, or direct interests during a primary distribution. Such loan interests may be acquired from U.S. or foreign banks, insurance companies, finance companies, or other financial institutions that have made loans or are members of a lending syndicate or from other holders of loan interests. A fund may also acquire loan interests under which a fund derives its rights directly from the borrower. Such loan interests are separately enforceable by a fund against the borrower and all payments of interest and principal are typically made directly to a fund from the borrower. In the event that a fund and other lenders become entitled to take possession of shared collateral, it is anticipated that such collateral would be held in the custody of the Collateral Bank for their mutual benefit. A fund may not act as an Agent, a Collateral Bank, a guarantor or sole negotiator or structurer with respect to a loan.

The investment adviser will analyze and evaluate the financial condition of the borrower in connection with the acquisition of any loan interest. Credit ratings are typically assigned to loan interests in the same manner as with other fixed income debt securities, and the investment adviser analyzes and evaluates these ratings, if any, in deciding whether to purchase a loan interest. The investment adviser also analyzes and evaluates the financial condition of the Agent and, in the case of loan interests in which a fund does not have privity with the borrower, those institutions from or through whom a fund derives its rights in a loan ("Intermediate Participants").

In a typical loan, the Agent administers the terms of the loan agreement. In such cases, the Agent is normally responsible for the collection of principal and interest payments from the borrower and the apportionment of these payments to the credit of all the institutions that are parties to the loan agreement. A fund will generally rely upon the Agent or Intermediate Participant to receive and forward to a fund its portion of the principal and interest payments on the loan. Furthermore, unless under the terms of a participation agreement a fund has direct recourse against the borrower, a fund will rely on the Agent and the other members of the lending syndicate to use appropriate credit remedies against the borrower. The Agent is typically responsible for monitoring compliance with covenants contained in the loan agreement based upon reports prepared by the borrower. The seller of the loan interest usually does, but is often not obligated to, notify holders of loan interests of any failures of compliance. The Agent may monitor the value of the collateral and, if the value of the collateral declines, may accelerate the loan, may give the borrower an opportunity to provide additional collateral or may seek other protection for the benefit of the participants in the loan. The Agent is compensated by the borrower for providing these services under a loan agreement, and such compensation may include special fees paid upon structuring and funding the loan and other fees paid on a continuing basis. With respect to loan interests for which the Agent does not perform such administrative and enforcement functions, a fund will perform such tasks on its own behalf, although a Collateral Bank will typically hold any collateral on behalf of a fund and the other holders pursuant to the applicable loan agreement.

A financial institution's appointment as Agent may usually be terminated in the event that it fails to observe the requisite standard of care or becomes insolvent, enters Federal Deposit Insurance Corporation (FDIC) receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A successor agent generally would be appointed to replace the terminated Agent, and assets held by the Agent under the loan agreement should remain available to holders of loan interests. However, if assets held by the Agent for the benefit of a fund were determined to be subject to the claims of the Agent's general creditors, a fund might incur certain costs and delays in realizing payment on a loan interest, or suffer a loss of principal and/or interest. In situations involving Intermediate Participants, similar risks may arise.

Purchasers of loan interests depend primarily upon the creditworthiness of the borrower for payment of principal and interest. If a fund does not receive a scheduled interest or principal payment on such indebtedness, a fund's share price and yield could be adversely affected.

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Loans that are fully secured offer a fund more protections than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrower's obligation, or that the collateral can be liquidated. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Direct indebtedness of developing countries also will involve a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due.

The loan interests market is in a developing phase with increased participation among several investor types. The dealer community has become increasingly involved in this secondary market. If, however, a particular loan interest is deemed to be illiquid, it would be valued using procedures adopted by the Board. In such a situation, there is no guarantee that a fund will be able to sell such loan interests, which could lead to a decline in the value of the loan interests and the value of a fund's shares.

**Loan Participations and Assignments** — A fund may purchase participations in commercial loans. Such indebtedness may be secured or unsecured. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. A fund may participate in such syndications, or can buy part of a loan, becoming a part lender. When purchasing loan participations, a fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary. The participation interests in which a fund intends to invest may not be rated by any nationally recognized rating service.

A loan is often administered by an agent bank acting as agent for all holders. The agent bank administers the terms of the loan, as specified in the loan agreement. In addition, the agent bank is normally responsible for the collection of principal and interest payments from the corporate borrower and the apportionment of these payments to the credit of all institutions which are parties to the loan agreement. Unless, under the terms of the loan or other indebtedness, a fund has direct recourse against the corporate borrower, a fund may have to rely on the agent bank or other financial intermediary to apply appropriate credit remedies against a corporate borrower.

A financial institution's employment as agent bank might be terminated in the event that it fails to observe a requisite standard of care or becomes insolvent. A successor agent bank would generally be appointed to replace the terminated agent bank, and assets held by the agent bank under the loan agreement should remain available to holders of such indebtedness. However, if assets held by the agent bank for the benefit of a fund were determined to be subject to the claims of the agent bank's general creditors, a fund might incur certain costs and delays in realizing payment on a loan or loan participation and could suffer a loss of principal and/or interest. In situations involving other interposed financial institutions (e.g., an insurance company or governmental agency) similar risks may arise.

Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the corporate borrower for payment of principal and interest. If a fund does not receive scheduled interest or principal payments on such indebtedness, a fund's share price and yield could be adversely affected. Loans that are fully secured offer a fund more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated.

A fund may invest in loan participations with credit quality comparable to that of issuers of its securities investments. Indebtedness of companies whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. Some companies may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Consequently, when investing in indebtedness of companies with poor credit, a fund bears a substantial risk of losing the entire amount invested.

A fund limits the amount of its total assets that it will invest in any one issuer or in issuers within the same industry. For purposes of these limits, a fund generally will treat the corporate borrower as the "issuer" of indebtedness held by a fund. In the case of loan participations where a bank or other lending institution serves as a financial intermediary between a fund and the corporate borrower, if the participation does not shift to a fund the direct debtor-creditor relationship with the corporate borrower, SEC interpretations require a fund to treat both the lending bank or other lending institution and the corporate borrower as "issuers" for the purposes of determining whether a fund has invested more than 5% of its assets in a single issuer. Treating a financial intermediary as an issuer of indebtedness may restrict a fund's ability to invest in indebtedness related to a single financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many different companies and industries.

Loans and other types of direct indebtedness may not be readily marketable and may be subject to restrictions on resale. In some cases, negotiations involved in disposing of indebtedness may require weeks to complete. Consequently, some indebtedness may be difficult or impossible to dispose of readily at what the investment adviser believes to be a fair price. In addition, valuation of illiquid indebtedness involves a greater degree of judgment in determining a fund's NAV than if that value were based on available market quotations, and could result in significant variations in a fund's daily share price. At the same time, some loan interests are traded among certain financial institutions and accordingly may be deemed liquid. As the market for different types of indebtedness develops, the liquidity of these instruments is expected to improve. In addition, a fund currently intends to treat indebtedness for which there is no readily available market as illiquid for purposes of a fund's limitation on illiquid investments. Investments in loan participations are considered to be debt obligations for purposes of a fund's investment restriction relating to the lending of funds or assets by a fund.

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Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may involve additional risks to a fund. For example, if a loan is foreclosed, a fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a fund could be held liable as co-lender. It is unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and misrepresentation. In the absence of definitive regulatory guidance, a fund relies on the investment adviser's research in an attempt to avoid situations where fraud or misrepresentation could adversely affect a fund.

**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, tariffs, 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.

A widespread health crisis, such as an infectious disease outbreak, epidemic or pandemic, could cause substantial market volatility, securities exchange suspensions, restrictions or closures, and other deleterious effects, any of which could disrupt fund operations and adversely affect fund performance. For example, the outbreak of COVID-19, a novel coronavirus disease, caused volatility, severe market dislocations and liquidity constraints in many markets, including those in which the funds invest. Efforts to contain the spread of infectious disease could result 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 could have negative economic effects. Such disruptions could lead to instability in the market place, including losses and overall volatility. Future health crises could adversely affect economies, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways.

A decrease in the share price of issuers in the same or related industries or sectors that comprise a large portion of the overall market or major market indices could disproportionately impact financial markets, even if other industries or sectors are performing well otherwise. To the extent such issuers are financially interconnected or their securities behave similarly, events affecting one issuer or their industry or sector could have an outsized effect.

War, terrorism, military interventions, cyberattacks or other forms of unconventional warfare, and related responses and events could cause substantial market volatility, disrupt fund operations, and adversely affect fund performance. These conflicts can lead to related events such as nationalization, expropriation or confiscatory taxation, currency blockage, political changes, government regulation, political, regulatory or social instability or uncertainty or adverse diplomatic developments, including the imposition of sanctions, tariffs, trade restrictions, or other similar measures. The extent, duration and impact of such events are impossible to predict, but could be significant and have severe adverse effects on regional or global economies, specific sectors and the markets for certain securities, commodities, currencies and goods. Such events and their consequences may result in restricted access or elimination of access to certain markets, investments, service providers or counterparties, and may cause increased volatility, currency fluctuations, liquidity constraints, counterparty default, valuation and settlement difficulties and heightened operational risk. These events and other similar events could negatively affect a fund's performance.

U.S. and global markets have experienced increased volatility in past years, including as a result of the failures of certain U.S. and non-U.S. banks, which could be harmful to the funds and issuers in which they invest. For example, if a bank in which a fund or an issuer has an account fails, any cash or other assets in bank accounts may be temporarily inaccessible or permanently lost by the fund or issuer. If a bank that provides a subscription line credit facility, asset-based facility, other credit facility and/or other services to an issuer fails, the issuer could be unable to draw funds under its credit facilities or obtain replacement credit facilities or other services from other lending institutions with similar terms. Even if banks used by issuers in which the funds invest remain solvent, continued volatility in the banking sector could cause or intensify an economic recession, increase the costs of banking services or result in the issuers being unable to obtain or refinance indebtedness at all or on as favorable terms as could otherwise have been obtained. Conditions in the banking sector are evolving, and the scope of any potential impacts to the funds and issuers, both from market conditions and also potential legislative or regulatory responses, are uncertain. Continued market volatility and uncertainty and/or a downturn in market and economic and financial conditions, as a result of developments in the banking industry or otherwise (including as a result of delayed access to cash or credit facilities), could have an adverse impact on the funds and issuers in which they invest.

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, possible failure of individual companies or industries, slower economic growth or recession, inflation, increased unemployment or market volatility, any of which could have a negative impact on a fund's performance. Recently the United States has increased tariffs or threatened to increase tariffs on imports from certain countries and on certain imported

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goods. An increase in tariffs or trade restrictions, or even the threat of such developments, could lead to retaliatory actions by other countries and an escalation of trade barriers, and could heighten the aforementioned risks to a fund.

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.

**Maturity of Investments** for underlying Schwab bond funds will generally be determined using a portfolio security's final maturity date (date on which the final principal payment of a bond is scheduled to be paid); however, for securitized products, such as mortgage backed securities and certain other asset-backed securities, maturity will be determined on an average life basis (weighted average time to receipt of all principal payments) by the investment adviser. Because pre-payment rates of individual mortgage pools vary widely, the average life of a particular pool cannot be predicted precisely. For securities with embedded demand features, such as puts or calls, either the demand date or the final maturity date will be used depending on interest rates, yields and other market conditions. The average portfolio maturity of a fund is dollar-weighted based upon the market value of a fund's securities at the time of the calculation.

Maturity of Investments for underlying Schwab money market funds generally will be determined using the portfolio securities' final maturity dates or a shorter period as permitted by Rule 2a-7. For a government security that is a variable rate security where the variable rate of interest is readjusted at least every 397 calendar days, the maturity is deemed to be equal to the period remaining until the next readjustment of the interest rate. A government security that is a floating rate security is deemed to have a maturity of one day. A short-term variable rate security is deemed to have a maturity equal to the earlier of the period remaining until the next readjustment of the interest rate or the period remaining until the principal amount can be recovered through demand. A long-term variable rate security that is subject to a demand feature is deemed to have a maturity equal to the longer of the period remaining until the next readjustment of the interest rate or the period remaining until the principal amount can be recovered through demand. A short-term floating rate security is deemed to have a maturity of one day. A long-term floating rate security that is subject to a demand feature is deemed to have a maturity equal to the period remaining until the principal amount can be recovered through demand. A repurchase agreement is deemed to have a maturity equal to the period remaining until the date on the repurchase of the underlying securities is scheduled to occur, or, where the agreement is subject to a demand, the notice period applicable to the demand for repurchase of the securities. A securities lending agreement will be treated as having a maturity equal to the period remaining until the date on which the loaned securities are scheduled to be returned, or where the agreement is subject to demand, the notice period applicable to a demand for the return of the loaned securities.

**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.

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*<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.

**Mortgage-Backed Securities (MBS) and other Asset-Backed Securities (ABS)** may be purchased by the 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 Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), or the Government National Mortgage Association (Ginnie Mae). 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 the 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 of both Fannie Mae and Freddie Mac MBS in the "to-be-announced" (TBA) market, Fannie Mae and Freddie Mac started issuing uniform MBS (UMBS) in place of their previous offerings of TBA-eligible MBS. While the initial effects of the issuance of UMBS on the market for MBS and on a fund's ability to invest in UMBS have been minimal, the long-term effects of the Single Security Initiative are uncertain.

*<u>Asset-backed Securities</u>* have structural characteristics similar to MBS. ABS represent direct or indirect participation in assets such as automobile loans, credit card receivables, trade receivables, home equity loans (which sometimes are categorized as MBS) or other financial assets. Therefore, repayment depends largely on the cash flows generated by the assets backing the securities. The credit quality of most ABS depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on ABS may be supported by credit enhancements including letters of credit, an insurance guarantee, reserve funds and overcollateralization. Asset-backed securities also may be debt instruments, which are also known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning such assets and issuing debt obligations.

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*<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.

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; and (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 Obligations</u>* (CMOs) are a hybrid between mortgage-backed bonds and mortgage pass-through securities. 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.

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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>* 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, 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 (SMBS)</u>* 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.

**Mortgage Pass-Through Securities** — 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 Fannie Mae, Freddie Mac, or Ginnie Mae. 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 entitled 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

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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 "to-be-announced" or "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, a 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 a 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.

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.

**Municipal Leases** are obligations issued in the form of a lease, an installment purchase contract or a participation interest in any of these obligations to finance the construction or acquisition of equipment or facilities. Municipal leases are generally subject to "nonappropriation risk," which is the risk that the municipality may terminate the lease because funds have not been allocated to make the necessary lease payments. The lessor would then be entitled to repossess the property, but the value of the property may be less to private sector entities than it would be to the municipality.

**Municipal Securities** are debt securities issued by municipal issuers. Municipal issuers include states, counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. Municipal issuers may also include issuers located in U.S. territories, commonwealths and possessions if interest on securities issued by those issuers is not subject to federal or state income tax. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. Other public purposes include refunding outstanding obligations, obtaining funds for general operating expenses and obtaining funds to loan to other public institutions and facilities.

Municipal securities also may be issued to finance various private activities, including certain types of private activity bonds ("industrial development bonds" under prior law). These securities may be issued by or on behalf of public authorities to obtain funds to provide certain privately owned or operated facilities.

Municipal securities may be owned directly or through participation interests, and include general obligation or revenue securities, tax-exempt commercial paper, notes and leases. General obligation securities typically are secured by the issuer's pledge of its full faith and credit and most often its taxing power for the payment of principal and interest. Revenue securities typically are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special tax or other specific revenue source. Private activity bonds and industrial development bonds are, in most cases, revenue bonds and generally do not constitute the pledge of the credit of the issuer of such bonds. The credit quality of private activity bonds is frequently related to the credit standing of private corporations or other entities.

In addition to bonds, municipalities issue short-term securities such as tax anticipation notes, bond anticipation notes, revenue anticipation notes, construction loan notes and tax-free commercial paper. Tax anticipation notes typically are sold to finance working capital needs of municipalities in anticipation of the receipt of property taxes on a future date. Bond anticipation notes are sold on an interim basis in anticipation of a municipality's issuance of a longer-term bond in the future. Revenue anticipation notes are issued in expectation of the

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receipt of other types of revenue, such as that available under the Federal Revenue Sharing Program. Construction loan notes are instruments insured by the Federal Housing Administration with permanent financing by Freddie Mac, Fannie Mae or Ginnie Mae at the end of the project construction period. Tax-free commercial paper is an unsecured promissory obligation issued or guaranteed by a municipal issuer. A fund or underlying fund may purchase other municipal securities similar to the foregoing that are or may become available, including securities issued to pre-refund other outstanding obligations of municipal issuers.

A fund or underlying fund also may invest in moral obligation securities, which are normally issued by special purpose public authorities. If the issuer of a moral obligation security is unable to meet its obligation from current revenues, it may draw on a reserve fund. The state or municipality that created the entity has only a moral commitment, not a legal obligation, to restore the reserve fund.

The marketability, valuation or liquidity of municipal securities may be negatively affected in the event that states, localities or their authorities default on their debt obligations or other market events arise, which in turn may negatively affect fund performance, sometimes substantially. A credit rating downgrade relating to, default by, or insolvency or bankruptcy of, one or several municipal issuers of a particular state, territory, commonwealth, or possession could affect the market value or marketability of any one or all such states, territories, commonwealths, or possessions.

The value of municipal securities may be affected by uncertainties with respect to the rights of holders of municipal securities in the event of bankruptcy or the taxation of municipal securities as a result of legislation or litigation. For example, under federal law, certain issuers of municipal securities may be authorized in certain circumstances to initiate bankruptcy proceedings without prior notice to or the consent of creditors. Such action could result in material adverse changes in the rights of holders of the securities. In addition, litigation challenging the validity under the state constitutions of present systems of financing public education has been initiated or adjudicated in a number of states, and legislation has been introduced to effect changes in public school finances in some states. In other instances, there has been litigation challenging the issuance of pollution control revenue bonds or the validity of their issuance under state or federal law, which ultimately could affect the validity of those municipal securities or the tax-free nature of the interest thereon.

Municipal securities pay fixed-, variable- or floating-rates of interest, which may be exempt from federal income tax, and, typically personal income tax of a state or locality. Failure of municipal obligations to qualify for tax-exempt status, either at issuance or as a result of a deemed reissuance, may adversely affect a fund and its shareholders, including its ability to distribute exempt-interest dividends.

The investment adviser relies on the opinion of the issuer's counsel, which is rendered at the time the security is issued, to determine whether the security is fit, with respect to its validity and tax status, to be purchased by a fund. Neither the investment adviser nor the funds guarantee this opinion is correct, and there is no assurance that the IRS will agree with such counsel's opinion.

**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.

**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.

**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 Nationally Recognized Statistical Rating Organization (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, S&P or Fitch Ratings, Inc. or are determined to be of similar investment quality by the investment manager.

**Repurchase Agreements** 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

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buyer's holding period. Any repurchase agreements a 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 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. Repurchase agreements are the economic equivalents of loans.

**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 tender option bonds, commercial paper, and other promissory notes, may be issued under Section 4(a)(2) of the 1933 Act and may be sold only to qualified institutional buyers, such as a fund, pursuant to Rule 144A under the 1933 Act. Securities purchased through a private placement offering are also restricted securities. These securities 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 or if buyers in that market become unwilling to purchase the securities.

**Reverse Repurchase Agreements and Mortgage Dollar Rolls** may be used by a fund or an underlying fund. A fund or an underlying 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 or an underlying fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. A fund or an underlying fund generally retains the right to interest and principal payments on the security. If a fund or an underlying fund uses the cash it obtains to invest in other securities, this may be considered a form of leverage and may expose a fund or an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of a fund's investment securities. Because a fund or underlying fund receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing.

A fund or an underlying fund also may enter into mortgage dollar rolls, in which a fund or an underlying 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 or an underlying fund would forego principal and interest paid on the MBS during the roll period, a fund or an underlying 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 or an underlying 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. The net effect is that the investment advisor is able to maintain mortgage exposure while having the cash available to facilitate redemptions. Mortgage dollar roll transactions may be considered a borrowing by a fund or an underlying 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, 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

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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 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

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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 each 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 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 assets, 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.

**Sinking Funds** may be established by bond issuers to set aside a certain amount of money to cover timely repayment of bondholders' principal raised through a bond issuance. By creating a sinking fund, the issuer is able to spread repayment of principal to numerous bondholders while reducing reliance on its then current cash flows. A sinking fund also may allow the issuer to annually repurchase certain of its outstanding bonds from the open market or repurchase certain of its bonds at a call price named in a bond's sinking fund provision. This call provision will allow bonds to be prepaid or called prior to a bond's maturity.

**Stripped Securities** are securities whose income and principal components are detached and sold separately. While risks associated with stripped securities are similar to other fixed-income securities, stripped securities are typically subject to greater changes in value. U.S. Treasury securities that have been stripped by the Federal Reserve Bank are obligations of the U.S. Treasury.

**Temporary Defensive Strategies** are strategies the funds may take for temporary or defensive purposes. The investment strategies for the funds are those that the funds use during normal circumstances. 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 that would not ordinarily be consistent with the funds' objectives. The funds will do so only if the investment adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. When the funds engage in such activities, they may not achieve their investment objectives.

**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

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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. The SPAs contain various covenants that severely limit each enterprise's operations.

The conditions attached to entering into the SPAs place significant restrictions on the activities of Freddie Mac and Fannie Mae. Freddie Mac and Fannie Mae must obtain the consent of the U.S. Treasury to, among other things, (i) make any payment to purchase or redeem its capital stock or pay any dividend other than in respect of the senior preferred stock, (ii) issue capital stock of any kind, (iii) terminate the conservatorship of the FHFA except in connection with a receivership, or (iv) increase its debt beyond certain specified levels. Under a letter agreement entered into in January 2021, each enterprise is permitted to retain earnings and raise private capital to enable them to meet the minimum capital requirements under the FHFA's Enterprise Regulatory Capital Framework ("ERCF"). The letter agreement also permits each enterprise to develop a plan to exit conservatorship, but may not do so until litigation involving the conservatorships is resolved and each enterprise has the minimum capital required by FHFA's rules. In addition, significant restrictions are placed on the maximum size of each of Freddie Mac's and Fannie Mae's respective portfolios of mortgages and mortgage-backed securities, and the purchase agreements entered into by Freddie Mac and Fannie Mae provide that the maximum size of their portfolios of these assets must decrease by a specified percentage each year. The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac's and Fannie Mae's operations and activities as a result of the senior preferred stock investment made by the U.S. Treasury, market responses to developments at Freddie Mac and Fannie Mae, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any mortgage-backed securities guaranteed by Freddie Mac and Fannie Mae, including any such mortgage-backed securities held by a fund.

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. Under amendments to the ERCF, Fannie Mae and Freddie Mac have published capital disclosures which provide additional information about their capital position and capital requirements on a quarterly basis since the first quarter of 2023 and delivered their first capital plans to FHFA in May 2023. The FHFA finalized amendments to certain provisions of the ERCF in November 2023 that modify various capital requirements for Freddie Mac and Fannie Mae. The FHFA previously 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. The ERCF requires Fannie Mae and Freddie Mac, upon exit from conservatorship, to maintain higher levels of capital than prior to conservatorship to satisfy their risk-based capital requirements, leverage ratio requirements and prescribed buffer amounts. 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.

A default by the U.S. government on 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 or periodic legislation to fund the government. If the U.S. Congress is unable to negotiate an increase to the statutory debt ceiling or pass legislation to fund the government, 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. More recently, in August 2023, and in May 2025, two other major rating agencies downgraded the long-term credit rating of the U.S. government due to a combination of expected fiscal deterioration, a high and growing government debt burden, rising interest costs, and an erosion of

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governance relative to peers. Further 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. It is 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.

**Variable- and Floating-Rate Debt Securities** pay an interest rate, which is adjusted either periodically or at specific intervals or which floats continuously according to a formula or benchmark. Although these structures generally are intended to minimize the fluctuations in value that occur when interest rates rise and fall, some structures may be linked to a benchmark in such a way as to cause greater volatility to the security's value.

Some variable-rate securities may be combined with a put or demand feature (variable-rate demand securities) that entitles the holder to the right to demand repayment in full or to resell at a specific price and/or time. While the demand feature is intended to reduce credit risks, it is not always unconditional and may be subject to termination if the issuer's credit rating falls below investment grade or if the issuer fails to make payments on other debt. While most variable-rate demand securities allow a fund to exercise its demand rights at any time, some such securities may only allow a fund to exercise its demand rights at certain times, which reduces the liquidity usually associated with this type of security. A fund could suffer losses in the event that the demand feature provider, usually a bank, fails to meet its obligation to pay the demand.

Variable- and floating-rate debt securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating-rate debt securities will not generally increase in value if interest rates decline. When a fund holds variable- or floating-rate debt securities, a decrease in market interest rates will adversely affect the income received from such securities, which may also impact the NAV of a fund's shares.

**Wrap Agreements** may be entered into by a fund or an underlying 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 or an underlying 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 net asset value (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 or an underlying 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 or an underlying fund will be able to purchase any wrap agreements or replace ones that defaulted. Wrap agreements are valued using procedures adopted by the Board of Trustees. 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 or an underlying 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 a 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

#### The following investment limitations may be changed only by vote of a majority of a 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 are non-fundamental investment policies and restrictions and may be changed by the Board of Trustees:

#### 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 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.

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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 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.

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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 April 28, 2026, included 112 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 425 Market Street, Suite 1700, San Francisco, CA 94105.

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) <br>with the Trust (Term of Office and <br>Length of Time Served<sup>(1)</sup>)** | **Principal Occupations During the Past Five Years** | **Number of Portfolios in Fund Complex Overseen by the Trustee** | **Other Directorships During <br>the Past Five Years** |
| **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** |
| Michael J. Beer <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. | 112 |  |
| 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. | 112 |  |
| 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. | 112 |  |
| 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. | 112 | Director (2004-present), Corcept Therapeutics Incorporated<br>Director (2009-2021), Adamas Pharmaceuticals, Inc. |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s) <br>with the Trust (Term of Office and <br>Length of Time Served<sup>(1)</sup>)** | **Principal Occupations During the Past Five Years** | **Number of Portfolios in Fund Complex Overseen by the Trustee** | **Other Directorships During <br>the Past Five Years** |
| **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** |
| 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). | 112 |  |
| 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). | 112 |  |
| 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) | Retired. | 112 |  |

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| | | | |
|:---|:---|:---|:---|
| **Name, Year of Birth, and Position(s)<br> with the Trust (Term of Office and<br> Length of Time Served<sup>(1)</sup>)** | **Principal Occupations During the Past Five Years** | **Number of Portfolios in Fund Complex Overseen by the Trustee** | **Other Directorships During the Past Five Years** |
| **INTERESTED TRUSTEES** | **INTERESTED TRUSTEES** | **INTERESTED TRUSTEES** | **INTERESTED TRUSTEES** |
| Omar Aguilar<sup>(2)</sup> <br>1970<br>Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2025) | Director (Oct. 2024-present), Chief Executive Officer (Jan. 2022-present), President (Oct. 2023-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022-July 2024), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Sept. 2023-present), President (Oct. 2023-present), Chief Investment Officer (June 2011-present) and Vice President (June 2011-Sept. 2023), Schwab Funds, Laudus Trust and Schwab ETFs. | 112 |  |
| Richard A. Wurster<sup>(2)</sup> <br>1973<br>Chairman and 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) | Director and Chief Executive Officer (Jan. 2025-present), President (Oct. 2021-present), and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019-Oct. 2021), The Charles Schwab Corporation; President, Director (Nov. 2021-Dec. 2024), Executive Vice President – Schwab Asset Management Solutions (July 2019-Oct. 2021), Charles Schwab & Co., Inc.; President (Nov. 2021-Dec. 2024), 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. | 112 | Director (2025-present), The Charles Schwab Corporation |

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|:---|:---|
| **Name, Year of Birth, and Position(s) with the Trust <br>(Term of Office and Length of Time Served<sup>(3)</sup>)** | **Principal Occupations During the Past Five Years** |
| **OFFICERS** | **OFFICERS** |
| Omar Aguilar <br>1970<br>Chief Executive Officer, 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) | Director (Oct. 2024-present), Chief Executive Officer (Jan. 2022-present), President (Oct. 2023-present), Chief Investment Officer (Apr. 2011-present) and Senior Vice President (Apr. 2011-Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Oct. 2022-July 2024), Charles Schwab Investment Advisory, Inc.; Trustee (Jan. 2025-present), Chief Executive Officer (Sept. 2023-present), President (Oct. 2023-present), Chief Investment Officer (June 2011-present) and Vice President (June 2011-Sept. 2023), Schwab Funds, Laudus Trust and Schwab ETFs. |
| Jessica Seidlitz <br>1978<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 from 2013-2017 and since 2023) | Chief Operating Officer and Chief Financial Officer (Sept. 2024-present), Managing Director (Nov. 2023-present), and Chief Compliance Officer (Nov. 2023-Dec. 2024), Charles Schwab Investment Management, Inc.; Managing Director (Jan. 2019-present), Charles Schwab & Co., Inc.; Chief Compliance Officer (Mar. 2021-June 2023), Schwab Wealth Advisory, Inc.; Chief Operating Officer (Sept. 2024–present), and Chief Compliance Officer (Oct. 2023-Dec. 2024), Schwab Funds, Laudus Trust and Schwab ETFs. |
| 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; Managing Director (Mar. 2023-present), Vice President (Mar. 2022-Mar. 2023) and Director (Oct. 2015-Mar. 2022), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (Apr. 2022-May 2022), Charles Schwab & Co., Inc. |
| Patrick Cassidy <br>1964<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 2018) | Chief Investment Officer (Oct. 2023-present) and Vice President (Feb. 2018-present), Schwab Funds, Laudus Trust and Schwab ETFs; Managing Director (Mar. 2023-present), Chief Investment Officer (Oct. 2023-present), and Senior Vice President (Oct. 2012-Mar. 2023), Charles Schwab Investment Management, Inc. |
| 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) | Managing Director (Mar. 2023-present), Senior Vice President (Jan. 2020-Mar. 2023) 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. |
| Catherine MacGregor <br>1964<br>Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs 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), Managing Director (Mar. 2023-present) and Vice President (Sept. 2005-Mar. 2023), Charles Schwab Investment Management, Inc.; Managing Director (May 2022-present) and Vice President (Aug. 2005-May 2022), Charles Schwab & Co., Inc.; Managing Director (Aug. 2025 - present), Charles Schwab Bank, SSB; 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. Aguilar and Mr. Wurster are Interested Trustees. Mr. Aguilar 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. In addition, Mr. Wurster 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>(3)</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, Richard A. Wurster, 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 (78 percent) of trustees who are not interested persons of the Trust (i.e., independent trustees). There are three primary committees of the Board: the Audit, Compliance and

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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 independent trustees meet regularly in executive session without management. While the Board does not have single lead independent trustee, the chair of the Governance Committee leads executive sessions held by the independent trustees and coordinates responses from the independent trustees to management. 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.

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. Aguilar should serve as trustee of the Trust because of the experience he gained as chief executive officer, chief investment officer, and president of Schwab Asset Management, the Schwab Funds, Schwab ETFs and Laudus Funds, as well as his knowledge of and experience in financial and investment management services.

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. 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

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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:

&nbsp;&nbsp;&nbsp;&nbsp;· 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.

&nbsp;&nbsp;&nbsp;&nbsp;· 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 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.

&nbsp;&nbsp;&nbsp;&nbsp;· 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 December 31, 2025, 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** | |
| Omar Aguilar |  | N/A |  |
| Richard A. Wurster |  | N/A |  |

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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** |
|  | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | |
| Michael J. Beer | $2559  | N/A | $364375 |
| Robert W. Burns | $2559 | N/A | $364375 |

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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** |
|  | **INDEPENDENT TRUSTEES** | **INDEPENDENT TRUSTEES** | |
| Nancy F. Heller | $2559 | N/A | $364375 |
| David L. Mahoney | $2805 | N/A | $399375 |
| Jane P. Moncreiff | $2735 | N/A | $389375 |
| Kimberly S. Patmore | $2735 | N/A | $389375 |
| J. Derek Penn | $2559 | N/A | $364375 |

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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, 2025.

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| | | |
|:---|:---|:---|
| **Name of Trustee** | **Dollar Range of Trustee Ownership of the Funds Included in the SAI** | **Aggregate Dollar Range of Trustee Ownership in the Family of Investment Companies** |
| | **INTERESTED TRUSTEES** | |
| **Omar Aguilar<sup>(1)</sup>** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| **Richard A. Wurster** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |

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| | | |
|:---|:---|:---|
| **Name of Trustee** | **Dollar Range of Trustee Ownership of the Funds Included in the SAI** | **Aggregate Dollar Range of Trustee Ownership in the Family of Investment Companies** |
|  | **INDEPENDENT TRUSTEES** |  |
| **Michael J. Beer** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| **Robert W. Burns** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| **Nancy F. Heller** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| **David L. Mahoney** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |

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| | | |
|:---|:---|:---|
| **Name of Trustee** | **Dollar Range of Trustee Ownership of the Funds Included in the SAI** | **Aggregate Dollar Range of Trustee Ownership in the Family of Investment Companies** |
|  | **INDEPENDENT TRUSTEES** |  |
| **Jane P. Moncreiff** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| **Kimberly S. Patmore** |  | Over $100,000 |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |
| J. Derek Penn |  |  |
|  | Schwab Monthly Income Fund – Target Payout |  |
|  | Schwab Monthly Income Fund – Flexible Payout |  |
|  | Schwab Monthly Income Fund – Income Payout |  |

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As of December 31, 2025, 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.

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Control Persons and Principal Holders of Securities

As of March 31, 2026, the officers and trustees of the Trust, as a group did not own, of record or beneficially, any of the outstanding voting securities of each fund.

As of March 31, 2026, 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 Ownership** |
| Schwab Monthly Income Fund — Target Payout | Charles Schwab & Co., Inc.<br>FBO Customers<br>Attn: Schwab Funds Team N<br>425 Market Street <br>Suite 1700<br>San Francisco, CA 94105 | 94.79% |
| Schwab Monthly Income Fund — Flexible Payout | Charles Schwab & Co., Inc. | 95.46% |
| Schwab Monthly Income Fund — Income Payout | Charles Schwab & Co., Inc. | 96.80% |

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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.

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Investment Advisory and Other Services

#### Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of CSC, 425 Market Street, Suite 1700, 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, Co-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.

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 funds.

The net operating expenses of each of the funds, which currently are limited to 0.00%, will continue to be limited to 0.00% for so long as Schwab Asset Management serves as the adviser of the funds. This agreement may only be amended or terminated with approval of the funds' Board of Trustees.

The expense limitation is not intended to cover all fund expenses, and a fund's expenses may exceed the expense limitation. For example, the expense limitation 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 (such as the underlying funds), that are held by a fund, nor does it cover extraordinary or non-routine expenses, such as shareholder meeting costs.

#### Distributor
Pursuant to a Second Amended and Restated Distribution Agreement between Schwab and the Trust, Schwab, located at 3000 Schwab Way, Westlake, TX 76262, 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.

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.

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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 April 28, 2026, Schwab Asset Management anticipates that Ascensus, LLC, Envestnet Asset Management, Inc., Fidelity Brokerage Services LLC/National Financial Services LLC, Empower Annuity Insurance Company of America, Minnesota Life Insurance Company, Morgan Stanley Smith Barney LLC, OneDigital Investment Advisors LLC, Principal Life Insurance Company, and Schwab Retirement Plan Services, Inc. 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 of Trustees has adopted a Shareholder Servicing Plan (the Plan) on behalf of certain funds of the Trust. The Plan enables these 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, the funds (or Schwab as paying agent) may pay Schwab or service providers that, pursuant to written agreements with Schwab, provide certain account maintenance, customer liaison and shareholder services to fund shareholders. Schwab and the other 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 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 Trustees 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 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 Trustees of the Trust for review. All material amendments to the Plan must be approved by votes of the majority of both (i) the Board of Trustees and (ii) the Qualified Trustees.

The shareholder servicing fee paid to a particular service provider is calculated at an annual rate and is based on the average daily NAV of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above regardless of Schwab's or the service provider's actual cost of providing the services. If the cost of providing the services under the Plan is less than the payments received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Currently, the funds are not subject to any fee under the Plan.

#### 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.

#### Custodian and Fund Accountant
State Street Bank and Trust Company (State Street), One Congress Street, Suite 1, Boston, MA 02114, serves as custodian and accountant for the funds.

The custodian is responsible for the daily safekeeping of securities and cash held by the funds. The funds' accountant maintains all books and records related to the funds' transactions.

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#### 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.

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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 December 31, 2025.**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Registered Investment Companies <br>(this amount does not include <br>the funds in this SAI)** | **Registered Investment Companies <br>(this amount does not include <br>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 | 34 | $19578374089 | 0 | $0 | 0 | $0 |
| Patrick Kwok | 34 | $19578374089 | 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 may include separate accounts and other mutual funds and ETFs 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 or traders may aggregate trade orders for the Other Managed Accounts, excluding separately managed 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) Schwab Asset Management will not receive additional compensation or remuneration of any kind as a result of aggregating transactions; (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. For equity transactions, 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 and round lots. For fixed income transactions, aggregated orders are generally allocated after execution. For fixed income and money market fund accounts that have similar strategies, Schwab Asset Management determines allocations with the general purpose of achieving, as nearly as possible, performance and portfolio characteristic parity/ proportionality among such accounts over time. For fixed income and money market fund accounts that do not have similar strategies, Schwab Asset Management has target ranges for significant portfolio characteristics and determines allocations among such accounts in accordance with the target ranges in effect at the time of the trade. In addition, Schwab Asset Management may follow certain investment priorities to satisfy the investment targets for fixed income and money market funds that have investment mandates related to particular sectors.

*<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 funds. 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

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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 the fund managed by a 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. Portfolio Managers also have the potential to participate in discretionary equity awards. 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:

&nbsp;&nbsp;&nbsp;&nbsp;· a portion based on weighting of Investment Fund Performance and Other Managed Account Performance (if applicable)

&nbsp;&nbsp;&nbsp;&nbsp;· 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.

Certain Portfolio Managers receive a discretionary bonus that is funded based only on corporate results.

#### 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:

&nbsp;&nbsp;&nbsp;&nbsp;· Fund performance relative to performance measure

&nbsp;&nbsp;&nbsp;&nbsp;· Risk management and mitigation

&nbsp;&nbsp;&nbsp;&nbsp;· Individual performance against key objectives

&nbsp;&nbsp;&nbsp;&nbsp;· Contribution to overall group results

&nbsp;&nbsp;&nbsp;&nbsp;· Functioning as an active contributor to the firm's success

&nbsp;&nbsp;&nbsp;&nbsp;· Team work

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&nbsp;&nbsp;&nbsp;&nbsp;· Collaboration between Analysts and Portfolio Managers

&nbsp;&nbsp;&nbsp;&nbsp;· Regulatory/Compliance management

The Portfolio Managers' compensation is neither based on the value of the assets held in a fund's portfolio or any Other Managed Account, nor flows into a fund's portfolio or any Other Managed Account.

**Ownership of Fund Shares** – The Portfolio Managers did not beneficially own any shares of the funds they managed as of December 31, 2025, the funds' most recent fiscal year end. "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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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, a portfolio with a higher 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 each fund for the past two fiscal years is as follows.

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| | | |
|:---|:---|:---|
| **Fund** | **2025** | **2024** |
| Schwab Monthly Income Fund – Target Payout | 27%<sup>(1)</sup> | 14% |
| Schwab Monthly Income Fund – Flexible Payout | 25%<sup>(1)</sup> | 14% |
| Schwab Monthly Income Fund – Income Payout | 25%<sup>(1)</sup> | 8% |

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<sup>(1)</sup> The fund experienced increased portfolio turnover as a result of increases in assets and volatility during the year along with strategic shifts in positioning by the investment adviser.

#### 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

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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.

#### Brokerage Commissions
For the last three fiscal years, the funds paid the following brokerage commissions.

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2025** | **2024** | **2023** |
| Schwab Monthly Income Fund – Target Payout | $5378<br><sup>(1)</sup> | $1100 | $1317 |
| Schwab Monthly Income Fund – Flexible Payout | $5201<br><sup>(1)</sup> | $1805<br><sup>(2)</sup> | $1235 |
| Schwab Monthly Income Fund – Income Payout | $5059<br><sup>(1)</sup> | $1325 | $1480 |

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<sup>(1)</sup> The fund experienced increased brokerage commissions due to increased trading activity and share splits of underlying ETFs which caused an increase in the number of shares traded during the period. 

<sup>(2)</sup> Commissions increased in 2024 due to higher turnover as a result of increased volatility in 2024.

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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 December 31, 2025.

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **Regular Broker-Dealer** | **Value of Holdings** | **Value of Holdings** |
| Schwab Monthly Income Fund – <br>Target Payout | None |  | N/A |
| Schwab Monthly Income Fund – <br>Flexible Payout | None |  | N/A |
| Schwab Monthly Income Fund – <br>Income Payout | None |  | 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/prospectus**. You can also obtain this information at no cost by calling 1-866-414-6349 or by sending an email request to orders@mysummaryprospectus.com. A fund's Form N-PX will also be available on the SEC's website at **www.sec.gov**.

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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, sub-adviser (if applicable), principal underwriter or any affiliated person of a fund, its investment adviser, sub-adviser or principal underwriter, on the other. Pursuant to such procedures, the Board has authorized one of the Chief Executive Officer, President, Chief Operating Officer or Chief Financial Officer of the Trusts (in consultation with a fund's sub-adviser, 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, sub-advisers (if applicable), the distributor, the custodian, fund accountant, transfer agent, certain affiliates of the investment adviser or subadvisers, 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 sub-adviser to a fund as disclosed in the most current prospectus, Glass, Lewis & Co., LLC, State Street, Citibank, N.A. 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 Opportunities 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.

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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.

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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 with a Declaration of Trust entered into on May 6, 1993 and filed with the Commonwealth of Massachusetts 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 NAV 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 (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 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 NAV 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 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 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 NAV 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

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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 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, NAV per share, 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 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 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 domestic 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.

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In accordance with the 1940 Act, the underlying funds in which the funds invest are valued at their respective NAVs 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.

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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 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

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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 a fund's other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon securities or other securities which are issued with original issue discount (OID), 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 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.

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.

#### Federal Income Tax Information for Shareholders
The discussion of federal income taxation presented below supplements the discussion in the funds' 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 the funds 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 funds 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. 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 a 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 gain (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 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.

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

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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.

The funds 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 funds, dividend distributions a 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.

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.

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.

The funds 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 will be 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, the funds generally serve 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 their investments 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 the funds from holding investments in REITs that hold residual interests in REMICs, and the funds 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.

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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 or an underlying 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 or an underlying mutual fund to pass through to non-corporate shareholders (whether investing directly or indirectly through a fund) the character of income derived from MLP investments or for the funds and any underlying mutual funds to pass through to non-corporate shareholders the ability to claim this deduction with respect to income derived from MLP investments.

Income that a 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. A fund of funds is eligible to "pass-through" to its shareholders the ability to claim a deduction or credit with respect to foreign income and similar taxes paid by an underlying fund, provided that the fund of funds has at least 50% of its total interests invested in other regulated investment companies at the end of each quarter of the tax year.

The funds may invest in a non-U.S. corporation, 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, a fund may be required to distribute amounts in excess of realized income and gains. To the extent that 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 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 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 <br>AS OF MARCH 2026**<br>

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.

**PROXY VOTING POLICY <br>AS OF MARCH 2026**<br>

**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 for overseeing 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 regular 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 management of material risks 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 and 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 material 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") and Institutional Shareholder Services Inc. ("ISS").

The services provided by Glass Lewis include global issuer research and analysis, as well as a voting platform used to submit our votes, reporting and record keeping. CSIM has also retained ISS to provide research and analysis on certain topics and may retain additional experts in the proxy voting, corporate governance and other areas of material risk in the future.

**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, election of director and reincorporation proposals, and many shareholder proposals, including environmental, social, political and governance-related proposals, such as those requesting additional disclosures, are voted on a case-by-case basis by the Investment Stewardship Team.

While the voting policy is in place to provide structure and guidance and ensure CSIM's approach is consistent and repeatable, CSIM recognizes instances may arise that would benefit from additional research and analysis to determine CSIM's policy recommendation. As

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such, CSIM reserves the right to use discretion and apply a case-by-case approach when determining its vote decision for any proposal that it believes warrants added scrutiny 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. DIRECTORS AND AUDITORS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Directors</u>

As a starting point, CSIM expects boards 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 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:

&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 board is not majority independent

&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;· A company board is not sufficiently diverse with respect to background, or the board has not provided a reasonable explanation of board diversity or lack thereof

&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;· Non-independent directors serve on the nominating, compensation or audit committees

&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;· A director recently failed to attend at least 75% of meetings or serves on an excessive number of publicly traded company boards

&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;· A director approved executive compensation schemes that appear misaligned with shareholders' interests

&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;· A director recently acted in a manner inconsistent with this Proxy Policy or failed to be responsive to shareholder concerns

&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 company has not provided explicit disclosure of board oversight of material risks

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&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;· Audit-related fees are less than half of the total fees paid by the company to the audit firm

&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;· A recent material restatement of annual financial statements

&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;· 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;&nbsp;&nbsp;&nbsp;&nbsp;B. BOARD MATTERS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Classified Boards</u>

CSIM generally does not support classified board proposals unless management has provided valid reasoning for the structure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Majority Voting</u>

CSIM generally supports majority voting proposals when they call for plurality voting standards in contested elections.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Proxy Access</u>

CSIM typically supports proxy access proposals when the following criteria are met:

&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;· Ownership threshold of at least 3% of the company's outstanding shares held for at least three years

&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;· Number of nominees is no more than 20% of current board (rounded down to nearest whole 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;· Group size is capped at 20 shareholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <u>Board Leadership Structure: Separation of Chair and CEO role / Independent Chair</u>

CSIM believes that boards are typically best positioned to determine their leadership structure. Therefore, CSIM will typically not support shareholder proposals requiring the separation of the Chair and CEO roles or mandating an independent Chair unless there are concerns regarding a board's accountability or responsiveness to shareholders.

Factors that may result in supporting such proposals 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;· The board does not have a lead independent director or lacks a robust lead independent director

&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 board is not two-thirds independent

&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 company did not implement a shareholder proposal that was passed by shareholders

&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 company nominated directors for election who did not receive a majority of shareholder support at the previous shareholder meeting

&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 company had material financial statement restatements

&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 company's board adopted a Shareholder Rights Plan during the past year without submitting it to shareholders for approval

&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;· Ongoing executive compensation concerns

&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;· Ongoing financial underperformance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. COMPENSATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&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;· There is a disconnect identified between executive pay and company performance

&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;· Executive compensation is out of line with industry peers considering the company's performance over 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;&nbsp;&nbsp;&nbsp;&nbsp;· Executive compensation plan includes significant guaranteed bonuses or has a low amount of compensation at risk

&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;· Executive compensation plan offers excessive one-time payments, perquisites, tax-gross up provisions, or golden parachutes

&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;· Compensation amounts are increased, or goals are lowered without providing a valid explanation

&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;· Executive compensation plan lacks adequate disclosure or rationale for decisions related to goals and amounts

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

Factors that may result in a vote against Equity Compensation Plans:

&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;· Plan's total potential dilution appears excessive

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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;· Plan's burn rate appears excessive compared to industry peers

&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;· Plan allows for the re-pricing of options without shareholder approval

&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;· Plan has an evergreen feature

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. <u>Compensation-Related Shareholder Proposals</u>

CSIM generally votes with management on compensation-related shareholder proposals. CSIM believes the responsibility for designing an effective executive compensation program lies with the board's compensation committee, rather than shareholders. Therefore, rather than supporting policies proposed by shareholders, a more appropriate way for shareholders to express discontent with a company's policies and practices is through the election of directors, the advisory vote on executive compensation, proposals regarding equity plans and/or other executive compensation specific proposals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. ANTI-TAKEOVER

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Shareholder Rights Plans

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:

&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;· Plan does not expire in a relatively short time horizon

&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;· Plan does not have a well-crafted permitted bid or qualified offer feature that mandates shareholder votes in certain situations

&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;· Plan automatically renews without shareholder approval

&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;· Company's corporate governance profile is problematic

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Right to Call Special Meeting

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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. Right to Act by Written Consent

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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. Supermajority Voting

CSIM generally supports the concept of simple majority standards to pass proposals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. CAPITAL STRUCTURE, MERGERS AND ACQUISITIONS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Increase in Authorized Common Shares

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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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Preferred Shares

CSIM generally supports proposals to create a class of preferred shares with specific voting, dividend, conversion and other rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. Mergers and Acquisitions

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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. ENVIRONMENTAL AND SOCIAL SHAREHOLDER PROPOSALS

Effective oversight of material environmental and social 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, boards are best positioned to determine their company's strategy and manage its operations, and generally does not support shareholder proposals seeking a change in business practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Climate Change Proposals

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. We generally support proposals requesting additional disclosure on climate change-related impacts when the company's current reporting is inadequate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Corporate Political Activity Proposals

CSIM expects boards 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 on a case-by-case basis and considers supporting them if there is no evidence of board oversight, a political spending policy and/or a company's disclosure is deficient and lags that of its peers.

**V. ADMINISTRATION**

&nbsp;&nbsp;&nbsp;&nbsp;&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.

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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:

&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;· maintaining a reporting structure that separates employees with voting authority from those with sales or business relationship authority,

&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;· reporting of potential conflicts to the Proxy Committee to review the conflict and provide final vote determination,

&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;· 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.

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:

&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;· ensuring that no members of the board of (i) CSC or (ii) an Affiliated Fund, which are affiliated with such company, are participants in such meetings.

&nbsp;&nbsp;&nbsp;&nbsp;&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:

&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;· proxy statements and ballots written in a foreign language,

&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;· untimely and/or inadequate notice of shareholder meetings,

&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;· restrictions of foreigner's ability to exercise votes,

&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;· requirements to vote proxies in person,

&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;· 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;&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 and it complies with all reporting requirements.

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

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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;&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, and the Investment Company Act of 1940, as amended.

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#### Schwab Capital Trust PEA No. 239

#### Part C: Other Information

---

| | |
|:---|:---|
| **ITEM 28.** | **EXHIBITS** |
| (a) | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000095013406008289/f19559exv99wxay.txt) |
| (b) | [<u>Second Amended and Restated Bylaws of the Registrant, adopted as of February 24, 2021, are 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 PEA No. 208).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exb.htm) |
| (c)(i) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000095013406008289/f19559exv99wxay.txt) |
| (c)(ii) | [<u>Article 9 and Article 11 of the Second Amended and Restated Bylaws, are incorporated herein by reference to Exhibit (b) of PEA No. 208.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exb.htm) |
| (d)(i) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/0000950149-97-002227.txt) |
| (d)(i)(a) | [<u>Amended Schedules A and B, dated February 23, 2026, to the Investment Advisory and Administration Agreement between Registrant and CSIM, dated June 15, 1994, are incorporated herein by reference to Exhibit (d)(i)(a) of Post-Effective Amendment No. 236 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on February 23, 2026, (hereinafter referred to as PEA No. 236).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxixa.htm) |
| (d)(i)(b) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312517205908/d268800dex99dib.htm) |
| (d)(i)(c) | [<u>Amended Schedule A, dated February 23, 2026, 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. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxixc.htm) |
| (d)(ii) | [<u>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 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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516683771/d203826dex99dxxi.htm) |
| (d)(ii)(a) | [<u>Amendment No. 2, dated February 23, 2026, 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. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxiixa.htm) |
| (d)(iii) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312517130472/d370221dex99dxxiv.htm) |
| (d)(iii)(a) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312517357634/d469497dex99div.htm) |
| (d)(iii)(b) | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99diva.htm) |
| (d)(iv) | [<u>Investment Sub-Advisory Agreement between the Investment Adviser and Causeway Capital Management LLC (Causeway), dated January 6, 2026, is incorporated herein by reference to Exhibit (d)(iv) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxiv.htm) |
| (d)(v) | [<u>Investment Sub-Advisory Agreement between the Investment Adviser and Columbia Management Investment Advisers, LLC (Columbia), dated September 26, 2023, is incorporated herein by reference to Exhibit (d)(vi) of Post-Effective Amendment No. 224 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on December 11, 2023 (hereinafter referred to as PEA No. 224).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923124767/tm2331702d1_exdvi.htm) |
| (d)(vi) | [<u>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 Post-Effective Amendment</u>](http://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwx.htm) |

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| | |
|:---|:---|
|  | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwx.htm) |
| (d)(vi)(a) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000095012311018562/f58404bexv99wdwxvi.htm) |
| (d)(vi)(b) | [<u>Amendment to Schedule B, dated June 30, 2023, to Investment Sub-Advisory Agreement between the Investment Adviser and American Century is incorporated herein by reference to Exhibit (d)(vii)(b) of Post-Effective Amendment No. 229 to Registrant's Registration Statement on Form N-1A (file No. 811-07704) electronically filed with the SEC on July 26, 2024.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465924082726/tm2415475d1_ex99-xdxviixb.htm) |
| (d)(vii) | **[<u>Investment Sub-Advisory Agreement between the Investment Adviser and Baillie Gifford Overseas Limited (Baillie Gifford), dated December 12, 2019, is incorporated herein by reference to Exhibit (d)(x) of Post-Effective Amendment No. 199 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on February 28, 2020.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312520053146/d813551dex99dx.htm)** |
| (d)(viii) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000095012309069914/f54319cexv99wdwxxi.htm) |
| (d)(viii)(a) | [<u>Schedule A, dated February 23, 2026, 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)(viii)(a) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxviiixa.htm) |
| (d)(viii)(b) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516683771/d203826dex99dxxii.htm) |
| (d)(viii)(c) | [<u>Schedule A, dated February 23, 2026, to the Expense Limitation Agreement among Registrant, the Investment Adviser and Schwab, dated August 18, 2016, is incorporated herein by reference to Exhibit (d)(viii)(c) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xdxviiixc.htm) |
| (d)(viii)(d) | [<u>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 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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exdixd.htm) |
| (e)(i) | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99e.htm) |
| (e)(i)(a) | [<u>Amended Schedule A, dated February 23, 2026, 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. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xexixa.htm) |
| (f) | Inapplicable. |
| (g)(i) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312513010885/d451327dex99gi.htm) |
| (g)(i)(a) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465921027621/tm214467-1_exgia.htm) |
| (g)(ii) | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/904333/000095013406003828/f17617ctexv99wxgyxixy.txt) |
| (g)(ii)(a) | [<u>Amended Appendix A and Appendix B, dated September 28, 2022, to the Amended and Restated Master Custodian Agreement between Registrant and State Street, are incorporated herein by reference to Exhibit (g)(ii)(a) of Post-Effective Amendment No. 220 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on February 27, 2023 (hereinafter referred to as PEA No. 220).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923025396/tm233086d1_exgiia.htm) |
| (g)(ii)(b) | [<u>Amendment, dated April 30, 2021, to the Amended and Restated Master Custodian Agreement between the Registrant and State Street Bank and Trust Company, dated October 17, 2005, is incorporated herein by reference to Exhibit (g)(ii)(b) of Post-Effective Amendment No. 230 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on February 28, 2025 (hereinafter referred to as PEA No. 230).</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925018350/tm254183d1_ex99-xgxiixb.htm) |
| (g)(ii)(c) | [<u>Amendment, dated December 11, 2024, to the Amended and Restated Master Custodian Agreement between the Registrant and State Street Bank and Trust Company, dated October 17, 2005, is incorporated herein by reference to Exhibit (g)(ii)(c) of PEA No. 230.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925018350/tm254183d1_ex99-xgxiixc.htm) |
| (g)(iii) | [<u>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).</u>](http://www.sec.gov/Archives/edgar/data/0000904333/000110465922073098/tm2218769-2_exgiii.htm) |

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|:---|:---|
| (g)(iii)(a) | [<u>Amendment, dated February 23, 2026, to the Global Custody Services Agreement between Registrant and Citibank, N.A. is incorporated herein by reference to Exhibit (g)(iii)(a) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xgxiiixa.htm) |
| (h)(i) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/0000950149-99-000334.txt) |
| (h)(ii) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465921055724/tm2113235d1_exhii.htm) |
| (h)(ii)(a) | [<u>Amendment No. 1, dated March 2, 2021, to the Transfer Agency and Service Agreement between Registrant and BNY Mellon Investment Servicing (US) Inc., is incorporated herein by reference to Exhibit (h)(ii)(a) of PEA No. 224.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923124767/tm2331702d1_exhiia.htm) |
| (h)(ii)(b) | [<u>Amendment No. 2, dated April 28, 2023, to the Transfer Agency and Service Agreement between Registrant and BNY Mellon Investment Servicing (US) Inc., is incorporated herein by reference to Exhibit (h)(ii)(b) of PEA No. 224.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923124767/tm2331702d1_exhiib.htm) |
| (h)(ii)(c) | [<u>Amendment No. 3, dated February 18, 2026, to the Transfer Agency and Service Agreement between Registrant and BNY Investment Servicing (US) Inc. is incorporated herein by reference to Exhibit (h)(ii)(c) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xhxiixc.htm) |
| (h)(iii) | [<u>Amended and Restated Shareholder Servicing Plan, dated December 11, 2015, is incorporated herein by reference to Exhibit (h)(iv) of PEA No. 151.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99hiv.htm) |
| (h)(iii)(a) | [<u>Amended Schedule A, dated February 23, 2026, to the Amended and Restated Shareholder Servicing Plan, is incorporated herein by reference to Exhibit (h)(iii)(a) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xhxiiixa.htm) |
| (h)(iv) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000095013406003828/f17617ctexv99wxgyxiy.txt) |
| (h)(iv)(a) | [<u>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 incorporated herein by reference to Exhibit (h)(iv)(a) of PEA No. 220.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923025396/tm233086d1_exhiva.htm) |
| (h)(iv)(b) | [<u>Amendment, dated November 14, 2024, to the Master Fund Accounting and Services Agreement between the Registrant and State Street Bank and Trust Company, dated October 1, 2005, is incorporated herein by reference to Exhibit (h)(iv)(b) of PEA No. 230.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925018350/tm254183d1_ex99-xhxivxb.htm) |
| (h)(iv)(c) | [<u>Amendment, dated February 23, 2026, to the Master Fund Accounting and Services Agreement between the Registrant and State Street Bank and Trust Company, dated October 1, 2005, is incorporated herein by reference to Exhibit (h)(iv)(c) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xhxivxc.htm) |
| (h)(v) | [<u>Form of Fund of Funds Investment Agreement is incorporated herein by reference to Exhibit (h)(v) of PEA No. 213.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465922026747/tm225671d1_exhv.htm) |
| (i) | [<u>Opinion and Consent of Counsel is filed herein as Exhibit (i).</u>](ex99ilegalopinin-1.htm) |
| (j)(i) | [<u>Consent of Deloitte & Touche LLP is filed herein as Exhibit (j)(i).</u>](ex99jotheropinin-1.htm) |
| (j)(ii) | [<u>Power of Attorney executed by Omar Aguilar, dated January 1, 2025, is incorporated herein by reference to Exhibit (j)(ii) of PEA No. 230.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925018350/tm254183d1_ex99-xjxii.htm) |
| (j)(iii) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jv.htm) |
| (j)(iv) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jviii.htm) |
| (j)(v) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312516475886/d117636dex99jx.htm) |
| (j)(vi) | [<u>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 Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on June 26, 2018.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312518203629/d600161dex99jxi.htm) |
| (j)(vii) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312519056547/d681474dex99jxiii.htm) |
| (j)(viii) | [<u>Power of Attorney executed by Dana S. Smith, dated January 11, 2023, is incorporated herein by reference to Exhibit (j)(ix) of PEA No. 220.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923025396/tm233086d1_exjix.htm) |
| (j)(ix) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000119312520179306/d730999dex99jxv.htm) |
| (j)(x) | [<u>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.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465921085243/tm2117253d1_exjxiv.htm) |
| (j)(xi) | [<u>Power of Attorney executed by Michael J. Beer, dated September 26, 2022, is incorporated herein by reference to Exhibit</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923025396/tm233086d1_exjxii.htm) |

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| | |
|:---|:---|
|  | [<u>(j)(xii) of PEA No. 220.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465923025396/tm233086d1_exjxii.htm) |
| (j)(xii) | [<u>Power of Attorney executed by Richard A. Wurster, dated January 1, 2025, is incorporated herein by reference to Exhibit (j)(xii) of PEA No. 230.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925018350/tm254183d1_ex99-xjxxii.htm) |
| (k) | Inapplicable. |
| (l) | Inapplicable. |
| (m) | Inapplicable. |
| (n) | Inapplicable. |
| (o) | Inapplicable. |
| (p)(i) | [<u>Joint Code of Ethics for the Registrant, Investment Adviser and Schwab, dated November 1, 2025, is incorporated herein by reference to Exhibit (p)(i) of Post-Effective Amendment No. 234 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on December 10, 2025.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925119734/tm2532102d1_ex99-xpxi.htm) |
| (p)(ii) | [<u>Code of Ethics for American Century, dated February 19, 2026, is filed herein as Exhibit (p)(ii).</u>](ex99pcodeeth-2.htm) |
| (p)(iii) | [<u>Code of Ethics for Causeway, dated June 30, 2025, is incorporated herein by reference to Exhibit (p)(vi) of Post-Effective Amendment No. 235 to Registrant's Registration Statement on Form N-1A (File No. 811-07704) electronically filed with the SEC on December 17, 2025.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465925121688/tm2531957d2_ex99-xpxvi.htm) |
| (p)(iv) | [<u>Code of Ethics for Columbia, dated September 2025, is incorporated herein by reference to Exhibit (p)(iv) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xpxiv.htm) |
| (p)(v) | [<u>Code of Ethics for Baillie Gifford, dated November 2025, is incorporated herein by reference to Exhibit (p)(v) of PEA No. 236.</u>](http://www.sec.gov/Archives/edgar/data/904333/000110465926018231/tm262487d1_ex99-xpxv.htm) |

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| **ITEM 29.** | **PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.** |

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The Boards of Trustees of the following trusts, The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Strategic Trust, Schwab Annuity Portfolios, and Laudus Trust, are identical. 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.

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| **ITEM 30.** | **INDEMNIFICATION.** |

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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.

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| **ITEM 31.** | **BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.** |

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The Registrant's investment adviser is Charles Schwab Investment Management, Inc., dba Schwab Asset Management<sup>®</sup>, a Delaware corporation, organized in October 1989 with a principal place of business at 425 Market Street, Suite 1700, San Francisco, CA 94105. The only business in which the investment adviser engages is that of investment adviser and administrator to The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Schwab Strategic Trust; investment adviser to Laudus

------

Trust; investment adviser and/or administrator to any other open-end management investment companies that Schwab may sponsor in the future; and an investment adviser to certain non-investment company clients.

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.

---

| | | |
|:---|:---|:---|
| **Name and Position with Adviser** | **Name of Other Company** | **Capacity** |
| Omar Aguilar, Director, Chief Executive Officer, President and Chief Investment Officer | Schwab ETFs | Trustee, Chief Executive Officer, President and Chief Investment Officer |
| Omar Aguilar, Director, Chief Executive Officer, President and Chief Investment Officer | Schwab Funds | Trustee, Chief Executive Officer, President and Chief Investment Officer |
| Omar Aguilar, Director, Chief Executive Officer, President and Chief Investment Officer | Laudus Trust | Trustee, Chief Executive Officer, President and Chief Investment Officer |
| Patrick Cassidy, Managing Director and Chief Investment Officer | Schwab ETFs | Vice President and Chief Investment Officer |
| Patrick Cassidy, Managing Director and Chief Investment Officer | Schwab Funds | Vice President and Chief Investment Officer |
| Patrick Cassidy, Managing Director and Chief Investment Officer | Laudus Trust | Vice President and Chief Investment Officer |
| Mark Hunter, Managing Director and Chief Compliance Officer | Charles Schwab & Co., Inc | Managing Director |
| Mark Hunter, Managing Director and Chief Compliance Officer | Schwab ETFs | Chief Compliance Officer |
| Mark Hunter, Managing Director and Chief Compliance Officer | Schwab Funds | Chief Compliance Officer |
| Mark Hunter, Managing Director and Chief Compliance Officer | Laudus Trust | Chief Compliance Officer |
| Catherine MacGregor, Managing Director and Chief Legal Officer | Charles Schwab & Co., Inc | Managing Director |
| Catherine MacGregor, Managing Director and Chief Legal Officer | Charles Schwab Bank, SSB | Managing Director |
| Catherine MacGregor, Managing Director and Chief Legal Officer | Schwab ETFs | Secretary and Chief Legal Officer |
| Catherine MacGregor, Managing Director and Chief Legal Officer | Schwab Funds | Secretary and Chief Legal Officer |
| Catherine MacGregor, Managing Director and Chief Legal Officer | Laudus Trust | Vice President, Chief Legal Officer and Clerk |
| William P. McMahon, Jr., Managing Director and Chief Investment Officer | Schwab ETFs | Vice President and Chief Investment Officer |
| William P. McMahon, Jr., Managing Director and Chief Investment Officer | Schwab Funds | Vice President and Chief Investment Officer |
| William P. McMahon, Jr., Managing Director and Chief Investment Officer | Laudus Trust | Vice President and Chief Investment Officer |
| Jessica Seidlitz, Managing Director, Chief Operating Officer, and Chief Financial Officer | Charles Schwab & Co., Inc | Managing Director |
| Jessica Seidlitz, Managing Director, Chief Operating Officer, and Chief Financial Officer | Schwab ETFs | Chief Operating Officer |
| Jessica Seidlitz, Managing Director, Chief Operating Officer, and Chief Financial Officer | Schwab Funds | Chief Operating Officer |
| Jessica Seidlitz, Managing Director, Chief Operating Officer, and Chief Financial Officer | Laudus Trust | Chief Operating Officer |
| Michael D. Verdeschi, Director | The Charles Schwab Corporation | Managing Director and Chief Financial Officer |
| Michael D. Verdeschi, Director | Charles Schwab & Co., Inc. | Director, Managing Director and Chief Financial Officer |
| Michael D. Verdeschi, Director | Ameritrade Holding LLC | Manager |
| Michael D. Verdeschi, Director | Schwab Holdings, Inc. | Director |
| Richard A. Wurster, Director | Schwab ETFs | Chairman and Trustee |
| Richard A. Wurster, Director | Schwab Funds | Chairman and Trustee |
| Richard A. Wurster, Director | Laudus Trust | Chairman and Trustee |
| Richard A. Wurster, Director | The Charles Schwab Corporation | Director, Chief Executive Officer and President |

---

---

| | |
|:---|:---|
| **ITEM 32.** | **PRINCIPAL UNDERWRITERS.** |

---

------

(a) Schwab acts as principal underwriter and distributor of the shares of the following trusts, The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, and Laudus Trust, and may act as such for any other investment company which Schwab may sponsor in the future.

(b) Information with respect to Schwab's directors and officers is as follows:

---

| | | |
|:---|:---|:---|
| **Name** | **Position and Offices with the Underwriter** | **Position and Offices with the Registrant** |
| Jonathan M. Craig | President and Director, Managing Director, and Head of Investor Services and Marketing | None |
| Steven H. Anderson | Managing Director - Advisor | None |
| Chris Bakke | Managing Director and Sarbanes-Oxley Control Officer | None |
| Jonathan Beatty | Director, Managing Director, and Head of Advisor Services | None |
| Jason C. Clague | Managing Director - Advisor | None |
| Glenn Cooper | Managing Director - Corporate Real Estate | None |
| Andrew D'Anna | Managing Director and Head of Product | None |
| Ryan Doherty | Managing Director, Corporate Compliance and Chief Privacy Officer | None |
| Adam Goethe | Managing Director and Treasurer | None |
| Stacy S. Hammond | Managing Director and Chief Marketing Officer | 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, Chief Technology, Operations and Data Officer | None |
| Lisa K. Hunt | Managing Director and Head of International Services | None |
| David J. Johnson | Managing Director, Financial Crimes Risk Management and Bank Secrecy Act Officer | None |
| Shannon Jurecka | Managing Director and Chief Administrative Officer | None |
| James Kostulias | Managing Director - Trading Services | None |
| Mitchell N. Mantua | Managing Director and General Auditor | None |
| Peter J. Morgan III | Managing Director, General Counsel and Corporate Secretary | None |
| Nigel J. Murtagh | Managing Director and Chief Risk Officer | None |
| Chad Nichols | Managing Director and Chief Compliance Officer | None |
| Tracy Saale | Managing Director, Financial Crimes Risk Management and Corporate Responsibility Officer | None |
| Andrew M. Salesky | Managing Director and Chief Digital Officer | None |
| Elizabeth A. Sonders | Managing Director and Chief Investment Strategist | None |
| Jeffrey Starr | Managing Director and Head of Operations | None |
| Nikhil Sudan | Managing Director, Chief Strategy and Innovation Officer | None |
| Kara Suro | Managing Director and Anti-Money Laundering Officer | None |
| Kristopher Tate | Managing Director and Assistant Corporate Secretary | None |
| Adele Taylor | Managing Director and Head of Workplace Services | None |

---

------

---

| | | |
|:---|:---|:---|
| **Name** | **Position and Offices with the Underwriter** | **Position and Offices with the Registrant** |
| F. Aubrey Thacker | Managing Director and Corporate Controller | None |
| Michael D.Verdeschi | Director, Managing Director, and Chief Financial Officer | None |
| Christopher Wyse | Managing Director and Chief Corporate Affairs Officer | None |

---

The principal business address of all directors and officers of Schwab is 3000 Schwab Way, Westlake, TX 76262.

(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., 425 Market Street, Suite 1700, San Francisco, CA 94105; Registrant's principal underwriter, Charles Schwab & Co., Inc., 3000 Schwab Way, Westlake, TX 76262; 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, MA 02110, Registrant's custodian for the balance of the funds and fund accountant, State Street Bank and Trust Company, One Congress Street, Suite 1, Boston, MA 02114-2016; 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; Causeway Capital Management LLC, 11111 Santa Monica Boulevard, 15th Floor, Los Angeles, CA 90025; Columbia Management Investment Advisers, LLC, 290 Congress Street, Boston, MA 02210. 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. 239 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. 239 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Washington in the District of Columbia, on the 27th day of April, 2026.

---

| |
|:---|
| **SCHWAB CAPITAL TRUST**<br>**Registrant** |
| Omar Aguilar \* |
| Omar Aguilar, Chief Executive Officer, President and Chief Investment Officer |

---

Pursuant to the requirements of the 1933 Act, this Post-Effective Amendment No. 239 to Registrant's Registration Statement on Form N-1A has been signed below by the following persons in the capacities indicated this 27th day of April, 2026.

---

| | |
|:---|:---|
| **Signature** | **Title** |
| Richard A. Wurster\* | Chairman and Trustee |
| Richard A. Wurster |  |
| Michael J. Beer\* | Trustee |
| Michael J. Beer |  |
| Nancy F. Heller\* | Trustee |
| Nancy F. Heller |  |
| David L. Mahoney\* | Trustee |
| David L. Mahoney |  |
| Jane P. Moncreiff\* | Trustee |
| Jane P. Moncreiff |  |
| Kimberly S. Patmore\* | Trustee |
| Kimberly S. Patmore |  |
| J. Derek Penn\* | Trustee |
| J. Derek Penn |  |
| Omar Aguilar\* | Trustee, Chief Executive Officer, President and Chief Investment Officer |
| Omar Aguilar | Trustee, Chief Executive Officer, President and Chief Investment Officer |
| Dana S. Smith\* | Treasurer and Chief Financial Officer |
| Dana S. Smith |  |

---

---

| | |
|:---|:---|
| \*By: | /s/ Douglas P. Dick |
|  | Douglas P. Dick, Attorney-in Fact<br>Pursuant to Power of Attorney |

---

------

## Ex-99.I

#### Exhibit (i)

---

| | |
|:---|:---|
| ![](img_f58689aeb94c4f6.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 |

---

April 27, 2026

Schwab Capital Trust

425 Market Street, Suite 1700

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. 239 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. 240 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 April 28, 2026 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.

<br>Very truly yours,

<u>/s/ Dechert LLP</u>

------

## Ex-99.J

#### Exhibit (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 report dated February 13, 2026, relating to the financial statements and financial highlights of Schwab Monthly Income Fund - Flexible Payout, Schwab Monthly Income Fund – Income Payout, and Schwab Monthly Income Fund - Target Payout, each a series of Schwab Capital Trust (the "Trust"), appearing in the Annual Report on Form N-CSR of the Trust for the year ended December 31, 2025, and to the references to us under the headings "Financial Highlights" in the Prospectus and "Independent Registered Public Accounting Firm" and "Portfolio Holdings Disclosure" in the Statement of Additional Information, which are part of such Registration Statement.

/s/ Deloitte & Touche LLP

Denver, Colorado<br>April 23, 2026

------

## Ex-99.P

#### Exhibit (p)(ii)
![](img_1155c3835d234f8.jpg)

#### Applicable Entities / Rules

---

| | |
|:---|:---|
| *Applicable Entities:* | Enterprise-wide policy, including American Century Investment Management, Inc., Registered Investment Companies, Schedule A, American Century Investment Services, Inc., American Century Services, LLC |
| *Statutory/Regulatory:* | Investment Company Act § 17(j), Rule 17j-1; Investment Advisers Act § 204A, 206, Rule 204A-1 and 204-2(12) |
| *Effective Date(s):* | October 29, 1999, Last Revised February 19, 2026 |
| ***Policy or Summary:*** | **Policy** |
| ***Related Summary:*** | **Code of Ethics Policies and Procedures** |
| *Related Documents:* | Business Code of Conduct; Insider Trading Policy |

---

**Table of Contents**

---

| | |
|:---|:---|
| [Snapshot of the Policy](#_Toc256000000_8) | [2](#_Toc256000000_8) |
| [Requirements for All Employees](#_Toc256000001_8) | [2](#_Toc256000001_8) |
| [Requirements for Access, Investment and Portfolio Persons](#_Toc256000002_8) | [2](#_Toc256000002_8) |
| [Trading Prohibitions for Investment and Portfolio Persons](#_Toc256000003_8) | [2](#_Toc256000003_8) |
| [I.](#_Toc256000004_8) | Purpose of Code [3](#_Toc256000004_8) |
| [II.](#_Toc256000005_8) | Why Do We Have a Code of Ethics? [4](#_Toc256000005_8) |
| [III.](#_Toc256000006_8) | Does the Code of Ethics Apply to You? [5](#_Toc256000006_8) |
| [IV.](#_Toc256000007_8) | Restrictions on Personal Investing Activities [6](#_Toc256000007_8) |
| [V.](#_Toc256000008_8) | Reporting Requirements [11](#_Toc256000008_8) |
| [VI.](#_Toc256000009_8) | Can there be any exceptions to the restrictions? [15](#_Toc256000009_8) |
| [VII.](#_Toc256000010_8) | Confidential Information [16](#_Toc256000010_8) |
| [VIII.](#_Toc256000011_8) | Conflicts of Interest [17](#_Toc256000011_8) |
| [IX.](#_Toc256000012_8) | What happens if you violate the rules in the Code of Ethics? [17](#_Toc256000012_8) |
| [X.](#_Toc256000013_8) | ACI's Quarterly Report to Fund Directors/Trustees [19](#_Toc256000013_8) |
| [APPENDIX 1: DEFINITIONS](#_Toc256000014_8) | [19](#_Toc256000014_8) |
| [APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"?](#_Toc256000015_8) | [23](#_Toc256000015_8) |
| [APPENDIX 3: CODE-EXEMPT AND PROHIBITED SECURITIES](#_Toc256000016_8) | [26](#_Toc256000016_8) |
| [APPENDIX 4: HOW THE PRECLEARANCE PROCESS WORKS](#_Toc256000017_8) | [28](#_Toc256000017_8) |
| [APPENDIX 5: ACCOUNT REPORTING INSTRUCTIONS](#_Toc256000018_8) | [31](#_Toc256000018_8) |
| [APPENDIX 6: REQUESTING A Day 15 Sell EXEMPTION (Portfolio Persons Only)](#_Toc256000019_8) | [33](#_Toc256000019_8) |
| [SCHEDULE A: BOARD APPROVAL DATES](#_Toc256000020_8) | [35](#_Toc256000020_8) |
| [SCHEDULE B: SUBADVISED FUNDS](#_Toc256000021_8) | [36](#_Toc256000021_8) |

---

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 1

------

![](img_1155c3835d234f8.jpg)

---

| | |
|:---|:---|
| [SCHEDULE C: BROKERS](#_Toc256000022_8) | [37](#_Toc256000022_8) |
| [PROHIBITED BROKERS](#_Toc256000023_8) | [37](#_Toc256000023_8) |
| [APPROVED ELECTRONIC BROKERS](#_Toc256000024_8) | [37](#_Toc256000024_8) |

---

### 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;&nbsp;&nbsp;&nbsp;&nbsp;· Place our client's interest first

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Comply with federal securities laws

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Report violations to Compliance

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;· Link reportable brokerage accounts and reportable mutual fund accounts in ComplianceAlpha

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose holdings within 10 days of designation and annually, thereafter

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose personal security transactions on a quarterly basis

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclose conflicts of interest annually

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Obtain approval (preclearance) to trade in reportable securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 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;&nbsp;&nbsp;&nbsp;&nbsp;· Investment Persons and Portfolio Persons cannot participate in an Initial Public Offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Investment Persons and Portfolio Persons cannot profit on short-term reportable security trades within 60 calendar days.

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 2

------

![](img_1155c3835d234f8.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Portfolio Persons cannot trade in a security, or a related security, within seven days before and after transactions of a client portfolio you manage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Portfolio Persons cannot sell a security, or a related security which is held by your assigned client portfolio or buy a security held as a short position in your assigned funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 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;&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;&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;&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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 3

------

![](img_1155c3835d234f8.jpg)

**II.** **Why Do We Have a Code of Ethics?**

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;**C. Regulations require that we have a Code of Ethics**

The Investment Company Act of 1940 and the Investment Advisers Act of 1940, and other governmental regulations, 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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 4

------

![](img_1155c3835d234f8.jpg)

**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:

---

| | | | |
|:---|:---|:---|:---|
| *Fewest Restrictions* |  |  | *Most Restrictions* |
| **Non-Access Person** | **Access Person** | **Investment Person** | **Portfolio Person** |

---

The standard profile for each of the categories is described below:

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• any officers and directors of an investment adviser.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 5

------

![](img_1155c3835d234f8.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&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;&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 your 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;&nbsp;&nbsp;&nbsp;&nbsp;**A. Principles of Personal Investing**

All ACI employees, officers, and directors, and members of your 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;&nbsp;&nbsp;&nbsp;&nbsp;**B. Trading on Inside Information**

Federal law prohibits trading on material nonpublic information. Examples of potentially material nonpublic information include confidential received by employees regarding

Policy updated: February 19, 2026

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securities that are current or potential portfolio investments. You are expected to abide by the highest ethical and legal standards in conducting your personal investment activities.

As set forth in ACI's Insider Trading Policy, under certain circumstances, an employee may be granted permission to serve as a director, trustee or officer of an outside private or public company. If approved to join the board of directors of such company, the employee is required to abide by ACI's Code of Ethics and related policies, as well as such company's code of ethics or similar rules, including any requirement to abide by trading windows. In such case, the employee must obtain preclearance approval from Compliance prior to trading the outside company's stock.

#### 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;&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

<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>.

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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 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;&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 requests 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;&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.

<sup>4</sup> See [Appendix 2](#Appendix2_8) for an explanation of beneficial ownership.

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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;&nbsp;&nbsp;&nbsp;&nbsp;2. Submit a Preclearance Request in ComplianceAlpha. You will be required to enter the following information, correctly**:**

&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;• Security name and/or 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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Quantity (number of shares or par value) (optional)

&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;• Price (optional)

&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;• Dollar value (Your actual transaction amount should be less than or equal to the value entered on your Preclearance Request.)

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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.

<u>Private Investments.</u> 

Before you personally acquire any securities in a private placement, private equity fund, venture capital fund or any other private fund (including any private fund managed by

<sup>5</sup> See Appendix 4 for a description of the preclearance process.

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American Century Private Investment), you must first request and obtain preclearance by entering your request in ComplianceAlpha to acquire such securities.

&nbsp;&nbsp;&nbsp;&nbsp;&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. In order to mitigate this risk, Portfolio and Investment Persons are subject to additional trading restrictions. If these restrictions apply to your preclearance request, it will not be approved through the de minimis process. 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;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Initial Public Offerings</u><u>.</u> You may not acquire securities issued in an initial public offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>60-Day Rule (Short-Term Trading Profits)</u><u>.</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;&nbsp;&nbsp;&nbsp;&nbsp;**F. Seven-Day Blackout Period**<br>**[Portfolio Persons]**

Portfolio Persons should avoid even the appearance of a conflict of interest between your own personal security transactions and those of client portfolios to which you are assigned ("Client Portfolios"), including trading in securities that are traded in a Client Portfolio before or after your personal transaction. If you are a Portfolio Person, you may not purchase or sell a security, or a related security, other than a code exempt security during the seven (7) calendar days after it has been traded in a Client Portfolio through the trade-order system. You may also be prohibited from trading that security before it is traded in a Client Portfolio depending on the circumstances surrounding both trades.

If you transact in a security of an issuer that is later traded in a Client Portfolio within seven days, your personal transaction will be reviewed by the Code of Ethics Review Committee to determine whether a violation has occurred and if any appropriate action should be taken (e.g. disgorgement of any personal profits). This possible prohibition should never impact whether the security should be traded in the Client Portfolio as that decision should always be made in the best interests of the Client Portfolio and independent of the Portfolio Person's earlier transaction in a security of the same issuer during the blackout period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G. Securities Held in Your Funds**

#### [Portfolio Persons]
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Personally investing in the same securities held by the client portfolios you are assigned to may result in a conflict of interest. To mitigate this risk, you may not sell a security, or a related security in which your client portfolio has a long position or purchase a security, or a related security, in which your client portfolio has a short position without an exemption from this Code.

#### &nbsp;&nbsp;&nbsp;&nbsp; H. Trading in Semi-Transparent Active ETFs (STA ETF)

#### [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;&nbsp;&nbsp;&nbsp;&nbsp;**I. Trading in Affiliated Self-Indexed ETFs** 

#### [Certain Members of the Global Analytics Team and the Index Governance Committee]
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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;2. Brokerage Accounts and Duplicate Confirmations

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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;&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;&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 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;&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;&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.

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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;&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;&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;&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 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 once your accounts are connected to the Direct or Aggregation Feed. If your holdings do not import from your broker feed by the due date of your Initial Holdings Certification, you will be required to attach a copy of your most recent statements to your Initial Holdings Certification in ComplianceAlpha. 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;&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 taxpayer 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;&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

<sup>6</sup> See Appendix 3 for a listing of code-exempt securities that must be reported.

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with directors or trustees in outside organizations other than community charitable activities, education activities, or dissimilar family business. Additional information regarding conflicts of interest can be found in the Business Code of Conduct and the Outside Business Activities Policy.

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

&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;&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;&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;&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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The transaction price, and amount; and

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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;&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;&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;&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;&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;&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;&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.

**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;&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;&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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;**B. Exemption Reporting**

Policy updated: February 19, 2026

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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;&nbsp;&nbsp;&nbsp;&nbsp;**C. Day 15 De Minimis Sell Exemption (Portfolio Persons Only)**

An exemption may be requested when a Portfolio Person's de minimis sell preclearance request has been denied. 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 the date on which the sale can take place which will be the 15<sup>th</sup> day following the approval.

&nbsp;&nbsp;&nbsp;&nbsp;&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.

&nbsp;&nbsp;&nbsp;&nbsp;&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. Your account must be reported in ComplianceAlpha and 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

Policy updated: February 19, 2026

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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;&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;&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;&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, Outside Business Activities Policy and Insider Trading Policy also contain limitations on outside employment and directorships.

**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 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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Indication of fraud, neglect, or indifference to Code provisions;

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Level of influence of the violator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Penalty Factors**

Policy updated: February 19, 2026

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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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Whether the trade would have been approved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Amount of profits on trades that would not have been approved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Prior record of the violator;

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Any mitigating circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Warning (notice sent to manager) 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Unwinding transactions at your own expense 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disgorgement of profit

&nbsp;&nbsp;&nbsp;&nbsp;&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 any of the above sanctions in addition 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Suspension of trading privileges for one-year if, for any reason, you've had three non-material trading violations in a six-month period. The six-month period will not include months for which you served a suspension.

&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;b) Suspension or termination of employment.

Policy updated: February 19, 2026

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**X.** **ACI's Quarterly Report to Fund Directors/Trustees**

ACI will prepare a quarterly report for the Board of Directors/Trustees of each Fund Client of any material violation of this Code of Ethics.

#### 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

Policy updated: February 19, 2026

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**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;&nbsp;&nbsp;&nbsp;&nbsp;• Your spouse or domestic partner;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your minor children; or

&nbsp;&nbsp;&nbsp;&nbsp;&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. "Related Security"**

A security made available by the same issuer (i.e. stocks, preferred stocks, depository receipts, bonds, rights, warrants); or an underlying asset of a derivative (futures, SWAPs, etc.).

**12. "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, including managed or discretionary accounts.

**13. "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).

**14. "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;&nbsp;&nbsp;&nbsp;&nbsp;• Note;

Policy updated: February 19, 2026

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&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Treasury stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bond;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Debenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Derivative;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exchange traded fund (ETFs) or similar vehicles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Unit Investment Trusts (UIT);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Shares of open-end mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Shares of closed-end mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evidence of indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Collateral-trust certificate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Preorganization certificate or subscription;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Transferable share;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investment contract;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Voting-trust certificate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Certificate of deposit for a security;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Interests in private investment funds including private equity funds, venture capital funds, or hedge funds, or unregistered collective investment vehicles;

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

Policy updated: February 19, 2026

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&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• In general, any interest or instrument commonly known as a "security;" or

&nbsp;&nbsp;&nbsp;&nbsp;&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.

**15. "Subadvised Fund"**

A "subadvised fund" means any mutual fund or portfolio listed on Schedule B.

**16. "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: February 19, 2026

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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;&nbsp;&nbsp;&nbsp;&nbsp;• A member of your immediate family OR

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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 or your immediate family member 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 or your immediate family member 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;&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;&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: February 19, 2026

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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;&nbsp;&nbsp;&nbsp;&nbsp;• A trustee; or

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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. The accounts require reporting in ComplianceAlpha.

**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;&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: February 19, 2026

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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;&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;&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: February 19, 2026

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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;&nbsp;&nbsp;&nbsp;&nbsp;• American Century Investments stock and stock options

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Reportable mutual funds (Access Persons only);

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Money market mutual funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bank Certificates of Deposit;

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Commercial paper;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bankers acceptances;

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Exchange Traded Products\*, Closed-End Funds and Unit Investment Trusts

&nbsp;&nbsp;&nbsp;&nbsp;&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: February 19, 2026

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&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;• Futures contracts on the following:

– Futures on U.S. Treasuries.

– 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;&nbsp;&nbsp;&nbsp;&nbsp;· Options Contract (Calls, Covered Calls, Puts, Naked Calls or Puts)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Single Stock ETFs

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Contracts for Difference (CFDs)

We may modify this list of securities at any time. Please contact Compliance to request the most current list.

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 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;&nbsp;&nbsp;&nbsp;&nbsp;a. Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;c. Corporate Bond Preclearance Request

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;e. Private Placement Preclearance Request (for private placements, private equity funds, hedge fund, private companies, limited liability companies)

&nbsp;&nbsp;&nbsp;&nbsp;&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)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 transaction is subject to the following tests.

#### Step 1: Restricted Security List
&nbsp;&nbsp;&nbsp;&nbsp;&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.

#### Step 2: De Minimis Transaction Test (per security per day)
&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 28

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#### Step 3: Client Trades Test
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Have there been any transactions in the past 72 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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 29

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![](img_1155c3835d234f8.jpg)

#### Preclearance Process Flowchart
![](img_afefce1e0dbe4f8.jpg)

\*De Minimis

&nbsp;&nbsp;&nbsp;&nbsp;A. Is the market cap = to $1B and the per day trade value </= to $5,000 for the security and related securities?</font

&nbsp;&nbsp;&nbsp;&nbsp;B. Is the market cap between $1B and $7.5B and the per day trade value = to $10,000 for the security and related securities; or</font

&nbsp;&nbsp;&nbsp;&nbsp;C. Is the market cap >/= to $7.5B and the per day trade value = to $25,000 for the security and related securities?</font

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 30

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#### 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>.

&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;&nbsp;&nbsp;&nbsp;&nbsp;a. Select your broker.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;c. Provide Date Opened, Account Owner Type, and Investment Discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Select "Not Required" in the Broker Statement field.

&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;&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;&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.

Policy updated: February 19, 2026

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&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 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;&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;&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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 32

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**APPENDIX 6: REQUESTING A Day 15 Sell EXEMPTION (Portfolio Persons Only)**

The Code of Ethics policy allows for limited exemptions. Exemption requests are submitted by emailing Compliance or in ComplianceAlpha using the following process:

#### Trading Exemptions:
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Log-in to ComplianceAlpha at <u>https://www.compliancealpha.com/auth/login</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;3. Select "Trade" at "What type of request or disclosure would you like to set up?" Select "Sell Exemption – Day 15 Exemption" form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Complete the required fields on the request form and submit the form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Compliance will review your request. If your request is approved, Compliance will assign a one-day trading window which will be 15 days from the date the exemption was approved. You will be notified by email of the approval or denial.

#### 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. The accounts must be reported in ComplianceAlpha. You must provide a copy of your managed account or discretionary account agreement.

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 may be emailed to Code of Ethics or submitted in ComplianceAlpha using the following process:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Log-in to ComplianceAlpha at <u>https://www.compliancealpha.com/auth/login</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;3. Click "Create Request or Disclosure".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Click on "Other"

Policy updated: February 19, 2026

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&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;6. Complete the requested information.

&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;8. Click Submit.

&nbsp;&nbsp;&nbsp;&nbsp;&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: February 19, 2026

COMPANY CONFIDENTIAL -©2026 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:

---

| | |
|:---|:---|
| **Investment Adviser** | **Most Recent Approval Date** |
| American Century Investment Management, Inc. | January 1, 2018 |

---

---

| | |
|:---|:---|
| **Principal Underwriter** | **Most Recent Approval Date** |
| American Century Investment Services, Inc. | January 1, 2018 |

---

---

| | |
|:---|:---|
| **Fund Clients** | **Most Recent Approval Date** |
| American Century Asset Allocation Portfolios, Inc. | December 1, 2017 |
| American Century California Tax-Free and Municipal Funds | December 14, 2017 |
| American Century Capital Portfolios, Inc. | December 1, 2017 |
| American Century ETF Trust | December 20, 2017 |
| American Century Government Income Trust | December 14, 2017 |
| American Century Growth Funds, Inc. | December 1, 2017 |
| American Century International Bond Funds | December 14, 2017 |
| American Century Investment Trust | December 14, 2017 |
| American Century Municipal Trust | December 14, 2017 |
| American Century Mutual Funds, Inc. | December 1, 2017 |
| American Century Quantitative Equity Funds, Inc. | December 14, 2017 |
| American Century Strategic Asset Allocations, Inc. | December 1, 2017 |
| American Century World Mutual Funds, Inc. | December 1, 2017 |

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Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 35

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#### SCHEDULE B: SUBADVISED FUNDS

#### (Last updated February 19, 2026)
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.

[Fund List Redacted]

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 36

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#### SCHEDULE C: BROKERS

#### (Last updated February 19, 2026)
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.

Cash App Investing

Ninja Traders

Optimus Futures

Think or Swim

WeBull

#### 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

Benjamin F. Edwards (through Pershing)

Cetera (through Pershing)

Charles Schwab - Investments

Chase – Investments

Citi Private Wealth

Citibank - Investments

Deutsche Bank

DriveWealth (Health Savings Account through WealthCare Savers)

Edward Jones

E\*TRADE at Morgan Stanley

Fidelity Investments

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 37

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Fidelity International (UK)

First Republic

Goldman Sachs Wealth Management

GW & Wade Asset Management (through National Financial Services)

Interactive Brokers

JP Morgan Private Client

Lion Street (through Pershing)

LPL Financial

MML Investors (through National Financial Services)

Merrill Lynch – MyMerrill Investments

Morgan Stanley - ClientServ

Northern Trust Securities

Northwestern Mutual

Oppenheimer & Co.

Raymond James

Robinhood

Royal Bank of Canada Wealth Management (RBC)

RBC Dominion Securities (Wealth Management) - Canada

Roundtable (through National Financial Services)

SEI Investments

Stifel Nicholas

UBS

US Trust

Vanguard Investments

Wells Fargo Advisors

Zerodha

Policy updated: February 19, 2026

COMPANY CONFIDENTIAL -©2026 American Century Proprietary Holdings, Inc. 38

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