Quarterly Video Commentary on SMRT™ & SIRT™

Transcript of the video:

Hello, and welcome. I’m Inga Rachwald. I’m an investment portfolio strategist at Schwab Asset Management. And today, in our World Cup edition, we’ll recap the market backdrop and performance for our target retirement trusts, including Schwab Managed Retirement Trusts and Schwab Index Retirement Trusts, or SMRT insert.

So just like those nail-biters in this year’s World Cup matches, the broad equity and fixed income markets showed us several unexpected twists during the second quarter and first half of 2026. So breaking down some of the areas in which the Schwab target date trusts are invested, the broad US equity market generally experienced strong performance, with the Russell 1000 up 15% in Q2 and up 10% year-to-date, primarily on the heels of strong earnings, particularly within AI infrastructure companies. While US small-caps experienced a sharp decline in performance following the start of the Middle East conflict, they saw a resurgence, and posted a 22% return for the first half of 2026. That is the best first half performance for this asset class since 1991. Like many parts of the US equity markets, the moves were largely on the heels of AI infrastructure stocks, which contributed about 40% of the year-to-date returns for the Russell 2000 Index.

Emerging markets equities, which are included in our glide path allocation, experienced strong performance for the first half of the year. The MSCI Emerging Markets Index returned almost 24% year-to-date. Performance here was also heavily concentrated in technology and AI companies, specifically in Korea and Taiwan. As an illustration of this concentration, the equal-weighted MSCI Emerging Markets Index rose just about 4% for the year.

REITs, like many of the World Cup teams, had their share of fits and starts during the first half of 2026, but like a good defense, served a key diversification role, generally performing well during broader equity market declines, particularly during periods of semiconductor and technology selloffs.

Lastly, in domestic fixed income, uncertainty around the path of Federal Reserve policy continued during the second quarter. The 10-year treasury yield, which briefly moved below 4%, then climbed to over 4.6%, while stock and bond correlations rose.

Within the Schwab target date trusts, asset allocation impacts across glide path were mixed, as we saw longer-dated trusts benefit from higher equity exposure, while lower equity exposure designed to protect assets in or near retirement, detracted from peer relative returns in the shorter-dated trusts.

On the sub-asset class front, an underweight to international equities, emerging markets in particular, detracted from peer relative performance in the shorter-dated trusts. However, in a nod to the benefit of diversification, a higher weight to US small-caps relative to peers helped offset the impact of that underweight to emerging markets equities.

Lastly, passive index strategies ranked above the peer medium compared to active managers. This benefited the SIRT passive target date trust peer ranks relative to our smart active-passive blend target date trusts.

As target date managers, we focus on long-term outcomes for retirees. Our goal is to build wealth for our clients, and ensure sustainable levels of withdrawals during their retirement, accounting for multiple market environments and those unexpected twists.

Thank you for joining our second quarter update. I hope you enjoyed this year’s World Cup. And if you have any questions, please contact your Schwab representative, or visit our website at schwabtrustbankcollectives.com for more information about the trusts. We look forward to seeing you on our next update.

Diversification, asset allocation, and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.

The material in this presentation is based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. Errors and omissions can occur. None of the information constitutes a recommendation or a solicitation of an offer to buy or sell any product or service from Schwab Trust Bank or any of its affiliates. Please review the trust and participation agreement, Schwab Trust Bank CIT Fact Sheets and other disclosure materials before making any decision to invest in the Trusts.

The Schwab Managed Retirement™ Trust Funds, Schwab Indexed Retirement™ Trust Funds, and Schwab Institutional Trust™ Funds (each a “Trust”, collectively the “Trusts” or “Collective Investment Trusts (CITs)”) are collective investment trusts maintained by Charles Schwab Trust Bank (CSTB), as trustee. They are available for investment only by eligible retirement plans and entities. Charles Schwab Trust Bank’s Collective Investment Trusts are not insured by FDIC or any other type of deposit insurance; are not deposits or other obligations of and are not guaranteed by CSTB or any of its affiliates; and involve investment risks, including possible loss of principal invested. The Trusts are not mutual funds and are exempt from registration and regulation under the Investment Company Act of 1940 (the “1940 Act”), and their units are not registered under the Securities Act of 1933, or applicable securities laws of any state or other jurisdiction. Unit holders of the Trusts are not entitled to the protections of the 1940 Act. The Declaration of Trust and Participation Agreement contain important information about Trust fees and investment objectives, risks, and expenses of the underlying investments in the Collective Investment Trusts maintained by CSTB and should be read carefully before investing. The decision to invest in the Trusts should be carefully considered. The Trusts’ unit values will fluctuate and may be worth more or less when redeemed, so unit holders may lose money. The Trusts are not sold by prospectus and are not available for investment by the public. The Trusts’ prices are not quoted in newspapers.

Trust Affiliations

The Charles Schwab Corporation provides services to retirement and other employee benefit plans and participants through its separate but affiliated companies and subsidiaries: Charles Schwab Trust Bank (CSTB); Charles Schwab & Co., Inc.; Schwab Asset Management®, the dba name for Charles Schwab Investment Management, Inc.; and Schwab Retirement Plan Services, Inc. Trust, custody, and deposit products and services are available through CSTB, Member FDIC. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). Schwab Retirement Plan Services, Inc. is not a fiduciary to retirement plans or participants and only provides recordkeeping and related services to retirement plans. Schwab Asset Management is an investment adviser registered with the Securities and Exchange Commission and provides investment research, advice, and fund administration services to CSTB and the Funds.

Schwab Asset Management®, the dba name for Charles Schwab Investment Management, Inc., is the investment advisor for Schwab Funds. Schwab Asset Management also provides non-discretionary advisory services to the Charles Schwab Trust Bank (CSTB) Collective Investment Trusts (CITs). Schwab Funds are distributed by Charles Schwab & Co., Inc., Member SIPC. Schwab Asset Management, Charles Schwab & Co., Inc., and CSTB are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

The Charles Schwab Trust Bank CITs™ select investments based on advice received from, or products offered by industry-recognized investment management firms (“sub- advisors”). The Trusts access investment strategies through various investment vehicles including, but not limited to, collective investment trusts, mutual funds, and/or exchange- traded funds and may also access strategies through sub-advisors engaged by Charles Schwab Trust Bank to advise one or more separate accounts of a Trust. The Trusts may invest in securities directly managed by Schwab Asset Management, including Schwab ETFs, and from which Schwab Asset Management earns advisory fees. Exposure to some strategies may be indirect through investment in other Charles Schwab Trust Bank CITs. The Schwab Managed Retirement Trust™ invests in the Schwab Institutional Large Cap Value Trust™, Schwab Institutional Large Cap Growth Trust™, Schwab Institutional Small Cap Trust™, Schwab Institutional Diversified International Trust™, and Schwab Institutional Core Plus Fixed Income Trust™.