Quarterly Video Commentary on SMRT™ & SIRT™

Transcript of the video:

A Volatile Q1: A Peak Behind Market Blinders

Hello and welcome to the first quarter 2026 Schwab Target Date Trusts update. I’m Inga Rachwald, and I am an Investment Portfolio Specialist at Schwab Asset Management and today we’ll recap the market context and performance for our Target Retirement Trusts: Schwab Managed Retirement Trusts and the Schwab Indexed Retirement Trusts or what we refer to as SMRT & SIRT.

The first quarter of 2026 reminded us of the inevitably blinding impact of geopolitical events on the global markets, sparked by the U.S. military involvement in the middle east and subsequent oil price shocks. In contrast to just a few months earlier, Q1 saw an increase in risk premiums, concerns around global growth related to oil supply and AI worries, and fears of rising inflation and interest rates.

Negative returns marked nearly every major asset class during the quarter. Furthermore, markets exhibited notable volatility with U.S. large cap stocks down 9% from January highs and U.S. small cap, down nearly 10% from recent highs, although still outperforming U.S. large caps for the quarter. Developed International equities retracted. Although Emerging Markets was hit hard during the first few weeks of conflict, it was roughly flat to slightly negative in USD terms for the full quarter. This was largely due to the strength of AI-related companies in the larger parts of the Emerging Markets index, areas like South Korea – whose equity market is up over 30% for the quarter and up over 140% over the1 year, as well as Taiwan, whose equities are up ~16% for the quarter. Lastly, within U.S. fixed income, we saw 10-year TSY yields tick up, with previous market expectations of two Federal Reserve rate cuts coming in 2026 shifting to potentially no rate cuts and even talk of a potential rate hike.

As is common with diversified strategies, allocation positioning was also mixed in the Schwab Target Date Trusts. An underweight to international equities, specifically emerging market equities, predominantly impacted the shorter dated funds and detracted from peer-relative performance during the quarter. Although it was additive during the initial sharp market sell off as the middle east conflict got underway – an illustration of our diversification and focus on managing downside protection. A higher weight to Global REITs was additive during the quarter. Passive Index funds ranked slightly below median in the first quarter compared to active managers.

Lastly, in what may seem like a “bleak midwinter” following a volatile Q1, we note the 20^th anniversary of the Pension Protection Act, which paved the way for defined contribution plans to use TDFs as a default investment option for plan participants. In a new paper “Target Date Funds: Wealth Accumulation Made Simple” we discuss how Target Date Funds have altered the face of retirement investing by automatically managing risk and diversification, helping investors stay disciplined and focused on their long-term goals.

Thank you for joining our first quarter update. For questions, please contact your Schwab representative or visit our website at schwabtrustbankcollectives.com for more information about the trusts. We will see you on our next update.

Disclosures

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

The matenal in this presentation is based on information from a vanety 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 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

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™