UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06200
Schwab Investments – Schwab Global Real Estate Fund
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
(Address of principal executive offices) (Zip code)
Jonathan de St. Paer
Schwab Investments – Schwab Global Real Estate Fund
211 Main Street, San Francisco, California 94105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 636-7000
Date of fiscal year end: February 28
Date of reporting period: August 31, 2022
Item 1: Report(s) to Shareholders.
Semiannual Report | August 31, 2022
Schwab Global Real Estate Fund
This page is intentionally left blank.
Fund investment adviser: Charles Schwab Investment Management, Inc., dba Schwab Asset ManagementTM
Distributor: Charles Schwab & Co., Inc. (Schwab)
The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS) which was developed by and is the exclusive property of MSCI Inc. (MSCI) and Standard & Poor’s (S&P). GICS is a service mark of MSCI and S&P and has been licensed for use by Schwab.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. To obtain performance information current to the most recent month end, please visit www.schwabassetmanagement.com/schwabfunds_prospectus.
| Total Returns for the 6 Months Ended August 31, 2022 |
| Schwab Global Real Estate Fund (Ticker Symbol: SWASX) | -12.59% 1 |
| FTSE EPRA Nareit Global Index (Net)* | -13.17% |
| Fund Category: Morningstar Global Real Estate2 | -13.59% |
| Performance Details | pages 6-7 |
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Fund expenses may have been partially absorbed by the investment adviser and its affiliates. Without these reductions, the fund’s total return would have been lower. Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
| * | The net version of the index reflects reinvested dividends net of withholding taxes but reflects no deductions for expenses or other taxes. |
| 1 | Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the net asset value (NAV) at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports. |
| 2 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds and ETFs within the category as of the report date. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
The Investment Environment
For the six-month reporting period ended August 31, 2022, U.S. and international equity markets lost ground as a result of accelerating inflation, rising interest rates, and geopolitical tensions, including the war in Ukraine. Albeit decelerating, COVID-19 continued to weigh on economies worldwide, with highly transmissible variants and subvariants keeping infection rates high in many areas. Economic growth around the world slowed and recession fears rose. Over the reporting period, the U.S. dollar continued to strengthen against a basket of international currencies, generally decreasing the returns on overseas investments in U.S. dollar terms. For the reporting period, the FTSE EPRA Nareit Global Index (Net)*, which represents general trends in eligible real estate securities worldwide, returned -13.17%, while the Dow Jones Equity All REIT Capped Index, which represents U.S. real estate investment trusts (REITs), returned -6.78%. During the same period, the S&P 500® Index, a bellwether for the overall U.S. stock market, returned -8.84%. Outside the United States, the MSCI EAFE® Index (Net)*, a broad measure of developed international equity performance, and the MSCI Emerging Markets Index (Net)*, returned -13.97% and -13.30%, respectively.
After recovering strongly from severe pressure early in the COVID-19 pandemic, U.S. REITs began to weaken early in the reporting period as inflation continued to rise and the U.S. Federal Reserve (Fed) began raising interest rates, dampening demand. REITs hit their reporting-period low in mid-June 2022, when they began to rebound, but in the final days of the reporting period slumped again as the Fed reiterated its intentions to further raise interest rates. Among REIT sub-industries in the Dow Jones Equity All REIT Capped Index, all but one—specialized REITs—lost ground for the reporting period. The weakest sub-industry was office REITs, which continued to suffer as remote work environments continued to gain momentum. Residential REITs were also comparatively weak, as high valuation and higher funding costs as a result of rising mortgage rates drove homebuyers to the sidelines and made investors steer clear.
Real estate markets outside the United States exhibited varied performance. Among real estate securities in countries included in the FTSE EPRA Nareit Global Index, the strongest performers for the reporting period were real estate securities in Turkey and Chile. Returns on real estate securities in Russia, Germany, and Norway were negative for the reporting period.
Asset Class Performance Comparison % returns during the 6 months ended August 31, 2022
Index figures assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized. Past performance is not a guarantee of future results.
For index definitions, please see the Glossary.
Data source: Index provider websites and Schwab Asset Management.
Nothing in this report represents a recommendation of a security by the investment adviser.
Management views may have changed since the report date.
| * | The net version of the index reflects reinvested dividends net of withholding taxes but reflects no deductions for expenses or other taxes. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
The Investment Environment (continued)
In the United States, amid fading government stimuli, ongoing supply chain disruptions, persisting inflation, a tight labor market, and a widening U.S. trade deficit, gross domestic product (GDP) decreased at an annualized rate of -0.6% for the second quarter of 2022, following a decrease at an annualized rate of -1.6% for the first quarter of 2022. The unemployment rate remained near pre-pandemic lows over the reporting period. Inflation remained stubbornly high due to imbalances in the labor market, supply chain bottlenecks, and soaring energy costs.
Outside the United States, global economies also wrestled with the fallout of the COVID-19 pandemic, as well as steepening energy costs, rising inflation, and the war in Ukraine. After spiking to over $120 per barrel in early March 2022 as sanctions were imposed on Russian imports, oil prices ended the reporting period at just under $90 per barrel. The eurozone, heavily impacted by the war in Ukraine and associated commodity price spikes, managed to eke out small gains in GDP for both the first and second quarters of 2022 as COVID-19 restrictions eased and tourism increased in response to pent-up demand. The United Kingdom also posted small increases in GDP growth in the first and second quarters of 2022, in part driven by increases in COVID-19 testing and tracing and an expansion of its vaccination program. In Japan, following a slight contraction for the first quarter of 2022, GDP growth was positive for the second quarter of 2022 as COVID-19 restrictions were lifted and government spending rose. Among emerging markets, China’s GDP growth remained positive but slowed notably as it dealt with numerous headwinds including the political landscape, an emphasis on domestic consumption over globalization, lockdowns and quarantines, and a severe property downturn as a result of stalled demand, a decline in financing for property development, halted construction on in progress projects, and homeowners pausing payment of their mortgages on incomplete builds. India’s GDP growth jumped for the second quarter on rising consumer demand and a rapid decline in COVID-19 cases.
Monetary policy around the world varied. In the United States, after maintaining the federal funds rate in a range of 0.00% to 0.25% through mid-March 2022, the Fed shifted its stance as inflation continued to rise and indicators of economic activity and employment continued to strengthen. After issuing successively stronger signals that interest rates could begin to rise sooner in 2022 than previously anticipated, the Fed increased the federal funds rate by 0.25% in mid-March, 0.50% in early May, 0.75% in mid-June, and 0.75% in late July in an effort to achieve a return to price stability. The federal funds rate ended the reporting period in a range of 2.25% to 2.50%. The Fed also set expectations for further rate hikes by the end of 2022. In addition, the Fed ended its bond-buying program in early March 2022. In June, the Fed began to reduce the $9 trillion in assets it holds on its balance sheet, vowing to be even more aggressive than during its last round of quantitative tightening in 2017 through 2019. Outside the United States, central banks were generally similarly responsive. After holding its policy rate unchanged since March 2016, at 0.00%, the European Central Bank raised its interest rate by 0.50% in July 2022 and ended its long-running asset purchase program amid downgraded growth forecasts. The Bank of England raised its key official bank rate four times during the reporting period, to 1.75%, bringing borrowing costs to a 13-year high as the Bank of England wrestles with soaring inflation. In contrast, the Bank of Japan upheld its short-term interest rate target of -0.1%, unchanged since 2016, but reiterated that it would not hesitate to take extra easing measures if needed. Central banks in India, Indonesia, Brazil, Mexico, and Pakistan all raised rates multiple times over the reporting period to counteract the impacts of inflation. In contrast, China cut its rate in August 2022, its second rate reduction in 2022. Russia, which raised its benchmark policy rate to 20% in late February 2022 amid the broadening fallout of Western sanctions in retaliation against Russia’s invasion of Ukraine, subsequently reduced it several times during the reporting period.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
 | Iain Clayton, CFA, Senior Portfolio Manager and Head of Quantitative Portfolio Management for Schwab Asset Management, is responsible for the day-to-day co-management of the fund. Mr. Clayton also leads Schwab Asset Management’s quantitative investment management team. Prior to joining Schwab in 2013, Mr. Clayton spent more than five years at SSI Investment Management where he was a portfolio manager and the director of quantitative research. In these roles, Mr. Clayton co-managed multiple investment strategies and developed quantitative models and valuation approaches. From 2004 to 2008, he worked as a portfolio manager and director at RCM Capital Management (now known as Allianz Global Investors) and helped manage various equity portfolios and developed fundamental-based stock selection models. Prior to that, he was a vice president at Eureka Investment Advisors for almost three years and also served as a senior quantitative analyst and assistant portfolio manager. He has also worked as a quantitative research analyst at RCM Capital Management. |
 | Wei Li, Ph.D., CFA, Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining Schwab in 2012, Ms. Li spent more than 10 years at Barclays Global Investors (now known as BlackRock), where she held a number of positions. From 2001 to 2009, she worked in various roles in the global advanced active group, including portfolio management and quantitative research for both U.S. and international equity markets. After 2009, she worked in the defined contribution research and product development area for almost two years. |
 | Holly Emerson, CFA, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining Schwab in 2014, Ms. Emerson spent nearly 10 years at Algert Coldiron Investors LLC (now known as Algert Global), a quantitative market-neutral hedge fund manager. She held a number of positions at Algert, including assistant portfolio manager and director of operations. In her various roles, she acted as the lead portfolio manager for the Canadian fund, conducted macroeconomic research, and managed relationships with prime brokerage investment banks. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. To obtain performance information current to the most recent month end, please visit www.schwabassetmanagement.com/schwabfunds_prospectus.
Average Annual Total Returns1
| Fund and Inception Date | 6 Months | 1 Year | 5 Years | 10 Years |
| Fund: Schwab Global Real Estate Fund (5/31/07) | -12.59% 2 | -16.51% | 1.13% | 4.57% |
| FTSE EPRA Nareit Global Index (Net)3 | -13.17% | -17.25% | 1.02% | 4.04% |
| Fund Category: Morningstar Global Real Estate4 | -13.59% | -18.20% | 2.16% | 4.54% |
| Fund Expense Ratio5: 0.73% |
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Small-company stocks may be subject to greater volatility than many other asset classes.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.
The fund is subject to risks associated with the direct ownership of real estate securities, and an investment in the fund will be closely linked to the performance of the real estate markets.
| 1 | Fund expenses may have been partially absorbed by the investment adviser and its affiliates. Without these reductions, the fund’s returns may have been lower. Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the net asset value (NAV) at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports. |
| 3 | The net version of the index reflects reinvested dividends net of withholding taxes but reflects no deductions for expenses or other taxes. |
| 4 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds and ETFs within the category as of the report date. |
| 5 | As stated in the prospectus. Reflects the total annual fund operating expenses without contractual fee waivers. For actual expense ratios during the period, refer to the Financial Highlights section of the financial statements. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Performance and Fund Facts as of August 31, 2022
| Number of Holdings | 122 |
| Weighted Average Market Cap (millions) | $20,135 |
| Price/Earnings Ratio (P/E) | 11.6 |
| Price/Book Ratio (P/B) | 1.1 |
| Portfolio Turnover Rate | 46% 2 |
Industry Weightings % of Investments1
Top Holdings % of Net Assets3
Country Weightings % of Investments4
Portfolio holdings may have changed since the report date.
Source of Industry Classification: S&P and MSCI.
| 1 | Excludes derivatives. |
| 2 | Not annualized. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, excluding derivatives, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Fund Expenses (Unaudited)
Examples for a $1,000 Investment
As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent and shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning March 1, 2022 and held through August 31, 2022.
Actual Return line in the table below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for your fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Return line in the table below provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | EXPENSE RATIO
(ANNUALIZED) 1 | BEGINNING
ACCOUNT VALUE
AT 3/1/22 | ENDING
ACCOUNT VALUE
(NET OF EXPENSES)
AT 8/31/22 | EXPENSES PAID
DURING PERIOD
3/1/22-8/31/22 2 |
| Schwab Global Real Estate Fund | | | | |
| Actual Return | 0.95% | $1,000.00 | $ 873.00 | $4.48 |
| Hypothetical 5% Return | 0.95% | $1,000.00 | $1,020.42 | $4.84 |
| 1 | Based on the most recent six-month expense ratio. Effective June 27, 2022, the annual operating expense ratio of Schwab Global Real Estate Fund was reduced to 0.75%. If the fund expense change had been in place throughout the most recent fiscal half-year the expenses paid during the period under the actual return and hypothetical 5% return example would have been $3.54 and $3.82 (see financial note 4 for additional information). |
| 2 | Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 365 days of the fiscal year. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Statements
FINANCIAL HIGHLIGHTS
| | 3/1/22–
8/31/22* | 3/1/21–
2/28/22 | 3/1/20–
2/28/21 | 3/1/19–
2/29/20 | 3/1/18–
2/28/19 | 3/1/17–
2/28/18 |
| Per-Share Data |
| Net asset value at beginning of period | $7.66 | $7.13 | $7.53 | $7.70 | $7.28 | $7.37 |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)1 | 0.16 | 0.16 | 0.15 | 0.19 | 0.20 | 0.19 |
| Net realized and unrealized gains (losses) | (1.12) | 0.68 | (0.34) | 0.24 | 0.51 | 0.04 |
| Total from investment operations | (0.96) | 0.84 | (0.19) | 0.43 | 0.71 | 0.23 |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.11) | (0.31) | (0.08) | (0.55) | (0.29) | (0.32) |
| Distributions from net realized gains | — | — | (0.13) | (0.05) | — | — |
| Total distributions | (0.11) | (0.31) | (0.21) | (0.60) | (0.29) | (0.32) |
| Net asset value at end of period | $6.59 | $7.66 | $7.13 | $7.53 | $7.70 | $7.28 |
| Total return | (12.70%) 2 | 11.82% | (2.41%) | 5.34% | 10.01% | 3.04% |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses | 0.95% 3,4,5 | 1.05% | 1.05% | 1.05% | 1.05% | 1.05% |
| Gross operating expenses | 0.99% 4,5 | 1.10% | 1.11% | 1.12% | 1.12% | 1.12% |
| Net investment income (loss) | 4.36% 4 | 2.01% | 2.24% | 2.36% | 2.68% | 2.53% |
| Portfolio turnover rate | 46% 2 | 75% | 72% | 96% | 90% | 96% |
| Net assets, end of period (x 1,000,000) | $300 | $363 | $281 | $304 | $296 | $277 |
| * | Unaudited. |
| 1 | Calculated based on the average shares outstanding during the period. |
| 2 | Not annualized. |
| 3 | Effective June 27, 2022, the net operating expense limitation was lowered from 1.05% to 0.75%. The ratio presented for the period ended August 31, 2022 is a blended ratio. |
| 4 | Annualized (except for proxy expenses). |
| 5 | Ratio includes less than 0.005% of non-routine proxy expenses. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Portfolio Holdings as of August 31, 2022 (Unaudited)
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com.The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| SECURITY | NUMBER
OF SHARES | VALUE ($) |
| COMMON STOCKS 97.9% OF NET ASSETS |
| |
| Australia 4.0% |
| Abacus Property Group | 1,102,900 | 2,032,918 |
| Dexus | 814,839 | 4,819,752 |
| Growthpoint Properties Australia Ltd. | 113,059 | 270,440 |
| Mirvac Group | 608,888 | 867,137 |
| Vicinity Centres | 3,032,873 | 3,970,665 |
| | | 11,960,912 |
| |
| Brazil 0.5% |
| Direcional Engenharia S.A. | 526,956 | 1,311,718 |
| Multiplan Empreendimentos Imobiliarios S.A. | 61,231 | 283,651 |
| | | 1,595,369 |
| |
| Canada 2.9% |
| Artis Real Estate Investment Trust | 327,001 | 2,748,766 |
| Boardwalk Real Estate Investment Trust | 28,713 | 1,055,955 |
| H&R Real Estate Investment Trust | 499,964 | 4,827,002 |
| RioCan Real Estate Investment Trust | 7,400 | 113,421 |
| | | 8,745,144 |
| |
| China 3.2% |
| China Overseas Property Holdings Ltd. | 1,055,000 | 1,119,601 |
| China Resources Land Ltd. | 356,000 | 1,457,552 |
| Gemdale Properties & Investment Corp., Ltd. | 2,031,226 | 173,079 |
| Kerry Properties Ltd. | 1,726,831 | 3,981,280 |
| Longfor Group Holdings Ltd. | 246,583 | 800,350 |
| Sunac China Holdings Ltd. *(a) | 408,000 | 178,562 |
| Yuexiu Property Co., Ltd. | 1,390,599 | 1,739,322 |
| | | 9,449,746 |
| |
| France 1.1% |
| ICADE | 66,304 | 2,920,415 |
| Klepierre S.A. * | 13,245 | 271,685 |
| Mercialys S.A. | 18,677 | 147,087 |
| | | 3,339,187 |
| |
| Germany 1.9% |
| Deutsche Wohnen SE | 20,376 | 462,837 |
| Grand City Properties S.A. | 102,077 | 1,211,090 |
| LEG Immobilien SE | 20,928 | 1,581,607 |
| TAG Immobilien AG | 196,182 | 1,809,874 |
| Vonovia SE | 24,803 | 671,455 |
| | | 5,736,863 |
| |
| SECURITY | NUMBER
OF SHARES | VALUE ($) |
| Hong Kong 4.5% |
| China Overseas Land & Investment Ltd. | 100,000 | 268,747 |
| CK Asset Holdings Ltd. | 1,136,994 | 7,674,439 |
| K Wah International Holdings Ltd. | 909,000 | 342,808 |
| Link REIT | 169,324 | 1,310,402 |
| Sino Land Co., Ltd. | 2,690,135 | 3,933,850 |
| | | 13,530,246 |
| |
| Indonesia 0.4% |
| Ciputra Development Tbk PT | 4,923,560 | 315,134 |
| PT Bumi Serpong Damai Tbk * | 14,505,000 | 897,873 |
| | | 1,213,007 |
| |
| Japan 9.3% |
| Daiwa House Industry Co., Ltd. | 78,100 | 1,746,099 |
| Goldcrest Co., Ltd. | 41,595 | 518,273 |
| Heiwa Real Estate Co., Ltd. | 34,300 | 967,210 |
| Hulic REIT, Inc. | 1,887 | 2,250,269 |
| Japan Hotel REIT Investment Corp. | 2,091 | 1,030,859 |
| Kenedix Retail REIT Corp. | 1,106 | 2,264,375 |
| Mitsubishi Estate Co., Ltd. | 220,948 | 2,975,476 |
| Mitsui Fudosan Co., Ltd. | 36,400 | 736,758 |
| Mori Trust Sogo REIT, Inc. | 1,757 | 1,832,556 |
| Nippon Building Fund, Inc. | 795 | 3,959,863 |
| NIPPON REIT Investment Corp. | 854 | 2,341,703 |
| NTT UD REIT Investment Corp. | 2,008 | 2,170,513 |
| One REIT, Inc. | 817 | 1,596,053 |
| Takara Leben Real Estate Investment Corp. | 822 | 632,733 |
| Tokyu REIT, Inc. | 1,932 | 2,754,435 |
| | | 27,777,175 |
| |
| Mexico 1.2% |
| Fibra Uno Administracion S.A. de C.V. | 3,355,305 | 3,512,440 |
| |
| New Zealand 0.0% |
| Kiwi Property Group Ltd. | 54,355 | 33,848 |
| |
| Norway 0.3% |
| Entra A.S.A. | 58,328 | 758,452 |
| |
| Singapore 3.3% |
| AIMS APAC REIT | 672,700 | 658,624 |
| CapitaLand China Trust | 41,800 | 32,853 |
| Capitaland Investment Ltd. | 265,400 | 698,739 |
| City Developments Ltd. | 578,500 | 3,358,888 |
| Cromwell European Real Estate Investment Trust | 34,700 | 71,836 |
| Frasers Centrepoint Trust | 453,900 | 732,661 |
| Lendlease Global Commercial REIT | 7,176,513 | 4,228,768 |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Portfolio Holdings as of August 31, 2022 (Unaudited) (continued)
| SECURITY | NUMBER
OF SHARES | VALUE ($) |
| UOL Group Ltd. | 13,100 | 64,816 |
| | | 9,847,185 |
| |
| Spain 1.1% |
| Merlin Properties Socimi S.A. | 347,751 | 3,182,313 |
| |
| Sweden 1.5% |
| Atrium Ljungberg AB, B Shares | 68,736 | 996,865 |
| Dios Fastigheter AB | 272,319 | 2,015,678 |
| Nyfosa AB | 29,830 | 250,591 |
| Wihlborgs Fastigheter AB | 170,250 | 1,219,626 |
| | | 4,482,760 |
| |
| United Arab Emirates 2.3% |
| Emaar Development PJSC * | 1,357,089 | 1,771,223 |
| Emaar Properties PJSC | 3,037,537 | 5,162,181 |
| | | 6,933,404 |
| |
| United Kingdom 4.2% |
| Land Securities Group plc | 533,897 | 4,026,869 |
| LondonMetric Property plc | 99,092 | 250,030 |
| Safestore Holdings plc | 218,520 | 2,797,426 |
| Segro plc | 128,599 | 1,403,398 |
| The British Land Co., plc | 631,450 | 3,149,805 |
| Tritax Big Box REIT plc | 481,343 | 928,629 |
| | | 12,556,157 |
| |
| United States 56.2% |
| Alexandria Real Estate Equities, Inc. | 9,440 | 1,448,096 |
| Apple Hospitality REIT, Inc. | 240,531 | 3,826,848 |
| Armada Hoffler Properties, Inc. | 229,657 | 3,015,396 |
| AvalonBay Communities, Inc. | 1,500 | 301,365 |
| Brixmor Property Group, Inc. | 94,196 | 2,023,330 |
| BRT Apartments Corp. | 29,600 | 706,552 |
| Camden Property Trust | 23,193 | 2,980,532 |
| CareTrust REIT, Inc. | 91,735 | 1,975,972 |
| Crown Castle, Inc. | 19,173 | 3,275,324 |
| CubeSmart | 14,980 | 689,829 |
| Digital Realty Trust, Inc. | 5,398 | 667,355 |
| Duke Realty Corp. | 39,146 | 2,303,742 |
| EastGroup Properties, Inc. | 30,981 | 5,112,794 |
| EPR Properties | 86,248 | 3,750,926 |
| Equinix, Inc. | 17,556 | 11,540,788 |
| Equity Residential | 21,028 | 1,538,829 |
| Essential Properties Realty Trust, Inc. | 28,191 | 638,244 |
| Essex Property Trust, Inc. | 29,325 | 7,772,885 |
| Extra Space Storage, Inc. | 21,670 | 4,306,479 |
| Gaming & Leisure Properties, Inc. | 114,998 | 5,550,954 |
| Global Medical REIT, Inc. | 163,334 | 1,770,541 |
| SECURITY | NUMBER
OF SHARES | VALUE ($) |
| Healthcare Realty Trust, Inc., Class A | 195,192 | 4,747,069 |
| Healthpeak Properties, Inc. | 80,575 | 2,115,094 |
| Host Hotels & Resorts, Inc. | 225,855 | 4,013,443 |
| Invitation Homes, Inc. | 197,420 | 7,162,398 |
| Kilroy Realty Corp. | 2,300 | 112,171 |
| Life Storage, Inc. | 28,141 | 3,580,942 |
| Mid-America Apartment Communities, Inc. | 49,320 | 8,170,844 |
| National Retail Properties, Inc. | 44,455 | 1,996,030 |
| National Storage Affiliates Trust | 48,564 | 2,453,453 |
| Paramount Group, Inc. | 272,771 | 1,890,303 |
| Piedmont Office Realty Trust, Inc., Class A | 349,076 | 4,112,115 |
| Prologis, Inc. | 166,650 | 20,749,592 |
| Public Storage | 13,524 | 4,474,145 |
| Realty Income Corp. | 71,375 | 4,873,485 |
| Regency Centers Corp. | 4,955 | 301,462 |
| RPT Realty | 63,629 | 612,747 |
| Sabra Health Care REIT, Inc. | 157,302 | 2,354,811 |
| SBA Communications Corp. | 13,415 | 4,363,229 |
| Simon Property Group, Inc. | 33,808 | 3,447,740 |
| SITE Centers Corp. | 330,525 | 4,283,604 |
| SL Green Realty Corp. | 66,406 | 2,933,153 |
| Spirit Realty Capital, Inc. | 33,400 | 1,364,390 |
| Sun Communities, Inc. | 9,925 | 1,525,572 |
| Tanger Factory Outlet Centers, Inc. | 42,700 | 658,434 |
| The Necessity Retail REIT, Inc. | 322,458 | 2,405,537 |
| Ventas, Inc. | 12,269 | 587,194 |
| VICI Properties, Inc. | 19,373 | 639,115 |
| Welltower, Inc. | 67,082 | 5,141,835 |
| WP Carey, Inc. | 26,300 | 2,209,989 |
| | | 168,476,677 |
Total Common Stocks
(Cost $306,511,589) | 293,130,885 |
Total Investments in Securities
(Cost $306,511,589) | 293,130,885 |
| | NUMBER OF
CONTRACTS | NOTIONAL
AMOUNT
($) | CURRENT VALUE/
UNREALIZED
APPRECIATION
($) |
| FUTURES CONTRACTS |
| Long | | | |
| S&P 500 Index, e-mini, expires 09/16/22 | 4 | 791,300 | 11,193 |
| * | Non-income producing security. |
| (a) | Fair-valued by management using significant unobservable inputs in accordance with procedures approved by the fund’s Board of Trustees. |
| REIT — | Real Estate Investment Trust |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Portfolio Holdings as of August 31, 2022 (Unaudited) (continued)
The following is a summary of the inputs used to value the fund’s investments as of August 31, 2022 (see financial note 2(a) for additional information):
| DESCRIPTION | QUOTED PRICES IN
ACTIVE MARKETS FOR
IDENTICAL ASSETS
(LEVEL 1) | OTHER SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2) | SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3) | TOTAL |
| Assets | | | | |
| Common Stocks1 | $182,329,630 | $— | $— | $182,329,630 |
| Australia | — | 11,960,912 | — | 11,960,912 |
| China | — | 9,271,184 | 178,562 | 9,449,746 |
| France | — | 3,339,187 | — | 3,339,187 |
| Germany | — | 5,736,863 | — | 5,736,863 |
| Hong Kong | — | 13,530,246 | — | 13,530,246 |
| Indonesia | 315,134 | 897,873 | — | 1,213,007 |
| Japan | — | 27,777,175 | — | 27,777,175 |
| New Zealand | — | 33,848 | — | 33,848 |
| Norway | — | 758,452 | — | 758,452 |
| Singapore | 71,836 | 9,775,349 | — | 9,847,185 |
| Spain | — | 3,182,313 | — | 3,182,313 |
| Sweden | 996,865 | 3,485,895 | — | 4,482,760 |
| United Arab Emirates | — | 6,933,404 | — | 6,933,404 |
| United Kingdom | 250,030 | 12,306,127 | — | 12,556,157 |
| Futures Contracts2 | 11,193 | — | — | 11,193 |
| Total | $183,974,688 | $108,988,828 | $178,562 | $293,142,078 |
| 1 | As categorized in the Portfolio Holdings. |
| 2 | Futures contracts are reported at cumulative unrealized appreciation or depreciation. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Statement of Assets and Liabilities
As of August 31, 2022; unaudited
| Assets |
| Investments in securities, at value - unaffiliated (cost $306,511,589) | | $293,130,885 |
| Cash | | 4,517,540 |
| Foreign currency, at value (cost $719,420) | | 722,753 |
| Deposit with broker for futures contracts | | 768,000 |
| Receivables: | | |
| Investments sold | | 2,233,452 |
| Dividends | | 787,610 |
| Fund shares sold | | 245,156 |
| Foreign tax reclaims | | 136,308 |
| Income from securities on loan | | 407 |
| Prepaid expenses | + | 15,825 |
| Total assets | | 302,557,936 |
| Liabilities |
| Payables: | | |
| Investments bought | | 2,646,336 |
| Investment adviser and administrator fees | | 134,142 |
| Fund shares redeemed | | 68,893 |
| Shareholder service fees | | 41,290 |
| Variation margin on futures contracts | | 6,207 |
| Independent trustees’ fees | | 277 |
| Accrued expenses | + | 104,120 |
| Total liabilities | | 3,001,265 |
| Net assets | | $299,556,671 |
| Net Assets by Source |
| Capital received from investors | | $336,815,914 |
| Total distributable loss | + | (37,259,243) |
| Net assets | | $299,556,671 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $299,556,671 | | 45,455,366 | | $6.59 |
| | | | | |
| | | | | |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Statement of Operations
| For the period March 1, 2022 through August 31, 2022; unaudited |
| Investment Income |
| Dividends received from securities - unaffiliated (net of foreign withholding tax of $446,343) | | $8,815,074 |
| Interest received from securities - unaffiliated | | 6,103 |
| Securities on loan, net | + | 407 |
| Total investment income | | 8,821,584 |
| Expenses |
| Investment adviser and administrator fees | | 1,127,910 |
| Shareholder service fees | | 356,289 |
| Portfolio accounting fees | | 48,154 |
| Custodian fees | | 29,941 |
| Professional fees | | 29,182 |
| Registration fees | | 15,506 |
| Proxy fees1 | | 14,941 |
| Shareholder reports | | 9,281 |
| Independent trustees’ fees | | 6,050 |
| Transfer agent fees | | 793 |
| Other expenses | + | 7,316 |
| Total expenses | | 1,645,363 |
| Expense reduction by investment adviser | – | 59,010 |
| Net expenses | – | 1,586,353 |
| Net investment income | | 7,235,231 |
| REALIZED AND UNREALIZED GAINS (LOSSES) |
| Net realized losses on sales of securities - unaffiliated | | (19,473,858) |
| Net realized losses on futures contracts | | (412,008) |
| Net realized gains on foreign currency transactions | + | 782 |
| Net realized losses | | (19,885,084) |
| Net change in unrealized appreciation (depreciation) on securities - unaffiliated | | (30,224,162) |
| Net change in unrealized appreciation (depreciation) on futures contracts | | 11,193 |
| Net change in unrealized appreciation (depreciation) on foreign currency translations | + | (24,533) |
| Net change in unrealized appreciation (depreciation) | + | (30,237,502) |
| Net realized and unrealized losses | | (50,122,586) |
| Decrease in net assets resulting from operations | | ($42,887,355) |
| 1 | Proxy fees are non-routine expenses (see financial note 4 for additional information). |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Statement of Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
| OPERATIONS |
| | 3/1/22-8/31/22 | 3/1/21-2/28/22 |
| Net investment income | | $7,235,231 | $6,478,218 |
| Net realized gains (losses) | | (19,885,084) | 29,723,949 |
| Net change in unrealized appreciation (depreciation) | + | (30,237,502) | (5,184,617) |
| Increase (decrease) in net assets resulting from operations | | ($42,887,355) | $31,017,550 |
| DISTRIBUTIONS TO SHAREHOLDERS |
| Total distributions | | ($4,875,465) | ($12,406,849) |
| TRANSACTIONS IN FUND SHARES |
| | 3/1/22-8/31/22 | 3/1/21-2/28/22 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 892,419 | $6,541,801 | 10,739,437 | $84,967,134 |
| Shares reinvested | | 610,519 | 4,368,441 | 1,377,869 | 10,628,598 |
| Shares redeemed | + | (3,440,989) | (26,395,474) | (4,149,840) | (32,630,499) |
| Net transactions in fund shares | | (1,938,051) | ($15,485,232) | 7,967,466 | $62,965,233 |
| SHARES OUTSTANDING AND NET ASSETS |
| | 3/1/22-8/31/22 | 3/1/21-2/28/22 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 47,393,417 | $362,804,723 | 39,425,951 | $281,228,789 |
| Total increase (decrease) | + | (1,938,051) | (63,248,052) | 7,967,466 | 81,575,934 |
| End of period | | 45,455,366 | $299,556,671 | 47,393,417 | $362,804,723 |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Notes, unaudited
1. Business Structure of the Fund:
Schwab Global Real Estate Fund is a series of Schwab Investments (the trust), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the 1940 Act). The list below shows all the funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:
| SCHWAB INVESTMENTS (ORGANIZED OCTOBER 26, 1990) |
| Schwab Global Real Estate Fund | Schwab Tax-Free Bond Fund |
| Schwab Treasury Inflation Protected Securities Index Fund | Schwab California Tax-Free Bond Fund |
| Schwab U.S. Aggregate Bond Index Fund | Schwab Opportunistic Municipal Bond Fund |
| Schwab Short-Term Bond Index Fund | Schwab 1000 Index® Fund |
Schwab Global Real Estate Fund offers one share class. Shares are bought and sold at closing net asset value per share (NAV), which is the price for all outstanding shares of a fund. Each share has a par value of 1/1,000 of a cent, and the fund’s Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.
The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).
The fund may invest in certain mutual funds and exchange-traded funds (ETFs), which are referred to as "underlying funds". For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC) and are available on the SEC’s website at www.sec.gov.
(a) Security Valuation:
Under procedures approved by the Board, the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
• Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at the mean of the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
• Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the fund valuing its holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of the fund’s portfolio holdings and the NAV of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of the fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the fund pursuant to these procedures.
• Futures contracts: Futures contracts are valued at their settlement prices as of the close of their exchanges.
• Cash management sweep time deposits: Balances held in cash management sweep time deposits are accounted for on a cost basis, which approximates fair value.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
2. Significant Accounting Policies (continued):
• Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, the fund may fair value a security when it 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; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs, when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
The three levels of the fair value hierarchy are as follows:
• Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities and futures contracts.
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the fund values its holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.
• Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The levels associated with valuing the fund’s investments as of August 31, 2022 are disclosed in the Portfolio Holdings.
(b) Accounting Policies for certain Portfolio Investments (if held):
Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. The fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
2. Significant Accounting Policies (continued):
vary from one contract to another. Subsequent payments (variation margin) are made or received by the fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their value may change daily.
Securities Lending: Under the trust’s Securities Lending Program, the fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides the fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating pursuant to Rule 2a-7 under the 1940 Act. The fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the fund or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreement. Securities lending income, as disclosed in the fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between the fund and the lending agent. The aggregate fair value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan. Securities lending fees 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 the borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by the fund, as applicable. No portion of lending revenue is paid to or retained by the investment adviser or any of its affiliates.
As of August 31, 2022, the fund had no securities on loan.
Cash Management Transactions: Effective May 23, 2022 Brown Brothers Harriman & Co. (BBH) was replaced by Citibank, N.A as custodian of the fund. The fund no longer subscribes to the BBH Cash Management Service Sweep (CMS Sweep). The BBH CMS Sweep was an investment product that automatically swept the fund’s cash balances into overnight offshore time deposits with either the BBH Grand Cayman branch or a branch of a pre-approved commercial bank. This fully automated program allowed the fund to earn interest on cash balances. Excess cash invested with deposit institutions domiciled outside of the U.S., as with any offshore deposit, was subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. The fund assumed the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit was ultimately placed. The fund terminated the CMS Sweep program and cash was returned to the fund prior to terminating services with BBH.
Cash Investments: The fund may invest a portion of its assets in cash. Cash includes cash bank balances in an interest-bearing demand deposit account with maturity on demand by the fund.
Passive Foreign Investment Companies: The fund may own shares in certain foreign corporations that meet the Internal Revenue Code definition of a Passive Foreign Investment Company (PFIC). The fund may elect for tax purposes to mark-to-market annually the shares of each PFIC lot held and would be required to distribute as ordinary income to shareholders any such marked-to-market gains (as well as any gains realized on sale).
Central Securities Depositories Regulation: The Central Securities Depositories Regulation (CSDR) introduced measures for the authorization and supervision of European Union Central Security Depositories and created a common set of prudential, organizational, and conduct of business standards at a European level. CSDR is designed to support securities settlement and operational aspects of securities settlement, including the provision of shorter settlement periods; mandatory buy-ins; and cash penalties, to prevent and address settlement fails. CSDR measures are aimed to prevent settlement fails by ensuring that all transaction details are provided to facilitate settlement, as well as further incentivizing timely settlement by imposing cash penalty fines and buy-ins. The Fund may be subject to pay cash penalties and may also receive cash penalties with certain counterparties in instances where there are settlement fails. These cash penalties are included in net realized gains (losses) on sales of securities in the fund’s Statement of Operations, if any.
(c) Security Transactions:
Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
2. Significant Accounting Policies (continued):
Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the differences between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange appreciation or depreciation arises from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are reported in foreign currency transactions or translations in the Statement of Operations. The fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Gains realized by the fund on the sale of securities in certain foreign countries may be subject to non-U.S. taxes. In those instances, the fund records a liability based on unrealized appreciation to provide for potential non-U.S. taxes payable upon the sale of these securities.
When the fund closes out a futures contract position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.
The fund invests in real estate investment trusts (REITs) which report information on the source of their distributions annually. The fund’s policy is to record all REIT distributions initially as dividend income on the ex-dividend date and then re-designate them as return of capital and/or capital gain distributions at the end of the reporting period based on information provided annually by each REIT, and management estimates such re-designations when actual information has not yet been reported.
(d) Investment Income:
Interest income is recorded as it accrues. Dividends and distributions from portfolio securities are recorded on the date they are effective (the ex-dividend date), although the fund records certain foreign security dividends on the date the ex-dividend date is confirmed.
Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax rate is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.
(e) Expenses:
Expenses that are specific to the fund are charged directly to the fund. Expenses that are common to more than one fund in the trusts generally are allocated among those funds in proportion to their average daily net assets.
(f) Distributions to Shareholders:
The fund makes distributions from net investment income, if any, quarterly and from net realized capital gains, if any, in December. To receive a distribution, you must be a registered shareholder on the record date. Distributions are paid to shareholders on the payable date.
(g) Accounting Estimates:
The accounting policies described in this report conform to GAAP. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.
(h) Federal Income Taxes:
The fund intends to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains, if any, to its shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
2. Significant Accounting Policies (continued):
(i) Foreign Taxes:
The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the fund invests. These foreign taxes, if any, are paid by the fund and are disclosed in the Statement of Operations. Foreign taxes accrued as of August 31, 2022, if any, are reflected in the fund’s Statement of Assets and Liabilities.
(j) Indemnification:
Under the fund’s organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss attributable to these arrangements to be remote.
3. Risk Factors:
Investing in the fund may involve certain risks, as discussed in the fund’s prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.
Market Risk. Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions and other government actions. In addition, the occurrence of global events, such as war, terrorism, environmental disasters, natural disasters and epidemics, may also negatively affect the financial markets. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.
Management Risk. As an actively managed mutual fund, the fund is subject to the risk that its investment adviser will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its objective. The fund’s investment 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.
Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
Market Capitalization Risk. Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund’s performance could be impacted.
Mid-Cap Company Risk. Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.
Small-Cap Company Risk. Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.
Real Estate Investment Risk. The fund has a policy of concentrating its investments in real estate companies and companies related to the real estate industry. As such, the fund is subject to risks associated with the direct ownership of real estate securities and an investment in the 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.
REITs Risk. 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 cash flows and may have their investments in relatively few properties, or in a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.
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Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
3. Risk Factors (continued):
Foreign Investment Risk. The fund’s investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the fund’s investments, and could impair the fund’s ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. To the extent the fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, the fund’s performance maybe adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.
Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting, auditing, financial reporting and record keeping requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.
Convertible Securities Risk. The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline, and the credit standing of the issuer. The price of a convertible security will also normally vary in some proportion to changes in the price of the underlying common stock because of the conversion or exercise feature.
Derivatives Risk. The fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right, but not the obligation, to buy or sell an instrument at a specific price on or before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments. The fund’s use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.
The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, leverage risk, market risk and management risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to counterparty risk, lack of availability risk, valuation risk, correlation risk and tax risk. Counterparty risk is the risk that the counterparty to a derivatives transaction may not fulfill its contractual obligations either because the financial condition of the counterparty declines, or because the counterparty is otherwise unable or unwilling to perform under the contract. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund’s use of derivatives could reduce the fund’s performance, increase the fund’s volatility and could cause the fund to lose more than the initial amount invested.
Leverage Risk. Certain fund transactions, such as derivatives transactions, short sales and reverse repurchase agreements, may give rise to a form of leverage and may expose the fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of the fund’s portfolio securities. The use of leverage may cause the fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.
Short Sales Risk. The fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security.
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 securities.
Securities Lending Risk. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.
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Financial Notes, unaudited (continued)
3. Risk Factors (continued):
Liquidity Risk. The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.
Portfolio Turnover Risk. The fund buys and sells portfolio securities actively. This may cause the fund’s portfolio turnover rate and transaction costs to rise, which may lower the fund’s performance and may increase the likelihood of capital gains distributions.
Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund.
4. Affiliates and Affiliated Transactions:
Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a wholly owned subsidiary of The Charles Schwab Corporation, serves as the fund’s investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement between the investment adviser and the trust.
For its advisory and administrative services to the fund, the investment adviser is entitled to receive an annual fee equal to 0.50% of the fund’s average daily net assets. Prior to June 27, 2022, the annual fee was 0.77%.
Shareholder Servicing
The Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc. (Schwab), a broker-dealer affiliate of the investment adviser (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund.
Effective June 27, 2022, pursuant to the Plan, the fund’s shares are subject to an annual shareholder servicing fee up to 0.15%. Prior to June 27, 2022, the fund’s shares were subject to an annual shareholder servicing fee up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the fund (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab’s written agreement with the fund), and, effective June 27, 2022, the fund will pay no more than 0.15% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Prior to June 27, 2022, the fund would pay no more than 0.25% of the average annual daily net asset value of the fund shares owned by shareholders. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider’s actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.
Expense Limitation
Although these agreements specify certain fees for these services, the investment adviser and its affiliates have made an additional agreement with the fund, for so long as the investment adviser serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation) to 0.75%. The above expense limitation also excludes paying acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. Prior to June 27, 2022, the expense limitation was 1.05%, excluding interest, taxes, and certain non-routine expenses.
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Financial Notes, unaudited (continued)
4. Affiliates and Affiliated Transactions (continued):
Investments from Affiliates
Certain funds in the Fund Complex (for definition refer to the Trustees and Officers section) may own shares of other funds in the Fund Complex. The table below reflects the percentage of shares of the fund that are owned by other funds in the Fund Complex as of August 31, 2022:
| Schwab Monthly Income Fund - Enhanced Payout | 1.3% |
| Schwab Monthly Income Fund - Maximum Payout | 0.7% |
| Schwab Monthly Income Fund - Moderate Payout | 1.0% |
| Schwab Target 2010 Fund | 0.4% |
| Schwab Target 2015 Fund | 0.6% |
| Schwab Target 2020 Fund | 4.0% |
| Schwab Target 2025 Fund | 6.4% |
| Schwab Target 2030 Fund | 13.9% |
| Schwab Target 2035 Fund | 8.4% |
| Schwab Target 2040 Fund | 18.6% |
| Schwab Target 2045 Fund | 4.4% |
| Schwab Target 2050 Fund | 4.5% |
| Schwab Target 2055 Fund | 3.0% |
| Schwab Target 2060 Fund | 0.9% |
| Schwab Target 2065 Fund | 0.1% |
Interfund Borrowing and Lending
Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex. All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The fund had no interfund borrowing or lending activity during the period.
5. Board of Trustees:
The Board may include people who are officers and/or directors of the investment adviser or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted on the fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report.
6. Borrowing from Banks:
During the period, the fund was a participant with other funds in the Fund Complex in a joint, syndicated, committed $850 million line of credit (the Syndicated Credit Facility), maturing on September 29, 2022. Under the terms of the Syndicated Credit Facility, in addition to the investment adviser paying the interest charged on any borrowings by the fund, the investment adviser paid a commitment fee of 0.15% per annum on the funds’ proportionate share of the unused portion of the Syndicated Credit Facility.
During the period, the fund was a participant with other funds in the Fund Complex in a joint, unsecured, uncommitted $400 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, maturing on September 29, 2022. Under the terms of the Uncommitted Credit Facility, the investment adviser pays interest on the amount the fund borrows. There were no borrowings from either line of credit during the period.
The fund also has access to custodian overdraft facilities. The fund may have utilized the overdraft facility and incurred an interest expense, which is paid by the adviser. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
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Schwab Global Real Estate Fund
Financial Notes, unaudited (continued)
The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The value and variation margin for futures contracts held at August 31, 2022, are presented in the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized gains (losses) and net change in unrealized appreciation (depreciation) on futures contracts are presented on the Statement of Operations, if any. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended August 31, 2022, the month-end average notional amounts of futures contracts held by the fund was $1,999,329 and the month-end average number of contracts held was 9.
8. Purchases and Sales of Investment Securities:
For the period ended August 31, 2022, purchases and sales of securities (excluding short-term obligations) were as follows:
PURCHASES
OF SECURITIES | SALES
OF SECURITIES |
| $150,423,006 | $166,171,626 |
9. Federal Income Taxes:
As of August 31, 2022, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:
| TAX COST | GROSS UNREALIZED
APPRECIATION | GROSS UNREALIZED
DEPRECIATION | NET UNREALIZED
APPRECIATION
(DEPRECIATION) |
| $307,392,787 | $21,818,701 | ($36,069,410) | ($14,250,709) |
Capital loss carryforwards have no expiration and may be used to offset future realized capital gains for federal income tax purposes. As of February 28, 2022, the fund had capital loss carryforwards of $6,355,374.
The tax-basis components of distributions and components of distributable earnings on a tax basis are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of August 31, 2022. The tax-basis components of distributions paid during the fiscal year ended February 28, 2022 were as follows:
| | PRIOR FISCAL YEAR END DISTRIBUTIONS |
| | ORDINARY
INCOME |
| | $12,406,849 |
Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
As of February 28, 2022, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the fiscal year ended February 28, 2022, the fund did not incur any interest or penalties.
10. Subsequent Events:
Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.
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Schwab Global Real Estate Fund
Shareholder Vote Results (unaudited)
A Special Meeting of Shareholders of Schwab Investments (the “Trust”) was held on June 1, 2022, for the purpose of seeking shareholder approval to elect the following individuals as trustees of the Trust: Walter W. Bettinger II, Richard A. Wurster, Michael J. Beer, Robert W. Burns, Nancy F. Heller, David L. Mahoney, Jane P. Moncreiff, Kiran M. Patel, Kimberly S. Patmore, and J. Derek Penn. The number of votes necessary to conduct the Special Meeting and approve the proposal was obtained. The results of the shareholder vote are listed below:
Proposal – To elect each of the
following individuals as trustees of the Trust: | For | Withheld |
| Walter W. Bettinger II | 423,830,446.945 | 41,037,210.315 |
| Richard A. Wurster | 449,247,822.632 | 15,619,834.628 |
| Michael J. Beer | 449,188,616.594 | 15,679,040.666 |
| Robert W. Burns | 449,093,044.919 | 15,774,612.341 |
| Nancy F. Heller | 450,193,833.945 | 14,673,823.315 |
| David L. Mahoney | 419,552,571.056 | 45,315,086.204 |
| Jane P. Moncreiff | 450,325,483.733 | 14,542,173.527 |
| Kiran M. Patel | 448,721,580.221 | 16,146,077.039 |
| Kimberly S. Patmore | 449,526,424.435 | 15,341,232.825 |
| J. Derek Penn | 449,384,537.556 | 15,483,119.704 |
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Schwab Global Real Estate Fund
Investment Advisory Agreement Approval
The Investment Company Act of 1940, as amended (the 1940 Act), requires that the continuation of a fund’s investment advisory agreement must be specifically approved (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 (the Independent Trustees), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement.
The Board of Trustees (the Board or the Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory and administration agreement (the Agreement) between Schwab Investments (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) (dba Schwab Asset Management) (the investment adviser) with respect to the existing funds in the Trust, including Schwab Global Real Estate Fund (the Fund), and to review certain other agreements pursuant to which the investment adviser provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by the investment adviser, including information about the investment adviser’s affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. As part of the renewal process, the Independent Trustees’ legal counsel, on behalf of the Independent Trustees, sends an information request letter to the investment adviser seeking certain relevant information. The responses by the investment adviser are provided to the Trustees in the Board materials for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives data provided by an independent provider of investment company data. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to the Fund’s operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. In considering the renewal, the Independent Trustees receive advice from Independent Trustees’ legal counsel, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees participate in question and answer sessions with representatives of the investment adviser and meet in executive session outside the presence of Fund management.
The Board, including a majority of the Independent Trustees, considered information specifically relating to the continuance of the Agreement with respect to the Fund at meetings held on May 16, 2022 and June 8, 2022, and approved the renewal of the Agreement with respect to the Fund for an additional one-year term at the meeting on June 8, 2022 called for the purpose of voting on such approval.
The Board’s approval of the continuance of the Agreement with respect to the Fund was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:
| 1. | the nature, extent and quality of the services provided to the Fund under the Agreement, including the resources of the investment adviser and its affiliates dedicated to the Fund; |
| 2. | the Fund’s investment performance and how it compared to that of certain other comparable mutual funds and benchmark data; |
| 3. | the Fund’s expenses and how those expenses compared to those of certain other similar mutual funds; |
| 4. | the profitability of the investment adviser and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to the Fund, including both direct and indirect benefits accruing to the investment adviser and its affiliates; and |
| 5. | the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors. |
Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by the investment adviser to the Fund and the resources of the investment adviser and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, the investment adviser’s experience, track record, compliance program, resources dedicated to hiring and retaining skilled personnel and specialized talent, and information security resources. The Trustees also considered information provided by the investment adviser relating to services and support provided with respect to the Fund’s portfolio management team, portfolio strategy, and internal investment guidelines, as well as trading infrastructure, liquidity management, product design and analysis, shareholder communications, securities valuation, fund accounting and custody, and vendor and risk oversight. The Trustees also considered investments the investment adviser has made in its infrastructure, including modernizing the investment adviser’s technology and use of data, increasing expertise in key areas (including portfolio management and trade operations), and improving business
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Schwab Global Real Estate Fund
continuity, cybersecurity, due diligence, risk management processes, and information security programs, which are designed to provide enhanced services to the Fund and its shareholders. The Trustees considered Schwab’s overall financial condition and its reputation as a full service brokerage firm, as well as the wide range of products, services and account features that benefit Fund shareholders who are brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by the investment adviser to the Fund and the resources of the investment adviser and its affiliates dedicated to the Fund supported renewal of the Agreement with respect to the Fund.
Fund Performance. The Board considered the Fund’s performance in determining whether to renew the Agreement with respect to the Fund. Specifically, the Trustees considered the Fund’s performance relative to a peer category of other mutual funds and applicable indices/benchmarks, in light of total return and market trends, as well as in consideration of the Fund’s investment style and strategy attributes and disclosures. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the independent provider of investment company data who prepared the peer category analysis. In evaluating the performance of the Fund, the Trustees considered the risk profile for the Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and the investment adviser’s profitability discussed below and also noted that the Board and a designated committee of the Board review performance throughout the year. Although the Fund had performance that ranked in the fourth quartile of a relevant peer group for more than one performance period considered, the Board concluded that other factors relevant to performance supported renewal of the Agreement with respect to the Fund including that the underperformance was attributable, to a significant extent, to investment decisions by the investment adviser that were reasonable and consistent with the Fund’s investment objective and policies and that it had taken steps designed to help improve performance. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.
Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement and the Fund’s operating expense ratio, in each case, in comparison to those of other similar mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. The investment adviser reported to the Board, and the Board took into account, the risk assumed by the investment adviser in the development of the Fund and provision of services as well as the competitive marketplace for financial
products. The Trustees considered the effects of the investment adviser’s and Schwab’s practice of waiving certain fees to prevent total annual operating expenses of the Fund from exceeding a specified cap. The Trustees also considered the investment adviser’s contractual commitment to keep expense cap for so long as it serves as the adviser to the Fund. The Trustees also considered fees charged by the investment adviser to other mutual funds and to other types of accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services the investment adviser provides to these other accounts and any differences in the market for these types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.
Profitability. The Trustees considered the compensation flowing to the investment adviser and its affiliates, directly or indirectly and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also reviewed profitability of the investment adviser relating to the Schwab fund complex as a whole, noting the benefits to Fund shareholders of being part of the Schwab fund complex, including the allocations of certain fixed costs across the Fund and other funds in the complex. The Trustees also considered any other benefits derived by the investment adviser from its relationship with the Fund, such as whether, by virtue of its management of the Fund, the investment adviser obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the compensation and profitability with respect to the Fund under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund by the investment adviser and its affiliates. The Trustees noted that the investment adviser continues to invest substantial sums in its business in order to provide enhanced research capabilities, services and systems to benefit the Fund. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of the investment adviser is reasonable and supported renewal of the Agreement with respect to the Fund.
Economies of Scale. Although the Trustees recognized the difficulty of determining economies of scale with precision, the Trustees considered the potential existence of any economies of scale and whether those are passed along to the Fund’s shareholders through (i) the enhancement of services provided to the Fund in return for fees paid, including through investments by the investment adviser in its infrastructure, including modernizing the investment adviser’s technology and use of data, increasing expertise and capabilities in key areas
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Schwab Global Real Estate Fund
(including portfolio and trade operations), and improving business continuity, cybersecurity, due diligence and information security programs, which are designed to provide enhanced services to the Fund and its shareholders; and (ii) fee waivers or expense caps by the investment adviser and its affiliates for those funds in the Schwab fund complex with such features. The Trustees acknowledged that the investment adviser has shared any economies of scale with the Fund by investing in the investment adviser’s infrastructure, as discussed above, over time and that the investment adviser’s internal costs of providing investment management, technology, administrative, legal and compliance services to the Fund continue to increase as a result of regulatory or other developments. The Trustees considered that the investment adviser and its affiliates may employ contractual expense caps to protect shareholders from high fees when fund assets are relatively small, for example, in the case of newer funds or funds with investment strategies that are from time to time out
of favor, because, among other reasons, shareholders may benefit from the continued availability of such funds at subsidized expense levels. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund obtains reasonable benefits from economies of scale.
In the course of their deliberations, the Trustees may have accorded different weights to various factors and did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreement with respect to the Fund and concluded that the compensation under the Agreement with respect to the Fund is fair and reasonable in light of the services provided and the related expenses borne by the investment adviser and its affiliates and such other matters as the Trustees considered to be relevant in the exercise of their reasonable judgment.
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Schwab Global Real Estate Fund
Trustees and Officers
The tables below give information about the trustees and officers of Schwab Investments, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 105 funds.
The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-877-824-5615.
| Independent Trustees |
Name, Year of Birth, and
Position(s) with the trust
(Terms of office, and
length of Time Served1) | Principal Occupations
During the Past Five Years | Number of
Portfolios in
Fund Complex
Overseen by
the Trustee | Other Directorships |
Michael J. Beer
1961
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | Retired. Director, President and Chief Executive Officer (Dec. 2016 – Sept. 2019), Principal Funds (investment management). | 105 | Director (2016 – 2019), Principal Funds, Inc. |
Robert W. Burns
1959
Trustee
(Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) | Retired/Private Investor. | 105 | None |
Nancy F. Heller
1956
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 105 | None |
David L. Mahoney
1954
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Private Investor. | 105 | Director (2004 – present), Corcept Therapeutics Incorporated
Director (2009 – 2021), Adamas Pharmaceuticals, Inc.
Director (2003 – 2019), Symantec Corporation |
Jane P. Moncreiff
1961
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018 – present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009 – 2017), CareGroup Healthcare System, Inc. (healthcare). | 105 | None |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
| Independent Trustees (continued) |
Name, Year of Birth, and
Position(s) with the trust
(Terms of office, and
length of Time Served1) | Principal Occupations
During the Past Five Years | Number of
Portfolios in
Fund Complex
Overseen by
the Trustee | Other Directorships |
Kiran M. Patel
1948
Trustee
(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) | Retired. | 105 | Director (2008 – present), KLA-Tencor Corporation |
Kimberly S. Patmore
1956
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008 – present), Patmore Management Consulting (management consulting). | 105 | None |
J. Derek Penn
1957
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006 – 2018), BNY Mellon (financial services). | 105 | None |
| Interested Trustees |
Name, Year of Birth, and
Position(s) with the trust
(Terms of office, and
length of Time Served1) | Principal Occupations
During the Past Five Years | Number of
Portfolios in
Fund Complex
Overseen by
the Trustee | Other Directorships |
Walter W. Bettinger II2
1960
Chairman and Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Co-Chairman of the Board (July 2022 – present), Director and Chief Executive Officer (Oct. 2008 – present) and President (Feb. 2007 – Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – Oct. 2021) and Director (May 2008 – Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank, SSB; Director (Nov. 2017 – present), Charles Schwab Premier Bank, SSB; Director (July 2019 – present), Charles Schwab Trust Bank; Director (May 2008 – present), Chief Executive Officer (Aug. 2017 – present), and President (Aug. 2017 – Nov. 2021), Schwab Holdings, Inc.; Director (Oct. 2020 – present), TD Ameritrade Holding Corporation; Director (July 2016 – Oct. 2021), Charles Schwab Investment Management, Inc. | 105 | Director (2008 – present), The Charles Schwab Corporation |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
| Interested Trustees (continued) |
Name, Year of Birth, and
Position(s) with the trust
(Terms of office, and
length of Time Served1) | Principal Occupations
During the Past Five Years | Number of
Portfolios in
Fund Complex
Overseen by
the Trustee | Other Directorships |
Richard A. Wurster2
1973
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2022) | President (Oct. 2021 – present) and Executive Vice President – Schwab Asset Management Solutions (Apr. 2019 – Oct. 2021), The Charles Schwab Corporation; President, Director (Oct. 2021 – present), Executive Vice President – Schwab Asset Management Solutions (July 2019 – Oct. 2021) and Senior Vice President – Advisory (May 2016 – July 2019), Charles Schwab & Co., Inc.; President (Nov. 2021 – present), Schwab Holdings, Inc.; Director (Oct. 2021 – present) and Chief Executive Officer (Nov. 2019 – Jan. 2022), Charles Schwab Investment Management, Inc.; Director, Chief Executive Officer and President (Mar. 2018 – present), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (July 2016 – Apr. 2018) and President (Mar. 2017 – Apr. 2018), ThomasPartners, Inc.; Chief Executive Officer (July 2016 – Apr. 2018), Windhaven Investment Management, Inc. | 105 | None |
| Officers of the Trust |
Name, Year of Birth, and Position(s) with the trust
(Terms of office, and length of Time Served3) | Principal Occupations During the Past Five Years |
Jonathan de St. Paer
1973
President and Chief Executive Officer
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019 – present), President (Oct. 2018 – present), Chief Operating Officer (Jan. 2021 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020 – Mar. 2022) and Chief Operating Officer (Jan. 2021 – Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019 – present), President (Nov. 2018 – present) and Trustee (Apr. 2019 – Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Director (Mar. 2019 – Apr. 2022), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Managing Director (May 2022 – present), Senior Vice President (Apr. 2019 – May 2022) and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), Charles Schwab & Co., Inc. |
Mark Fischer
1970
Treasurer, Chief Financial Officer and Chief Operating Officer
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Treasurer and Chief Financial Officer (Jan. 2016 – present) and Chief Operating Officer (Dec. 2020 – present), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020 – present) and Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Director (July 2020 – Apr. 2022), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited. |
Omar Aguilar
1970
Vice President and Chief Investment Officer
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022 – present), Chief Investment Officer (Apr. 2011 – present) and Senior Vice President (Apr. 2011 – Dec. 2021), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011 – present), Schwab Funds, Laudus Trust and Schwab ETFs. |
Brett Wander
1961
Vice President and Chief Investment Officer
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011 – present), Schwab Funds, Laudus Trust and Schwab ETFs. |
William P. McMahon, Jr.
1972
Vice President and Chief Investment Officer
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020 – present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021 – present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018 – Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001 – Apr. 2018), ThomasPartners, Inc. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
| Officers of the Trust (continued) |
Name, Year of Birth, and Position(s) with the trust
(Terms of office, and length of Time Served3) | Principal Occupations During the Past Five Years |
Catherine MacGregor
1964
Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs
Chief Legal Officer, Vice President and Clerk, Laudus Trust
(Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) | Chief Legal Officer (Mar. 2022 – present) and Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Managing Director (May 2022 – present) and Vice President (July 2005 – May 2022), Charles Schwab & Co., Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021 – present), Vice President (Nov. 2005 – Oct. 2021) and Assistant Secretary (June 2007 – Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021 – present), Vice President and Assistant Secretary (Oct. 2009 – Oct. 2021), Schwab ETFs. |
| 1 | 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. |
| 2 | Mr. Bettinger and Mr. Wurster are Interested Trustees. Each of Mr. Bettinger and Mr. Wurster is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc., the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc. (Schwab), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust. |
| 3 | 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. |
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
asset allocation The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage.
asset class A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes.
beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500®). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.
Bloomberg US Aggregate Bond Index An index that is a broad-based benchmark measuring the performance of the U.S. investment grade, taxable bond market, including U.S. Treasuries, government-related and corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities, and asset-backed securities that are publicly available for sale in the United States. To be eligible for inclusion in the index, securities must be fixed rate, non-convertible, U.S. dollar-denominated with at least $300 million or more of outstanding face value and have one or more years remaining to maturity. The index excludes certain types of securities, including tax-exempt state and local government series bonds, structured notes embedded with swaps or other special features, private placements, floating rate securities, inflation-linked bonds and Eurobonds. The index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
bond A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the coupon rate) until a specified date (the maturity date), at which time the issuer returns the money borrowed (principal or face value) to the bondholder. Because of their structure, bonds are sometimes called “fixed-income securities” or “debt securities.”
An individual bond is subject to the credit risk of the issuer. Changes in interest rates can affect a bond’s market value prior to call or maturity. There is no guarantee that a bond’s yield to call or maturity will provide a positive return over the rate of inflation.
cap, capitalization See “market cap.”
capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.
Dow Jones Equity All REIT Capped Index A float-adjusted market cap weighted index that is designed to measure all equity real estate investment trusts (REITs) in the Dow Jones U.S. Total Stock Market Index, as defined by the S&P Dow Jones Indices REIT/RESI Industry Classification Hierarchy, that meet the minimum float market capitalization (FMC) and liquidity thresholds. The aggregate weight of all companies weighing more than 4.5% cannot exceed 22.5%, and no single company’s weight can exceed 10%. The index is reviewed daily based on each company’s capped market capitalization weight. Daily capping is only performed when the sum of companies with weights great than 5% exceeds 25%.
earnings growth rate For a mutual fund, the average yearly rate at which the earnings of the companies in the fund’s portfolio have grown, measured over the past five years.
earnings per share (EPS) A company’s earnings, or net income, for the past 12 months, divided by the number of shares outstanding.
expense ratio The amount that is taken from a mutual fund’s assets each year to cover the fund’s operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets a year.
FTSE EPRA Nareit Global Index (Net) An index that provides a diverse representation of publicly traded equity real estate investment trusts (REITs) and listed property companies worldwide. The index constituents are free-float adjusted, and screened on liquidity, size and revenue. The index is comprised of countries in developed and emerging markets. The Net of Tax Index is calculated based on the maximum withholding tax rates applicable to dividends received by institutional investors who are not resident in the same country as the remitting company and who do not benefit from double taxation treaties.
market cap, market capitalization The value of a company as determined by the total value of all shares of its stock outstanding.
median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.
MSCI EAFE Index (Net) A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets in Europe, Australasia, and the Far East. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes; returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.
MSCI Emerging Markets Index (Net) A free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment. The returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.
net asset value (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding.
outstanding shares, shares outstanding When speaking of a company or mutual fund, indicates all shares currently held by investors.
price-to-book ratio (P/B) The market price of a company’s stock compared with its “book value.” A mutual fund’s P/B is the weighted average of the P/B of all stocks in the fund’s portfolio.
price-to-earnings ratio (P/E) The market price of a company’s stock compared with earnings over the past year. A mutual fund’s P/E is the weighted average of the P/E of all stocks in the fund’s portfolio.
real estate investment trust (REIT) Real estate companies that own and commonly operate income producing commercial and/or residential real estate.
real estate operating companies (REOC) Real estate companies that engage in the development, management or financing of real estate.
return on equity (ROE) The average yearly rate of return for each dollar of investors’ money, measured over the past five years.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
rights and warrants Rights and warrants 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.
S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.
stock A share of ownership, or equity, in the issuing company.
total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested.
weighted average For mutual funds, an average that gives the same weight to each security as the security represents in the fund’s portfolio.
yield The income paid out by an investment, expressed as a percentage of the investment’s market value.
Schwab Global Real Estate Fund | Semiannual Report
Schwab Global Real Estate Fund
Schwab Asset Management
With a straightforward lineup of core products and solutions for building the foundation of a portfolio, Schwab Asset Management advocates for investors of all sizes with a steadfast focus on lowering costs and reducing unnecessary complexity. The list below shows all currently available Schwab Funds®.
Investors should carefully consider information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-877-824-5615 for a prospectus for any Schwab Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.
Proxy Voting Policies, Procedures and Results
A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Schwab Funds’ website at www.schwabassetmanagement.com/schwabfunds_prospectus, the SEC’s website at www.sec.gov, or by contacting Schwab Funds at 1-877-824-5615.
Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus or the SEC’s website at www.sec.gov.
Equity Funds
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Large-Cap Growth Fund
Schwab Small-Cap Equity Fund
Schwab Health Care Fund
Schwab International Core Equity Fund
Schwab International Opportunities Fund
Schwab Select Large Cap Growth Fund
Schwab Fundamental US Large Company Index Fund
Schwab Fundamental US Small Company Index Fund
Schwab Fundamental International Large Company Index Fund
Schwab Fundamental International Small Company Index Fund
Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab Fundamental Global Real Estate Index Fund
Schwab Global Real Estate Fund
Schwab S&P 500 Index Fund
Schwab 1000 Index® Fund
Schwab Small-Cap Index Fund®
Schwab Total Stock Market Index Fund®
Schwab U.S. Large-Cap Growth Index Fund
Schwab U.S. Large-Cap Value Index Fund
Schwab U.S. Mid-Cap Index Fund
Schwab International Index Fund®
Asset Allocation Funds
Schwab Balanced Fund
Schwab MarketTrack Portfolios®
Schwab Target Funds
Schwab Target Index Funds
Schwab Monthly Income Funds
Bond Funds
Schwab Treasury Inflation Protected Securities Index Fund
Schwab U.S. Aggregate Bond Index Fund
Schwab Short-Term Bond Index Fund
Schwab Tax-Free Bond Fund1
Schwab California Tax-Free Bond Fund1
Schwab Opportunistic Municipal Bond Fund
Schwab Money Funds2
Schwab provides a broad choice of taxable and tax-exempt money market funds for both retail and institutional client types.
Investment Adviser
Charles Schwab Investment Management, Inc., dba Schwab Asset Management
211 Main Street, San Francisco, CA 94105
Funds
Schwab Funds
1-877-824-5615
© 2022 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC®
Printed on recycled paper.
| ¹ | State, local, and the Federal Alternative Minimum Tax may apply. Capital gains are not exempt from Federal Taxation. |
| ² | You could lose money by investing in the Schwab Money Funds. All Schwab Money Funds with the exception of Schwab Variable Share Price Money Fund seek to preserve the value of your investment at $1.00 per share, but cannot guarantee they will do so. Because the share price of Schwab Variable Share Price Money Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. All Schwab Money Funds with the exception of Schwab Government Money Fund, Schwab Retirement Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Treasury Obligations Money Fund and Schwab Government Money Market Portfolio may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Schwab Money Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Schwab Money Funds’ sponsor has no legal obligation to provide financial support to the Funds, and you should not expect that the sponsor will provide financial support to the Funds at any time. |
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Item 2: Code of Ethics.
Not applicable to this semi-annual report.
Item 3: Audit Committee Financial Expert.
Not applicable to this semi-annual report.
Item 4: Principal Accountant Fees and Services.
Not applicable to this semi-annual report.
Item 5: Audit Committee of Listed Registrants.
Not applicable to this semi-annual report.
Item 6: Schedule of Investments.
The schedule of investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11: Controls and Procedures.
| (a) | Based on their evaluation of Registrant’s disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant’s Chief Executive Officer, Jonathan de St. Paer and Registrant’s Chief Financial Officer, Mark Fischer, have concluded that Registrant’s disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to Registrant’s officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above. |
| (b) | During the period covered by this report, there have been no changes in Registrant’s internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting. |
Item 12: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13: Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwab Investments – Schwab Global Real Estate Fund
| | |
| By: | | /s/ Jonathan de St. Paer |
| | Jonathan de St. Paer |
| | Chief Executive Officer |
| |
| Date: | | October 17, 2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
| By: | | /s/ Jonathan de St. Paer |
| | Jonathan de St. Paer |
| | Chief Executive Officer |
| |
| Date: | | October 17, 2022 |
| |
| By: | | /s/ Mark Fischer |
| | Mark Fischer |
| | Chief Financial Officer |
| |
| Date: | | October 17, 2022 |
