Cash in on tax and potential growth opportunities

1. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the maximum tax rate on qualified dividends to 15% (5% for those in the 10% and 15% income tax bracket). Qualified dividends are dividends from domestic corporations and certain foreign corporations, but do not include dividends from certain preferred stock and most REITs. In addition, interet income from bonds and money market instruments are not qualified dividends. The portion of a mutual fund dividend payment that is not designated as a qualified dividend will continue to be taxed at the higher ordinary income tax rates. The reduced rates on qualified dividends will expire after 2010 and revert back to the higher rates in effect prior to 2003, unless extended by federal legislation. Check with your tax advisor for more information.
2. Schwab and the investment adviser have agreed to limit the fund's "net operating expenses" as stated in the prospectus for each fund, for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund's Board of Trustees. The limitation excludes interest, taxes, expenses for dividends and interest paid on securities sold short, and certain non-routine expenses, which may result in a fund incurring net operating expenses above the limitation.

Morningstar proprietary ratings reflect historical risk-adjusted performance as of 09/30/2009. The Schwab Dividend Equity Fund was ranked 4 stars overall in the Large-Cap Value category as of 09/30/2009. It was rated 4 stars out of 1192 funds for the three-year period ending 09/30/2009. It was rated 4 stars out of 933 funds for the five-year period ending 09/30/2009. It was rated 4 stars out of 453 funds for the 10 year period ending 09/30/2009. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The top 10% of the funds in an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.

The Schwab Dividend Equity Fund is part of the suite of actively managed Schwab Funds®, each with a disciplined investment approach. Schwab Funds reflects our unwavering commitment to offer the right selection of funds to meet your long-term financial needs.

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can view, download and print a prospectus by clicking on Prospectuses & Reports. Please read the prospectus carefully before investing. 

The fund may underperform funds that do not limit their investment to dividend-paying stocks. Stocks held by the fund may reduce or stop paying dividends, affecting the ability to generate income.

Trades in no-load mutual funds available through Mutual Funds OneSource service (including SchwabFunds) as well as certain other funds, are available without transaction fees when placed through schwab.com or our automated phone channels. For each of these trade orders placed through a broker, a $25 service charge applies. Schwab reserves the right to change the funds we make available without transaction fees and to reinstate fees on any funds. Funds are also subject to management fees and expenses.