UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07704
Schwab Capital Trust – Schwab Target Index Funds
(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 Capital Trust
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: March 31
Date of reporting period: March 31, 2021
Item 1: Report(s) to Shareholders.
Annual Report | March 31, 2021
Schwab Target Index Funds
Schwab Target 2010 Index Fund
Schwab Target 2015 Index Fund
Schwab Target 2020 Index Fund
Schwab Target 2025 Index Fund
Schwab Target 2030 Index Fund
Schwab Target 2035 Index Fund
Schwab Target 2040 Index Fund
Schwab Target 2045 Index Fund
Schwab Target 2050 Index Fund
Schwab Target 2055 Index Fund
Schwab Target 2060 Index Fund
Schwab Target 2065 Index Fund
This page is intentionally left blank.
Schwab Target Index Funds
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor: Charles Schwab & Co., Inc. (Schwab)
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
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 12 Months Ended March 31, 2021 |
| Schwab Target 2010 Index Fund (Ticker Symbol: SWYAX) | 19.04% |
| Target 2010 Passive Composite Index | 18.51% |
| Fund Category: Morningstar Target-Date 2000-20101 | 21.21% |
| Performance Details | pages 8-10 |
| |
| Schwab Target 2015 Index Fund (Ticker Symbol: SWYBX) | 20.52% |
| Target 2015 Passive Composite Index | 19.99% |
| Fund Category: Morningstar Target-Date 20151 | 24.25% |
| Performance Details | pages 11-13 |
| |
| Schwab Target 2020 Index Fund (Ticker Symbol: SWYLX) | 21.51% |
| Target 2020 Passive Composite Index | 20.98% |
| Fund Category: Morningstar Target-Date 20201 | 26.41% |
| Performance Details | pages 14-16 |
| |
| Schwab Target 2025 Index Fund (Ticker Symbol: SWYDX) | 28.91% |
| Target 2025 Passive Composite Index | 28.50% |
| Fund Category: Morningstar Target-Date 20251 | 30.22% |
| Performance Details | pages 17-19 |
| |
| Schwab Target 2030 Index Fund (Ticker Symbol: SWYEX) | 34.98% |
| Target 2030 Passive Composite Index | 34.55% |
| Fund Category: Morningstar Target-Date 20301 | 35.96% |
| Performance Details | pages 20-22 |
| |
| Schwab Target 2035 Index Fund (Ticker Symbol: SWYFX) | 39.84% |
| Target 2035 Passive Composite Index | 39.50% |
| Fund Category: Morningstar Target-Date 20351 | 42.17% |
| Performance Details | pages 23-25 |
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.
The components that make up each of the composite indices may vary over time. For index definitions, please see the Glossary.
Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, a 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.
| 1 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Performance at a Glance (continued)
| Total Returns For the 12 Months Ended March 31, 2021 |
| Schwab Target 2040 Index Fund (Ticker Symbol: SWYGX) | 44.07% |
| Target 2040 Passive Composite Index | 43.84% |
| Fund Category: Morningstar Target-Date 20401 | 47.12% |
| Performance Details | pages 26-28 |
| |
| Schwab Target 2045 Index Fund (Ticker Symbol: SWYHX) | 48.06% 2 |
| Target 2045 Passive Composite Index | 48.01% |
| Fund Category: Morningstar Target-Date 20451 | 50.64% |
| Performance Details | pages 29-31 |
| |
| Schwab Target 2050 Index Fund (Ticker Symbol: SWYMX) | 50.43% |
| Target 2050 Passive Composite Index | 50.43% |
| Fund Category: Morningstar Target-Date 20501 | 52.03% |
| Performance Details | pages 32-34 |
| |
| Schwab Target 2055 Index Fund (Ticker Symbol: SWYJX) | 52.24% |
| Target 2055 Passive Composite Index | 52.10% |
| Fund Category: Morningstar Target-Date 20551 | 52.87% |
| Performance Details | pages 35-37 |
| |
| Schwab Target 2060 Index Fund (Ticker Symbol: SWYNX) | 53.70% |
| Target 2060 Passive Composite Index | 53.79% |
| Fund Category: Morningstar Target-Date 2060+1 | 53.66% |
| Performance Details | pages 38-40 |
| |
| Schwab Target 2065 Index Fund (Ticker Symbol: SWYOX) | 2.10% 3 |
| Target 2065 Passive Composite Index | 1.46% 3 |
| Fund Category: Morningstar Target-Date 2060+1 | N/A |
| Performance Details | pages 41-43 |
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.
The components that make up each of the composite indices may vary over time. For index definitions, please see the Glossary.
Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, a 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.
| 1 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 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 | Total returns shown are since the fund’s inception date of February 25, 2021. |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Jonathan de St. Paer
President of Charles Schwab
Investment Management, Inc.
and the funds covered
in this report.
Dear Shareholder,
The COVID-19 pandemic shook the entire world over the 12-months ended March 31, 2021, dramatically reshaping daily life. As much as we might now like to turn our focus elsewhere, the COVID-19 pandemic remains a central issue today. How it unfolds in the coming months will continue to have implications for how we will live our lives and invest for our futures. Thankfully, while equities suffered their fastest decline ever in March 2020, U.S. markets have rallied. The S&P 500® Index, a bellwether for the overall U.S. stock market, rose by more than 50% over the reporting period, repeatedly reaching new record highs. After a period of heightened volatility, fixed-income markets stabilized as well, generally providing positive rates of return. Economic growth followed a similar pattern. After contracting in the first and second quarters of 2020, U.S. gross domestic product (GDP) rebounded, posting gains in the third and fourth quarters of 2020. For the 12-months ended March 31, 2021, the S&P 500® Index returned 56.4% and the broad U.S. bond market, as measured by the Bloomberg Barclays US Aggregate Bond Index, returned 0.7%. The MSCI EAFE® Index (Net)*, a broad measure of developed international equity performance, returned 44.6%.
At Charles Schwab Investment Management, we believe in the importance of staying invested and having a long-term investing plan that reflects your risk tolerance and long-term financial goals. The Schwab Target Index Funds—including the Schwab Target 2065 Index Fund, which launched on February 25, 2021—are designed to provide broad and efficient diversification for investors at a low-cost. By selecting a fund that corresponds to their target retirement date, an investor gains exposure to a carefully selected balance of equities and fixed income, as well as other potentially diversifying asset classes such as real estate investment trusts (REITs). Over time, the allocations in the Schwab Target Index Funds are shifted to become more conservative as the retirement date approaches.
Thank you for investing with Charles Schwab Investment Management. For more information about the Schwab Target Index Funds, please continue reading this report. In addition, you can find further details about these funds by visiting our website at www.schwabassetmanagement.com. We are also happy to hear from you at 1-877-824-5615.
Sincerely,
“ The Schwab Target Index Funds—including the Schwab Target 2065 Index Fund, which launched on February 25, 2021—are designed to provide broad and efficient diversification for investors at a low-cost.”
Past performance is no guarantee of future results.
Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.
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 Target Index Funds | Annual Report
Schwab Target Index Funds
The Investment Environment
For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For the 12-month reporting period, the S&P 500® Index, a bellwether for the overall U.S. stock market, returned 56.35%. U.S. small-cap stocks outperformed U.S. large-cap stocks by a large margin, with the Russell 2000® Index and Russell 1000® Index returning 94.85% and 60.59%, respectively. International equities also posted strong gains. The MSCI EAFE® Index (Net)*, a broad measure of developed international equity performance, returned 44.57% and the MSCI Emerging Markets Index (Net)* returned 58.39%. Bond markets were significantly weaker, with the Bloomberg Barclays US Aggregate Bond Index, representing the broad U.S. fixed-income market, returning 0.71%.
As a result of the COVID-19 pandemic, economic growth stalled around the globe. Bolstered by the extensive emergency rescue and fiscal stimulus measures passed by the U.S. Federal Reserve (Fed) and U.S. Congress, the U.S. economy has held up relatively well, especially given the intensity of the COVID-19 pandemic’s economic impact. After falling by an annualized rate of 31.4% in the second quarter of 2020, U.S. gross domestic product (GDP) jumped by an annualized rate of 33.4% for the third quarter of 2020, reflecting pent-up consumer demand and government support. GDP grew at an annualized rate of 4.3% in the fourth quarter of 2020. For the full year of 2020, GDP decreased by 3.5%. Unemployment skyrocketed in April 2020, rising to the highest level since the Great Depression, but declined
Asset Class Performance Comparison % returns during the 12 months ended March 31, 2021
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 an indication of future results.
For index definitions, please see the Glossary.
Data source: Index provider websites and CSIM.
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 Target Index Funds | Annual Report
Schwab Target Index Funds
The Investment Environment (continued)
over the remainder of the reporting period, dropping below double digits beginning in August 2020. Inflation remained well below the Fed’s traditional target of 2%, although inflation concerns rose toward the end of the reporting period when the yield on the 10-year U.S. Treasury spiked in March 2021 to its highest level in more than a year.
Outside the U.S., conditions were similar as global economies wrestled with dramatically slowing growth amid stay-at-home orders, supply chain disruptions, and broadly diminishing demand. Oil prices deteriorated early in the reporting period amid significantly reduced demand, coupled with rising U.S. crude production and a price war between Russia and Saudi Arabia. For the second quarter of 2020, GDP growth contracted in most major economies, including the eurozone, the United Kingdom, and Japan. Europe and Japan subsequently recovered much of their losses, but the United Kingdom, which was particularly hard-hit by the COVID-19 pandemic, suffered its biggest slump in more than three centuries over the course of 2020, effectively wiping out its growth over the past seven years. Over 2020, China was the only major economy to avoid contraction in the face of COVID-19 pandemic-related shocks and maintained positive GDP growth in its last three quarters of 2020, on rising industrial output, strong manufacturing, and a robust real estate market. India, after plunging into one of the worst recessions of any major economy, saw its first positive gain in GDP in the fourth quarter of 2020.
Central banks around the world, including the Fed, enacted or maintained low—and for some international central banks, negative—interest rates instituted prior to, and in response to, the COVID-19 pandemic. In the U.S., the federal funds rate remained in a range of 0.00% to 0.25% throughout the reporting period. In addition, other Fed-driven emergency measures remained in effect, including large purchases of U.S. Treasuries and other securities to support smooth market function, facilitating the flow of credit to municipalities, financing for employers, consumers, and businesses, and the provision of facilities to support credit to businesses and consumers alike. In August 2020, the Fed announced that it was shifting its interest rate policy to allow inflation to rise above its previous 2% target for periods of time, even in times of rising employment. Outside the U.S., the European Central Bank held its policy rate at 0.00%, unchanged since March 2016, and maintained its asset purchase program to help counter the impact of the COVID-19 pandemic. The Bank of Japan upheld its short-term interest rate target of -0.01%, also unchanged since 2016. The Bank of England maintained its key official bank rate at 0.10% and also reiterated its commitment to its bond-buying program. Central banks in key emerging market economies—including China, India, Russia, and Thailand—also maintained low rates to help counter the effects of the COVID-19 pandemic. Mexico reduced its benchmark interest rate by 0.25% in February 2021.
For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.) The yield on the 10-year U.S. Treasury, which began the period at 0.70%, rose gradually over most of the period before spiking in February and March to end the period sharply higher—at 1.74%, its highest rate in more than a year—as investors grappled with the potential impacts of yet another costly round of economic stimulus. The three-month U.S. Treasury yield remained historically low, beginning the reporting period at 0.11% and ending it at 0.03%. Outside the U.S., bond yields remained low.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
 | Zifan Tang, Ph.D., CFA, Senior Portfolio Manager, is responsible for the co-management of the funds. Prior to joining CSIM in January 2012, Ms. Tang was a product manager at Thomson Reuters and from 1997 to 2009 worked as a portfolio manager at Barclays Global Investors (now known as BlackRock). |
 | Patrick Kwok, CFA, Portfolio Manager, is responsible for the co-management of the funds. Previously, Mr. Kwok served as an associate portfolio manager with CSIM from 2012 to 2016. Prior to that, he worked as a fund administration manager for CSIM, where he was responsible for oversight of sub-advisers, trading, cash management, and fund administration for the Charles Schwab Trust Bank Collective Investment Trusts and Schwab’s multi-asset mutual funds. Prior to joining CSIM in 2008, Mr. Kwok spent two years as an asset operations specialist at Charles Schwab Trust Company. He also worked for one year at State Street Bank & Trust as a portfolio accountant and pricing specialist. |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund as of March 31, 2021
The Schwab Target 2010 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 34.6% equity securities, 60.7% fixed-income securities, and 4.7% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 19.04%. The fund’s internally calculated comparative index, the Target 2010 Passive Composite Index (the composite index), returned 18.51% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity and U.S. small-cap holdings, the Schwab International Equity ETF and Schwab U.S. Small-Cap ETF, also contributed to the total return of the fund, returning approximately 49% and 96%, respectively, for the reporting period.
The fund’s fixed-income allocation also contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab U.S. TIPS ETF also contributed to the total return of the fund, returning approximately 8% for the reporting period. The Schwab Short-Term U.S. Treasury ETF contributed slightly to the total return of the fund, returning less than 1% for the reporting period.
The fund’s real estate allocation was the smallest contributor to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2010 Index Fund (8/25/16) | 19.04% | 7.86% | 6.83% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2010 Passive Composite Index | 18.51% | 7.89% | 6.90% |
| Fund Category: Morningstar Target-Date 2000-20103 | 21.21% | 7.44% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 9 |
| Portfolio Turnover Rate | 21% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund as of March 31, 2021
The Schwab Target 2015 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 37.6% equity securities, 58.1% fixed-income securities, and 4.3% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 20.52%. The fund’s internally calculated comparative index, the Target 2015 Passive Composite Index (the composite index), returned 19.99% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity and U.S. small-cap holdings, the Schwab International Equity ETF and Schwab U.S. Small-Cap ETF, also contributed to the total return of the fund, returning approximately 49% and 96%, respectively, for the reporting period.
The fund’s fixed-income allocation also contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab U.S. TIPS ETF also contributed to the total return of the fund, returning approximately 8% for the reporting period. The Schwab Short-Term U.S. Treasury ETF contributed slightly to the total return of the fund, returning less than 1% for the reporting period.
The fund’s real estate allocation was the smallest contributor to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2015 Index Fund (8/25/16) | 20.52% | 8.07% | 7.07% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2015 Passive Composite Index | 19.99% | 8.15% | 7.17% |
| Fund Category: Morningstar Target-Date 20153 | 24.25% | 7.94% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 9 |
| Portfolio Turnover Rate | 30% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund as of March 31, 2021
The Schwab Target 2020 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 39.7% equity securities, 56.3% fixed-income securities, and 4.0% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 21.51%. The fund’s internally calculated comparative index, the Target 2020 Passive Composite Index (the composite index), returned 20.98% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity and U.S. small-cap holdings, the Schwab International Equity ETF and Schwab U.S. Small-Cap ETF, also contributed to the total return of the fund, returning approximately 49% and 96%, respectively, for the reporting period.
The fund’s fixed-income allocation also contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab U.S. TIPS ETF also contributed to the total return of the fund, returning approximately 8% for the reporting period. The Schwab Short-Term U.S. Treasury ETF contributed slightly to the total return of the fund, returning less than 1% for the reporting period.
The fund’s real estate allocation was the smallest contributor to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2020 Index Fund (8/25/16) | 21.51% | 8.31% | 7.82% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2020 Passive Composite Index | 20.98% | 8.34% | 7.87% |
| Fund Category: Morningstar Target-Date 20203 | 26.41% | 8.21% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 9 |
| Portfolio Turnover Rate | 13% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund as of March 31, 2021
The Schwab Target 2025 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 51.9% equity securities, 44.9% fixed-income securities, and 3.2% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 28.91%. The fund’s internally calculated comparative index, the Target 2025 Passive Composite Index (the composite index), returned 28.50% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab U.S. TIPS ETF also contributed to the total return of the fund, returning approximately 8% for the reporting period. The Schwab Short-Term U.S. Treasury ETF contributed slightly to the total return of the fund, returning less than 1% for the reporting period.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2025 Index Fund (8/25/16) | 28.91% | 9.47% | 9.19% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2025 Passive Composite Index | 28.50% | 9.54% | 9.25% |
| Fund Category: Morningstar Target-Date 20253 | 30.22% | 8.84% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 10 |
| Portfolio Turnover Rate | 15% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund as of March 31, 2021
The Schwab Target 2030 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 63.1% equity securities, 34.3% fixed-income securities, and 2.5% cash and cash equivalents (including money market funds).1 (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 34.98%. The fund’s internally calculated comparative index, the Target 2030 Passive Composite Index (the composite index), returned 34.55% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.2 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab U.S. TIPS ETF and Schwab Short-Term U.S. Treasury ETF also contributed slightly to the total return of the fund, returning 8% and less than 1%, respectively, for the reporting period.
Management views and portfolio holdings may have changed since the report date.
| 1 | Percentages may not add up to 100% due to rounding. |
| 2 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2030 Index Fund (8/25/16) | 34.98% | 10.34% | 10.21% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2030 Passive Composite Index | 34.55% | 10.41% | 10.25% |
| Fund Category: Morningstar Target-Date 20303 | 35.96% | 9.73% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 11 |
| Portfolio Turnover Rate | 13% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund as of March 31, 2021
The Schwab Target 2035 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 71.6% equity securities, 26.4% fixed-income securities, and 2.0% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 39.84%. The fund’s internally calculated comparative index, the Target 2035 Passive Composite Index (the composite index), returned 39.50% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2035 Index Fund (8/25/16) | 39.84% | 10.94% | 10.96% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2035 Passive Composite Index | 39.50% | 11.02% | 11.02% |
| Fund Category: Morningstar Target-Date 20353 | 42.17% | 10.58% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 9 |
| Portfolio Turnover Rate | 12% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund as of March 31, 2021
The Schwab Target 2040 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 78.7% equity securities, 19.7% fixed-income securities, and 1.5% cash and cash equivalents (including money market funds).1 (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 44.07%. The fund’s internally calculated comparative index, the Target 2040 Passive Composite Index (the composite index), returned 43.84% for the same period. The fund’s outperformance relative to the composite index was primarily a result of an underlying fund, the Schwab U.S. Aggregate Bond ETF, recovering to trade near its net asset value (NAV) after trading at a discount to its NAV in March 2020 as a result of trading and market volatility.
Positioning and Strategies.2 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund and was the largest contributor to relative return. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | Percentages may not add up to 100% due to rounding. |
| 2 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2040 Index Fund (8/25/16) | 44.07% | 11.39% | 11.61% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2040 Passive Composite Index | 43.84% | 11.51% | 11.68% |
| Fund Category: Morningstar Target-Date 20403 | 47.12% | 11.15% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 10 |
| Portfolio Turnover Rate | 9% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund as of March 31, 2021
The Schwab Target 2045 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 85.4% equity securities, 13.5% fixed-income securities, and 1.1% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 48.06%1. The fund’s internally calculated comparative index, the Target 2045 Passive Composite Index (the composite index), returned 48.01% for the same period.
Positioning and Strategies.2 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | Total return for the report period above differs from the return in the Financial Highlights. The total return presented above 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 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2045 Index Fund (8/25/16) | 48.06% 3 | 11.79% | 12.10% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2045 Passive Composite Index | 48.01% | 11.94% | 12.18% |
| Fund Category: Morningstar Target-Date 20454 | 50.64% | 11.57% | N/A |
| Fund Expense Ratios5: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | 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. |
| 4 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 5 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 10 |
| Portfolio Turnover Rate | 6% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,4,5
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | Less than 0.05%. |
| 4 | This list is not a recommendation of any security by the investment adviser. |
| 5 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund as of March 31, 2021
The Schwab Target 2050 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 89.4% equity securities, 9.7% fixed-income securities, and 0.9% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 50.43%. The fund’s internally calculated comparative index, the Target 2050 Passive Composite Index (the composite index), returned 50.43% for the same period.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed slightly to the total return of the fund. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2050 Index Fund (8/25/16) | 50.43% | 12.02% | 12.38% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2050 Passive Composite Index | 50.43% | 12.18% | 12.47% |
| Fund Category: Morningstar Target-Date 20503 | 52.03% | 11.71% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 10 |
| Portfolio Turnover Rate | 6% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,4,5
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | Less than 0.05%. |
| 4 | This list is not a recommendation of any security by the investment adviser. |
| 5 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund as of March 31, 2021
The Schwab Target 2055 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 92.0% equity securities, 7.3% fixed-income securities, and 0.7% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 52.24%. The fund’s internally calculated comparative index, the Target 2055 Passive Composite Index (the composite index), returned 52.10% for the same period.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed slightly to the total return of the fund. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2055 Index Fund (8/25/16) | 52.24% | 12.18% | 12.62% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2055 Passive Composite Index | 52.10% | 12.33% | 12.69% |
| Fund Category: Morningstar Target-Date 20553 | 52.87% | 11.80% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 9 |
| Portfolio Turnover Rate | 6% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,4,5
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | Less than 0.05%. |
| 4 | This list is not a recommendation of any security by the investment adviser. |
| 5 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund as of March 31, 2021
The Schwab Target 2060 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; as of the last annual adjustment at the beginning of February 2021, the fund’s asset allocation was approximately 94.5% equity securities, 5.0% fixed-income securities, and 0.5% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the 12-month reporting period ended March 31, 2021, global equity markets generated strong returns in an impressive recovery from their steep slide in late February and March of 2020 when the COVID-19 pandemic began to wreak havoc on economies around the globe. Even in the face of persisting COVID-19 pandemic-driven stresses to the economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world prompted global equity markets to rally throughout the reporting period. Despite a resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through the remainder of the reporting period. Major market indices achieved repeated record highs over the second half of the reporting period. The U.S. dollar generally weakened over the reporting period, generally enhancing the return of overseas investments in U.S. dollar terms. For much of the reporting period, bond yields remained historically low as demand for U.S. Treasuries remained strong. However, in January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.)
Performance. For the 12-month reporting period ended March 31, 2021, the fund returned 53.70%. The fund’s internally calculated comparative index, the Target 2060 Passive Composite Index (the composite index), returned 53.79% for the same period.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity holding, the Schwab U.S. Large-Cap ETF, was the largest contributor to the total return of the fund, returning approximately 60% for the reporting period. The fund’s international equity, U.S. small-cap, and emerging markets holdings, the Schwab International Equity ETF, Schwab U.S. Small-Cap ETF, and Schwab Emerging Markets Equity ETF, also contributed to the total return of the fund, returning approximately 49%, 96%, and 57%, respectively, for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 29% for the reporting period.
The fund’s fixed-income allocation contributed to the total return of the fund. The Schwab U.S. Aggregate Bond ETF, the fund’s intermediate-term bond holding, contributed slightly to the total return of the fund. The Schwab U.S. Aggregate Bond ETF returned approximately 2% for the reporting period outperforming its comparative index, the Bloomberg Barclays US Aggregate Bond Index, which returned less than 1% for the reporting period. The Schwab U.S. Aggregate Bond ETF’s NAV return generally tracked the Bloomberg Barclays US Aggregate Bond Index. The Schwab Short-Term U.S. Treasury ETF returned less than 1% for the reporting period and neither contributed to nor detracted from the total return of the fund.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (August 25, 2016 – March 31, 2021)1,2
Average Annual Total Returns1,2
| Fund and Inception Date | 1 Year | 3 Years | Since Inception |
| Schwab Target 2060 Index Fund (8/25/16) | 53.70% | 12.34% | 12.74% |
| Dow Jones U.S. Total Stock Market IndexSM | 62.68% | 17.05% | 16.46% |
| Bloomberg Barclays US Aggregate Bond Index | 0.71% | 4.65% | 2.79% |
| Target 2060 Passive Composite Index | 53.79% | 12.48% | 12.83% |
| Fund Category: Morningstar Target-Date 2060+3 | 53.66% | 11.88% | N/A |
| Fund Expense Ratios4: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | On July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. Accordingly, the performance history of the fund, prior to July 24, 2017, is that of the fund’s former Institutional Shares. |
| 3 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 4 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 8 |
| Portfolio Turnover Rate | 7% |
Asset Class Weightings % of Investments1,2
Top Holdings % of Net Assets1,3,4
Portfolio holdings may have changed since the report date.
| 1 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 2 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 3 | This list is not a recommendation of any security by the investment adviser. |
| 4 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund as of March 31, 2021
The Schwab Target 2065 Index Fund (the fund) seeks to provide capital appreciation and income consistent with its current asset allocation, and seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The fund may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds. The target asset allocation is adjusted annually based on the adviser’s asset allocation strategy; at the fund’s inception, February 25, 2021, the asset allocation was anticipated to be approximately 95.0% equity securities, 4.5% fixed-income securities, and 0.5% cash and cash equivalents (including money market funds). (For portfolio allocations as of the end of this reporting period, please see the fund’s Portfolio Holdings included in this report.)
Market Highlights. For the reporting period of fund inception, February 25, 2021, to March 31, 2021, global equity markets generated positive returns. Despite persisting COVID-19 pandemic-driven stresses to the global economy—including widespread business disruptions, high unemployment, and prolonged stay-at-home orders—and the resurgence of COVID-19 cases in the fall and winter, markets were buoyed by the extensive emergency rescue and fiscal stimulus measures passed by governments and central banks around the world beginning in March 2020, as well as the initial distribution of COVID-19 vaccines in December 2020 and the expanded rollout in 2021. The COVID-19 vaccine rollout helped to fuel the early stages of a shift in the market towards cyclical sectors, beginning in November and December 2020 and continuing through March 2021. In January and February 2021, as the likelihood of yet another stimulus package rose, bonds sold off, driving yields higher. (Bond yields and bond prices typically move in opposite directions.) The U.S. dollar strengthened slightly over the reporting period, generally reducing the return of overseas investments in U.S. dollar terms.
Performance. The fund returned 2.10% for the reporting period of fund inception, February 25, 2021, to March 31, 2021. The fund’s internally calculated comparative index, the Target 2065 Passive Composite Index (the composite index), returned 1.46% for the same period. The fund’s outperformance relative to the composite index was primarily a result of two underlying funds, the Schwab International Equity ETF and Schwab Emerging Markets Equity ETF, recovering to trade at a slight premium after trading at a discount to its net asset value (NAV) on the date of the fund’s launch.
Positioning and Strategies.1 The fund’s asset allocations were generally in line with those of the composite index over the reporting period.
The fund’s equity allocation was the largest contributor to the total return of the fund. The fund’s U.S. large-cap equity and international equity holdings, the Schwab U.S. Large-Cap ETF and Schwab International Equity ETF, were the largest contributors to the total return of the fund, returning approximately 3% and 1%, respectively, for the reporting period. The fund’s U.S. small-cap holding, the Schwab U.S. Small-Cap ETF, also contributed to the total return of the fund, returning approximately 1% for the reporting period. The fund’s emerging markets holding, the Schwab Emerging Markets Equity ETF, detracted slightly from the total return of the fund, returning approximately -2% for the reporting period.
The fund’s real estate allocation also contributed to the total return of the fund. The Schwab U.S. REIT ETF returned approximately 4% for the reporting period.
The fund’s fixed-income allocation detracted slightly from the total return of the fund. The Schwab U.S. Aggregate Bond ETF detracted from the total return of the fund, returning less than 0% for the reporting period. The Schwab Short-Term U.S. Treasury ETF was flat for the reporting.
Management views and portfolio holdings may have changed since the report date.
| 1 | ETF performance can be expressed on a market price or NAV basis. The returns cited in this section are Market Price Returns. The ETF’s per share NAV is the value of one share of the ETF. NAV is calculated by taking the ETF’s total assets (including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the ETF, and the Market Price Return is based on the market price per share of the ETF. The price used to calculate market return (Market Price) is determined using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time). NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the ETF at Market Price and NAV, respectively. |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Performance and Fund Facts as of March 31, 2021
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.
Performance of Hypothetical $10,000 Investment (February 25, 2021 – March 31, 2021)1
Average Annual Total Returns1
| Fund and Inception Date | Since Inception |
| Schwab Target 2065 Index Fund (2/25/21) | 2.10% |
| Dow Jones U.S. Total Stock Market IndexSM | 3.16% |
| Bloomberg Barclays US Aggregate Bond Index | -0.42% |
| Target 2065 Passive Composite Index | 1.46% |
| Fund Category: Morningstar Target-Date 2060+2 | N/A |
| Fund Expense Ratios3: Net 0.08%; Gross 0.13% |
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.
| 1 | Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| 2 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date. |
| 3 | As stated in the prospectus. Includes 0.05% of acquired fund fees and expenses (AFFE), which are based on estimated amounts for the current fiscal year and are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements. |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Performance and Fund Facts as of March 31, 2021 (continued)
| Number of Holdings | 8 |
| Portfolio Turnover Rate | 0% 1 |
Asset Class Weightings % of Investments2,3
Top Holdings % of Net Assets2,4,5
Portfolio holdings may have changed since the report date.
| 1 | Portfolio turnover was 0%. Portfolio turnover is calculated by factoring in the lesser of long-term purchases or sales of securities. The fund had no sales of securities during the period. |
| 2 | The fund intends to primarily invest in affiliated Schwab ETFs and may also invest in affiliated Schwab Funds and Laudus Funds, and unaffiliated third party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). |
| 3 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
| 4 | This list is not a recommendation of any security by the investment adviser. |
| 5 | The holdings listed exclude any temporary liquidity investments. |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
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.
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a 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 October 1, 2020 and held through March 31, 2021.
Actual Return lines in the table below provide 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 lines in the table below provide information about hypothetical account values and hypothetical expenses based on a 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 a 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)1,2 | Effective
Expense Ratio
(Annualized)3,4 | Beginning
Account Value
at 10/1/20 | Ending
Account Value
(Net of Expenses)
at 3/31/212 | Expenses Paid
During Period
10/1/20-3/31/212,5 | Effective
Expenses Paid
During Period
10/1/20-3/31/214,5 |
| Schwab Target 2010 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,059.70 | $0.15 | $0.41 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2015 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,065.50 | $0.15 | $0.41 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2020 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,070.20 | $0.15 | $0.41 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2025 Index Fund | | | | | | |
| Actual Return | 0.04% | 0.08% | $1,000.00 | $1,101.50 | $0.21 | $0.42 |
| Hypothetical 5% Return | 0.04% | 0.08% | $1,000.00 | $1,024.70 | $0.20 | $0.40 |
| Schwab Target 2030 Index Fund | | | | | | |
| Actual Return | 0.04% | 0.08% | $1,000.00 | $1,126.70 | $0.21 | $0.42 |
| Hypothetical 5% Return | 0.04% | 0.08% | $1,000.00 | $1,024.70 | $0.20 | $0.40 |
| Schwab Target 2035 Index Fund | | | | | | |
| Actual Return | 0.04% | 0.08% | $1,000.00 | $1,147.80 | $0.21 | $0.43 |
| Hypothetical 5% Return | 0.04% | 0.08% | $1,000.00 | $1,024.70 | $0.20 | $0.40 |
| Schwab Target 2040 Index Fund | | | | | | |
| Actual Return | 0.04% | 0.08% | $1,000.00 | $1,166.50 | $0.22 | $0.43 |
| Hypothetical 5% Return | 0.04% | 0.08% | $1,000.00 | $1,024.70 | $0.20 | $0.40 |
| Schwab Target 2045 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,183.80 | $0.16 | $0.44 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2050 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,194.20 | $0.16 | $0.44 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2055 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,201.60 | $0.16 | $0.44 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
| Schwab Target 2060 Index Fund | | | | | | |
| Actual Return | 0.03% | 0.08% | $1,000.00 | $1,208.30 | $0.17 | $0.44 |
| Hypothetical 5% Return | 0.03% | 0.08% | $1,000.00 | $1,024.75 | $0.15 | $0.40 |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Fund Expenses (Unaudited) (continued)
| | Expense Ratio
(Annualized)1,2 | Effective
Expense Ratio
(Annualized)3,4 | Beginning
Account Value
at 10/1/20 | Ending
Account Value
(Net of Expenses)
at 3/31/212 | Expenses Paid
During Period
10/1/20-3/31/212,5 | Effective
Expenses Paid
During Period
10/1/20-3/31/214,5 |
| Schwab Target 2065 Index Fund6,7 | | | | | | |
| Actual Return | 0.04% | 0.08% | $1,000.00 | $1,021.00 | $0.04 | $0.08 |
| Hypothetical 5% Return | 0.04% | 0.08% | $1,000.00 | $1,024.70 | $0.20 | $0.40 |
| 1 | Based on the most recent six-month expense ratio. |
| 2 | Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. |
| 3 | Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expenses ratios in the prospectus. |
| 4 | Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. |
| 5 | Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 182 days of the period, and divided by the 365 days of the fiscal year. |
| 6 | The expense ratio provided for the fund is for the period from 2/26/21 (commencement of operations) through 3/31/21. See financial note 4. |
| 7 | Actual expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 34 days of the period from commencement of operations on 2/26/21 through 3/31/21, and divided by 365 days of the fiscal year. Hypothetical expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 182 days of the period, and divided by 365 days of the fiscal year. |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.70 | $10.88 | $10.59 | $10.15 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.22 | 0.27 | 0.27 | 0.22 | 0.12 | |
| Net realized and unrealized gains (losses) | 1.82 | (0.19) | 0.23 | 0.34 | 0.10 | |
| Total from investment operations | 2.04 | 0.08 | 0.50 | 0.56 | 0.22 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.21) | (0.25) | (0.20) | (0.12) | (0.07) | |
| Distributions from net realized gains | (0.04) | (0.01) | (0.01) | (0.00) 4 | — | |
| Total distributions | (0.25) | (0.26) | (0.21) | (0.12) | (0.07) | |
| Net asset value at end of period | $12.49 | $10.70 | $10.88 | $10.59 | $10.15 | |
| Total return | 19.04% | 0.58% | 4.81% | 5.57% | 2.26% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.02% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.83% | 2.43% | 2.53% | 2.11% | 1.99% 7 | |
| Portfolio turnover rate | 21% | 19% | 30% | 28% | 2% 5 | |
| Net assets, end of period (x 1,000) | $55,137 | $35,614 | $25,391 | $14,185 | $955 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.0% of net assets |
| |
| U.S. Stocks 23.9% |
| Large-Cap 22.4% |
| Schwab U.S. Large-Cap ETF | 128,592 | 12,348,690 |
| Small-Cap 1.5% |
| Schwab U.S. Small-Cap ETF | 8,025 | 799,851 |
| | | 13,148,541 |
| |
| International Stocks 9.1% |
| Developed-Market Large-Cap 9.1% |
| Schwab International Equity ETF | 133,474 | 5,021,292 |
| |
| Real Assets 1.7% |
| Real Estate 1.7% |
| Schwab U.S. REIT ETF | 23,188 | 952,795 |
| |
| Fixed Income 60.6% |
| Inflation-Protected Bond 6.5% |
| Schwab U.S. TIPS ETF | 58,917 | 3,603,364 |
| Intermediate-Term Bond 45.1% |
| Schwab U.S. Aggregate Bond ETF | 460,928 | 24,867,066 |
| Treasury Bond 9.0% |
| Schwab Short-Term U.S. Treasury ETF | 96,311 | 4,941,717 |
| | | 33,412,147 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 3.7% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 2,036,921 | 2,037,532 |
| Total Affiliated Underlying Funds |
| (Cost $48,230,874) | | 54,572,307 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.8% of net assets |
| |
| Time Deposit 0.8% |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (b) | 449,945 | 449,945 |
| Total Short-Term Investment |
| (Cost $449,945) | | 449,945 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
| TIPS — | Treasury Inflation Protected Securities |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab International Equity ETF | $3,345,065 | $1,674,120 | ($1,566,744) | ($41,608) | $1,610,459 | $5,021,292 | 133,474 | $98,722 |
| Schwab Short-Term U.S. Treasury ETF | 3,149,995 | 2,097,693 | (274,295) | 162 | (31,838) | 4,941,717 | 96,311 | 39,588 |
| Schwab U.S. Aggregate Bond ETF | 15,862,741 | 11,125,639 | (1,729,313) | (5,012) | (386,989) | 24,867,066 | 460,928 | 466,191 |
| Schwab U.S. Large-Cap ETF | 8,039,920 | 4,187,514 | (4,402,996) | 131,338 | 4,392,914 | 12,348,690 | 128,592 | 180,760 |
| Schwab U.S. REIT ETF | 644,520 | 278,118 | (154,408) | (30,472) | 215,037 | 952,795 | 23,188 | 22,185 |
| Schwab U.S. Small-Cap ETF | 512,418 | 111,420 | (261,725) | 12,660 | 425,078 | 799,851 | 8,025 | 8,008 |
| Schwab U.S. TIPS ETF | 2,325,992 | 1,377,893 | (249,795) | 1,426 | 147,848 | 3,603,364 | 58,917 | 33,574 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 1,340,257 | 1,246,918 | (550,000) | (66) | 423 | 2,037,532 | 2,036,921 | 1,341 |
| Total | $35,220,908 | $22,099,315 | ($9,189,276) | $68,428 | $6,372,932 | $54,572,307 | | $850,369 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $54,572,307 | $— | $— | $54,572,307 | |
| Short-Term Investment1 | — | 449,945 | — | 449,945 | |
| Total | $54,572,307 | $449,945 | $— | $55,022,252 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $48,230,874) | | $54,572,307 |
| Investments in unaffiliated issuers, at value (cost $449,945) | | 449,945 |
| Receivables: | | |
| Investments sold | | 447,234 |
| Fund shares sold | | 64,916 |
| Dividends | + | 28 |
| Total assets | | 55,534,430 |
| Liabilities |
| Payables: | | |
| Investments bought | | 395,019 |
| Investment adviser fees | | 1,555 |
| Fund shares redeemed | + | 825 |
| Total liabilities | | 397,399 |
| Net Assets |
| Total assets | | 55,534,430 |
| Total liabilities | – | 397,399 |
| Net assets | | $55,137,031 |
| Net Assets by Source | | |
| Capital received from investors | | 49,073,662 |
| Total distributable earnings | | 6,063,369 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $55,137,031 | | 4,415,971 | | $12.49 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $850,369 |
| Interest received from securities of unaffiliated issuers | + | 67 |
| Total investment income | | 850,436 |
| Expenses |
| Investment adviser fees | + | 36,443 |
| Total expenses | | 36,443 |
| Expense reduction by CSIM and its affiliates | – | 20,585 |
| Net expenses | – | 15,858 |
| Net investment income | | 834,578 |
| Realized and Unrealized Gains (Losses) |
| Net realized gains on sales of affiliated underlying funds | | 68,428 |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 6,372,932 |
| Net realized and unrealized gains | | 6,441,360 |
| Increase in net assets resulting from operations | | $7,275,938 |
Schwab Target Index Funds | Annual Report
Schwab Target 2010 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $834,578 | $738,570 |
| Net realized gains (losses) | | 68,428 | (105,961) |
| Net change in unrealized appreciation (depreciation) | + | 6,372,932 | (959,936) |
| Increase (decrease) in net assets from operations | | 7,275,938 | (327,327) |
| Distributions to Shareholders | |
| Total distributions | | ($992,119) | ($743,254) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 2,108,080 | $25,488,388 | 1,744,332 | $19,661,588 |
| Shares reinvested | | 75,235 | 935,167 | 60,876 | 698,243 |
| Shares redeemed | + | (1,096,596) | (13,184,147) | (808,805) | (9,065,956) |
| Net transactions in fund shares | | 1,086,719 | $13,239,408 | 996,403 | $11,293,875 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 3,329,252 | $35,613,804 | 2,332,849 | $25,390,510 |
| Total increase | + | 1,086,719 | 19,523,227 | 996,403 | 10,223,294 |
| End of period | | 4,415,971 | $55,137,031 | 3,329,252 | $35,613,804 |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.68 | $10.92 | $10.61 | $10.17 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.22 | 0.28 | 0.27 | 0.22 | 0.13 | |
| Net realized and unrealized gains (losses) | 1.97 | (0.26) | 0.22 | 0.38 | 0.12 | |
| Total from investment operations | 2.19 | 0.02 | 0.49 | 0.60 | 0.25 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.22) | (0.25) | (0.17) | (0.15) | (0.08) | |
| Distributions from net realized gains | (0.07) | (0.01) | (0.01) | (0.01) | — | |
| Total distributions | (0.29) | (0.26) | (0.18) | (0.16) | (0.08) | |
| Net asset value at end of period | $12.58 | $10.68 | $10.92 | $10.61 | $10.17 | |
| Total return | 20.52% | (0.02%) | 4.74% | 5.83% | 2.49% 4 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses5 | 0.04% | 0.03% | 0.03% | 0.03% | 0.02% 6 | |
| Gross operating expenses5 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 6 | |
| Net investment income (loss) | 1.85% | 2.45% | 2.54% | 2.06% | 2.15% 6 | |
| Portfolio turnover rate | 30% | 24% | 29% | 47% | 15% 4 | |
| Net assets, end of period (x 1,000) | $73,384 | $57,790 | $45,688 | $20,229 | $797 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Not annualized.
5
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
6
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.9% of net assets |
| |
| U.S. Stocks 25.6% |
| Large-Cap 24.0% |
| Schwab U.S. Large-Cap ETF | 183,179 | 17,590,679 |
| Small-Cap 1.6% |
| Schwab U.S. Small-Cap ETF | 11,747 | 1,170,824 |
| | | 18,761,503 |
| |
| International Stocks 10.2% |
| Developed-Market Large-Cap 10.2% |
| Schwab International Equity ETF | 199,662 | 7,511,284 |
| |
| Real Assets 1.9% |
| Real Estate 1.9% |
| Schwab U.S. REIT ETF | 33,653 | 1,382,802 |
| |
| Fixed Income 57.9% |
| Inflation-Protected Bond 6.2% |
| Schwab U.S. TIPS ETF | 74,770 | 4,572,933 |
| Intermediate-Term Bond 43.3% |
| Schwab U.S. Aggregate Bond ETF | 588,732 | 31,762,091 |
| Treasury Bond 8.4% |
| Schwab Short-Term U.S. Treasury ETF | 120,674 | 6,191,783 |
| | | 42,526,807 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 3.3% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 2,435,779 | 2,436,510 |
| Total Affiliated Underlying Funds |
| (Cost $62,832,947) | | 72,618,906 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.8% of net assets |
| |
| Time Deposit 0.8% |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (b) | 568,631 | 568,631 |
| Total Short-Term Investment |
| (Cost $568,631) | | 568,631 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
| TIPS — | Treasury Inflation Protected Securities |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab International Equity ETF | $6,072,193 | $1,632,892 | ($2,808,974) | ($88,920) | $2,704,093 | $7,511,284 | 199,662 | $161,388 |
| Schwab Short-Term U.S. Treasury ETF | 4,804,838 | 2,114,651 | (683,389) | (2,011) | (42,306) | 6,191,783 | 120,674 | 55,804 |
| Schwab U.S. Aggregate Bond ETF | 24,880,516 | 12,340,741 | (5,071,450) | (16,126) | (371,590) | 31,762,091 | 588,732 | 662,779 |
| Schwab U.S. Large-Cap ETF | 13,915,755 | 4,433,135 | (7,941,577) | 539,963 | 6,643,403 | 17,590,679 | 183,179 | 274,317 |
| Schwab U.S. REIT ETF | 1,132,411 | 239,898 | (283,316) | (56,274) | 350,083 | 1,382,802 | 33,653 | 34,582 |
| Schwab U.S. Small-Cap ETF | 917,983 | 174,178 | (641,500) | 44,477 | 675,686 | 1,170,824 | 11,747 | 12,335 |
| Schwab U.S. TIPS ETF | 3,587,991 | 1,319,894 | (562,866) | 7,445 | 220,469 | 4,572,933 | 74,770 | 45,424 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 1,712,928 | 2,422,689 | (1,700,000) | 572 | 321 | 2,436,510 | 2,435,779 | 1,907 |
| Total | $57,024,615 | $24,678,078 | ($19,693,072) | $429,126 | $10,180,159 | $72,618,906 | | $1,248,536 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $72,618,906 | $— | $— | $72,618,906 | |
| Short-Term Investment1 | — | 568,631 | — | 568,631 | |
| Total | $72,618,906 | $568,631 | $— | $73,187,537 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $62,832,947) | | $72,618,906 |
| Investments in unaffiliated issuers, at value (cost $568,631) | | 568,631 |
| Receivables: | | |
| Investments sold | | 754,786 |
| Fund shares sold | | 102,484 |
| Dividends | + | 34 |
| Total assets | | 74,044,841 |
| Liabilities |
| Payables: | | |
| Investments bought | | 513,334 |
| Investment adviser fees | | 2,106 |
| Fund shares redeemed | + | 145,270 |
| Total liabilities | | 660,710 |
| Net Assets |
| Total assets | | 74,044,841 |
| Total liabilities | – | 660,710 |
| Net assets | | $73,384,131 |
| Net Assets by Source | | |
| Capital received from investors | | 63,843,031 |
| Total distributable earnings | | 9,541,100 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $73,384,131 | | 5,834,352 | | $12.58 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $1,248,536 |
| Interest received from securities of unaffiliated issuers | + | 101 |
| Total investment income | | 1,248,637 |
| Expenses |
| Investment adviser fees | + | 53,031 |
| Total expenses | | 53,031 |
| Expense reduction by CSIM and its affiliates | – | 29,453 |
| Net expenses | – | 23,578 |
| Net investment income | | 1,225,059 |
| Realized and Unrealized Gains (Losses) |
| Net realized gains on sales of affiliated underlying funds | | 429,126 |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 10,180,159 |
| Net realized and unrealized gains | | 10,609,285 |
| Increase in net assets resulting from operations | | $11,834,344 |
Schwab Target Index Funds | Annual Report
Schwab Target 2015 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $1,225,059 | $1,254,328 |
| Net realized gains (losses) | | 429,126 | (134,161) |
| Net change in unrealized appreciation (depreciation) | + | 10,180,159 | (2,026,953) |
| Increase (decrease) in net assets from operations | | 11,834,344 | (906,786) |
| Distributions to Shareholders | |
| Total distributions | | ($1,653,449) | ($1,249,697) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 2,294,441 | $28,073,103 | 2,382,529 | $27,134,552 |
| Shares reinvested | | 125,594 | 1,568,669 | 104,637 | 1,205,409 |
| Shares redeemed | + | (1,997,955) | (24,228,989) | (1,260,697) | (14,081,094) |
| Net transactions in fund shares | | 422,080 | $5,412,783 | 1,226,469 | $14,258,867 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 5,412,272 | $57,790,453 | 4,185,803 | $45,688,069 |
| Total increase | + | 422,080 | 15,593,678 | 1,226,469 | 12,102,384 |
| End of period | | 5,834,352 | $73,384,131 | 5,412,272 | $57,790,453 |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.93 | $11.18 | $10.92 | $10.30 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.23 | 0.29 | 0.27 | 0.23 | 0.16 | |
| Net realized and unrealized gains (losses) | 2.12 | (0.29) | 0.22 | 0.52 | 0.21 | |
| Total from investment operations | 2.35 | 0.00 4 | 0.49 | 0.75 | 0.37 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.21) | (0.25) | (0.23) | (0.13) | (0.07) | |
| Distributions from net realized gains | (0.02) | (0.00) 4 | (0.00) 4 | (0.00) 4 | — | |
| Total distributions | (0.23) | (0.25) | (0.23) | (0.13) | (0.07) | |
| Net asset value at end of period | $13.05 | $10.93 | $11.18 | $10.92 | $10.30 | |
| Total return | 21.51% | (0.17%) | 4.73% | 7.30% | 3.69% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.03% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.86% | 2.46% | 2.48% | 2.15% | 2.68% 7 | |
| Portfolio turnover rate | 13% | 22% | 13% | 21% | 17% 5 | |
| Net assets, end of period (x 1,000) | $277,678 | $172,353 | $129,760 | $70,841 | $5,455 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.05% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.0% of net assets |
| |
| U.S. Stocks 26.6% |
| Large-Cap 24.9% |
| Schwab U.S. Large-Cap ETF | 721,566 | 69,291,983 |
| Small-Cap 1.7% |
| Schwab U.S. Small-Cap ETF | 46,808 | 4,665,354 |
| | | 73,957,337 |
| |
| International Stock 11.2% |
| Developed-Market Large-Cap 11.2% |
| Schwab International Equity ETF | 824,086 | 31,002,115 |
| |
| Real Assets 2.0% |
| Real Estate 2.0% |
| Schwab U.S. REIT ETF | 134,300 | 5,518,387 |
| |
| Fixed Income 56.2% |
| Inflation-Protected Bond 6.0% |
| Schwab U.S. TIPS ETF | 273,923 | 16,753,131 |
| Intermediate-Term Bond 42.2% |
| Schwab U.S. Aggregate Bond ETF | 2,171,783 | 117,167,693 |
| Treasury Bond 8.0% |
| Schwab Short-Term U.S. Treasury ETF | 429,779 | 22,051,960 |
| | | 155,972,784 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 3.0% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 8,379,132 | 8,381,645 |
| Total Affiliated Underlying Funds |
| (Cost $240,897,397) | | 274,832,268 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.9% of net assets |
| |
| Time Deposit 0.9% |
| Sumitomo Mitsui Trust Bank, Limited |
| 0.01%, 04/01/21 (b) | 2,653,823 | 2,653,823 |
| Total Short-Term Investment |
| (Cost $2,653,823) | | 2,653,823 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
| TIPS — | Treasury Inflation Protected Securities |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab International Equity ETF | $19,620,881 | $8,085,994 | ($6,334,376) | ($48,269) | $9,677,885 | $31,002,115 | 824,086 | $613,608 |
| Schwab Short-Term U.S. Treasury ETF | 13,637,994 | 8,741,288 | (181,547) | (886) | (144,889) | 22,051,960 | 429,779 | 180,347 |
| Schwab U.S. Aggregate Bond ETF | 72,234,618 | 50,802,358 | (3,826,471) | (98,642) | (1,944,170) | 117,167,693 | 2,171,783 | 2,234,721 |
| Schwab U.S. Large-Cap ETF | 42,872,979 | 20,061,849 | (18,545,277) | 368,261 | 24,534,171 | 69,291,983 | 721,566 | 1,015,965 |
| Schwab U.S. REIT ETF | 3,541,420 | 1,476,856 | (553,981) | (89,626) | 1,143,718 | 5,518,387 | 134,300 | 126,955 |
| Schwab U.S. Small-Cap ETF | 2,893,363 | 544,111 | (1,353,611) | 143,648 | 2,437,843 | 4,665,354 | 46,808 | 47,980 |
| Schwab U.S. TIPS ETF | 10,353,813 | 5,721,127 | — | — | 678,191 | 16,753,131 | 273,923 | 161,363 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 5,270,141 | 3,109,707 | — | — | 1,797 | 8,381,645 | 8,379,132 | 7,298 |
| Total | $170,425,209 | $98,543,290 | ($30,795,263) | $274,486 | $36,384,546 | $274,832,268 | | $4,388,237 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $274,832,268 | $— | $— | $274,832,268 | |
| Short-Term Investment1 | — | 2,653,823 | — | 2,653,823 | |
| Total | $274,832,268 | $2,653,823 | $— | $277,486,091 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $240,897,397) | | $274,832,268 |
| Investments in unaffiliated issuers, at value (cost $2,653,823) | | 2,653,823 |
| Receivables: | | |
| Investments sold | | 2,088,119 |
| Fund shares sold | | 387,648 |
| Dividends | + | 117 |
| Total assets | | 279,961,975 |
| Liabilities |
| Payables: | | |
| Investments bought | | 2,036,609 |
| Investment adviser fees | | 8,048 |
| Fund shares redeemed | + | 239,099 |
| Total liabilities | | 2,283,756 |
| Net Assets |
| Total assets | | 279,961,975 |
| Total liabilities | – | 2,283,756 |
| Net assets | | $277,678,219 |
| Net Assets by Source | | |
| Capital received from investors | | 244,303,352 |
| Total distributable earnings | | 33,374,867 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $277,678,219 | | 21,278,995 | | $13.05 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $4,388,237 |
| Interest received from securities of unaffiliated issuers | + | 317 |
| Total investment income | | 4,388,554 |
| Expenses |
| Investment adviser fees | + | 185,771 |
| Total expenses | | 185,771 |
| Expense reduction by CSIM and its affiliates | – | 105,231 |
| Net expenses | – | 80,540 |
| Net investment income | | 4,308,014 |
| Realized and Unrealized Gains (Losses) |
| Net realized gains on sales of affiliated underlying funds | | 274,486 |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 36,384,546 |
| Net realized and unrealized gains | | 36,659,032 |
| Increase in net assets resulting from operations | | $40,967,046 |
Schwab Target Index Funds | Annual Report
Schwab Target 2020 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $4,308,014 | $3,894,681 |
| Net realized gains (losses) | | 274,486 | (423,546) |
| Net change in unrealized appreciation (depreciation) | + | 36,384,546 | (6,362,387) |
| Increase (decrease) in net assets from operations | | 40,967,046 | (2,891,252) |
| Distributions to Shareholders | |
| Total distributions | | ($4,687,144) | ($3,756,760) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 11,635,221 | $145,527,249 | 9,139,520 | $106,454,826 |
| Shares reinvested | | 344,207 | 4,454,042 | 305,404 | 3,625,150 |
| Shares redeemed | + | (6,467,255) | (80,935,744) | (5,281,760) | (60,839,073) |
| Net transactions in fund shares | | 5,512,173 | $69,045,547 | 4,163,164 | $49,240,903 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 15,766,822 | $172,352,770 | 11,603,658 | $129,759,879 |
| Total increase | + | 5,512,173 | 105,325,449 | 4,163,164 | 42,592,891 |
| End of period | | 21,278,995 | $277,678,219 | 15,766,822 | $172,352,770 |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.92 | $11.46 | $11.18 | $10.40 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.25 | 0.30 | 0.28 | 0.25 | 0.14 | |
| Net realized and unrealized gains (losses) | 2.90 | (0.61) | 0.23 | 0.68 | 0.34 | |
| Total from investment operations | 3.15 | (0.31) | 0.51 | 0.93 | 0.48 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.23) | (0.23) | (0.23) | (0.15) | (0.08) | |
| Distributions from net realized gains | (0.01) | (0.00) 4 | (0.00) 4 | (0.00) 4 | — | |
| Total distributions | (0.24) | (0.23) | (0.23) | (0.15) | (0.08) | |
| Net asset value at end of period | $13.83 | $10.92 | $11.46 | $11.18 | $10.40 | |
| Total return | 28.91% | (2.89%) | 4.79% | 8.93% | 4.82% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.04% | 0.03% | 0.03% | 0.04% | 0.03% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.90% | 2.50% | 2.46% | 2.22% | 2.41% 7 | |
| Portfolio turnover rate | 15% | 19% | 13% | 14% | 6% 5 | |
| Net assets, end of period (x 1,000) | $443,433 | $264,880 | $154,328 | $84,235 | $1,649 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04%, 0.05%, 0.05%, 0.04% and 0.05% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.9% of net assets |
| |
| U.S. Stocks 33.5% |
| Large-Cap 31.1% |
| Schwab U.S. Large-Cap ETF | 1,439,061 | 138,193,028 |
| Small-Cap 2.4% |
| Schwab U.S. Small-Cap ETF | 105,889 | 10,553,956 |
| | | 148,746,984 |
| |
| International Stocks 15.8% |
| Developed-Market Large-Cap 14.1% |
| Schwab International Equity ETF | 1,666,074 | 62,677,704 |
| Emerging-Market 1.7% |
| Schwab Emerging Markets Equity ETF | 236,692 | 7,522,072 |
| | | 70,199,776 |
| |
| Real Assets 2.6% |
| Real Estate 2.6% |
| Schwab U.S. REIT ETF | 280,460 | 11,524,101 |
| |
| Fixed Income 44.8% |
| Inflation-Protected Bond 2.8% |
| Schwab U.S. TIPS ETF | 203,762 | 12,462,084 |
| Intermediate-Term Bond 37.2% |
| Schwab U.S. Aggregate Bond ETF | 3,052,680 | 164,692,086 |
| Security | Number
of Shares | Value ($) |
| Treasury Bond 4.8% |
| Schwab Short-Term U.S. Treasury ETF | 414,941 | 21,290,623 |
| | | 198,444,793 |
| |
| Money Market Fund 2.2% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 9,718,814 | 9,721,730 |
| Total Affiliated Underlying Funds |
| (Cost $377,558,204) | | 438,637,384 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.6% of net assets |
| |
| Time Deposit 0.6% |
| Bank of Montreal |
| 0.01%, 04/01/21 (b) | 2,623,337 | 2,623,337 |
| Total Short-Term Investment |
| (Cost $2,623,337) | | 2,623,337 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
| TIPS — | Treasury Inflation Protected Securities |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $5,177,652 | $1,223,334 | ($1,660,630) | ($23,049) | $2,804,765 | $7,522,072 | 236,692 | $163,565 |
| Schwab International Equity ETF | 39,522,797 | 15,393,928 | (11,076,531) | (302,543) | 19,140,053 | 62,677,704 | 1,666,074 | 1,191,921 |
| Schwab Short-Term U.S. Treasury ETF | 11,289,245 | 10,470,179 | (345,906) | (1,688) | (121,207) | 21,290,623 | 414,941 | 148,712 |
| Schwab U.S. Aggregate Bond ETF | 94,708,096 | 77,040,003 | (4,125,515) | (51,674) | (2,878,824) | 164,692,086 | 3,052,680 | 2,899,391 |
| Schwab U.S. Large-Cap ETF | 85,347,771 | 35,749,214 | (31,436,286) | (272,604) | 48,804,933 | 138,193,028 | 1,439,061 | 1,988,033 |
| Schwab U.S. REIT ETF | 7,408,243 | 3,098,409 | (1,122,970) | (219,684) | 2,360,103 | 11,524,101 | 280,460 | 261,651 |
| Schwab U.S. Small-Cap ETF | 6,751,902 | 1,837,826 | (3,867,147) | 153,197 | 5,678,178 | 10,553,956 | 105,889 | 108,335 |
| Schwab U.S. TIPS ETF | 6,152,420 | 5,957,398 | — | — | 352,266 | 12,462,084 | 203,762 | 92,331 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 5,409,656 | 4,310,341 | — | — | 1,733 | 9,721,730 | 9,718,814 | 7,426 |
| Total | $261,767,782 | $155,080,632 | ($53,634,985) | ($718,045) | $76,142,000 | $438,637,384 | | $6,861,365 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $438,637,384 | $— | $— | $438,637,384 | |
| Short-Term Investment1 | — | 2,623,337 | — | 2,623,337 | |
| Total | $438,637,384 | $2,623,337 | $— | $441,260,721 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $377,558,204) | | $438,637,384 |
| Investments in unaffiliated issuers, at value (cost $2,623,337) | | 2,623,337 |
| Receivables: | | |
| Investments sold | | 4,192,999 |
| Fund shares sold | | 1,060,130 |
| Dividends | + | 136 |
| Total assets | | 446,513,986 |
| Liabilities |
| Payables: | | |
| Investments bought | | 2,927,165 |
| Investment adviser fees | | 13,014 |
| Fund shares redeemed | + | 140,715 |
| Total liabilities | | 3,080,894 |
| Net Assets |
| Total assets | | 446,513,986 |
| Total liabilities | – | 3,080,894 |
| Net assets | | $443,433,092 |
| Net Assets by Source | | |
| Capital received from investors | | 384,742,841 |
| Total distributable earnings | | 58,690,251 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $443,433,092 | | 32,069,466 | | $13.83 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $6,861,365 |
| Interest received from securities of unaffiliated issuers | + | 480 |
| Total investment income | | 6,861,845 |
| Expenses |
| Investment adviser fees | + | 282,980 |
| Total expenses | | 282,980 |
| Expense reduction by CSIM and its affiliates | – | 158,809 |
| Net expenses | – | 124,171 |
| Net investment income | | 6,737,674 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (718,045) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 76,142,000 |
| Net realized and unrealized gains | | 75,423,955 |
| Increase in net assets resulting from operations | | $82,161,629 |
Schwab Target Index Funds | Annual Report
Schwab Target 2025 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $6,737,674 | $5,351,090 |
| Net realized losses | | (718,045) | (1,630,571) |
| Net change in unrealized appreciation (depreciation) | + | 76,142,000 | (20,706,485) |
| Increase (decrease) in net assets from operations | | 82,161,629 | (16,985,966) |
| Distributions to Shareholders | |
| Total distributions | | ($7,138,221) | ($4,882,701) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 15,334,187 | $200,810,712 | 16,258,147 | $195,983,617 |
| Shares reinvested | | 507,299 | 6,894,197 | 382,547 | 4,709,155 |
| Shares redeemed | + | (8,030,698) | (104,175,236) | (5,847,945) | (68,271,719) |
| Net transactions in fund shares | | 7,810,788 | $103,529,673 | 10,792,749 | $132,421,053 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 24,258,678 | $264,880,011 | 13,465,929 | $154,327,625 |
| Total increase | + | 7,810,788 | 178,553,081 | 10,792,749 | 110,552,386 |
| End of period | | 32,069,466 | $443,433,092 | 24,258,678 | $264,880,011 |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.86 | $11.65 | $11.37 | $10.46 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.26 | 0.31 | 0.28 | 0.26 | 0.15 | |
| Net realized and unrealized gains (losses) | 3.53 | (0.86) | 0.24 | 0.80 | 0.41 | |
| Total from investment operations | 3.79 | (0.55) | 0.52 | 1.06 | 0.56 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.24) | (0.24) | (0.15) | (0.10) | |
| Distributions from net realized gains | (0.00) 4 | (0.00) 4 | — | (0.00) 4 | — | |
| Total distributions | (0.24) | (0.24) | (0.24) | (0.15) | (0.10) | |
| Net asset value at end of period | $14.41 | $10.86 | $11.65 | $11.37 | $10.46 | |
| Total return | 34.98% | (4.99%) | 4.76% | 10.12% | 5.66% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.04% | 0.03% | 0.03% | 0.04% | 0.03% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.94% | 2.53% | 2.46% | 2.30% | 2.49% 7 | |
| Portfolio turnover rate | 13% | 13% | 8% | 8% | 7% 5 | |
| Net assets, end of period (x 1,000) | $622,076 | $352,969 | $201,250 | $109,554 | $3,258 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04%, 0.05%, 0.05%, 0.04% and 0.05% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.0% of net assets |
| |
| U.S. Stocks 40.1% |
| Large-Cap 36.9% |
| Schwab U.S. Large-Cap ETF | 2,393,483 | 229,846,172 |
| Small-Cap 3.2% |
| Schwab U.S. Small-Cap ETF | 197,991 | 19,733,763 |
| | | 249,579,935 |
| |
| International Stocks 20.1% |
| Developed-Market Large-Cap 17.3% |
| Schwab International Equity ETF | 2,849,515 | 107,198,754 |
| Emerging-Market 2.8% |
| Schwab Emerging Markets Equity ETF | 550,924 | 17,508,365 |
| | | 124,707,119 |
| |
| Real Assets 3.2% |
| Real Estate 3.2% |
| Schwab U.S. REIT ETF | 477,297 | 19,612,134 |
| |
| Fixed Income 34.2% |
| Inflation-Protected Bond 0.7% |
| Schwab U.S. TIPS ETF | 74,090 | 4,531,344 |
| Intermediate-Term Bond 30.9% |
| Schwab U.S. Aggregate Bond ETF | 3,563,243 | 192,236,960 |
| Treasury Bond 2.6% |
| Schwab Short-Term U.S. Treasury ETF | 314,700 | 16,147,257 |
| | | 212,915,561 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 1.4% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 8,986,749 | 8,989,445 |
| Total Affiliated Underlying Funds |
| (Cost $522,681,012) | | 615,804,194 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investments 1.1% of net assets |
| |
| Time Deposits 1.1% |
| Australia & New Zealand Banking Group Ltd. |
| 0.01%, 04/01/21 (b) | 774,835 | 774,835 |
| Barclays Capital, Inc. |
| 0.01%, 04/01/21 (b) | 6,208,906 | 6,208,906 |
| Total Short-Term Investments |
| (Cost $6,983,741) | | 6,983,741 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
| TIPS — | Treasury Inflation Protected Securities |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $10,676,557 | $4,230,626 | ($3,058,426) | ($162,767) | $5,822,375 | $17,508,365 | 550,924 | $335,488 |
| Schwab International Equity ETF | 63,000,633 | 25,509,943 | (11,308,236) | (707,327) | 30,703,741 | 107,198,754 | 2,849,515 | 1,912,135 |
| Schwab Short-Term U.S. Treasury ETF | 8,235,675 | 8,222,022 | (221,376) | (1,080) | (87,984) | 16,147,257 | 314,700 | 108,276 |
| Schwab U.S. Aggregate Bond ETF | 104,648,298 | 95,014,977 | (4,029,847) | (74,727) | (3,321,741) | 192,236,960 | 3,563,243 | 3,218,838 |
| Schwab U.S. Large-Cap ETF | 132,644,409 | 57,834,376 | (36,210,035) | (1,006,127) | 76,583,549 | 229,846,172 | 2,393,483 | 3,135,190 |
| Schwab U.S. REIT ETF | 11,802,344 | 5,680,110 | (1,318,222) | (383,009) | 3,830,911 | 19,612,134 | 477,297 | 422,153 |
| Schwab U.S. Small-Cap ETF | 11,642,387 | 3,792,039 | (5,748,586) | (822) | 10,048,745 | 19,733,763 | 197,991 | 189,126 |
| Schwab U.S. TIPS ETF | 1,987,488 | 2,453,258 | — | — | 90,598 | 4,531,344 | 74,090 | 28,194 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 4,479,218 | 4,508,886 | — | — | 1,341 | 8,989,445 | 8,986,749 | 6,215 |
| Total | $349,117,009 | $207,246,237 | ($61,894,728) | ($2,335,859) | $123,671,535 | $615,804,194 | | $9,355,615 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $615,804,194 | $— | $— | $615,804,194 | |
| Short-Term Investments1 | — | 6,983,741 | — | 6,983,741 | |
| Total | $615,804,194 | $6,983,741 | $— | $622,787,935 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $522,681,012) | | $615,804,194 |
| Investments in unaffiliated issuers, at value (cost $6,983,741) | | 6,983,741 |
| Receivables: | | |
| Investments sold | | 5,229,944 |
| Fund shares sold | | 1,606,218 |
| Dividends | + | 126 |
| Total assets | | 629,624,223 |
| Liabilities |
| Payables: | | |
| Investments bought | | 6,696,451 |
| Investment adviser fees | | 18,269 |
| Fund shares redeemed | + | 833,734 |
| Total liabilities | | 7,548,454 |
| Net Assets |
| Total assets | | 629,624,223 |
| Total liabilities | – | 7,548,454 |
| Net assets | | $622,075,769 |
| Net Assets by Source | | |
| Capital received from investors | | 531,458,730 |
| Total distributable earnings | | 90,617,039 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $622,075,769 | | 43,173,992 | | $14.41 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $9,355,615 |
| Interest received from securities of unaffiliated issuers | + | 646 |
| Total investment income | | 9,356,261 |
| Expenses |
| Investment adviser fees | + | 379,669 |
| Total expenses | | 379,669 |
| Expense reduction by CSIM and its affiliates | – | 211,443 |
| Net expenses | – | 168,226 |
| Net investment income | | 9,188,035 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (2,335,859) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 123,671,535 |
| Net realized and unrealized gains | | 121,335,676 |
| Increase in net assets resulting from operations | | $130,523,711 |
Schwab Target Index Funds | Annual Report
Schwab Target 2030 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $9,188,035 | $7,298,415 |
| Net realized losses | | (2,335,859) | (793,980) |
| Net change in unrealized appreciation (depreciation) | + | 123,671,535 | (37,454,839) |
| Increase (decrease) in net assets from operations | | 130,523,711 | (30,950,404) |
| Distributions to Shareholders | |
| Total distributions | | ($9,236,247) | ($6,630,493) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 19,840,138 | $266,949,865 | 20,543,091 | $252,081,474 |
| Shares reinvested | | 638,370 | 8,962,715 | 511,903 | 6,449,978 |
| Shares redeemed | + | (9,799,265) | (128,093,640) | (5,831,022) | (69,231,522) |
| Net transactions in fund shares | | 10,679,243 | $147,818,940 | 15,223,972 | $189,299,930 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 32,494,749 | $352,969,365 | 17,270,777 | $201,250,332 |
| Total increase | + | 10,679,243 | 269,106,404 | 15,223,972 | 151,719,033 |
| End of period | | 43,173,992 | $622,075,769 | 32,494,749 | $352,969,365 |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.81 | $11.82 | $11.53 | $10.54 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.26 | 0.31 | 0.29 | 0.26 | 0.12 | |
| Net realized and unrealized gains (losses) | 4.04 | (1.06) | 0.22 | 0.90 | 0.52 | |
| Total from investment operations | 4.30 | (0.75) | 0.51 | 1.16 | 0.64 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.26) | (0.22) | (0.17) | (0.10) | |
| Distributions from net realized gains | (0.01) | (0.00) 4 | (0.00) 4 | (0.00) 4 | — | |
| Total distributions | (0.25) | (0.26) | (0.22) | (0.17) | (0.10) | |
| Net asset value at end of period | $14.86 | $10.81 | $11.82 | $11.53 | $10.54 | |
| Total return | 39.84% | (6.72%) | 4.68% | 10.96% | 6.44% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.04% | 0.03% | 0.03% | 0.04% | 0.03% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.93% | 2.53% | 2.49% | 2.29% | 2.04% 7 | |
| Portfolio turnover rate | 12% | 12% | 6% | 14% | 13% 5 | |
| Net assets, end of period (x 1,000) | $372,100 | $196,194 | $126,200 | $62,526 | $1,904 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04%, 0.05%, 0.05%, 0.04% and 0.05% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.9% of net assets |
| |
| U.S. Stocks 44.8% |
| Large-Cap 40.8% |
| Schwab U.S. Large-Cap ETF | 1,582,222 | 151,940,779 |
| Small-Cap 4.0% |
| Schwab U.S. Small-Cap ETF | 147,615 | 14,712,787 |
| | | 166,653,566 |
| |
| International Stocks 23.4% |
| Developed-Market Large-Cap 19.6% |
| Schwab International Equity ETF | 1,935,477 | 72,812,645 |
| Emerging-Market 3.8% |
| Schwab Emerging Markets Equity ETF | 446,042 | 14,175,215 |
| | | 86,987,860 |
| |
| Real Assets 3.6% |
| Real Estate 3.6% |
| Schwab U.S. REIT ETF | 324,816 | 13,346,689 |
| |
| Fixed Income 26.2% |
| Intermediate-Term Bond 24.7% |
| Schwab U.S. Aggregate Bond ETF | 1,705,189 | 91,994,947 |
| Treasury Bond 1.5% |
| Schwab Short-Term U.S. Treasury ETF | 110,614 | 5,675,604 |
| | | 97,670,551 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 0.9% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 3,482,604 | 3,483,649 |
| Total Affiliated Underlying Funds |
| (Cost $306,837,525) | | 368,142,315 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 1.0% of net assets |
| |
| Time Deposit 1.0% |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (b) | 3,625,641 | 3,625,641 |
| Total Short-Term Investment |
| (Cost $3,625,641) | | 3,625,641 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $7,895,801 | $3,892,989 | ($1,988,940) | ($127,158) | $4,502,523 | $14,175,215 | 446,042 | $262,867 |
| Schwab International Equity ETF | 39,434,114 | 20,038,331 | (6,406,901) | (237,263) | 19,984,364 | 72,812,645 | 1,935,477 | 1,260,852 |
| Schwab Short-Term U.S. Treasury ETF | 2,847,064 | 3,175,245 | (314,658) | (1,270) | (30,777) | 5,675,604 | 110,614 | 38,720 |
| Schwab U.S. Aggregate Bond ETF | 45,947,858 | 48,576,282 | (778,914) | (17,327) | (1,732,952) | 91,994,947 | 1,705,189 | 1,484,791 |
| Schwab U.S. Large-Cap ETF | 80,768,537 | 41,500,288 | (18,505,882) | (330,057) | 48,507,893 | 151,940,779 | 1,582,222 | 2,003,589 |
| Schwab U.S. REIT ETF | 7,376,649 | 4,043,772 | (393,147) | (56,644) | 2,376,059 | 13,346,689 | 324,816 | 274,831 |
| Schwab U.S. Small-Cap ETF | 8,148,352 | 3,666,238 | (4,449,927) | (60,534) | 7,408,658 | 14,712,787 | 147,615 | 138,104 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 1,280,452 | 2,202,905 | — | — | 292 | 3,483,649 | 3,482,604 | 1,809 |
| Total | $193,698,827 | $127,096,050 | ($32,838,369) | ($830,253) | $81,016,060 | $368,142,315 | | $5,465,563 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $368,142,315 | $— | $— | $368,142,315 | |
| Short-Term Investment1 | — | 3,625,641 | — | 3,625,641 | |
| Total | $368,142,315 | $3,625,641 | $— | $371,767,956 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $306,837,525) | | $368,142,315 |
| Investments in unaffiliated issuers, at value (cost $3,625,641) | | 3,625,641 |
| Receivables: | | |
| Investments sold | | 2,847,210 |
| Fund shares sold | | 809,612 |
| Dividends | + | 49 |
| Total assets | | 375,424,827 |
| Liabilities |
| Payables: | | |
| Investments bought | | 3,254,413 |
| Investment adviser fees | | 10,973 |
| Fund shares redeemed | + | 59,297 |
| Total liabilities | | 3,324,683 |
| Net Assets |
| Total assets | | 375,424,827 |
| Total liabilities | – | 3,324,683 |
| Net assets | | $372,100,144 |
| Net Assets by Source | | |
| Capital received from investors | | 311,805,789 |
| Total distributable earnings | | 60,294,355 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $372,100,144 | | 25,047,332 | | $14.86 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $5,465,563 |
| Interest received from securities of unaffiliated issuers | + | 368 |
| Total investment income | | 5,465,931 |
| Expenses |
| Investment adviser fees | + | 222,627 |
| Total expenses | | 222,627 |
| Expense reduction by CSIM and its affiliates | – | 123,921 |
| Net expenses | – | 98,706 |
| Net investment income | | 5,367,225 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (830,253) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 81,016,060 |
| Net realized and unrealized gains | | 80,185,807 |
| Increase in net assets resulting from operations | | $85,553,032 |
Schwab Target Index Funds | Annual Report
Schwab Target 2035 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $5,367,225 | $4,289,393 |
| Net realized losses | | (830,253) | (378,604) |
| Net change in unrealized appreciation (depreciation) | + | 81,016,060 | (24,444,622) |
| Increase (decrease) in net assets from operations | | 85,553,032 | (20,533,833) |
| Distributions to Shareholders | |
| Total distributions | | ($5,583,495) | ($3,962,275) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 11,722,751 | $160,905,162 | 10,934,988 | $136,055,299 |
| Shares reinvested | | 378,126 | 5,433,666 | 298,511 | 3,829,893 |
| Shares redeemed | + | (5,196,060) | (70,402,360) | (3,769,332) | (45,395,356) |
| Net transactions in fund shares | | 6,904,817 | $95,936,468 | 7,464,167 | $94,489,836 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 18,142,515 | $196,194,139 | 10,678,348 | $126,200,411 |
| Total increase | + | 6,904,817 | 175,906,005 | 7,464,167 | 69,993,728 |
| End of period | | 25,047,332 | $372,100,144 | 18,142,515 | $196,194,139 |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.76 | $11.95 | $11.69 | $10.59 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.26 | 0.32 | 0.29 | 0.27 | 0.15 | |
| Net realized and unrealized gains (losses) | 4.48 | (1.26) | 0.21 | 1.00 | 0.55 | |
| Total from investment operations | 4.74 | (0.94) | 0.50 | 1.27 | 0.70 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.25) | (0.25) | (0.24) | (0.17) | (0.11) | |
| Distributions from net realized gains | (0.01) | (0.00) 4 | — | (0.00) 4 | — | |
| Total distributions | (0.26) | (0.25) | (0.24) | (0.17) | (0.11) | |
| Net asset value at end of period | $15.24 | $10.76 | $11.95 | $11.69 | $10.59 | |
| Total return | 44.07% | (8.20%) | 4.49% | 11.97% | 7.09% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.04% | 0.03% | 0.03% | 0.04% | 0.03% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.93% | 2.54% | 2.48% | 2.33% | 2.48% 7 | |
| Portfolio turnover rate | 9% | 7% | 2% | 15% | 8% 5 | |
| Net assets, end of period (x 1,000) | $473,638 | $249,144 | $143,404 | $72,830 | $1,514 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04%, 0.05%, 0.05%, 0.04% and 0.05% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.9% of net assets |
| |
| U.S. Stocks 48.6% |
| Large-Cap 43.8% |
| Schwab U.S. Large-Cap ETF | 2,160,978 | 207,518,717 |
| Small-Cap 4.8% |
| Schwab U.S. Small-Cap ETF | 228,015 | 22,726,255 |
| | | 230,244,972 |
| |
| International Stocks 26.3% |
| Developed-Market Large-Cap 21.5% |
| Schwab International Equity ETF | 2,703,129 | 101,691,713 |
| Emerging-Market 4.8% |
| Schwab Emerging Markets Equity ETF | 716,611 | 22,773,898 |
| | | 124,465,611 |
| |
| Real Assets 3.9% |
| Real Estate 3.9% |
| Schwab U.S. REIT ETF | 452,818 | 18,606,292 |
| |
| Fixed Income 19.6% |
| Intermediate-Term Bond 18.6% |
| Schwab U.S. Aggregate Bond ETF | 1,629,275 | 87,899,386 |
| Treasury Bond 1.0% |
| Schwab Short-Term U.S. Treasury ETF | 94,813 | 4,864,855 |
| | | 92,764,241 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 0.5% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 2,363,565 | 2,364,274 |
| Total Affiliated Underlying Funds |
| (Cost $386,177,961) | | 468,445,390 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investments 1.1% of net assets |
| |
| Time Deposits 1.1% |
| Australia & New Zealand Banking Group Ltd. |
| 0.01%, 04/01/21 (b) | 4,718,635 | 4,718,635 |
| JPMorgan Chase Bank |
| 0.01%, 04/01/21 (b) | 684,798 | 684,798 |
| Total Short-Term Investments |
| (Cost $5,403,433) | | 5,403,433 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $12,410,131 | $6,453,155 | ($3,011,327) | ($243,907) | $7,165,846 | $22,773,898 | 716,611 | $414,012 |
| Schwab International Equity ETF | 54,705,140 | 25,128,962 | (5,575,560) | (270,668) | 27,703,839 | 101,691,713 | 2,703,129 | 1,755,808 |
| Schwab Short-Term U.S. Treasury ETF | 2,345,748 | 2,708,200 | (162,712) | (794) | (25,587) | 4,864,855 | 94,813 | 32,191 |
| Schwab U.S. Aggregate Bond ETF | 43,605,294 | 46,818,460 | (873,380) | (16,992) | (1,633,996) | 87,899,386 | 1,629,275 | 1,417,081 |
| Schwab U.S. Large-Cap ETF | 109,484,620 | 47,279,287 | (14,638,713) | (534,157) | 65,927,680 | 207,518,717 | 2,160,978 | 2,751,993 |
| Schwab U.S. REIT ETF | 10,225,259 | 5,446,698 | (286,930) | (43,784) | 3,265,049 | 18,606,292 | 452,818 | 382,894 |
| Schwab U.S. Small-Cap ETF | 12,278,968 | 4,562,399 | (5,291,732) | (38,682) | 11,215,302 | 22,726,255 | 228,015 | 211,007 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 1,161,453 | 1,202,476 | — | — | 345 | 2,364,274 | 2,363,565 | 1,503 |
| Total | $246,216,613 | $139,599,637 | ($29,840,354) | ($1,148,984) | $113,618,478 | $468,445,390 | | $6,966,489 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $468,445,390 | $— | $— | $468,445,390 | |
| Short-Term Investments1 | — | 5,403,433 | — | 5,403,433 | |
| Total | $468,445,390 | $5,403,433 | $— | $473,848,823 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $386,177,961) | | $468,445,390 |
| Investments in unaffiliated issuers, at value (cost $5,403,433) | | 5,403,433 |
| Receivables: | | |
| Investments sold | | 2,108,995 |
| Fund shares sold | | 1,359,636 |
| Dividends | + | 33 |
| Total assets | | 477,317,487 |
| Liabilities |
| Payables: | | |
| Investments bought | | 3,432,493 |
| Investment adviser fees | | 13,786 |
| Fund shares redeemed | + | 232,788 |
| Total liabilities | | 3,679,067 |
| Net Assets |
| Total assets | | 477,317,487 |
| Total liabilities | – | 3,679,067 |
| Net assets | | $473,638,420 |
| Net Assets by Source | | |
| Capital received from investors | | 392,016,289 |
| Total distributable earnings | | 81,622,131 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $473,638,420 | | 31,082,509 | | $15.24 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $6,966,489 |
| Interest received from securities of unaffiliated issuers | + | 461 |
| Total investment income | | 6,966,950 |
| Expenses |
| Investment adviser fees | + | 283,685 |
| Total expenses | | 283,685 |
| Expense reduction by CSIM and its affiliates | – | 159,135 |
| Net expenses | – | 124,550 |
| Net investment income | | 6,842,400 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (1,148,984) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 113,618,478 |
| Net realized and unrealized gains | | 112,469,494 |
| Increase in net assets resulting from operations | | $119,311,894 |
Schwab Target Index Funds | Annual Report
Schwab Target 2040 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $6,842,400 | $5,257,322 |
| Net realized losses | | (1,148,984) | (95,272) |
| Net change in unrealized appreciation (depreciation) | + | 113,618,478 | (36,484,033) |
| Increase (decrease) in net assets from operations | | 119,311,894 | (31,321,983) |
| Distributions to Shareholders | |
| Total distributions | | ($6,957,762) | ($4,789,625) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 13,428,778 | $186,407,776 | 14,919,097 | $186,921,655 |
| Shares reinvested | | 465,178 | 6,814,844 | 358,722 | 4,674,150 |
| Shares redeemed | + | (5,964,631) | (81,082,577) | (4,122,683) | (49,744,250) |
| Net transactions in fund shares | | 7,929,325 | $112,140,043 | 11,155,136 | $141,851,555 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 23,153,184 | $249,144,245 | 11,998,048 | $143,404,298 |
| Total increase | + | 7,929,325 | 224,494,175 | 11,155,136 | 105,739,947 |
| End of period | | 31,082,509 | $473,638,420 | 23,153,184 | $249,144,245 |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.68 | $12.05 | $11.81 | $10.64 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.27 | 0.32 | 0.29 | 0.28 | 0.10 | |
| Net realized and unrealized gains (losses) | 4.86 | (1.43) | 0.19 | 1.06 | 0.65 | |
| Total from investment operations | 5.13 | (1.11) | 0.48 | 1.34 | 0.75 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.26) | (0.24) | (0.17) | (0.11) | |
| Distributions from net realized gains | (0.00) 4 | (0.00) 4 | (0.00) 4 | (0.00) 4 | — | |
| Total distributions | (0.24) | (0.26) | (0.24) | (0.17) | (0.11) | |
| Net asset value at end of period | $15.57 | $10.68 | $12.05 | $11.81 | $10.64 | |
| Total return | 48.20% | (9.63%) | 4.33% | 12.57% | 7.51% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.02% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.93% | 2.54% | 2.43% | 2.39% | 1.68% 7 | |
| Portfolio turnover rate | 6% | 6% | 7% | 11% | 8% 5 | |
| Net assets, end of period (x 1,000) | $274,502 | $135,960 | $84,790 | $44,817 | $1,261 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.9% of net assets |
| |
| U.S. Stocks 52.1% |
| Large-Cap 46.6% |
| Schwab U.S. Large-Cap ETF | 1,331,757 | 127,888,625 |
| Small-Cap 5.5% |
| Schwab U.S. Small-Cap ETF | 152,036 | 15,153,428 |
| | | 143,042,053 |
| |
| International Stocks 29.1% |
| Developed-Market Large-Cap 23.3% |
| Schwab International Equity ETF | 1,701,430 | 64,007,797 |
| Emerging-Market 5.8% |
| Schwab Emerging Markets Equity ETF | 497,422 | 15,808,071 |
| | | 79,815,868 |
| |
| Real Assets 4.4% |
| Real Estate 4.4% |
| Schwab U.S. REIT ETF | 290,295 | 11,928,221 |
| |
| Fixed Income 13.3% |
| Intermediate-Term Bond 12.7% |
| Schwab U.S. Aggregate Bond ETF | 645,600 | 34,830,120 |
| Treasury Bond 0.6% |
| Schwab Short-Term U.S. Treasury ETF | 33,054 | 1,696,001 |
| | | 36,526,121 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 0.0% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 45,979 | 45,993 |
| Total Affiliated Underlying Funds |
| (Cost $219,957,984) | | 271,358,256 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investments 1.0% of net assets |
| |
| Time Deposits 1.0% |
| Bank of Montreal |
| 0.01%, 04/01/21 (b) | 2,735,135 | 2,735,135 |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (b) | 23,422 | 23,422 |
| Total Short-Term Investments |
| (Cost $2,758,557) | | 2,758,557 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $8,156,764 | $4,705,968 | ($1,683,762) | ($130,464) | $4,759,565 | $15,808,071 | 497,422 | $283,714 |
| Schwab International Equity ETF | 32,328,243 | 16,793,537 | (1,760,378) | (79,955) | 16,726,350 | 64,007,797 | 1,701,430 | 1,075,004 |
| Schwab Short-Term U.S. Treasury ETF | 754,171 | 950,688 | — | — | (8,858) | 1,696,001 | 33,054 | 10,502 |
| Schwab U.S. Aggregate Bond ETF | 16,214,248 | 19,565,642 | (254,446) | (5,814) | (689,510) | 34,830,120 | 645,600 | 543,597 |
| Schwab U.S. Large-Cap ETF | 63,162,286 | 31,981,064 | (5,784,243) | (229,428) | 38,758,946 | 127,888,625 | 1,331,757 | 1,641,279 |
| Schwab U.S. REIT ETF | 6,030,806 | 3,901,763 | — | — | 1,995,652 | 11,928,221 | 290,295 | 233,628 |
| Schwab U.S. Small-Cap ETF | 7,762,931 | 3,398,115 | (3,241,488) | (56,969) | 7,290,839 | 15,153,428 | 152,036 | 138,466 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 45,716 | 259 | — | — | 18 | 45,993 | 45,979 | 23 |
| Total | $134,455,165 | $81,297,036 | ($12,724,317) | ($502,630) | $68,833,002 | $271,358,256 | | $3,926,213 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $271,358,256 | $— | $— | $271,358,256 | |
| Short-Term Investments1 | — | 2,758,557 | — | 2,758,557 | |
| Total | $271,358,256 | $2,758,557 | $— | $274,116,813 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $219,957,984) | | $271,358,256 |
| Investments in unaffiliated issuers, at value (cost $2,758,557) | | 2,758,557 |
| Receivables: | | |
| Investments sold | | 847,749 |
| Fund shares sold | + | 825,978 |
| Total assets | | 275,790,540 |
| Liabilities |
| Payables: | | |
| Investments bought | | 1,158,112 |
| Investment adviser fees | | 7,973 |
| Fund shares redeemed | + | 122,099 |
| Total liabilities | | 1,288,184 |
| Net Assets |
| Total assets | | 275,790,540 |
| Total liabilities | – | 1,288,184 |
| Net assets | | $274,502,356 |
| Net Assets by Source | | |
| Capital received from investors | | 223,739,897 |
| Total distributable earnings | | 50,762,459 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $274,502,356 | | 17,625,057 | | $15.57 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $3,926,213 |
| Interest received from securities of unaffiliated issuers | + | 186 |
| Total investment income | | 3,926,399 |
| Expenses |
| Investment adviser fees | + | 160,024 |
| Total expenses | | 160,024 |
| Expense reduction by CSIM and its affiliates | – | 90,557 |
| Net expenses | – | 69,467 |
| Net investment income | | 3,856,932 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (502,630) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 68,833,002 |
| Net realized and unrealized gains | | 68,330,372 |
| Increase in net assets resulting from operations | | $72,187,304 |
Schwab Target Index Funds | Annual Report
Schwab Target 2045 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $3,856,932 | $3,037,721 |
| Net realized losses | | (502,630) | (384,291) |
| Net change in unrealized appreciation (depreciation) | + | 68,833,002 | (20,788,149) |
| Increase (decrease) in net assets from operations | | 72,187,304 | (18,134,719) |
| Distributions to Shareholders | |
| Total distributions | | ($3,841,391) | ($2,805,470) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 7,425,308 | $104,668,863 | 7,299,115 | $91,442,977 |
| Shares reinvested | | 249,308 | 3,709,701 | 206,779 | 2,725,348 |
| Shares redeemed | + | (2,774,172) | (38,182,388) | (1,816,811) | (22,057,625) |
| Net transactions in fund shares | | 4,900,444 | $70,196,176 | 5,689,083 | $72,110,700 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 12,724,613 | $135,960,267 | 7,035,530 | $84,789,756 |
| Total increase | + | 4,900,444 | 138,542,089 | 5,689,083 | 51,170,511 |
| End of period | | 17,625,057 | $274,502,356 | 12,724,613 | $135,960,267 |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.63 | $12.09 | $11.85 | $10.65 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.27 | 0.32 | 0.29 | 0.28 | 0.15 | |
| Net realized and unrealized gains (losses) | 5.08 | (1.52) | 0.18 | 1.09 | 0.62 | |
| Total from investment operations | 5.35 | (1.20) | 0.47 | 1.37 | 0.77 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.26) | (0.23) | (0.17) | (0.12) | |
| Distributions from net realized gains | (0.01) | (0.00) 4 | — | (0.00) 4 | — | |
| Total distributions | (0.25) | (0.26) | (0.23) | (0.17) | (0.12) | |
| Net asset value at end of period | $15.73 | $10.63 | $12.09 | $11.85 | $10.65 | |
| Total return | 50.43% | (10.35%) | 4.23% | 12.85% | 7.80% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.02% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.93% | 2.55% | 2.48% | 2.37% | 2.54% 7 | |
| Portfolio turnover rate | 6% | 3% | 0% 8 | 15% | 4% 5 | |
| Net assets, end of period (x 1,000) | $321,048 | $146,944 | $88,727 | $37,619 | $793 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
8
Less than 0.5%
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.2% of net assets |
| |
| U.S. Stocks 54.2% |
| Large-Cap 48.1% |
| Schwab U.S. Large-Cap ETF | 1,607,815 | 154,398,474 |
| Small-Cap 6.1% |
| Schwab U.S. Small-Cap ETF | 196,289 | 19,564,125 |
| | | 173,962,599 |
| |
| International Stocks 30.9% |
| Developed-Market Large-Cap 24.4% |
| Schwab International Equity ETF | 2,086,433 | 78,491,609 |
| Emerging-Market 6.5% |
| Schwab Emerging Markets Equity ETF | 653,143 | 20,756,885 |
| | | 99,248,494 |
| |
| Real Assets 4.6% |
| Real Estate 4.6% |
| Schwab U.S. REIT ETF | 354,542 | 14,568,131 |
| |
| Fixed Income 9.5% |
| Intermediate-Term Bond 9.1% |
| Schwab U.S. Aggregate Bond ETF | 545,226 | 29,414,943 |
| Treasury Bond 0.4% |
| Schwab Short-Term U.S. Treasury ETF | 22,720 | 1,165,763 |
| | | 30,580,706 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 0.0% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 62,915 | 62,934 |
| Total Affiliated Underlying Funds |
| (Cost $258,839,297) | | 318,422,864 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investments 1.0% of net assets |
| |
| Time Deposits 1.0% |
| Royal Bank of Canada |
| 0.01%, 04/01/21 (b) | 187,484 | 187,484 |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (b) | 3,197,015 | 3,197,015 |
| Total Short-Term Investments |
| (Cost $3,384,499) | | 3,384,499 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $9,729,493 | $7,229,876 | ($1,939,315) | ($185,082) | $5,921,913 | $20,756,885 | 653,143 | $357,662 |
| Schwab International Equity ETF | 36,467,605 | 24,116,092 | (1,657,947) | (119,572) | 19,685,431 | 78,491,609 | 2,086,433 | 1,277,765 |
| Schwab Short-Term U.S. Treasury ETF | 627,019 | 681,001 | (135,697) | (293) | (6,267) | 1,165,763 | 22,720 | 8,022 |
| Schwab U.S. Aggregate Bond ETF | 12,875,395 | 17,420,684 | (277,926) | (4,070) | (599,140) | 29,414,943 | 545,226 | 451,227 |
| Schwab U.S. Large-Cap ETF | 70,233,844 | 44,824,492 | (5,226,976) | (284,156) | 44,851,270 | 154,398,474 | 1,607,815 | 1,935,268 |
| Schwab U.S. REIT ETF | 6,725,680 | 5,512,423 | — | — | 2,330,028 | 14,568,131 | 354,542 | 279,015 |
| Schwab U.S. Small-Cap ETF | 9,061,389 | 5,437,486 | (3,748,023) | (123,158) | 8,936,431 | 19,564,125 | 196,289 | 172,174 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 62,679 | 230 | — | — | 25 | 62,934 | 62,915 | 61 |
| Total | $145,783,104 | $105,222,284 | ($12,985,884) | ($716,331) | $81,119,691 | $318,422,864 | | $4,481,194 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $318,422,864 | $— | $— | $318,422,864 | |
| Short-Term Investments1 | — | 3,384,499 | — | 3,384,499 | |
| Total | $318,422,864 | $3,384,499 | $— | $321,807,363 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $258,839,297) | | $318,422,864 |
| Investments in unaffiliated issuers, at value (cost $3,384,499) | | 3,384,499 |
| Receivables: | | |
| Investments sold | | 462,670 |
| Fund shares sold | + | 1,042,419 |
| Total assets | | 323,312,452 |
| Liabilities |
| Payables: | | |
| Investments bought | | 2,077,861 |
| Investment adviser fees | | 9,067 |
| Fund shares redeemed | + | 177,348 |
| Total liabilities | | 2,264,276 |
| Net Assets |
| Total assets | | 323,312,452 |
| Total liabilities | – | 2,264,276 |
| Net assets | | $321,048,176 |
| Net Assets by Source | | |
| Capital received from investors | | 261,723,882 |
| Total distributable earnings | | 59,324,294 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $321,048,176 | | 20,409,263 | | $15.73 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $4,481,194 |
| Interest received from securities of unaffiliated issuers | + | 199 |
| Total investment income | | 4,481,393 |
| Expenses |
| Investment adviser fees | + | 182,074 |
| Total expenses | | 182,074 |
| Expense reduction by CSIM and its affiliates | – | 104,464 |
| Net expenses | – | 77,610 |
| Net investment income | | 4,403,783 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (716,331) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 81,119,691 |
| Net realized and unrealized gains | | 80,403,360 |
| Increase in net assets resulting from operations | | $84,807,143 |
Schwab Target Index Funds | Annual Report
Schwab Target 2050 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $4,403,783 | $3,239,438 |
| Net realized gains (losses) | | (716,331) | 7,192 |
| Net change in unrealized appreciation (depreciation) | + | 81,119,691 | (24,190,436) |
| Increase (decrease) in net assets from operations | | 84,807,143 | (20,943,806) |
| Distributions to Shareholders | |
| Total distributions | | ($4,431,058) | ($2,976,899) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 10,144,672 | $142,622,509 | 8,524,439 | $107,038,772 |
| Shares reinvested | | 290,416 | 4,350,434 | 219,241 | 2,904,936 |
| Shares redeemed | + | (3,849,108) | (53,244,708) | (2,257,570) | (27,806,155) |
| Net transactions in fund shares | | 6,585,980 | $93,728,235 | 6,486,110 | $82,137,553 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 13,823,283 | $146,943,856 | 7,337,173 | $88,727,008 |
| Total increase | + | 6,585,980 | 174,104,320 | 6,486,110 | 58,216,848 |
| End of period | | 20,409,263 | $321,048,176 | 13,823,283 | $146,943,856 |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.60 | $12.14 | $11.91 | $10.67 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.27 | 0.32 | 0.31 | 0.27 | 0.15 | |
| Net realized and unrealized gains (losses) | 5.25 | (1.60) | 0.15 | 1.15 | 0.65 | |
| Total from investment operations | 5.52 | (1.28) | 0.46 | 1.42 | 0.80 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.26) | (0.23) | (0.18) | (0.13) | |
| Distributions from net realized gains | (0.00) 4 | (0.00) 4 | — | (0.00) 4 | — | |
| Total distributions | (0.24) | (0.26) | (0.23) | (0.18) | (0.13) | |
| Net asset value at end of period | $15.88 | $10.60 | $12.14 | $11.91 | $10.67 | |
| Total return | 52.24% | (10.96%) | 4.15% | 13.25% | 8.03% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.02% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.92% | 2.57% | 2.60% | 2.33% | 2.53% 7 | |
| Portfolio turnover rate | 6% | 3% | 6% | 23% | 14% 5 | |
| Net assets, end of period (x 1,000) | $189,841 | $84,957 | $50,403 | $17,713 | $147 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.3% of net assets |
| |
| U.S. Stocks 55.4% |
| Large-Cap 48.9% |
| Schwab U.S. Large-Cap ETF | 967,730 | 92,931,112 |
| Small-Cap 6.5% |
| Schwab U.S. Small-Cap ETF | 122,963 | 12,255,722 |
| | | 105,186,834 |
| |
| International Stocks 32.1% |
| Developed-Market Large-Cap 25.2% |
| Schwab International Equity ETF | 1,269,538 | 47,760,020 |
| Emerging-Market 6.9% |
| Schwab Emerging Markets Equity ETF | 412,512 | 13,109,631 |
| | | 60,869,651 |
| |
| Real Assets 4.7% |
| Real Estate 4.7% |
| Schwab U.S. REIT ETF | 215,998 | 8,875,358 |
| |
| Fixed Income 7.1% |
| Intermediate-Term Bond 6.8% |
| Schwab U.S. Aggregate Bond ETF | 240,421 | 12,970,713 |
| Treasury Bond 0.3% |
| Schwab Short-Term U.S. Treasury ETF | 11,209 | 575,134 |
| | | 13,545,847 |
| |
| Security | Number
of Shares | Value ($) |
| Money Market Fund 0.0% |
| Schwab Variable Share Price Money Fund, Ultra Shares 0.03% (a) | 66,679 | 66,698 |
| Total Affiliated Underlying Funds |
| (Cost $152,783,476) | | 188,544,388 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.7% of net assets |
| |
| Time Deposit 0.7% |
| Sumitomo Mitsui Trust Bank, Limited |
| 0.01%, 04/01/21 (b) | 1,377,131 | 1,377,131 |
| Total Short-Term Investment |
| (Cost $1,377,131) | | 1,377,131 |
| (a) | The rate shown is the 7-day yield. |
| (b) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $6,001,197 | $4,766,533 | ($1,227,860) | ($78,137) | $3,647,898 | $13,109,631 | 412,512 | $220,584 |
| Schwab International Equity ETF | 21,666,246 | 15,549,666 | (1,207,082) | (53,735) | 11,804,925 | 47,760,020 | 1,269,538 | 763,156 |
| Schwab Short-Term U.S. Treasury ETF | 266,254 | 585,738 | (274,084) | 4,430 | (7,204) | 575,134 | 11,209 | 3,311 |
| Schwab U.S. Aggregate Bond ETF | 5,545,092 | 7,939,179 | (239,527) | (3,848) | (270,183) | 12,970,713 | 240,421 | 196,898 |
| Schwab U.S. Large-Cap ETF | 41,351,835 | 28,477,985 | (3,393,701) | (151,891) | 26,646,884 | 92,931,112 | 967,730 | 1,149,292 |
| Schwab U.S. REIT ETF | 4,030,883 | 3,440,834 | — | — | 1,403,641 | 8,875,358 | 215,998 | 166,950 |
| Schwab U.S. Small-Cap ETF | 5,451,692 | 3,389,435 | (2,002,233) | (85,332) | 5,502,160 | 12,255,722 | 122,963 | 105,770 |
| Schwab Variable Share Price Money Fund, Ultra Shares | 66,531 | 141 | — | — | 26 | 66,698 | 66,679 | 84 |
| Total | $84,379,730 | $64,149,511 | ($8,344,487) | ($368,513) | $48,728,147 | $188,544,388 | | $2,606,045 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $188,544,388 | $— | $— | $188,544,388 | |
| Short-Term Investment1 | — | 1,377,131 | — | 1,377,131 | |
| Total | $188,544,388 | $1,377,131 | $— | $189,921,519 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $152,783,476) | | $188,544,388 |
| Investments in unaffiliated issuers, at value (cost $1,377,131) | | 1,377,131 |
| Receivables: | | |
| Investments sold | | 318,147 |
| Fund shares sold | + | 623,019 |
| Total assets | | 190,862,685 |
| Liabilities |
| Payables: | | |
| Investments bought | | 917,576 |
| Investment adviser fees | | 5,303 |
| Fund shares redeemed | + | 98,559 |
| Total liabilities | | 1,021,438 |
| Net Assets |
| Total assets | | 190,862,685 |
| Total liabilities | – | 1,021,438 |
| Net assets | | $189,841,247 |
| Net Assets by Source | | |
| Capital received from investors | | 154,560,914 |
| Total distributable earnings | | 35,280,333 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $189,841,247 | | 11,958,355 | | $15.88 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $2,606,045 |
| Interest received from securities of unaffiliated issuers | + | 78 |
| Total investment income | | 2,606,123 |
| Expenses |
| Investment adviser fees | + | 106,559 |
| Total expenses | | 106,559 |
| Expense reduction by CSIM and its affiliates | – | 61,823 |
| Net expenses | – | 44,736 |
| Net investment income | | 2,561,387 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (368,513) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 48,728,147 |
| Net realized and unrealized gains | | 48,359,634 |
| Increase in net assets resulting from operations | | $50,921,021 |
Schwab Target Index Funds | Annual Report
Schwab Target 2055 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $2,561,387 | $1,862,731 |
| Net realized losses | | (368,513) | (55,655) |
| Net change in unrealized appreciation (depreciation) | + | 48,728,147 | (14,667,889) |
| Increase (decrease) in net assets from operations | | 50,921,021 | (12,860,813) |
| Distributions to Shareholders | |
| Total distributions | | ($2,551,965) | ($1,713,432) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 5,887,926 | $83,275,244 | 4,773,989 | $60,448,655 |
| Shares reinvested | | 164,503 | 2,482,361 | 124,969 | 1,664,589 |
| Shares redeemed | + | (2,106,273) | (29,242,736) | (1,038,683) | (12,984,766) |
| Net transactions in fund shares | | 3,946,156 | $56,514,869 | 3,860,275 | $49,128,478 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 8,012,199 | $84,957,322 | 4,151,924 | $50,403,089 |
| Total increase | + | 3,946,156 | 104,883,925 | 3,860,275 | 34,554,233 |
| End of period | | 11,958,355 | $189,841,247 | 8,012,199 | $84,957,322 |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Financial Statements
Financial Highlights
| | 4/1/20–
3/31/21 | 4/1/19–
3/31/20 | 4/1/18–
3/31/19 | 4/1/17–
3/31/181 | 8/25/16 2–
3/31/17 | |
| Per-Share Data |
| Net asset value at beginning of period | $10.55 | $12.16 | $11.92 | $10.68 | $10.00 | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)3 | 0.27 | 0.32 | 0.30 | 0.29 | 0.18 | |
| Net realized and unrealized gains (losses) | 5.38 | (1.66) | 0.17 | 1.12 | 0.62 | |
| Total from investment operations | 5.65 | (1.34) | 0.47 | 1.41 | 0.80 | |
| Less distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.27) | (0.23) | (0.17) | (0.12) | |
| Distributions from net realized gains | (0.01) | (0.00) 4 | (0.00) 4 | (0.00) 4 | — | |
| Total distributions | (0.25) | (0.27) | (0.23) | (0.17) | (0.12) | |
| Net asset value at end of period | $15.95 | $10.55 | $12.16 | $11.92 | $10.68 | |
| Total return | 53.70% | (11.50%) | 4.23% | 13.22% | 8.11% 5 | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses6 | 0.03% | 0.03% | 0.03% | 0.03% | 0.02% 7 | |
| Gross operating expenses6 | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% 7 | |
| Net investment income (loss) | 1.92% | 2.54% | 2.50% | 2.43% | 2.94% 7 | |
| Portfolio turnover rate | 7% | 4% | 2% | 19% | 0% 5 | |
| Net assets, end of period (x 1,000) | $226,973 | $100,674 | $58,895 | $24,224 | $166 | |
| |
1
Effective July 24, 2017, the Investor Shares and Institutional Shares share classes were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Institutional Shares.
2
Commencement of operations.
3
Calculated based on the average shares outstanding during the period.
4
Per-share amount was less than $0.005.
5
Not annualized.
6
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.05%, 0.05%, 0.05%, 0.05% and 0.06% (annualized), respectively, for the periods ended March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018 and March 31, 2017 (see financial note 4).
7
Annualized.
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 99.4% of net assets |
| |
| U.S. Stocks 56.5% |
| Large-Cap 49.7% |
| Schwab U.S. Large-Cap ETF | 1,176,166 | 112,947,221 |
| Small-Cap 6.8% |
| Schwab U.S. Small-Cap ETF | 154,099 | 15,359,047 |
| | | 128,306,268 |
| |
| International Stocks 33.3% |
| Developed-Market Large-Cap 25.9% |
| Schwab International Equity ETF | 1,558,749 | 58,640,138 |
| Emerging-Market 7.4% |
| Schwab Emerging Markets Equity ETF | 528,862 | 16,807,234 |
| | | 75,447,372 |
| |
| Real Assets 4.8% |
| Real Estate 4.8% |
| Schwab U.S. REIT ETF | 266,346 | 10,944,157 |
| |
| Fixed Income 4.8% |
| Intermediate-Term Bond 4.7% |
| Schwab U.S. Aggregate Bond ETF | 196,442 | 10,598,046 |
| Security | Number
of Shares | Value ($) |
| Treasury Bond 0.1% |
| Schwab Short-Term U.S. Treasury ETF | 7,133 | 365,994 |
| | | 10,964,040 |
| Total Affiliated Underlying Funds |
| (Cost $182,632,297) | | 225,661,837 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.6% of net assets |
| |
| Time Deposit 0.6% |
| Skandinaviska Enskilda Banken |
| 0.01%, 04/01/21 (a) | 1,409,016 | 1,409,016 |
| Total Short-Term Investment |
| (Cost $1,409,016) | | 1,409,016 |
| (a) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
03/31/20 | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $7,589,609 | $6,243,949 | ($1,453,769) | ($151,312) | $4,578,757 | $16,807,234 | 528,862 | $276,265 |
| Schwab International Equity ETF | 26,421,607 | 20,096,964 | (2,005,210) | (108,924) | 14,235,701 | 58,640,138 | 1,558,749 | 918,335 |
| Schwab Short-Term U.S. Treasury ETF | 203,092 | 164,990 | — | — | (2,088) | 365,994 | 7,133 | 2,506 |
| Schwab U.S. Aggregate Bond ETF | 4,326,079 | 6,497,805 | — | — | (225,838) | 10,598,046 | 196,442 | 152,805 |
| Schwab U.S. Large-Cap ETF | 49,831,591 | 36,473,482 | (4,899,396) | (189,474) | 31,731,018 | 112,947,221 | 1,176,166 | 1,373,489 |
| Schwab U.S. REIT ETF | 4,909,199 | 4,419,230 | (97,356) | (36,317) | 1,749,401 | 10,944,157 | 266,346 | 200,720 |
| Schwab U.S. Small-Cap ETF | 6,858,909 | 4,509,787 | (2,680,597) | (133,944) | 6,804,892 | 15,359,047 | 154,099 | 130,460 |
| Total | $100,140,086 | $78,406,207 | ($11,136,328) | ($619,971) | $58,871,843 | $225,661,837 | | $3,054,580 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| | |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $225,661,837 | $— | $— | $225,661,837 | |
| Short-Term Investment1 | — | 1,409,016 | — | 1,409,016 | |
| Total | $225,661,837 | $1,409,016 | $— | $227,070,853 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $182,632,297) | | $225,661,837 |
| Investments in unaffiliated issuers, at value (cost $1,409,016) | | 1,409,016 |
| Receivables: | | |
| Investments sold | | 145,197 |
| Fund shares sold | + | 1,043,873 |
| Total assets | | 228,259,923 |
| Liabilities |
| Payables: | | |
| Investments bought | | 933,291 |
| Investment adviser fees | | 6,276 |
| Fund shares redeemed | + | 347,745 |
| Total liabilities | | 1,287,312 |
| Net Assets |
| Total assets | | 228,259,923 |
| Total liabilities | – | 1,287,312 |
| Net assets | | $226,972,611 |
| Net Assets by Source | | |
| Capital received from investors | | 184,854,778 |
| Total distributable earnings | | 42,117,833 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $226,972,611 | | 14,230,322 | | $15.95 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Statement of Operations
For the period April 1, 2020 through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $3,054,580 |
| Interest received from securities of unaffiliated issuers | + | 87 |
| Total investment income | | 3,054,667 |
| Expenses |
| Investment adviser fees | + | 125,007 |
| Total expenses | | 125,007 |
| Expense reduction by CSIM and its affiliates | – | 73,077 |
| Net expenses | – | 51,930 |
| Net investment income | | 3,002,737 |
| Realized and Unrealized Gains (Losses) |
| Net realized losses on sales of affiliated underlying funds | | (619,971) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 58,871,843 |
| Net realized and unrealized gains | | 58,251,872 |
| Increase in net assets resulting from operations | | $61,254,609 |
Schwab Target Index Funds | Annual Report
Schwab Target 2060 Index Fund
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | |
| | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| Net investment income | | $3,002,737 | $2,166,379 |
| Net realized losses | | (619,971) | (523,146) |
| Net change in unrealized appreciation (depreciation) | + | 58,871,843 | (17,818,562) |
| Increase (decrease) in net assets from operations | | 61,254,609 | (16,175,329) |
| Distributions to Shareholders | |
| Total distributions | | ($3,027,524) | ($1,977,345) |
| Transactions in Fund Shares | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | VALUE | SHARES | VALUE |
| Shares sold | | 7,841,414 | $111,818,240 | 7,354,300 | $90,181,222 |
| Shares reinvested | | 194,228 | 2,936,732 | 139,936 | 1,868,137 |
| Shares redeemed | + | (3,351,894) | (46,683,614) | (2,791,650) | (32,117,401) |
| Net transactions in fund shares | | 4,683,748 | $68,071,358 | 4,702,586 | $59,931,958 |
| Shares Outstanding and Net Assets | | | |
| | | 4/1/20-3/31/21 | 4/1/19-3/31/20 |
| | | SHARES | NET ASSETS | SHARES | NET ASSETS |
| Beginning of period | | 9,546,574 | $100,674,168 | 4,843,988 | $58,894,884 |
| Total increase | + | 4,683,748 | 126,298,443 | 4,702,586 | 41,779,284 |
| End of period | | 14,230,322 | $226,972,611 | 9,546,574 | $100,674,168 |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Financial Statements
Financial Highlights
| | 2/26/21 1–
3/31/21 | | | | | |
| Per-Share Data |
| Net asset value at beginning of period | $10.00 | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss)2 | 0.02 | | | | | |
| Net realized and unrealized gains (losses) | 0.19 | | | | | |
| Total from investment operations | 0.21 | | | | | |
| Net asset value at end of period | $10.21 | | | | | |
| Total return | 2.10% 3 | | | | | |
| Ratios/Supplemental Data |
| Ratios to average net assets: | | | | | | |
| Net operating expenses4 | 0.04% 5 | | | | | |
| Gross operating expenses4 | 0.08% 5 | | | | | |
| Net investment income (loss) | 2.46% 5 | | | | | |
| Portfolio turnover rate | 0% 3,6 | | | | | |
| Net assets, end of period (x 1,000) | $1,820 | | | | | |
| |
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
Not annualized.
4
Ratio excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds. If the expenses incurred by the underlying funds were included in these ratios they would have increased by 0.04% (annualized), for the period ended March 31, 2021 (see financial note 4).
5
Annualized.
6
Portfolio turnover was 0%. Portfolio turnover is calculated by factoring in the lesser of long-term purchases or sales of securities. The fund had no sales of securities during the period.
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Portfolio Holdings as of March 31, 2021
This section shows all the securities in the fund’s portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. You can also obtain this information at no cost on the fund’s website at www.schwabassetmanagement.com/schwabfunds_prospectus, by calling 1-866-414-6349, or by sending an email request to orders@mysummaryprospectus.com. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website.
| Security | Number
of Shares | Value ($) |
| Affiliated Underlying Funds 98.1% of net assets |
| |
| U.S. Stocks 55.8% |
| Large-Cap 49.1% |
| Schwab U.S. Large-Cap ETF | 9,314 | 894,424 |
| Small-Cap 6.7% |
| Schwab U.S. Small-Cap ETF | 1,217 | 121,298 |
| | | 1,015,722 |
| |
| International Stocks 33.2% |
| Developed-Market Large-Cap 25.8% |
| Schwab International Equity ETF | 12,479 | 469,460 |
| Emerging-Market 7.4% |
| Schwab Emerging Markets Equity ETF | 4,258 | 135,319 |
| | | 604,779 |
| |
| Real Assets 4.7% |
| Real Estate 4.7% |
| Schwab U.S. REIT ETF | 2,071 | 85,098 |
| |
| Fixed Income 4.4% |
| Intermediate-Term Bond 4.3% |
| Schwab U.S. Aggregate Bond ETF | 1,444 | 77,904 |
| Security | Number
of Shares | Value ($) |
| Treasury Bond 0.1% |
| Schwab Short-Term U.S. Treasury ETF | 50 | 2,565 |
| | | 80,469 |
| Total Affiliated Underlying Funds |
| (Cost $1,768,808) | | 1,786,068 |
Issuer
Rate, Maturity Date | Face
Amount ($) | Value ($) |
| Short-Term Investment 0.6% of net assets |
| |
| Time Deposit 0.6% |
| Brown Brothers Harriman |
| 0.01%, 04/01/21 (a) | 10,623 | 10,623 |
| Total Short-Term Investment |
| (Cost $10,623) | | 10,623 |
| (a) | The rate shown is the current daily overnight rate. |
| | |
| ETF — | Exchange-traded fund |
| REIT — | Real Estate Investment Trust |
Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended March 31, 2021:
| Affiliated Underlying Funds |
Value at
02/26/21(a) | Gross
Purchases | Gross
Sales | Realized
Gains (Losses) | Net Change
in Unrealized
Appreciation
(depreciation) |
Value at
03/31/21 | Balance
of Shares
Held at
03/31/21 | Distributions
Received* |
| Schwab Emerging Markets Equity ETF | $— | $136,973 | $— | $— | ($1,654) | $135,319 | 4,258 | $— |
| Schwab International Equity ETF | — | 467,052 | — | — | 2,408 | 469,460 | 12,479 | — |
| Schwab Short-Term U.S. Treasury ETF | — | 2,565 | — | — | — | 2,565 | 50 | — |
| Schwab U.S. Aggregate Bond ETF | — | 78,185 | — | — | (281) | 77,904 | 1,444 | 40 |
| Schwab U.S. Large-Cap ETF | — | 879,715 | — | — | 14,709 | 894,424 | 9,314 | 2,173 |
| Schwab U.S. REIT ETF | — | 82,725 | — | — | 2,373 | 85,098 | 2,071 | 43 |
| Schwab U.S. Small-Cap ETF | — | 121,593 | — | — | (295) | 121,298 | 1,217 | 209 |
| Total | $— | $1,768,808 | $— | $— | $17,260 | $1,786,068 | | $2,465 |
| * | Distributions received include distributions from net investment income and capital gains, if any, from the underlying funds. |
| (a) | Commencement of operations. |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Portfolio Holdings as of March 31, 2021 (continued)
The following is a summary of the inputs used to value the fund’s investments as of March 31, 2021 (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 | | | | | |
| Affiliated Underlying Funds1 | $1,786,068 | $— | $— | $1,786,068 | |
| Short-Term Investment1 | — | 10,623 | — | 10,623 | |
| Total | $1,786,068 | $10,623 | $— | $1,796,691 | |
| 1 | As categorized in Portfolio Holdings. |
Fund investments in ETFs are classified as Level 1, without consideration to the classification level of the underlying securities held by the ETFs, which could be Level 1, Level 2 or Level 3.
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
| Assets |
| Investments in affiliated underlying funds, at value (cost $1,768,808) | | $1,786,068 |
| Investments in unaffiliated issuers, at value (cost $10,623) | | 10,623 |
| Receivables: | | |
| Fund shares sold | + | 260,858 |
| Total assets | | 2,057,549 |
| Liabilities |
| Payables: | | |
| Investments bought | | 237,431 |
| Investment adviser fees | + | 32 |
| Total liabilities | | 237,463 |
| Net Assets |
| Total assets | | 2,057,549 |
| Total liabilities | – | 237,463 |
| Net assets | | $1,820,086 |
| Net Assets by Source | | |
| Capital received from investors | | 1,800,396 |
| Total distributable earnings | | 19,690 |
| Net Asset Value (NAV) |
| Net Assets | ÷ | Shares
Outstanding | = | NAV |
| $1,820,086 | | 178,316 | | $10.21 |
| | | | | |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Statement of Operations
For the period February 26, 2021* through March 31, 2021
| Investment Income |
| Dividends received from affiliated underlying funds | | $2,465 |
| Expenses |
| Investment adviser fees | + | 79 |
| Total expenses | | 79 |
| Expense reduction by CSIM and its affiliates | – | 44 |
| Net expenses | – | 35 |
| Net investment income | | 2,430 |
| Realized and Unrealized Gains (Losses) |
| Net change in unrealized appreciation (depreciation) on affiliated underlying funds | + | 17,260 |
| Increase in net assets resulting from operations | | $19,690 |
| * | Commencement of operations. |
Schwab Target Index Funds | Annual Report
Schwab Target 2065 Index Fund
Statement of Changes in Net Assets
For the current period only.
| Operations |
| | 2/26/21*-3/31/21 |
| Net investment income | | $2,430 |
| Net change in unrealized appreciation (depreciation) | + | 17,260 |
| Increase in net assets from operations | | 19,690 |
| Transactions in Fund Shares | |
| | | 2/26/21*-3/31/21 |
| | | SHARES | VALUE |
| Shares sold | | 181,848 | $1,835,930 |
| Shares redeemed | + | (3,532) | (35,534) |
| Net transactions in fund shares | | 178,316 | $1,800,396 |
| Shares Outstanding and Net Assets | |
| | | 2/26/21*-3/31/21 |
| | | SHARES | NET ASSETS |
| Beginning of period | | — | $— |
| Total increase | + | 178,316 | 1,820,086 |
| End of period | | 178,316 | $1,820,086 |
| * | Commencement of operations. |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
1. Business Structure of the Funds:
Each of the funds in this report is a series of Schwab Capital Trust (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 funds discussed in this report, which are highlighted:
| SCHWAB CAPITAL TRUST (ORGANIZED MAY 7, 1993) |
| Schwab Target 2010 Index Fund | Schwab Large-Cap Growth Fund |
| Schwab Target 2015 Index Fund | Schwab Small-Cap Equity Fund |
| Schwab Target 2020 Index Fund | Schwab Hedged Equity Fund |
| Schwab Target 2025 Index Fund | Schwab Health Care Fund |
| Schwab Target 2030 Index Fund | Schwab International Core Equity Fund |
| Schwab Target 2035 Index Fund | Schwab Target 2010 Fund |
| Schwab Target 2040 Index Fund | Schwab Target 2015 Fund |
| Schwab Target 2045 Index Fund | Schwab Target 2020 Fund |
| Schwab Target 2050 Index Fund | Schwab Target 2025 Fund |
| Schwab Target 2055 Index Fund | Schwab Target 2030 Fund |
| Schwab Target 2060 Index Fund | Schwab Target 2035 Fund |
| Schwab Target 2065 Index Fund | Schwab Target 2040 Fund |
| Schwab S&P 500 Index Fund | Schwab Target 2045 Fund |
| Schwab Small-Cap Index Fund® | Schwab Target 2050 Fund |
| Schwab Total Stock Market Index Fund® | Schwab Target 2055 Fund |
| Schwab U.S. Large-Cap Growth Index Fund | Schwab Target 2060 Fund |
| Schwab U.S. Large-Cap Value Index Fund | Schwab Target 2065 Fund |
| Schwab U.S. Mid-Cap Index Fund | Schwab Fundamental US Large Company Index Fund |
| Schwab International Index Fund® | Schwab Fundamental US Small Company Index Fund |
| Schwab MarketTrack All Equity Portfolio™ | Schwab Fundamental International Large Company Index Fund |
| Schwab MarketTrack Growth Portfolio™ | Schwab Fundamental International Small Company Index Fund |
| Schwab MarketTrack Balanced Portfolio™ | Schwab Fundamental Emerging Markets Large Company Index Fund |
| Schwab MarketTrack Conservative Portfolio™ | Schwab Fundamental Global Real Estate Index Fund |
| Laudus International MarketMasters Fund™ | Schwab Monthly Income Fund - Moderate Payout |
| Schwab Balanced Fund | Schwab Monthly Income Fund - Enhanced Payout |
| Schwab Core Equity Fund | Schwab Monthly Income Fund - Maximum Payout |
| Schwab Dividend Equity Fund | |
The Schwab Target Index Funds are “funds of funds.” Each of the funds seeks to achieve its investment objective by investing primarily in affiliated Schwab exchange-traded funds (ETFs). The funds may also invest in affiliated Schwab Funds and Laudus Funds and unaffiliated third-party ETFs and mutual funds (all such ETFs and mutual funds referred to as “underlying funds”), in accordance with their target portfolio allocation. Each fund may also invest directly in equity and fixed-income securities, cash and cash equivalents, including money market securities.
Each fund in this report 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 funds’ Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.
The Schwab Target 2065 Index Fund commenced operations on February 26, 2021.
Each fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, each 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 funds use in their preparation of financial statements. The funds follow 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 financial statements of the funds should be read in conjunction with the underlying funds’ financial statements. 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.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
2. Significant Accounting Policies (continued):
(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 funds to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The funds value the securities in their portfolios every business day. The funds use 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.
• Mutual funds: Mutual funds are valued at their respective NAVs.
• Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a 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. Each 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 a 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 funds pursuant to the valuation procedures.
• Cash management sweep time deposits: Balances held in cash management sweep time deposits are accounted for on a cost basis, which approximates fair value.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their 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 funds determine 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, mutual funds and ETFs. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the underlying securities held by an underlying fund.
• 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.
• Level 3—significant unobservable inputs (including the funds’ 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 funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds 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
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
2. Significant Accounting Policies (continued):
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 funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ 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 funds’ investments as of March 31, 2021 are disclosed in the Portfolio Holdings.
(b) Accounting Policies for certain Portfolio Investments (if held):
Cash Management Transactions: The funds may subscribe to the Brown Brothers Harriman & Co. (BBH) Cash Management Service Sweep (CMS Sweep). The BBH CMS Sweep is an investment product that automatically sweeps the funds’ 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 allows the funds to earn interest on cash balances. Excess cash invested with deposit institutions domiciled outside of the U.S., as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. The funds bear the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed.
(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.
(d) Investment Income:
Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date). Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.
(e) Expenses:
Pursuant to the Amended and Restated Advisory Agreement (Advisory Agreement) between Charles Schwab Investment Management, Inc. (CSIM or the investment adviser) and the funds, the investment adviser pays the operating expenses of each fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding shareholder servicing fees, acquired fund fees and expenses, taxes, any brokerage expenses and extraordinary or non-routine expenses.
(f) Distributions to Shareholders:
The funds make distributions from net investment income and net realized capital gains, if any, once a year.
(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 funds intend to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.
(i) Indemnification:
Under the funds’ organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss attributable to these arrangements to be remote.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
3. Risk Factors:
Investing in the funds may involve certain risks, as discussed in the funds’ prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.
Asset Allocation Risk. The funds are subject to the risk that the selection of the underlying funds and the allocation of a fund’s assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective.
Conflicts of Interest Risk. The investment adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of a fund. However, the investment adviser is a fiduciary to each fund and is legally obligated to act in the fund’s best interests when selecting underlying funds.
Market Risk. Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. Markets may be impacted by economic, political, regulatory and other conditions, including economic sanctions 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 funds will fluctuate, which means that an investor could lose money over short or long periods.
ETF Risk. When a fund invests in an ETF, it will bear a proportionate share of the ETF’s expenses. In addition, lack of liquidity in the market for an ETF’s shares can result in its value being more volatile than the underlying portfolio of securities.
Direct Investment Risk. The funds may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain their asset allocations. A fund’s direct investment in these securities is subject to the same or similar risks as an underlying fund’s investment in the same securities.
Underlying Fund Investment Risk. Before investing in the funds, investors should assess the risks associated with the underlying funds in which the funds may invest, which include any combination of the risks described below.
• Investment Risk. The funds may experience losses with respect to their investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.
• Fixed-Income Risk. Interest rates rise and fall over time, which will affect an underlying fund’s yield and share price. A change in a central bank’s monetary policy or economic conditions, among other things, may result in a change in interest rates. A rise in interest rates could cause an underlying fund’s share price to fall. The credit quality of a portfolio investment could also cause an underlying fund’s share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed-income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt an underlying fund’s yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.
• Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
• Market Capitalization Risk. Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, an underlying fund’s performance could be impacted.
•�� Money Market Fund Risk. The funds may invest in underlying money market funds that either seek to maintain a stable $1.00 net asset value (“stable share price money market funds”) or that have a share price that fluctuates (“variable share price money market funds”). Although an underlying stable share price money market fund seeks to maintain a stable $1.00 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when a fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund’s liquidity falls below required minimums.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
3. Risk Factors (continued):
• Foreign Investment Risk. An underlying fund’s investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund’s investments, and could impair the underlying fund’s ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.
• 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 recordkeeping 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 an underlying fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.
• Derivatives Risk. An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures 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.
An underlying fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, liquidity risk and market risk, are discussed elsewhere in this section. An underlying fund’s use of derivatives is also subject to lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause an underlying fund to realize higher amounts of short-term capital gains. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase its volatility, and could cause the underlying fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) by an underlying fund could cause a fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.
• Leverage Risk. Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund’s portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.
• Concentration Risk. To the extent that an underlying fund’s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the underlying fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.
• Investment Style Risk. Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund’s expenses, the underlying fund’s performance is normally below that of the index. Errors relating to an index may occur from time to time and may not be identified by the underlying fund’s index provider for a period of time. In addition, market disruptions could cause delays in an underlying fund’s index’s rebalancing schedule. Such errors and/or market disruptions may result in losses for an underlying fund.
• Liquidity Risk. An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the underlying fund may have to sell them at a loss.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
3. Risk Factors (continued):
• Portfolio Turnover Risk. Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund’s performance and may increase the likelihood of capital gains distributions.
Please refer to the funds’ prospectuses for a more complete description of the principal risks of investing in the funds.
4. Affiliates and Affiliated Transactions:
Investment Adviser
CSIM, a wholly owned subsidiary of The Charles Schwab Corporation, serves as each fund’s investment adviser pursuant to the Advisory Agreement between CSIM and the trust.
For its advisory and administrative services to the funds, CSIM is entitled to receive an annual fee of 0.08%, payable monthly, based on a percentage of each fund’s average daily net assets.
Contractual Expense Limitations
CSIM and its affiliates have agreed with the funds, for so long as CSIM serves as the investment adviser to the funds, which may only be amended or terminated with the approval of the Board, to maintain the “net operating expenses” of each of the funds (including acquired fund fees and expenses, but excluding taxes and certain non-routine expenses) at 0.08%.
In the above agreement, CSIM and its affiliates have contractually agreed to waive acquired fund fees and expenses of the underlying funds in which the funds invest.
Investments in Affiliates
The funds may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the funds may invest in other related funds. As of March 31, 2021, each Schwab Target Index Fund’s ownership percentages of other related funds’ shares are:
| Underlying Funds | Schwab
Target
2010
Index
Fund | Schwab
Target
2015
Index
Fund | Schwab
Target
2020
Index
Fund | Schwab
Target
2025
Index
Fund | Schwab
Target
2030
Index
Fund | Schwab
Target
2035
Index
Fund | Schwab
Target
2040
Index
Fund | Schwab
Target
2045
Index
Fund | Schwab
Target
2050
Index
Fund | Schwab
Target
2055
Index
Fund | Schwab
Target
2060
Index
Fund | Schwab
Target
2065
Index
Fund |
| Schwab Emerging Markets Equity ETF | —% | —% | —% | 0.1% | 0.2% | 0.2% | 0.3% | 0.2% | 0.2% | 0.1% | 0.2% | 0.0%* |
| Schwab International Equity ETF | 0.0%* | 0.0%* | 0.1% | 0.2% | 0.4% | 0.3% | 0.4% | 0.3% | 0.3% | 0.2% | 0.2% | 0.0%* |
| Schwab Short-Term U.S. Treasury ETF | 0.1% | 0.1% | 0.3% | 0.3% | 0.2% | 0.1% | 0.1% | 0.0%* | 0.0%* | 0.0%* | 0.0%* | 0.0%* |
| Schwab U.S. Aggregate Bond ETF | 0.3% | 0.4% | 1.4% | 1.9% | 2.3% | 1.1% | 1.0% | 0.4% | 0.3% | 0.2% | 0.1% | 0.0%* |
| Schwab U.S. Large-Cap ETF | 0.0%* | 0.1% | 0.3% | 0.5% | 0.8% | 0.5% | 0.7% | 0.5% | 0.6% | 0.3% | 0.4% | 0.0%* |
| Schwab U.S. REIT ETF | 0.0%* | 0.0%* | 0.1% | 0.2% | 0.4% | 0.3% | 0.4% | 0.2% | 0.3% | 0.2% | 0.2% | 0.0%* |
| Schwab U.S. Small-Cap ETF | 0.0%* | 0.0%* | 0.0%* | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0%* |
| Schwab U.S. TIPS ETF | 0.0%* | 0.0%* | 0.1% | 0.1% | 0.0%* | —% | —% | —% | —% | —% | —% | —% |
| Schwab Variable Share Price Money Fund, Ultra Shares | 0.1% | 0.1% | 0.3% | 0.3% | 0.3% | 0.1% | 0.1% | 0.0%* | 0.0%* | 0.0%* | —% | —% |
Interfund Borrowing and Lending
Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). 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 funds had no interfund borrowing or lending activity during the period.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
4. Affiliates and Affiliated Transactions (continued):
Shareholder Concentration
Certain accounts or CSIM affiliates may from time to time own (beneficially) or control a significant percentage of a fund’s shares. As of March 31, 2021, CSIM affiliated ownership held 28% of the outstanding shares and one shareholder account held 11% of the outstanding shares of the Schwab Target 2065 Index Fund. The CSIM affiliated ownership percentage is related to seed capital invested on the first day of operations to assist the fund in meeting its investment objective.
5. Board of Trustees:
The Board may include people who are officers and/or directors of CSIM 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 funds do not pay any interested or non-interested trustees (independent trustees). The independent trustees are paid by CSIM. 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 funds were participants with other funds in the Fund Complex in a joint, syndicated, committed $750 million line of credit (the Syndicated Credit Facility), which matured on October 1, 2020. On October 1, 2020, the Syndicated Credit Facility was further amended to run for a new 364 day period with a line of credit of $850 million, maturing on September 30, 2021. Under the terms of the Syndicated Credit Facility, in addition to CSIM paying the interest charged on any borrowings by a fund, CSIM 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 funds were participants with other funds in the Fund Complex in a joint, unsecured, uncommitted $500 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, which was scheduled to mature on November 27, 2020. However, on October 1, 2020, the Uncommitted Credit Facility was amended to run for a new 364 day period with a line of credit of $400 million, maturing on September 30, 2021. Under the terms of the Uncommitted Credit Facility, CSIM pays interest on the amount a fund borrows. There were no borrowings from either line of credit during the period.
The funds also have access to custodian overdraft facilities. A fund may have utilized the overdraft facility and incurred an interest expense, which is paid by CSIM. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
7. Purchases and Sales of Investment Securities:
For the period ended March 31, 2021, purchases and sales of securities (excluding short-term obligations) were as follows:
| | Purchases
of Securities | Sales
of Securities |
| Schwab Target 2010 Index Fund | $22,099,315 | $9,189,276 |
| Schwab Target 2015 Index Fund | 24,678,078 | 19,693,072 |
| Schwab Target 2020 Index Fund | 98,543,290 | 30,795,263 |
| Schwab Target 2025 Index Fund | 155,080,632 | 53,634,985 |
| Schwab Target 2030 Index Fund | 207,246,237 | 61,894,728 |
| Schwab Target 2035 Index Fund | 127,096,050 | 32,838,369 |
| Schwab Target 2040 Index Fund | 139,599,637 | 29,840,354 |
| Schwab Target 2045 Index Fund | 81,297,036 | 12,724,317 |
| Schwab Target 2050 Index Fund | 105,222,284 | 12,985,884 |
| Schwab Target 2055 Index Fund | 64,149,511 | 8,344,487 |
| Schwab Target 2060 Index Fund | 78,406,207 | 11,136,328 |
| Schwab Target 2065 Index Fund | 1,768,808 | — |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
8. Federal Income Taxes:
As of March 31, 2021, the tax basis cost of the funds’ investments and gross unrealized appreciation and depreciation were as follows:
| | Schwab
Target
2010
Index Fund | | Schwab
Target
2015
Index Fund | | Schwab
Target
2020
Index Fund | | Schwab
Target
2025
Index Fund | | Schwab
Target
2030
Index Fund | | Schwab
Target
2035
Index Fund |
| Tax cost | $49,172,610 | | $64,035,288 | | $245,273,937 | | $384,089,387 | | $534,005,592 | | $312,452,768 |
| Gross unrealized appreciation | $6,341,443 | | $9,786,198 | | $33,934,871 | | $61,079,241 | | $93,123,342 | | $61,304,825 |
| Gross unrealized depreciation | (491,801) | | (633,949) | | (1,722,717) | | (3,907,907) | | (4,340,999) | | (1,989,637) |
| Net unrealized appreciation (depreciation) | $5,849,642 | | $9,152,249 | | $32,212,154 | | $57,171,334 | | $88,782,343 | | $59,315,188 |
| | Schwab
Target
2040
Index Fund | | Schwab
Target
2045
Index Fund | | Schwab
Target
2050
Index Fund | | Schwab
Target
2055
Index Fund | | Schwab
Target
2060
Index Fund | | Schwab
Target
2065
Index Fund |
| Tax cost | $393,455,822 | | $223,981,157 | | $263,149,276 | | $155,021,076 | | $185,388,865 | | $1,779,431 |
| Gross unrealized appreciation | $82,267,507 | | $51,400,276 | | $59,624,296 | | $35,779,211 | | $43,058,462 | | $19,490 |
| Gross unrealized depreciation | (1,874,506) | | (1,264,620) | | (966,209) | | (878,768) | | (1,376,474) | | (2,230) |
| Net unrealized appreciation (depreciation) | $80,393,001 | | $50,135,656 | | $58,658,087 | | $34,900,443 | | $41,681,988 | | $17,260 |
As of March 31, 2021, the components of distributable earnings on a tax basis were as follows:
| | Schwab
Target
2010
Index Fund | | Schwab
Target
2015
Index Fund | | Schwab
Target
2020
Index Fund | | Schwab
Target
2025
Index Fund | | Schwab
Target
2030
Index Fund | | Schwab
Target
2035
Index Fund |
| Undistributed ordinary income | $174,623 | | $180,014 | | $919,793 | | $1,157,599 | | $1,557,632 | | $839,146 |
| Undistributed long-term capital gains | 39,104 | | 208,837 | | 242,920 | | 361,318 | | 277,064 | | 140,021 |
| Net unrealized appreciation (depreciation) on investments | 5,849,642 | | 9,152,249 | | 32,212,154 | | 57,171,334 | | 88,782,343 | | 59,315,188 |
| Total | $6,063,369 | | $9,541,100 | | $33,374,867 | | $58,690,251 | | $90,617,039 | | $60,294,355 |
| | Schwab
Target
2040
Index Fund | | Schwab
Target
2045
Index Fund | | Schwab
Target
2050
Index Fund | | Schwab
Target
2055
Index Fund | | Schwab
Target
2060
Index Fund | | Schwab
Target
2065
Index Fund |
| Undistributed ordinary income | $1,069,986 | | $569,387 | | $622,949 | | $356,532 | | $402,676 | | $2,430 |
| Undistributed long-term capital gains | 159,144 | | 57,416 | | 43,258 | | 23,358 | | 33,169 | | — |
| Net unrealized appreciation (depreciation) on investments | 80,393,001 | | 50,135,656 | | 58,658,087 | | 34,900,443 | | 41,681,988 | | 17,260 |
| Total | $81,622,131 | | $50,762,459 | | $59,324,294 | | $35,280,333 | | $42,117,833 | | $19,690 |
The primary difference between book basis and tax basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales. The tax cost of the funds’ investments, disclosed above, have been adjusted from their book amounts to reflect these unrealized appreciation or depreciation differences, as applicable.
Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of March 31, 2021, the funds had no capital loss carryforwards available to offset future net capital gains.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
8. Federal Income Taxes (continued):
The tax basis components of distributions paid during the current and prior fiscal years were as follows:
| | Schwab
Target
2010
Index Fund | Schwab
Target
2015
Index Fund | Schwab
Target
2020
Index Fund | Schwab
Target
2025
Index Fund | Schwab
Target
2030
Index Fund | Schwab
Target
2035
Index Fund |
| Current fiscal year end distributions | | | | | | |
| Ordinary income | $885,461 | $1,305,865 | $4,687,144 | $6,774,266 | $9,209,541 | $5,480,139 |
| Long-term capital gains | 106,658 | 347,584 | — | 363,955 | 26,706 | 103,356 |
| Prior fiscal year end distributions | | | | | | |
| Ordinary income | $707,888 | $1,202,511 | $3,730,955 | $4,878,544 | $6,622,287 | $3,959,186 |
| Long-term capital gains | 35,366 | 47,186 | 25,805 | 4,157 | 8,206 | 3,089 |
| | Schwab
Target
2040
Index Fund | Schwab
Target
2045
Index Fund | Schwab
Target
2050
Index Fund | Schwab
Target
2055
Index Fund | Schwab
Target
2060
Index Fund | Schwab
Target
2065
Index Fund |
| Current fiscal year end distributions | | | | | | |
| Ordinary income | $6,943,973 | $3,838,268 | $4,431,058 | $2,551,965 | $3,026,320 | $— |
| Long-term capital gains | 13,789 | 3,123 | — | — | 1,204 | — |
| Prior fiscal year end distributions | | | | | | |
| Ordinary income | $4,780,237 | $2,802,217 | $2,976,899 | $1,713,432 | $1,977,345 | $— |
| Long-term capital gains | 9,388 | 3,253 | — | — | — | — |
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.
Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations.
As of March 31, 2021, 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 funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the fiscal year ended March 31, 2021, the funds did not incur any interest or penalties.
9. Independent Registered Public Accounting Firm:
On June 8, 2020, the Audit, Compliance and Valuation Committee of the Board approved, and on June 9, 2020, the Board approved, Deloitte & Touche LLP as the independent registered accounting firm of the Schwab Funds Complex for fiscal periods ending after June 8, 2020.
On June 8, 2020, PricewaterhouseCoopers LLP (the “Prior Auditor”) resigned as the independent registered public accounting firm of the Schwab Funds Complex. The Prior Auditor’s reports on the financial statements of the funds for the past two fiscal years, the years ended March 31, 2019 and March 31, 2020, did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the last two fiscal year-ends and through June 8, 2020, there were no (1) disagreements with the Prior Auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the Prior Auditor’s satisfaction, would have caused it to make reference to that matter in connection with its reports on the funds’ financial statements for such periods; or (2) “reportable events,” as that term is defined in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Financial Notes (continued)
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.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Schwab Capital Trust and Shareholders of Schwab Target 2010 Index Fund, Schwab Target 2015 Index Fund, Schwab Target 2020 Index Fund, Schwab Target 2025 Index Fund, Schwab Target 2030 Index Fund, Schwab Target 2035 Index Fund, Schwab Target 2040 Index Fund, Schwab Target 2045 Index Fund, Schwab Target 2050 Index Fund, Schwab Target 2055 Index Fund, Schwab Target 2060 Index Fund, and Schwab Target 2065 Index Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities, including the portfolio holdings, of Schwab Target 2010 Index Fund, Schwab Target 2015 Index Fund, Schwab Target 2020 Index Fund, Schwab Target 2025 Index Fund, Schwab Target 2030 Index Fund, Schwab Target 2035 Index Fund, Schwab Target 2040 Index Fund, Schwab Target 2045 Index Fund, Schwab Target 2050 Index Fund, Schwab Target 2055 Index Fund, Schwab Target 2060 Index Fund, and Schwab Target 2065 Index Fund (the “Funds”), twelve of the funds constituting Schwab Capital Trust, as of March 31, 2021; the related statements of operations, statements of changes in net assets, and the financial highlights for the year then ended for the Funds (excluding Schwab Target 2065 Index Fund); the related statement of operations, statement of changes in net assets, and the financial highlights for the period from February 26, 2021 (commencement of operations) through March 31, 2021, for Schwab Target 2065 Index Fund; and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds (excluding Schwab Target 2065 Index Fund) as of March 31, 2021, and the results of their operations, the changes in their net assets, and the financial highlights for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Schwab Target 2065 Index Fund as of March 31, 2021, and the results of its operations, changes in net assets, and financial highlights for the period from February 26, 2021 (commencement of operations) through March 31, 2021 in conformity with accounting principles generally accepted in the United States of America. For each of the Funds (excluding Schwab Target 2065 Index Fund), the statements of changes in net assets for the year ended March 31, 2020 and the financial highlights for the years ended March 31, 2020, 2019, 2018, and for the period August 25, 2016 through March 31, 2017, were audited by other auditors, whose report, dated May 18, 2020, expressed an unqualified opinion on such statements of changes in net assets and financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2021, by correspondence with the custodian, transfer agent, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Denver, Colorado
May 17, 2021
We have served as the auditor of one or more investment companies in Schwab Funds Complex since 2020.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Other Federal Tax Information (unaudited)
The funds may elect to pass on the benefits of the foreign tax credit to their shareholders for the fiscal year ended March 31, 2021. The foreign tax credit and the foreign source income amounts are as follows:
| | Foreign Tax Credit | Foreign Source Income |
| Schwab Target 2010 Index Fund | $9,912 | $97,478 |
| Schwab Target 2015 Index Fund | 15,601 | 159,355 |
| Schwab Target 2020 Index Fund | 62,020 | 605,878 |
| Schwab Target 2025 Index Fund | 137,051 | 1,340,470 |
| Schwab Target 2030 Index Fund | 228,549 | 2,223,533 |
| Schwab Target 2035 Index Fund | 156,269 | 1,507,834 |
| Schwab Target 2040 Index Fund | 221,747 | 2,147,700 |
| Schwab Target 2045 Index Fund | 140,944 | 1,345,174 |
| Schwab Target 2050 Index Fund | 170,160 | 1,619,329 |
| Schwab Target 2055 Index Fund | 101,988 | 974,125 |
| Schwab Target 2060 Index Fund | 124,924 | 1,183,031 |
| Schwab Target 2065 Index Fund | — | — |
For corporate shareholders, the following percentage of the funds’ dividend distributions paid during the fiscal year ended March 31, 2021, qualify for the corporate dividends received deduction:
| | Percentage |
| Schwab Target 2010 Index Fund | 18.01 |
| Schwab Target 2015 Index Fund | 20.06 |
| Schwab Target 2020 Index Fund | 19.42 |
| Schwab Target 2025 Index Fund | 26.34 |
| Schwab Target 2030 Index Fund | 30.30 |
| Schwab Target 2035 Index Fund | 33.05 |
| Schwab Target 2040 Index Fund | 35.65 |
| Schwab Target 2045 Index Fund | 38.41 |
| Schwab Target 2050 Index Fund | 39.13 |
| Schwab Target 2055 Index Fund | 40.40 |
| Schwab Target 2060 Index Fund | 41.03 |
| Schwab Target 2065 Index Fund | — |
For the fiscal year ended March 31, 2021, the funds designate the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2022 via IRS Form 1099 of the amounts for use in preparing their 2021 income tax return.
| | |
| Schwab Target 2010 Index Fund | $262,225 |
| Schwab Target 2015 Index Fund | 441,283 |
| Schwab Target 2020 Index Fund | 1,537,695 |
| Schwab Target 2025 Index Fund | 3,130,619 |
| Schwab Target 2030 Index Fund | 4,967,940 |
| Schwab Target 2035 Index Fund | 3,281,163 |
| Schwab Target 2040 Index Fund | 4,536,161 |
| Schwab Target 2045 Index Fund | 2,748,924 |
| Schwab Target 2050 Index Fund | 3,248,415 |
| Schwab Target 2055 Index Fund | 1,939,105 |
| Schwab Target 2060 Index Fund | 2,344,688 |
| Schwab Target 2065 Index Fund | — |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Other Federal Tax Information (unaudited) (continued)
Under section 852(b)(3)(C) of the Internal Revenue Code, the funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended March 31, 2021:
| | |
| Schwab Target 2010 Index Fund | $106,658 |
| Schwab Target 2015 Index Fund | 347,584 |
| Schwab Target 2020 Index Fund | — |
| Schwab Target 2025 Index Fund | 363,955 |
| Schwab Target 2030 Index Fund | 26,706 |
| Schwab Target 2035 Index Fund | 103,356 |
| Schwab Target 2040 Index Fund | 13,789 |
| Schwab Target 2045 Index Fund | 3,123 |
| Schwab Target 2050 Index Fund | — |
| Schwab Target 2055 Index Fund | — |
| Schwab Target 2060 Index Fund | 1,204 |
| Schwab Target 2065 Index Fund | — |
For the fiscal year ended March 31, 2021, the funds designate the following amounts as dividends eligible for the 20% qualified business income deduction under section 199A of the Internal Revenue Code. Shareholders will be notified in January 2022 via IRS form 1099 of the amounts for use in preparing their 2021 income tax return.
| | |
| Schwab Target 2010 Index Fund | $15,624 |
| Schwab Target 2015 Index Fund | 25,698 |
| Schwab Target 2020 Index Fund | 89,623 |
| Schwab Target 2025 Index Fund | 191,432 |
| Schwab Target 2030 Index Fund | 311,645 |
| Schwab Target 2035 Index Fund | 201,526 |
| Schwab Target 2040 Index Fund | 281,013 |
| Schwab Target 2045 Index Fund | 178,639 |
| Schwab Target 2050 Index Fund | 208,104 |
| Schwab Target 2055 Index Fund | 129,501 |
| Schwab Target 2060 Index Fund | 156,982 |
| Schwab Target 2065 Index Fund | — |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Investment Advisory Agreement Approval
The Investment Company Act of 1940, as amended (the 1940 Act), requires that initial approval of, as well as 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.
Initial Approval of Investment Advisory Agreement
The Board of Trustees (the Board or the Trustees, as appropriate) called and held a meeting on December 8, 2020, in part, for the purpose of considering whether to appoint Charles Schwab Investment Management, Inc. (CSIM) as investment adviser to the Schwab Target 2065 Index Fund (the Fund) under the investment advisory agreement between Schwab Capital Trust (the Trust) and CSIM (the Agreement). In preparation for the meeting, the Board requested and reviewed a wide variety of materials provided by CSIM and considered information that the Board receives from CSIM throughout the year, including information about CSIM’s affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. The Board also received data provided by an independent provider of investment company data. In recognition of the fact that the Fund had not yet commenced operations, the Board also considered information provided by CSIM in connection with the Board’s consideration of approval of the investment advisory agreement and administration with respect to the other funds within the Trust. The Board also took into account the detailed information about other funds within the Trust that the Board reviews during the course of each year, including information that relates to those funds’ operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. The Independent Trustees received advice from Independent Trustees’ legal counsel. In addition, the Independent Trustees participated in question and answer sessions with representatives of CSIM and met in executive session outside the presence of Fund management.
At the meeting on December 8, 2020, the Board, including a majority of the Independent Trustees, approved the Agreement with respect to the Fund. The Board’s approval was based on
consideration and evaluation of a variety of specific factors discussed at this meeting, including:
| 1. | the nature, extent and quality of the services to be provided to the Fund under the Agreement, including the resources of CSIM and its affiliates to be dedicated to the Fund; |
| 2. | CSIM’s experience in managing other comparable mutual funds and how the Fund’s glide path and asset allocations compare to those of other Schwab target date funds; |
| 3. | the Fund’s estimated expenses and how those expenses compared to those of certain other similar mutual funds; |
| 4. | the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to its management of other funds, including both direct and indirect benefits accruing to CSIM 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 to be provided by CSIM to the Fund and the resources of CSIM and its affiliates will dedicate to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’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 CSIM relating to services and support to be 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 CSIM has made in its infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise in key areas (including portfolio management and trade operations), and improving business 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 also considered Schwab’s wide range of products, services, and channel alternatives such as investment research tools and an array of account features that benefit Fund shareholders who are brokerage clients of Schwab. Finally, the Trustees also considered Schwab’s reputation as a full service brokerage firm and its overall financial condition including Schwab’s ability to maintain consistent operations and service levels during recent periods of remote work and market volatility. Following such evaluation, the Board concluded, within the context of its full
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
deliberations that the nature, extent and quality of services to be provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund supported approval of the Agreement with respect to the Fund.
Fund Performance. With regard to Fund performance, since the Fund had not commenced operations and therefore did not have any performance of its own, the Board considered performance of other funds advised by CSIM having comparable investment objectives in determining whether to approve the Agreement with respect to the Fund. The Trustees also considered the asset allocation expectations for the Fund over time. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the expected performance of the Fund supported approval 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 estimated net 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 based on data provided by an independent provider of investment company data. The Trustees considered that CSIM had contractually agreed to limit certain expenses of the Fund to a specified level. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported approval of the Agreement with respect to the Fund.
Profitability. With regard to profitability, the Trustees considered the expected compensation to be flowing to CSIM 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 CSIM 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 potential benefits to be derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the expected 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 to be rendered to the Fund by CSIM and its affiliates. The Trustees noted that CSIM continues to invest substantial sums in its business in order to provide enhanced research capabilities, services, and systems that would benefit the Fund. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the expected profitability of CSIM, albeit uncertain, is reasonable and supported approval of the Agreement with respect to the Fund.
Economies of Scale. Recognizing that the Fund had not yet commenced operations and had no assets, the Trustees considered the potential existence of any economies of scale and whether those could be expected to be 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 CSIM in CSIM’s infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise and capabilities in key areas (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; (ii) expense cap by CSIM and its affiliates; and (iii) pricing the Fund to scale and keeping overall expenses down as the Fund grows. The Trustees acknowledged that CSIM will share any economies of scale with the Fund by investing in CSIM’s infrastructure, as discussed above, over time and that CSIM’s internal costs of providing investment management, technology, administrative, legal and compliance services to the Fund may increase as a result of regulatory or other developments. The Trustees considered that CSIM had contractually agreed to an expense cap with respect to the Fund. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund may be expected to obtain reasonable benefits from economies of scale if such economies develop.
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, unanimously approved 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 such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Trustees and Officers
The tables below give information about the trustees and officers of Schwab Capital Trust, which includes the funds 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 103 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 funds’ 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 |
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 (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds. | 103 | None |
John F. Cogan
1947
Trustee
(Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016) | Senior Fellow (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University. | 103 | Director (2005 – 2020), Gilead Sciences, Inc. |
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. President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services). | 103 | 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. | 103 | Director (2004 – present), Corcept Therapeutics Incorporated
Director (2009 – present), 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). | 103 | None |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
| 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. Executive Vice President and General Manager of Small Business Group (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses). | 103 | 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). | 103 | 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) | Director, President and Chief Executive Officer (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), 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) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (Oct. 2020 – present), TD Ameritrade Holding Corporation; Director (July 2016 – present), Charles Schwab Investment Management, Inc. | 103 | Director (2008 – present), The Charles Schwab Corporation |
Joseph R. Martinetto2
1962
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) | Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank, SSB; Director (Nov. 2017 – present), Charles Schwab Premier Bank, SSB; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.; Director (Oct. 2020 – present), TD Ameritrade Holding Corporation. | 103 | None |
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
| 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. 2020 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020 – present) and Chief Operating Officer (Jan. 2020 – present), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019 – present), President (Nov. 2018 – present) and Trustee (Apr. 2019 – Dec. 2020), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), 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 Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Chief Financial Officer (Mar. 2020 – present) and Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management. |
Omar Aguilar
1970
Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies
(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.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management. |
Brett Wander
1961
Senior Vice President and Chief Investment Officer – Fixed Income
(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.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director and Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm). |
David Lekich
1964
Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs
Vice President and Assistant Clerk, Laudus Funds
(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 (Sept. 2011 – present) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs. |
Catherine MacGregor
1964
Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs
Chief Legal Officer, Vice President and Clerk, Laudus Funds
(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) | Vice President (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary (Oct. 2009 – present), 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. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust, and is a director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co. |
| 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 Target Index Funds | Annual Report
Schwab Target Index Funds
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.
Bloomberg Barclays 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.
Bloomberg Barclays US Treasury 1–3 Year Index An index which includes all publicly-issued U.S. Treasury securities that have a remaining maturity of greater than or equal to one year and less than three years, are rated investment grade, and have $300 million or more of outstanding face value. The securities in the index must be denominated in U.S. dollars and must be fixed-rate and non-convertible. The index excludes state and local government series bonds and coupon issues that have been stripped from bonds. The index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
Bloomberg Barclays US Treasury Bills 1–3 Month Index An index that includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months but more than 1 month, are rated investment grade and have $300 million or more of outstanding face value. It excludes zero-coupon STRIPS.
Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L) An index which includes all publicly-issued U.S. Treasury Inflation-Protected Securities (TIPS) that have at least one year remaining to maturity, are rated investment grade and have $500 million or more of outstanding face value. The TIPS in the index must be denominated in U.S. dollars and must be fixed-rate and non-convertible. The index is market capitalization weighted and the TIPS in the index are updated on the last business day of each month. TIPS are publicly issued, dollar denominated U.S. Government securities issued by the U.S. Treasury that have principal and interest payments linked to an official inflation measure (as measured by the Consumer Price Index, or CPI) and their payments are supported by the full faith and credit of the United States.
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.
bond fund A bond fund is subject to the same credit, interest rate, and inflation risks as bonds. In addition, a bond fund incurs ongoing fees and expenses. A bond fund’s net asset value will fluctuate with the price of the underlying bonds and the portfolio turnover activity; return of principal is not guaranteed.
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 capital gain or loss is considered unrealized appreciation or depreciation.
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%.
Dow Jones U.S. Large-Cap Total Stock Market Index An index that is a subset of the Dow Jones U.S. Total Stock Market Index, and is designed to measure the performance of large-cap U.S. equity securities. The index is a float-adjusted market capitalization weighted index.
Dow Jones U.S. Select REIT Index An index that is a float-adjusted market-capitalization weighted index comprised of income-producing commercial and/or residential real estate investment trusts (REITs). The index excludes mortgage REITs, net-lease REITs, real estate finance companies, mortgage brokers and bankers, commercial and residential real estate brokers and estate agents, homebuilders, large landowners and sub-dividers of unimproved land, hybrid REITs, timber REITs and companies that have more than 25% of their assets in direct mortgage investments.
Dow Jones U.S. Small-Cap Total Stock Market Index An index that is a subset of the Dow Jones U.S. Total Stock Market Index, and is designed to measure the performance of small-cap U.S. equity securities. The index is a float-adjusted market capitalization weighted index.
Dow Jones U.S. Total Stock Market Index An index which includes all publicly traded stocks of companies headquartered in the United States for which pricing information is readily available. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace.
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 Developed ex US Index (Net) An index that is comprised of large- and mid-capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the large- and mid-capitalization universe as approximately the top 90% of the eligible universe. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
FTSE Emerging Index (Net) An index that is comprised of large- and mid-capitalization companies in emerging market countries, as defined by the index provider. The index defines the large- and mid-capitalization universe as approximately the top 90% of the eligible universe. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
market cap, market capitalization The value of a company as determined by the total value of all shares of its stock outstanding.
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.
Russell 1000 Index An index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, and represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
Russell 2000 Index An index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
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.
Target 2010 Passive Composite Index A custom blended index developed by CSIM based on the Target 2010 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 22.3% Dow Jones U.S. Large-Cap Total Stock Market Index, 1.4% Dow Jones U.S. Small-Cap Total Stock Market Index, 9.1% FTSE Developed ex US Index (Net), 1.7% Dow Jones Equity All REIT Capped Index, 9.0% Bloomberg Barclays US Treasury 1-3 Year Index, 45.2% Bloomberg Barclays US Aggregate Bond Index, 6.5% Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), and 4.7% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2015 Passive Composite Index A custom blended index developed by CSIM based on the Target 2015 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 23.9% Dow Jones U.S. Large-Cap Total Stock Market Index, 1.6% Dow Jones U.S. Small-Cap Total Stock Market Index, 10.2% FTSE Developed ex US Index (Net), 1.9% Dow Jones Equity All REIT Capped Index, 8.4% Bloomberg Barclays US Treasury 1-3 Year Index, 43.4% Bloomberg Barclays US Aggregate Bond Index, 6.2% Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), and 4.3% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2020 Passive Composite Index A custom blended index developed by CSIM based on the Target 2020 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 24.9% Dow Jones U.S. Large-Cap Total Stock Market Index, 1.7% Dow Jones U.S. Small-Cap Total Stock Market Index, 11.1% FTSE Developed ex US Index (Net), 2.0% Dow Jones Equity All REIT Capped Index, 8.0% Bloomberg Barclays US Treasury 1-3 Year Index, 42.3% Bloomberg Barclays US Aggregate Bond Index, 6.0% Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), and 4.0% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2025 Passive Composite Index A custom blended index developed by CSIM based on the Target 2025 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 31.1% Dow Jones U.S. Large-Cap Total Stock Market Index, 2.4% Dow Jones U.S. Small-Cap Total Stock Market Index, 14.1% FTSE Developed ex US Index (Net), 1.7% FTSE Emerging Index (Net), 2.6% Dow Jones Equity All REIT Capped Index, 4.8% Bloomberg Barclays US Treasury 1-3 Year Index, 37.2% Bloomberg Barclays US Aggregate Bond Index, 2.9% Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), and 3.2% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2030 Passive Composite Index A custom blended index developed by CSIM based on the Target 2030 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 36.8% Dow Jones U.S. Large-Cap Total Stock Market Index, 3.1% Dow Jones U.S. Small-Cap Total Stock Market Index, 17.2% FTSE Developed ex US Index (Net), 2.8% FTSE Emerging Index (Net), 3.2% Dow Jones Equity All REIT Capped Index, 2.6% Bloomberg Barclays US Treasury 1-3 Year Index, 30.9% Bloomberg Barclays US Aggregate Bond Index, 0.8% Bloomberg Barclays US
Schwab Target Index Funds | Annual Report
Schwab Target Index Funds
Treasury Inflation-Linked Bond Index (Series-L), and 2.5% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2035 Passive Composite Index A custom blended index developed by CSIM based on the Target 2035 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 40.7% Dow Jones U.S. Large-Cap Total Stock Market Index, 4.0% Dow Jones U.S. Small-Cap Total Stock Market Index, 19.5% FTSE Developed ex US Index (Net), 3.8% FTSE Emerging Index (Net), 3.6% Dow Jones Equity All REIT Capped Index, 1.6% Bloomberg Barclays US Treasury 1-3 Year Index, 24.8% Bloomberg Barclays US Aggregate Bond Index, and 2.0% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2040 Passive Composite Index A custom blended index developed by CSIM based on the Target 2040 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 43.7% Dow Jones U.S. Large-Cap Total Stock Market Index, 4.8% Dow Jones U.S. Small-Cap Total Stock Market Index, 21.5% FTSE Developed ex US Index (Net), 4.8% FTSE Emerging Index (Net), 3.9% Dow Jones Equity All REIT Capped Index, 1.0% Bloomberg Barclays US Treasury 1-3 Year Index, 18.7% Bloomberg Barclays US Aggregate Bond Index, and 1.5% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2045 Passive Composite Index A custom blended index developed by CSIM based on the Target 2045 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 46.4% Dow Jones U.S. Large-Cap Total Stock Market Index, 5.6% Dow Jones U.S. Small-Cap Total Stock Market Index, 23.4% FTSE Developed ex US Index (Net), 5.8% FTSE Emerging Index (Net), 4.3% Dow Jones Equity All REIT Capped Index, 0.6% Bloomberg Barclays US Treasury 1-3 Year Index, 12.9% Bloomberg Barclays US Aggregate Bond Index, and 1.1% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2050 Passive Composite Index A custom blended index developed by CSIM based on the Target 2050 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 47.9% Dow Jones U.S. Large-Cap Total Stock Market Index, 6.1% Dow Jones U.S. Small-Cap Total Stock Market Index, 24.5% FTSE Developed ex US Index (Net), 6.5% FTSE Emerging Index (Net), 4.5% Dow Jones Equity All REIT Capped Index, 0.4%
Bloomberg Barclays US Treasury 1-3 Year Index, 9.3% Bloomberg Barclays US Aggregate Bond Index, and 0.9% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2055 Passive Composite Index A custom blended index developed by CSIM based on the Target 2055 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 48.8% Dow Jones U.S. Large-Cap Total Stock Market Index, 6.4% Dow Jones U.S. Small-Cap Total Stock Market Index, 25.2% FTSE Developed ex US Index (Net), 7.0% FTSE Emerging Index (Net), 4.6% Dow Jones Equity All REIT Capped Index, 0.3% Bloomberg Barclays US Treasury 1-3 Year Index, 7.0% Bloomberg Barclays US Aggregate Bond Index, and 0.7% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2060 Passive Composite Index A custom blended index developed by CSIM based on the Target 2060 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective July 1, 2020 the Dow Jones U.S. Select REIT Index was replaced with the Dow Jones Equity All REIT Capped Index. Effective February 1, 2021, the composite is derived using the following portion allocations: 49.6% Dow Jones U.S. Large-Cap Total Stock Market Index, 6.7% Dow Jones U.S. Small-Cap Total Stock Market Index, 25.9% FTSE Developed ex US Index (Net), 7.4% FTSE Emerging Index (Net), 4.7% Dow Jones Equity All REIT Capped Index, 0.2% Bloomberg Barclays US Treasury 1-3 Year Index, 4.8% Bloomberg Barclays US Aggregate Bond Index, and 0.5% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
Target 2065 Passive Composite Index A custom blended index developed by CSIM based on the Target 2065 Index Fund’s asset allocation glide schedule and will become more conservative as time elapses. Effective February 25, 2021, the composite is derived using the following portion allocations: 49.8% Dow Jones U.S. Large-Cap Total Stock Market Index, 6.8% Dow Jones U.S. Small-Cap Total Stock Market Index, 26.1% FTSE Developed ex US Index (Net), 7.5% FTSE Emerging Index (Net), 4.8% Dow Jones Equity All REIT Capped Index, 0.2% Bloomberg Barclays US Treasury 1-3 Year Index, 4.3% Bloomberg Barclays US Aggregate Bond Index, and 0.5% Bloomberg Barclays US Treasury Bills 1-3 Month Index. The components that make up the composite index may vary over time. The composite index represents target allocations for 2021. Percentages listed may not total to 100% due to rounding.
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 Target Index Funds | Annual Report
Schwab Target Index Funds
Charles Schwab Investment Management
With a straightforward lineup of core products and solutions for building the foundation of a portfolio, Charles Schwab Investment 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 Hedged Equity Fund
Schwab Health Care Fund
Schwab International Core Equity 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 High Yield 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.
211 Main Street, San Francisco, CA 94105
Funds
Schwab Funds
1-877-824-5615
© 2021 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. |
Item 2: Code of Ethics.
| (a) | Registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and any other persons who perform a similar function, regardless of whether these individuals are employed by Registrant or a third party. |
| (c) | During the period covered by the report, no amendments were made to the provisions of this code of ethics. |
| (d) | During the period covered by the report, Registrant did not grant any waivers, including implicit waivers, from the provisions of this code of ethics. |
| (f)(1) | Registrant has filed this code of ethics as an exhibit pursuant to Item 13(a)(1) of Form N-CSR. |
Item 3: Audit Committee Financial Expert.
Registrant’s Board of Trustees has determined that Kiran M. Patel and Kimberly S. Patmore, each currently serving on its audit, compliance and valuation committee, are each an “audit committee financial expert,” as such term is defined in Item 3 of Form N-CSR. Each member of Registrant’s audit, compliance and valuation committee is “independent” under the standards set forth in Item 3 of Form N-CSR.
The designation of each of Mr. Patel and Ms. Patmore as an “audit committee financial expert” pursuant to Item 3 of Form N-CSR does not (i) impose upon such individual any duties, obligations, or liability that are greater than the
duties, obligations and liability imposed upon such individual as a member of Registrant’s audit, compliance and valuation committee or Board of Trustees in the absence of such designation; and (ii) affect the duties, obligations or liability of any other member of Registrant’s audit, compliance and valuation committee or Board of Trustees.
Item 4: Principal Accountant Fees and Services.
Registrant is composed of fifty-three operational series. Twelve series have a fiscal year-end of March 31, whose annual financial statements are reported in Item 1, three series have a fiscal year-end of December 31, thirty-seven series have a fiscal year-end of October 31, and one series has a fiscal year-end of February 28. Principal accountant fees disclosed in Items 4(a)-(d) and 4(g) include fees billed for services rendered to the fifty-three operational series during 2020/2021 and 2019/2020, based on their respective 2020/2021 and 2019/2020 fiscal years, as applicable.
The following table presents fees billed by the principal accountant in each of the last two fiscal years for the services rendered to the Funds:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a)Audit Fees | | | (b) Audit-Related Fees1 | | | (c) Tax Fees2 | | | (d) All Other Fees | |
Fiscal Year
2020/2021 | | | Fiscal Year
2019/ 2020 | | | Fiscal
Year
2020/2021 | | | Fiscal Year
2019/2020 | | | Fiscal
Year
2020/2021 | | | Fiscal
Year
2019/2020 | | | Fiscal
Year
2020/2021 | | | Fiscal
Year
2019/2020 | |
| $ | 1,211,700 | | | $ | 1,517,001 | | | $ | 93,000 | | | $ | 87,870 | | | $ | 161,200 | | | $ | 169,567 | | | $ | 0 | | | $ | 0 | |
| 1 | The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. |
| 2 | The nature of the services includes tax compliance, tax advice and tax planning. |
(e) (1) Registrant’s audit, compliance and valuation committee does not have pre-approval policies and procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) There were no services described in each of paragraphs (b) through (d) above (including services required to be approved by Registrant’s audit, compliance and valuation committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were approved by Registrant’s audit, compliance and valuation committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Below are the aggregate non-audit fees billed in each of the last two fiscal years by Registrant’s principal accountant for services rendered to Registrant, to Registrant’s investment adviser, and to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant.
| | | | |
2020/2021: $4,663,610 | | 2019/2020: $ | 257,437 | |
(h) During the past fiscal year, all non-audit services provided by Registrant’s principal accountant to either Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant were pre-approved. Included in the audit, compliance and valuation committee’s pre-approval was the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: Schedule of Investments.
The schedules of investments are 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 Capital Trust – Schwab Target Index Funds
| | |
| By: | | /s/ Jonathan de St. Paer |
| | Jonathan de St. Paer Chief Executive Officer |
| |
| Date: | | May 17, 2021 |
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: | | May 17, 2021 |
| | |
| By: | | /s/ Mark Fischer |
| | Mark Fischer Chief Financial Officer |
| |
| Date: | | May 17, 2021 |
