Select List. Mutual Fund OneSource. and Income Mutual Fund Select List. The Many Ways to Buy Mutual Funds at Schwab

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FOURTH QUARTER

2015

Also available at

schwab.com/selectlist

Select List

®

The Many Ways to Buy Mutual Funds at Schwab

Key points:

• Schwab offers multiple tools and services for buying mutual funds,

ranging from fund screeners to comprehensive advice and guidance.

• While tools such as the Mutual Fund OneSource Select List offer

assistance in identifying appropriate funds, other services provide

a holistic view of mutual fund portfolio construction.

• Investors can get help in narrowing down potential funds for a

specific asset class as well as determining appropriate weightings

by asset class based on their risk tolerance.

At Schwab, we believe in offering clients flexibility to meet their unique needs. As such, we

provide investors a number of ways in which they can invest in mutual funds. Self-directed

investors, who generally prefer to do their own research and analysis to craft a portfolio of

individually selected funds, can easily buy funds online or by phone. Others are looking for

a bit more assistance or direction, either in constructing an appropriate asset allocation

with mutual funds or in narrowing down and/or selecting specific funds for various

categories. Still others seek a higher level of guidance in developing and maintaining

Analysis and Commentary on Actively

Managed Mutual Funds by Charles

Schwab Investment Advisory, Inc.

With thousands of mutual funds available,

finding the right funds for your portfolio can

seem more time-consuming and difficult than

ever. The Mutual Fund OneSource Select List,

consisting only of OneSource funds available

without a load or transaction fee, is a smart

solution that can help you make confident

investment decisions.

Mutual Fund OneSource

and Income Mutual Fund Select List

®

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a mutual fund portfolio as well as in growing and managing their

wealth. In this article we provide an overview of them all, so that

investors can determine which method would best meet their

needs, desired level of involvement, and comfort level.

For Self-Directed Investors

Many Schwab investors maintain self-directed accounts, do their

own research on potential investments, and make their fund

purchases on a one-time or as-needed basis—either online or by

phone. These investors often take advantage of the broad range

of information, insights and tools—including the Mutual Fund

OneSource Select List—available through Schwab to conduct

their research and find funds that meet their criteria.

For self-directed investors

• Online:

www.schwab.com/mutualfunds

• By phone:

(800) 435-4000

Of course, investment portfolios aren’t meant to be static.

Investors seeking to keep their asset allocation aligned to their

risk profile and investment horizon will want to rebalance

regularly. Many are also likely to add to their investments over

time, either on a regular basis or as their situation allows. At

such times, they can utilize the information and tools Schwab

provides to keep their portfolio on track.

Automating the Process

Schwab investors seeking to regularly add to their fund

holdings can take advantage of the convenience of Schwab’s

Automatic Investment Plan (AIP). It allows investors to make

subsequent investments in one or more funds—following an

initial purchase—on a monthly, semi-monthly, or quarterly

basis. In addition to convenience, AIP adds a level of discipline

to an investment program.

By investing a fixed amount on a regular basis, regardless of

market movements—a concept known as dollar-cost averaging—

investors can dampen market volatility while potentially lowering

their average share price over the long term. That’s because

when share prices are down, an investor’s fixed dollar investment

buys more shares than when share prices are higher.

AIP is available for Mutual Fund OneSource

®

_{funds, as well as}

certain other no-transaction-fee funds, with no loads and no

transaction fees, and there’s no cost to establish the plan. Be

aware, of course, that periodic investment plans such as AIP

won’t ensure a profit or protect against loss in a declining market.

AIP purchases can be funded via cash available in an account,

direct deposit or through regular online transfers from another

financial institution (MoneyLink).

To establish Schwab’s Automatic Investment Plan

• Online:

www.schwab.com/AIP

• By phone:

(800) 435-4000

Mutual Fund Portfolio Builder

Also designed for self-directed investors, Schwab Mutual Fund

Portfolio Builder

™

_{helps investors identify and select mutual funds}

that might be appropriate for them, simplifying the research

and selection process. Investors select one of five risk profiles—

Conservative, Moderately Conservative, Moderate, Moderately

Aggressive or Aggressive—and are presented with a list of highly

rated mutual funds for each profile, selected from the current

Mutual Fund OneSource Select List.

To help investors identify an appropriate risk profile, asset

allocations are shown for each of the five alternatives, along with

time horizons and investment goals appropriate for each, average

annual returns over the past 35 years, and each portfolio’s

best-year and worst-year return over that period. And if an

investor feels uncomfortable selecting a profile, a risk profile

questionnaire is offered to help.

The Mutual Fund Portfolio Builder was designed as an educational

tool to help investors establish a one-time, diversified portfolio of

mutual funds. Investors are responsible for all decisions made, as

well as for ongoing portfolio monitoring of and rebalancing of fund

allocations as needed and appropriate. The suggested minimums—

$10,000 for retirement accounts and $12,500 for non-retirement

accounts—are designed to ensure sufficient diversification, and

there are no fees for the service. It’s appropriate both for beginning

investors who may feel overwhelmed by the many mutual fund

choices available to them as well as for experienced investors

who may not have sufficient time or interest to sort through

potential portfolio choices.

To use Schwab’s Mutual Fund Portfolio Builder

• Online:

www.schwab.com/mutualfundportfoliobuilder

• By phone:

(866) 393-6185

The Many Ways to Buy Mutual Funds at Schwab

(continued)

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Schwab Managed Portfolios

For investors looking to delegate mutual fund decisions, there’s

Schwab Managed Portfolios

™

_{—Mutual Funds, which provide}

professionally managed, broadly diversified portfolios of mutual

funds. With minimums as low as $25,000, Schwab Managed

Portfolios offer broad diversification, exposure to a wide range

of asset classes, and ongoing investment monitoring and

port-folio rebalancing by investment professionals at Charles Schwab

Investment Advisory. Fees are competitive and are based on

portfolio value, with rates diminishing on higher balances.

Based on principles of asset allocation and diversification to

manage risk and help investors develop and maintain well-

balanced portfolios, Schwab Managed Portfolios offer six asset

allocation models: Conservative Income, Income with Growth,

Balanced, Balanced with Growth, Growth, and Aggressive

Growth; investors work with a Schwab investment professional

to determine which may be right for them. By holding a different

mix of mutual funds based on its strategy, each portfolio can

incorporate exposure to as many as 10 different asset classes,

as well as sub–asset classes such as commodities, REITs or

different styles of bonds. If taxes are a concern, a tax-aware

option is also available for each model. (Investors should consult

their tax advisor before purchasing the tax-aware option.)

To learn more about Schwab Managed Portfolios

• Online:

www.schwab.com/SMP

• By phone:

(866) 855-5689

Schwab Private Client

For investors who want help but also want to maintain control

of their investing decisions, there’s Schwab Private Client.

™

_It

provides guidance, recommendations, and service to investors

seeking to work with a team to build their wealth. With Schwab

Private Client, investors work one-on-one with an investment

advisor who is supported by a broad range of specialists on topics

from income to options to broad financial or estate planning.

Schwab’s Portfolio Consultants provide ongoing advice that’s

finely tailored to an investor’s particular situation, providing

recommendations not only on mutual funds but other types of

investments, where appropriate and desired.

Through quarterly reviews and more-frequent communication

as desired, investors and their Portfolio Consultant track

per-formance, consider recommended changes to the portfolio, and

discuss concerns or issues of interest. It’s a continuous process

comprising analysis, planning, portfolio construction, refinement,

and ongoing advice. Like Schwab Managed Portfolios, fees are

asset-based.

To learn more about Schwab Private Client

• Online:

www.schwab.com/SPC

• By phone:

(866) 645-4124

It’s All About Your Comfort Level

You don’t have to be on your own in investing in mutual funds at

Schwab. You can choose your method based on your interest,

time availability, or motivation. You can automate your mutual

fund purchases or get additional assistance when you need it.

As always, schwab.com offers a wealth of information—take some

time to explore what’s there. Schwab’s goal is to make mutual

fund investing available, accessible, and easy to help investors

get and stay on track to reach their financial goals.

The Many Ways to Buy Mutual Funds at Schwab

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Eligibility Requirements

Each OneSource Select List and Income Select List fund must:

Be no-load and open to new investors at Schwab in all 50 states.

Have a minimum three-year performance track record (except funds that

are listed below the “Leading Schwab Affiliate Funds” sections of the lists,

which are eligible if they have a minimum 12 months performance track

record under their current management and/or current investment

objectives and strategy).

Have at least $40 million in assets (except for small-cap value, high yield,

multisector bond, world bond, emerging market equity and bond,

diversified Pacific Asia, Pacific Asia ex-Japan, Europe, Japan, Latin

America, convertibles, retirement income, target date and specialty funds,

which require at least $20 million in assets). To meet this requirement,

assets in multiple share classes of the same fund may be aggregated.

Additionally, each Income Select List fund must:

Demonstrate a track record of making income distributions in each of the

prior five calendar years (or during every full calendar year since inception

in the case of funds with less than a five-year track record, including

Schwab Affiliate Funds which may have a 12-month track record).

For fixed income funds, make income distributions on at least a quarterly

basis; and—with the exception of the high-yield, multisector and emerging

markets bond categories—not allocate in excess of 30% to issues rated

below investment grade.

For equity funds, offer a current yield in excess of their category average;

and for equity funds with “dividend” or “income” in their name, make

income distributions at least quarterly.

With the exception of specialty sector (REITs) and fixed income funds, not

allocate in excess of 33% to any single sector.

Selection Criteria

Actively Managed OneSource Funds,

including Schwab Affiliate Funds, are

evaluated by CSIA based on a quantitative analysis of risk, performance,

expenses, active share (when meaningful), assets under management and

asset flows. CSIA also may apply additional qualitative factors to its analysis

to enhance its overall evaluation of a fund, including, for example, changes in

a fund’s investment strategy or management structure, portfolio manager

tenure, whether a fund’s investment style and portfolio holdings are

representative of its investment category, portfolio composition and turnover

rates, consistency of a fund’s performance and CSIA’s evaluation of the fund

over time, and other risk and diversification considerations.

In addition, for the Income Select List, those funds with the best capital

preservation attributes and investment strategies that focus on selecting

income-generating securities will receive preference when selecting from

similarly rated funds with comparable yield characteristics.

“Leading Schwab Affiliate Funds”

sections of the Select List and Income

Select List feature eligible actively managed Schwab Affiliate Funds that

generally fall into the top 35 percent of all CSIA-evaluated funds (including

OneSource and non-OneSource funds) in their respective Morningstar

categories. If two or more Schwab Affiliate Funds that fit this criteria also

have similar investment styles, CSIA may determine that only the most

favorably evaluated fund(s) be included in the list. Because Schwab Affiliate

Funds included in the “Leading Schwab Affiliate Funds” section of the

OneSource Select List and Income Select List are selected independently

from other actively managed funds on the list, they may have a less favorable

evaluation overall than the funds listed in the “Leading Third-Party Funds”

section of the list.

The

Index Funds

section of the Select List features only Schwab Affiliate

Funds. It includes up to one market capitalization weighted index fund for

each of the large-cap, small-cap, international and taxable bond asset

classes and one fundamentally weighted index fund for each of the large cap,

small cap, developed large cap international, developed small cap

international and emerging market asset classes. A market capitalization

weighted index fund is a fund that attempts to match the performance of an

established list of securities, where the securities with the highest market

capitalization (total market value of outstanding stock) get the most weight.

A fundamentally weighted index fund is a fund that attempts to match the

performance of an established list of securities, where the securities with

the highest fundamental value (measured based on criteria such as sales,

cash flow, dividends and stock buybacks) get the most weight. A Schwab

Affiliate fund that is market capitalization weighted and a Schwab Affiliate

Fund that is fundamentally weighted are included unless no funds meet

Schwab’s quantitative and qualitative evaluation criteria.

The Schwab affiliate index fund that receives the most favorable evaluation

by CSIA in each asset class is included on the Select List. If two index funds

receive equal evaluations, CSIA will generally include the fund that has the

lower expense ratio.

“Leading Third-Party Funds”

sections of the OneSource Select List and

Income Select List feature eligible actively managed third-party OneSource

funds that generally fall within the top 35 percent of all CSIA-evaluated

funds within a given Morningstar category and that receive the most

favorable evaluations in their respective categories.

For the

OneSource Select List

, CSIA generally includes the five most-favorably

evaluated funds in each of the large-cap, small-cap, intermediate-term bond,

municipal national intermediate and foreign large blend asset categories and

the two most favorably evaluated funds in all other asset categories. If two or

more of the most favorably evaluated funds within an asset category have

similar investment styles, CSIA may substitute a less-favorably evaluated

fund for one or more of those funds to provide a more diverse selection of

fund investment strategies.

How Funds Are Selected

To build the Schwab Mutual Fund OneSource Select List and the Schwab Income Mutual Fund Select List, Charles Schwab

Investment Advisory, Inc. (CSIA) starts by analyzing the funds tracked by Morningstar using quantitative and qualitative

selection criteria described below. Then, based on its analysis, CSIA builds the Mutual Fund OneSource Select List and

Income Select list by selecting the most favorably evaluated OneSource funds, including Schwab Funds and Laudus Funds

(“Schwab Affiliate Funds”), within each Morningstar category.

Most of the funds on the List are actively managed OneSource funds. In addition, CSIA also includes up to one Schwab

Affilate Fund that is a market-cap weighted index fund for each of the large-cap, small-cap, international and taxable bond

asset classes, and one Schwab Affiliate Fund that is a fundamentally weighted index fund for each of the large cap, small

cap, developed large cap international, developed small cap international and emerging market asset classes. Visit the

OneSource Select List on schwab.com to view the Select List online and to learn more about how index funds are selected.

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LARGE-CAP U.S. STOCK FUNDS

Perspectives and Third Quarter 2015 Summary

We expect bouts of volatility to persist as global growth concerns stay with us; while Fed uncertainty

along with a budget fight in Congress is likely to keep investors on edge. Although we are maintaining

our neutral rating on U.S. stocks (meaning don’t take excess risk above your long-term equity allocation),

for investors with excess cash and below their normal equity allocation, it may be appropriate to put

some of that cash to work as the U.S. economy is still supportive of stocks, particularly the continued

strength in the services side, which makes up a decisive majority of domestic economic activity.

The Standard & Poor’s 500 Composite Index posted a return of -6.4% for the third quarter of

the year, the worst quarterly loss since 2011 due in part to uncertainty over the timing of the

Federal Reserve’s interest rate increases and doubt regarding the sustainability of global growth,

particularly in China.

Large-cap U.S. stocks outperformed small-cap stocks. However, Large-cap Growth,

Large-cap Blend and Large-cap Value were all in negative territory, with returns of –6.7%,

-7.5% and -8.4%, respectively.

All perspectives are as of October 12, 2015

For the latest up-to-date perspectives, please visit schwab.com

FOR THE QUARTER ENDED SEPTEMBER 30, 2015

FUND NAME (FUND INCEPTION DATE) MORNINGSTARCATEGORY QUOTESYMBOL

AVERAGE ANNUALIZED TOTAL RETURN _UPSIDE

MARKET CAPTURE DOWNSIDE MARKET CAPTURE GROSS EXPENSE RATIOa NET EXPENSE RATIOa TOTAL ASSETS ($M) 1

YEAR YEARS3 YEARS5 YEARS10 INCEPTIONSINCE

LEADING SCHWAB AFFILIATE FUNDSd

Schwab Core Equity Fund (7/1/96) Large Blend SWANX -0.05 12.71 13.31 6.43 7.93 101.44 100.32 0.72 0.72 2,197 Laudus U.S. Large-Cap Growth Fund (10/14/97) Large Growth LGILX 3.76 13.45 14.44 9.54 6.24 105.30 101.80 0.77 0.77 2,047

FUNDAMENTAL INDEX FUNDS

Schwab Fundamental U.S. Large Company Index Fund (4/2/07) Large Value SFLNX -3.88 12.10 12.45 — 6.17 98.68 99.95 0.39 0.35 4,576

MARKET CAP-WEIGHTED INDEX FUNDS

Schwab®_{S&P 500 Index Fund (5/19/97)} _{Large Blend} _SWPPX _-0.70 _12.31 _13.24 _6.76 _— _99.63 _100.12 _0.09 _0.09 _19,947

LEADING 3RD PARTY FUNDS

Parnassus Core Equity Investor (8/31/92) Large Blend PRBLX 0.88 13.79 13.36 9.55 10.40 101.12 89.47 0.87 0.87 11,836 Glenmede Large Cap Core Port (2/27/04) Large Blend GTLOX 2.52 16.34 15.95 8.08 8.44 111.16 88.02 0.87 0.87 1,573 Oakmark I (8/5/91) Large Blend OAKMX -4.87 13.11 13.39 8.12 12.44 105.93 106.36 0.87 0.87 17,637 RS Large Cap Alpha A (6/1/72)e _{Large Blend} _GPAFX _-7.77 _11.70 _10.34 _7.50 _11.53 _{107.57 106.09} _0.92 _0.92 ₆₄₈ Parnassus (12/27/84) Large Growth PARNX 4.45 15.61 14.76 9.98 9.97 114.69 102.49 0.84 0.84 769 Glenmede Large Cap Growth (2/27/04) Large Growth GTLLX 5.35 18.03 16.63 9.11 8.95 116.23 83.86 0.88 0.88 1,831 Janus Research T (5/3/93) Large Growth JAMRX 4.94 15.67 13.82 8.67 10.86 107.30 85.66 0.80 0.80 4,421 Janus Forty T (7/6/09) Large Growth JACTX 11.10 14.52 13.38 8.34 13.73 101.13 82.72 0.77 0.77 2,182 Lord Abbett Growth Leaders A (6/30/11)e _{Large Growth} _LGLAX _-2.36 _13.88 _— _— _10.47 _106.95 _80.50 _1.02 _0.85 _1,907 INTECH US Mgd Volatility T (7/6/09) Large Value JRSTX 3.47 14.11 13.55 — 15.70 99.54 83.02 0.91 0.91 268 American Century Equity Income Inv (8/1/94) Large Value TWEIX -1.65 8.20 9.47 6.20 10.17 69.39 72.68 0.93 0.93 8,796 JPMorgan Equity Income A (2/18/92)e _{Large Value} _OIEIX _-6.67 _9.36 _11.92 _6.63 _8.16 _91.70 _91.78 _1.09 _1.04 _10,230 JPMorgan Intrepid Value A (2/18/05)e _{Large Value} _JIVAX _-10.38 _10.16 _11.30 _5.32 _5.74 _101.66 _105.93 _1.10 _0.84 _1,782 Delaware Value®_{A (9/14/98)}e _{Large Value} _DDVAX _-10.05 _10.12 _12.49 _5.98 _6.50 _93.43 _86.32 _0.98 _0.98 _9,054

PERFORMANCE BENCHMARKS

Schwab 1000 Index®_{(Dividends Reinvested)} _-0.46 _12.59 _13.3 _7.03 _— S&P 500 Index®_{(Dividends Reinvested)} _-0.61 _12.40 _13.34 _6.80 _— New to the Select List this quarter

Asset Class and Performance Benchmark Definitions

Large-cap U.S. stock funds invest primarily in stocks that fall in the top 70% of the U.S. market capitalization range as defined by Morningstar, Inc. Growth funds invest in companies that may be experiencing rapid growth in earnings, sales or return on equity. Value funds invest in companies that may have share prices below estimated fair market value, undervalued assets, an opportunity to “turnaround” or lower price-to-earnings or price-to-book ratios. Blend funds invest in a combination of value and growth stocks.

The S&P 500®_{Index includes common stocks of 500 widely held companies. S&P 500 is a registered trademark of The McGraw-Hill Co., Inc.}

If an expense waiver was in place during the period, the net expense ratio was used to calculate fund performance. A net expense ratio lower than the gross expense ratio may reflect a cap on or contractual waiver of fund expenses. Please read the fund prospectus for details on limits or expiration dates for any such waivers.

Performance quoted is past performance and is no guarantee of future results. Current performance may be lower or higher. Visit schwab.com for month’s

end performance information. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

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MID- AND SMALL-CAP U.S. STOCK FUNDS

Perspectives and Third Quarter 2015 Summary

The expected near-term bouts of volatility could cause a flare-up in risk aversion to the detriment

of smaller market caps stocks. However, domestically-oriented companies are shielded mostly from

the slowdown in China that has impacted U.S. companies which do more business overseas. Also,

the rally in the U.S. dollar should favor domestically-oriented company earnings results, while the

all-important U.S. consumer is likely to continue to be relatively unfazed, bolstered by lower energy

costs and a strengthening labor market. As always, we do not recommend making market cap bets

and encourage investors to stick to long-term asset allocation goals according to your risk tolerance.

Small-cap U.S. stocks declined sharply, as investors flocked to higher-quality, more stable

large-caps, with the Russell 2000

®

_{Index down -11.92%. The Small-cap Blend, Growth and}

Value categories all fell, returning -10.9%, -11.9% and -10.3%, respectively.

Mid-cap U.S. stocks performed better than small-cap, but lagged large-cap U.S. stocks, with

the Russell Mid Cap

®

_{Index returning -8.0% at quarter end. Mid-cap Blend, Growth and Value}

all declined at -9.2%, -9.5% and -9.2%, respectively.

Schwab Small-Cap Equity Fund (7/1/03) Small Blend SWSCX 2.14 14.31 14.96 6.48 10.39 112.21 108.98 1.11 1.11 595

Schwab Fundamental U.S. Small Co Index Fund (4/2/07) Small Blend SFSNX -0.18 12.34 12.10 — 6.93 106.69 115.21 0.44 0.35 1,333

Schwab Small-Cap Index Fund (5/19/97) Small Blend SWSSX 1.28 11.03 11.98 7.31 8.06 98.27 109.21 0.21 0.17 2,432

Parnassus Mid-Cap (4/29/05) Mid-Cap Blend PARMX 0.90 11.35 12.86 8.73 8.29 85.59 78.16 1.09 0.99 550 Hennessy Cornerstone Mid Cap 30 Inv (9/17/03) Mid-Cap Blend HFMDX 12.61 17.43 16.45 9.15 11.86 121.80 101.53 1.17 1.17 1,027 Janus Enterprise T (9/1/92) Mid-Cap Growth JAENX 6.13 14.87 13.46 9.28 10.39 92.96 61.36 0.92 0.92 5,554 Buffalo Discovery (4/16/01) Mid-Cap Growth BUFTX 6.28 14.54 14.93 10.29 8.38 101.69 83.72 1.01 1.01 867 Lord Abbett Calibrated Mid Cap Value A (12/29/11)e _{Mid-Cap Value} _LVMAX _-6.77 _11.01 _— _— _12.55 _101.10 _94.70 _1.09 _0.85 _1,035 TIAA-CREF Mid-Cap Value Retail (10/1/02) Mid-Cap Value TCMVX -2.26 12.40 11.78 7.15 11.50 97.78 95.11 0.72 0.72 5,072 TIAA-CREF Small-Cap Equity Retail (10/1/02) Small Blend TCSEX 4.20 12.87 12.33 6.48 10.24 99.22 93.90 0.83 0.83 2,818 Lazard US Small-Mid Cap Equity Open (1/30/97) Small Blend LZCOX 2.70 13.69 11.02 7.16 7.87 103.72 96.12 1.20 1.20 213 Hennessy Cornerstone Growth Investor (11/1/96) Small Blend HFCGX 7.32 15.53 14.28 2.80 9.29 102.95 77.39 1.15 1.15 285 Northern Small Cap Core (9/30/99) Small Blend NSGRX 2.08 12.14 12.72 7.65 6.58 98.11 98.30 0.88 0.77 319 Rice Hall James Small Cap Instl (11/1/96) Small Growth RHJMX 6.57 12.48 15.40 8.17 9.16 95.17 88.70 1.51 1.25 48 Wasatch Core Growth (12/8/86) Small Growth WGROX 10.87 13.22 14.94 7.36 12.03 94.24 79.68 1.18 1.18 1,215 Conestoga Small Cap Investors (10/1/02) Small Growth CCASX 8.95 11.18 12.66 8.06 10.65 89.08 87.48 1.24 1.10 625 Driehaus Micro Cap Growth (1/2/03)b _{Small Growth} _DMCRX _15.85 _19.01 _15.53 _11.11 _18.34 _117.22 _77.30 _1.59 _1.59 ₁₉₁ Perkins Small Cap Value T (10/21/87) Small Value JSCVX 1.19 10.49 8.80 7.41 12.03 87.55 90.80 0.83 0.83 1,461 Columbia Small/Mid Cap Value A (2/14/02)e _{Small Value} _AMVAX _-7.72 _9.39 _9.04 _5.63 _8.27 _96.18 _99.47 _1.22 _1.22 ₉₉₄ Undiscovered Mgrs Behavioral Value A (6/4/04)e _{Small Value} _UBVAX _-3.38 _12.40 _13.21 _7.36 _8.20 _104.55 _91.04 _2.08 _1.57 _2,926

PERFORMANCE BENCHMARK

Russell 2000 Index®_{(Dividends Reinvested)} _1.25 _11.02 _11.73 _6.55 _— New to the Select List this quarter

Mid-cap U.S. stock funds invest primarily in stocks that fall in the next 20% of the U.S. market capitalization range following large-cap stocks. Small-cap U.S. stock funds generally invest in stocks falling in the bottom 10% of the range. Definitions based on Morningstar, Inc.

Growth funds invest in companies that may be experiencing rapid growth in earnings, sales or return on equity. Value funds invest in companies that may have share prices below estimated fair market value, undervalued assets, an opportunity to “turnaround” or lower price-to-earnings or price-to-book ratios. Blend funds invest in a combination of value and growth stocks. The Russell 2000®_{Index consists of the}

2,000 smallest companies in the Russell 3000®_{Index, which represents approximately 98% of the total market value of publicly available domestic equities.}

Small-cap funds are subject to greater volatility than those in other asset categories.

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INTERNATIONAL STOCK FUNDS

Perspectives and Third Quarter 2015 Summary

We don’t believe we are on the verge of a global growth recession and feel the recent market volatility is not a harbinger of a global downturn, though further volatility is possible. Therefore, stick to your long-term plan and maintain a well-diversified portfolio. If additional international exposure is needed, you may consider our improved outlook for Japan and our bullish lean toward Europe.

The MSCI EAFE, a broad representation of non-U.S developed market equities was down by 10.6% with concerns over a China slowdown spreading across the globe. Japanese stocks shed 10.0% in light of a contraction in second quarter GDP. The Europe category held up slightly better, losing 6.9% amid slowing eurozone activity.

China’s unexpected devaluation of the renminbi and economic slowdown hit the Diversified Emerging Markets the hardest, which lost 15.9%. Unsurprisingly, the China category was most vulnerable and was down 20.0%. With Brazil reeling under a second quarter recession and a depreciating real, the Latin America category echoed similar losses, returning -21.4%.

Unfortunately, there was no respite for Foreign fund investors with all categories experiencing negative returns. Foreign SMID funds were marginally better than their Large cap counterparts with SMID Blend, Growth, and Value returning -8.4%, -7.1% and -9.0% respectively.

Schwab®_{International Core Equity Fund (5/30/08)} _{Foreign Large Blend} _SICNX _-4.97 _8.32 _6.90 _— _1.12 _112.69 _75.76 _0.98 _0.86 ₆₃₅ Laudus Mondrian International Equity Fund—Select (6/17/08)b,* _{Foreign Large Value} _LIEFX _-8.59 _5.79 _4.10 _— _-0.82 _109.99 _88.76 _1.12 _1.02 ₁₀₄

Schwab Fundamental Emerg Mkts Lg Co Index (1/31/08) Diversified Emerging Mkts SFENX -26.08 -9.27 -6.71 — -3.46 84.90 163.93 0.85 0.49 288 Schwab Fundamental Intl Large Co Index (4/2/07) Foreign Large Value SFNNX -12.12 5.64 2.74 — -0.29 118.94 99.84 0.48 0.35 1,101 Schwab Fundamental Intl Small Co Index (1/31/08) Foreign Small/Mid Blend SFILX -3.72 8.22 5.68 — 4.22 104.60 67.17 0.82 0.51 408

Schwab International Index Fund (5/19/97) Foreign Large Blend SWISX -8.28 5.67 4.12 3.07 3.77 109.79 89.34 0.23 0.19 2,604

Matthews China Dividend Investor (11/30/09) China Region MCDFX 0.00 8.41 5.93 — 8.12 106.52 68.16 1.19 1.19 161 Columbia Greater China A (5/16/97)e _{China Region} _NGCAX _-11.58 _4.57 _-0.39 _8.42 _8.61 _104.02 _76.48 _1.59 _1.59 ₁₃₈ Seafarer Overseas Gr and Income Investor (2/15/12) Diversified Emerging Mkts SFGIX -8.24 1.34 — — 3.50 79.64 83.60 1.25 1.15 657 Janus Emerging Markets T (12/28/10) Diversified Emerging Mkts JMFTX -15.52 -2.15 — — -5.73 96.93 126.83 1.77 1.27 40 Matthews Asia Dividend Investor (10/31/06) Diversified Pacific/Asia MAPIX -4.27 4.88 4.70 — 8.42 84.22 65.39 1.06 1.05 4,911 Matthews Asia Growth Investor (10/31/03) Diversified Pacific/Asia MPACX -12.22 3.66 3.52 6.04 8.09 75.38 63.27 1.11 1.11 839 Henderson European Focus A (8/31/01)e _{Europe Stock} _HFEAX _-8.94 _9.48 _6.05 _7.84 _14.26 _119.03 _62.15 _1.37 _1.37 _3,673 Columbia European Equity A (6/26/00)e _{Europe Stock} _AXEAX _-7.77 _6.13 _4.97 _5.69 _3.00 _112.56 _76.04 _1.36 _1.36 ₅₆₃ TIAA-CREF International Eq Retail (3/31/06) Foreign Large Blend TIERX -4.90 6.58 4.07 3.50 2.11 113.63 87.83 0.83 0.83 3,982 Federated International Leaders A (9/30/98)e _{Foreign Large Blend} _FGFAX _-10.05 _7.02 _5.37 _5.63 _8.27 _121.81 _81.41 _1.45 _1.25 _2,377 Lazard International Strategic Eq Open (2/3/06) Foreign Large Blend LISOX -6.99 7.39 6.43 — 4.28 109.93 78.48 1.09 1.09 6,752 Henderson International Opportunities A (8/31/01)e _{Foreign Large Blend} _HFOAX _-8.11 _6.80 _4.32 _4.64 _8.38 _101.01 _58.62 _1.39 _1.39 _4,548 FMI International (12/31/10) Foreign Large Blend FMIJX -0.19 10.46 — — 8.97 82.43 27.65 1.03 1.00 2,445 Buffalo International (9/28/07) Foreign Large Growth BUFIX -4.13 5.73 4.05 — 1.62 95.08 72.26 1.06 1.06 257 SSgA International Stock Selection N (3/7/95) Foreign Large Value SSAIX -5.32 7.89 4.24 2.71 4.10 112.46 78.21 1.26 1.00 328 Henderson Global Equity Income A (11/30/06)e _{Foreign Large Value} _HFQAX _-10.04 _3.52 _5.11 _— _2.38 _91.02 _68.56 _1.18 _1.18 _3,616 Oppenheimer International Small Co A (11/17/97)e _{Foreign Small/Mid Growth} _OSMAX _3.62 _16.55 _12.07 _10.26 _12.46 _116.27 _15.91 _1.22 _1.21 _5,151 Brandes International Small Cap Equity A (1/31/12)e _{Foreign Small/Mid Value} _BISAX _-8.42 _9.69 _8.23 _5.57 _9.48 _118.12 _59.84 _1.38 _1.40 _1,025 Matthews Japan Investor (12/31/98) Japan Stock MJFOX 4.84 12.82 10.19 2.19 5.34 89.47 21.19 1.03 1.03 1,524 BlackRock Latin America Inv A (9/27/91)e _{Latin America Stock} _MDLTX _-39.86 _-17.50 _-13.92 _1.65 _7.09 _{98.63 229.91} _1.53 _1.53 ₁₆₇ Matthews Pacific Tiger Investor (9/12/94) Pacific/Asia ex-Japan Stk MAPTX -10.00 3.44 2.89 8.91 8.21 85.54 76.32 1.09 1.08 6,972 Matthews Asia Small Companies Inv (9/15/08) Pacific/Asia ex-Japan Stk MSMLX -14.24 3.64 2.02 — 12.20 91.29 81.57 1.47 1.47 645 Perkins Global Value T (6/29/01) World Stock JGVAX -4.75 6.90 7.99 4.93 6.16 83.96 52.01 1.01 1.01 241 Janus Global Select T (6/30/00) World Stock JORNX -5.95 10.17 3.04 4.98 1.81 115.15 66.94 0.93 0.93 1,924

MSCI EAFE Index (Dividends Reinvested) -8.66 5.63 3.98 2.97 —

New to the Select List this quarter *$50,000 initial minimum investment

Foreign stock funds typically have less than 20% of assets invested in the United States. Funds that do not have a specific growth or value orientation compared to a benchmark are classified as blend funds. World Stock funds invest primarily in equity securities of issuers located throughout the world and generally invest at least 20% of assets in the United States. Regional funds generally hold high concentrations of securities from one specific geographic region. Emerging markets funds generally invest in securities from less developed countries.

International investments are subject to risks such as currency fluctuations and political instability. Investing in emerging markets can accentuate these risks.

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SECTOR FUNDS

Perspectives and Third Quarter 2015 Summary

We are reiterating our outperformance rating for financials due to improved broader macroeconomic

developments and fundamentals for the group. Moreover, we maintain our positive outlook for the

technology sector, bolstered by evidence suggesting past underinvestment in technological

improvements. We don’t think near-term outperformance for materials is likely, but underweight

tactical investors may consider gradually adding to positions. More improvement on the demand and

U.S. oil supply fronts are needed before recommending near-term outperformance for energy stocks,

but longer term, we are positive. We would not advocate chasing biotechs at this point, but rather

accumulating them within the context of an overall diversified health care portfolio.

The Specialty categories were mostly negative for the quarter with Energy MLPs (-25.7%), Equity

Energy (-22%) and Precious Metals (-19.2%) leading the pack, suppressed by continued weakness

in oil prices and the strengthening dollar. Health Care (-13.7%) also took a hit with weakness in Bio

Tech and Pharmaceutical stocks. Real Estate (1.35%), Utilities (-3.6%) and Financials (-7.5%) were

some of the more resilient performers in the Specialty category. All three of these sectors are

impacted by interest rate expectations, and either climbed (Real Estate and Utilities) or leveled-off

(Financials) late in the quarter after the Federal Reserve declined to raise rates.

AVERAGE ANNUALIZED TOTAL RETURN

UPSIDE MARKET CAPTURE DOWNSIDE MARKET CAPTURE GROSS EXPENSE RATIOa NET EXPENSE RATIOa TOTAL ASSETS ($M) 1

FINANCIAL FUNDS (CATEGORY AVERAGE)† _-0.13 _12.38 _9.70 _2.09

Schwab Financial Services Fund (7/3/00) Financial SWFFX 1.19 13.76 10.60 2.22 4.83 109.84 59.83 0.90 0.90 71

HEALTH FUNDS (CATEGORY AVERAGE)† _9.00 _22.65 _20.66 _11.37

Schwab Health Care Fund (7/3/00) Health SWHFX 6.30 19.95 19.67 10.30 9.30 126.82 38.53 0.80 0.80 1,070

EQUITY ENERGY FUNDS (CATEGORY AVERAGE)† _-38.89 _-9.14 _-3.36 _-0.54

Calvert Global Energy Solutions A (5/31/07)e _{Equity Energy} _CGAEX _-22.73 _2.07 _-7.27 _— _-11.08 _96.42 _121.74 _2.13 _1.85 ₉₀ BlackRock Natural Resources Inv A (10/21/94)e _{Equity Energy} _MDGRX _-39.15 _-10.36 _-4.27 _-0.45 _6.37 _43.80 _153.19 _1.06 _1.06 ₃₄₅

ENERGY LIMITED PARTNERSHIP FUNDS (CATEGORY AVERAGE)† _-33.83 _-0.59 _3.75 _—

Oppenheimer SteelPath MLP Select 40 A (3/30/10)e _{Energy Limited Partnership MLPFX} _-30.37 _-0.95 _2.73 _— _3.94 _60.35 _88.54 _6.44 _6.32 _2,766 Center Coast MLP Focus A (12/31/10)e _{Energy Limited Partnership CCCAX} _-29.22 _-2.17 _— _— _1.49 _56.52 _93.61 _7.06 _7.06 _2,658

FINANCIAL FUNDS (CATEGORY AVERAGE)† _-0.13 _12.38 _9.70 _2.09

Burnham Financial Services A (6/7/99)e _Financial _BURKX _13.23 _16.44 _13.39 _6.64 _12.22 _85.40 _-16.27 _1.64 _1.80 ₁₃₉ Davis Financial A (5/1/91)e _Financial _RPFGX _-2.17 _11.93 _9.48 _4.70 _11.29 _117.64 _72.10 _0.86 _0.86 ₈₃₆

HEALTH FUNDS (CATEGORY AVERAGE)† _9.00 _22.65 _20.66 _11.37

Janus Global Life Sciences T (12/31/98) Health JAGLX 14.12 29.36 24.97 13.08 12.12 143.80 -3.62 0.93 0.93 4,618 BlackRock Health Sciences Opps Inv A (12/21/99)e _Health _SHSAX _6.06 _21.79 _18.95 _12.81 _15.32 _129.62 _12.70 _1.19 _1.19 _5,870

NATURAL RESOURCES FUNDS (CATEGORY AVERAGE)† _-31.55 _-8.92 _-3.19 _0.17

ICON Materials S (5/5/97) Natural Resources ICBMX -21.22 2.95 4.14 4.94 3.71 92.56 122.47 1.36 1.36 70

PRECIOUS METALS FUNDS (CATEGORY AVERAGE)† _-32.66 _-32.43 _-22.05 _-3.18

USAA Precious Metals and Minerals (8/15/84)b _{Equity Precious Metals} _USAGX _-34.76 _-34.00 _-23.53 _-1.32 _{2.36 -126.23 166.96} _1.25 _1.25 ₆₅₃

GLOBAL REAL ESTATE FUNDS (CATEGORY AVERAGE)† _1.15 _5.68 _6.75 _3.80

Cohen & Steers International Realty A (3/31/05)e _{Global Real Estate} _IRFAX _-5.62 _3.25 _3.01 _2.60 _3.50 _87.80 _98.60 _1.46 _1.35 ₇₅₆

REAL ESTATE FUNDS (CATEGORY AVERAGE)† _8.58 _8.60 _11.19 _6.18

Cohen & Steers Realty Shares (7/2/91)b _{Real Estate} _CSRSX _11.65 _10.06 _11.69 _7.31 _12.00 _83.33 _47.68 _0.97 _0.97 _5,422 Manning & Napier Real Estate S (11/10/09) Real Estate MNREX 9.21 9.12 11.30 — 13.85 88.63 63.89 1.11 1.11 271

TECHNOLOGY FUNDS (CATEGORY AVERAGE)† _0.41 _12.95 _11.18 _7.85

Red Oak Technology Select (12/31/98) Technology ROGSX -1.04 15.41 14.32 9.14 2.81 126.13 72.44 1.15 1.15 127 Janus Global Technology T (12/31/98) Technology JAGTX 1.87 13.26 12.01 9.18 6.26 114.31 70.83 0.95 0.95 1,025

UTILITY FUNDS (CATEGORY AVERAGE)† _-4.73 _7.35 _8.91 _6.05

American Century Utilities Inv (3/1/93) Utilities BULIX 1.20 7.68 9.95 6.42 7.73 86.08 71.86 0.67 0.67 369 New to the Select List this quarter †_{Reflects load-adjusted returns}

Sector funds concentrate investments in firms that fall into specific industries that produce related products or services. Sector funds, in general, have a low correlation to market indices, such as the S&P 500 Index, so they tend to perform differently than broader market measures. Because of their unique investment objectives, it’s unfair to compare sector funds with broader market indices as they will seldom correlate. When evaluating sector fund performance, it’s more appropriate to compare an individual fund’s returns with the average performance of funds in its category.

Due to the concentrated nature of sector funds, they can be more volatile than broadly diversified equity funds.

MLP funds invest in the equity securities of master limited partnerships (“MLPs”). Investments in securities of MLPs involve risks that differ from investments in common stock, including risks related to cash flow, dilution and voting rights. MLP funds also may carry heightened risks including industry concentration, volatility, limited liquidity, issuer-specific risks, valuation and taxation. Many MLP funds are classified for federal tax purposes as a taxable regular corporation (“C corporation”), and are subject to US federal income tax on taxable income at corporate income tax rates, as well as state and local income taxes. These corporate taxes and accruals for deferred tax liabilities could substantially reduce a fund’s net assets (reflected in the fund’s NAV), the amount of income available for distribution and the amount of a fund’s distributions. If an MLP fund is classified for tax purposes as a C corporation, all distributions from a fund’s current or accumulated earnings and profits will be taxable to shareholders as ordinary income.

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TAXABLE BOND FUNDS

Perspectives and Third Quarter 2015 Summary

The Fed delayed raising the target for the Fed Funds rate during the third quarter. A Fed rate hike

appears less likely this year due to low inflation and weak economic growth. If the Fed does not

raise their target this year, we expect liftoff to be sometime in early 2016. Any Fed rate hike will

likely be slow and gradual, thus allowing fund managers to manage through the hike.

In the third quarter of 2015, the only categories with positive total return were long duration or

government-focused. Global growth concerns, uneasiness around China and the Fed’s decision

to wait on raising rates, brought down treasury yields across the curve, particularly in bonds

longer than 7 years. Bond prices move inversely to yields, so this price appreciation was a

tailwind to many funds; however, the same macroeconomic concerns caused credit spreads to

widen precipitously, which hurt all non-government-focused categories.

Long Government led the way with 4.26% of positive return. The next closest categories were

Long-Term Bond (1.74%) and Intermediate Government (0.93%).

The worst performers were Emerging Markets Bond funds (-6.44%) and High Yield Bond funds

(-4.49%). Several other categories had negative total returns but to a slightly lesser degree:

Multisector Bond (-2.24%), Inflation-Protected Bond (-1.85%) and Bank Loan (-1.62%).

UPSIDE MARKET CAPTURE DOWNSIDE MARKET CAPTURE GROSS EXPENSE RATIOa NET EXPENSE RATIOa AVG. WEIGHTED MATURITY (YRS) TOTAL ASSETS ($M) 1

Schwab GNMA Fund (3/3/03) Intermediate Government SWGSX 2.87 1.22 2.82 4.37 3.98 78.62 82.56 0.66 0.57 5.79 292 Schwab Intermediate-Term Bond Fund (10/31/07) Intermediate-Term Bond SWIIX 2.46 1.32 2.45 — 4.38 72.16 69.56 0.64 0.45 4.77 346

Schwab Total Bond Market Fund (3/5/93) Intermediate-Term Bond SWLBX 2.75 1.43 2.76 3.09 4.86 97.42 104.67 0.55 0.29 7.38 1,290

RidgeWorth Seix Floating Rate Hi Inc I (3/1/06) Bank Loan SAMBX 0.62 3.04 4.32 — 4.12 43.72 -27.12 0.61 0.61 — 5,955 Lord Abbett Floating Rate A (12/31/07)e _{Bank Loan} _LFRAX _-1.29 _2.61 _4.00 _— _3.79 _43.07 _-38.80 _0.80 _0.80 _— _6,382

PIMCO Investment Grade Corp Bd D (7/30/04) Corporate Bond PBDDX 1.60 2.71 5.02 6.77 6.59 148.40 142.75 0.91 0.90 11.45 6,573 Lord Abbett Income A (1/4/82)e _{Corporate Bond} _LAGVX _-4.29 _1.73 _4.21 _5.88 _7.89 _115.62 _99.38 _0.88 _0.78 _— _2,022

DoubleLine Emerging Markets Fixed Inc N (4/6/10) Emerging Markets Bond DLENX -5.17 0.82 3.94 — 4.81 62.74 70.60 1.15 1.15 7.38 929 TCW Emerging Markets Income N (3/1/04) Emerging Markets Bond TGINX -7.23 -0.92 3.22 7.03 7.64 58.81 119.36 1.13 1.13 11.50 3,336 RidgeWorth Seix High Yield I (12/29/00) High Yield Bond SAMHX -3.75 3.28 5.42 5.66 6.73 83.45 26.47 0.58 0.58 6.05 671 TIAA-CREF High-Yield Retail (3/31/06) High Yield Bond TIYRX -2.94 2.97 5.55 — 6.60 91.54 48.40 0.64 0.64 6.86 3,191 American Century Short Dur Inf PrBd Inv (5/31/05) Inflation-Protected Bond APOIX -1.68 -1.16 1.38 3.35 3.19 15.22 60.05 0.57 0.57 3.06 1,278 American Century Infl-Adj Bond Inv (2/10/97) Inflation-Protected Bond ACITX -1.77 -2.58 1.87 3.58 5.02 91.75 221.80 0.47 0.47 9.28 2,902 Columbia US Government Mortgage A (2/14/02)e _{Intermediate Government} _AUGAX _0.40 _0.89 _3.77 _4.66 _4.58 _58.14 _29.65 _0.97 _0.90 _7.26 _1,950

American Century Ginnie Mae Inv (9/23/85) Intermediate Government BGNMX 2.27 1.02 2.63 4.33 6.39 69.42 74.78 0.55 0.55 5.55 1,195 Western Asset Core Bond I (9/4/90) Intermediate-Term Bond WATFX 3.08 2.43 4.17 5.10 7.06 109.11 91.68 0.49 0.45 11.20 4,297 Prudential Total Return Bond Z (9/16/96) Intermediate-Term Bond PDBZX 2.57 2.79 4.72 6.02 6.05 131.52 114.66 0.62 0.58 — 11,497 Baird Core Plus Bond Inv (9/29/00) Intermediate-Term Bond BCOSX 2.22 2.05 3.89 5.50 6.00 106.98 100.04 0.55 0.55 6.96 9,281 Northern Fixed Income (3/31/94) Intermediate-Term Bond NOFIX 1.78 1.89 3.54 4.48 5.32 111.92 112.61 0.49 0.47 8.59 1,701 Metropolitan West Total Return Bond M (3/31/97)b _{Intermediate-Term Bond} _MWTRX _2.02 _2.65 _4.53 _6.23 _6.77 _102.96 _75.76 _0.69 _0.69 _8.11 _68,398

PIMCO Income D (3/30/07) Multisector Bond PONDX 1.67 5.72 8.30 — 8.98 108.53 -8.61 0.79 0.79 4.99 49,553 Western Asset Global Strategic Income I (10/10/95) Multisector Bond SDSYX -1.33 2.37 4.99 5.31 5.69 88.91 62.61 0.90 0.85 8.64 409 Putnam Absolute Return 300 A (12/23/08)e _{Nontraditional Bond} _PTRNX _-3.61 _1.52 _1.22 _— _2.24 _-5.46 _-66.69 _0.81 _0.81 _6.71 ₉₃₅

Western Asset Total Return Uncons I (7/6/06) Nontraditional Bond WAARX -0.91 1.56 2.72 — 4.61 28.68 -4.50 0.91 0.91 6.26 989 Loomis Sayles Ltd Term Govt and Agency A (1/3/89)e _{Short Government} _NEFLX _-1.78 _-0.39 _0.88 _3.11 _4.86 _34.66 _33.73 _0.81 _0.80 _3.21 ₈₂₈

Northern Short-Intermediate US Govt (10/1/99) Short Government NSIUX 1.75 0.16 0.89 2.66 3.30 34.85 48.62 0.48 0.41 2.79 177 Lord Abbett Short Duration Income A (11/4/93)e _{Short-Term Bond} _LALDX _-1.36 _1.11 _2.43 _4.28 _4.27 _41.18 _4.70 _0.59 _0.59 _— _35,346

Metropolitan West Low Duration Bond M (3/31/97)b _{Short-Term Bond} _MWLDX _0.40 _1.56 _2.71 _2.96 _4.04 _30.87 _-1.33 _0.63 _0.63 _3.34 _3,405

Payden Limited Maturity (4/29/94)b _{Ultrashort Bond} _PYLMX _0.32 _0.54 _0.74 _1.47 _3.02 _9.96 _-1.70 _0.57 _0.29 _1.89 ₄₀₅

RidgeWorth Seix US GovSec Ultr-Shrt Bd I (4/11/02) Ultrashort Bond SIGVX 0.29 0.35 0.88 2.57 2.43 6.97 -0.14 0.39 0.39 4.37 1,673 PIMCO Foreign Bond (USD-Hedged) D (4/8/98) World Bond PFODX 2.64 4.04 5.06 5.72 5.82 129.19 73.33 0.92 0.90 9.87 7,992 Dreyfus/Standish Global Fixed Income A (12/2/09)e _{World Bond} _DHGAX _-2.97 _1.40 _2.59 _5.24 _3.47 _107.64 _73.12 _0.89 _0.89 _7.64 _1,645

Barclays U.S. Aggregate Bond Index (Dividends Reinvested) 2.94 1.71 3.10 4.64 —

New to the Select List this quarter

Bond funds invest in corporate, municipal or government debt obligations of different maturities and interest rates. Taxable bond funds generally invest in the debt obligations issued by the U.S. Treasury, other U.S. government agencies and U.S. corporations. They also may invest in high-yield and foreign (non-U.S.) bonds.

The Barclays U.S. Aggregate Bond Index tracks the total U.S. bond market, which includes U.S. Treasury, government agency, investment-grade corporate bond and mortgage-backed securities with maturities of at least one year. The index includes reinvestment of interest.

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NOTES: ALL DATA SHOWN IS AS OF SEPTEMBER 30, 2015

a. Definitions: Gross Expense Ratio—actual expense as stated in the fund’s prospectus. Net Expense Ratio—net amount after any expenses are waived and/or partially

absorbed by fund management.

b. Fund has an initial minimum investment greater than $2,500.

c. Investor Shares

™

_{are available at a lower minimum but with higher operating expenses than Select Shares}

®

_.

d. Schwab Affiliate Funds include Schwab Funds and Laudus Funds. Schwab Funds and Laudus Funds are advised by Charles Schwab Investment Management, Inc. Schwab

Funds and the Laudus MarketMasters Funds are distributed by Charles Schwab & Co., Inc. Laudus Funds, except the Laudus MarketMasters Funds, are distributed by ALPS

Distributors, Inc.

e. This fund is available without a load through Schwab. The performance figures shown reflect the performance with the load. Please see the Fund Summary on schwab.com

for performance without load.

TAX-FREE BOND FUNDS

Perspectives and Third Quarter 2015 Summary

We expect muni yields to follow Treasury yields going forward. We also expect continued headline

stories to come out of troubled credits like Puerto Rico. However, we believe Puerto Rico is an outlier

and have a favorable view of the credit conditions in the muni market. The supply and demand

dynamics also appear favorable to us, which should help to support performance going forward.

Muni yields followed treasury yields lower during the third quarter, resulting in positive price

performance for most muni categories. The vast majority outperformed the Barclays Aggregate

Bond Index; a common proxy for the taxable bond market although the difference in

performance between most categories was very small.

Muni California Long outperformed all other categories with a total return of 1.75%. The runner-up

was Muni Pennsylvania at 1.56% but several categories were close behind with returns above

1.5% — High Yield Muni, Muni New York Long and Muni Massachusetts. Muni National Long and

Muni National Intermediate returned 1.47% and 1.28%, respectively.

While still positive, shorter duration categories returned the least in the third quarter. Muni

National Short only gained 0.38% and Muni Single State Short was slightly better with 0.66%.

UPSIDE MARKET CAPTURE DOWNSIDE MARKET CAPTURE GROSS EXPENSE RATIOa NET EXPENSE RATIOa AVG. WEIGHTED MATURITY (YRS) TOTAL ASSETS ($M) 1

Schwab Tax-Free Bond Fund (9/11/92) Muni National Interm SWNTX 2.55 2.30 3.70 4.30 5.15 78.44 77.19 0.58 0.49 5.23 642

American Century IntermTrm Tx-Fr Bd Inv (3/2/87) Muni National Interm TWTIX 1.88 1.60 3.00 3.93 4.98 73.59 88.09 0.47 0.47 9.09 3,379 USAA Tax Exempt Intermediate-Term (3/19/82)b _{Muni National Interm} _USATX _2.40 _2.82 _4.13 _4.39 _6.78 _85.77 _75.80 _0.55 _0.55 _8.44 _3,993 Northern Intermediate Tax-Exempt (3/31/94) Muni National Interm NOITX 2.38 1.97 3.18 3.84 4.39 88.59 104.64 0.50 0.46 9.32 3,194 BMO Intermediate Tax-Free Y (2/1/94) Muni National Interm MITFX 2.89 2.61 3.87 4.71 4.58 83.20 77.14 0.59 0.56 4.57 1,749 Baird Quality Intermediate Muni Bd Inv (3/30/01) Muni National Interm BMBSX 1.85 1.41 2.47 3.76 4.17 63.12 74.56 0.55 0.55 5.19 1,136 Northern Tax-Exempt (3/31/94) Muni National Long NOTEX 3.13 2.89 4.26 4.54 5.23 115.91 128.20 0.49 0.45 17.27 963 USAA Tax Exempt Long-Term (3/19/82)b _{Muni National Long} _USTEX _3.36 _3.43 _4.92 _4.49 _7.46 _{113.50 108.96} _0.55 _0.55 _16.07 _2,347 Federated Shrt-Interm Dur Muni Instl (9/4/81) Muni National Short FSHIX 0.51 1.02 1.87 2.54 4.27 29.48 24.66 0.79 0.46 3.20 1,162 Wells Fargo Advantage S/T Muni Bd A (7/18/08)e _{Muni National Short} _WSMAX _-1.70 _0.23 _1.17 _— _2.20 _16.77 _4.77 _0.75 _0.60 _2.11 _6,133 American Century High-Yield Muni Inv (3/31/98) High Yield Muni ABHYX 4.56 3.61 5.43 3.81 4.79 126.76 127.70 0.60 0.60 20.59 400 Nuveen High Yield Municipal Bond A (6/7/99)b,e _{High Yield Muni} _NHMAX _1.05 _4.47 _6.74 _3.21 _4.96 _176.39 _152.18 _0.83 _0.78 _22.02 _10,828

Barclays Municipal Bond Index (Dividends Reinvested) 3.16 2.88 4.14 4.64 — New to the Select List this quarter

Tax-exempt bond funds primarily invest in municipal bonds generally issued by state and local governments to fund general expenditures and public projects. Investment income may be subject to certain state and local income taxes and a portion of income may be subject to the alternative minimum tax (AMT). Capital gains are not exempt from federal income tax.

The Barclays Municipal Bond Index is a total-return performance benchmark for the investment-grade tax-exempt bond market. The index includes reinvestment of interest.