SMRT Funds - Strategic Asset Allocation Enhancements | Page 1 of 2

In January 2007 Equity exposure will increase for each of the target-date SMRT Funds as shown in the chart below; the SMRT Income Fund asset allocation of 25% equity, 75% fixed income will not change.

2007 STRATEGIC ASSET ALLOCATION ENHANCEMENTS

Schwab Managed Retirement Trust Funds™

The Schwab Managed Retirement Trust Funds (SMRT Funds) asset allocation schedules are being enhanced in January 2007. No action is required by plan sponsors or retirement plan participants.

Fund 2007 Equity Allocation Previous Equity Allocation Increase

SMRT 2040 Fund 91.50% 90.90% 0.60%

SMRT 2030 Fund 84.28% 81.00% 3.28%

SMRT 2020 Fund 70.06% 65.00% 5.06%

SMRT 2010 Fund 49.20% 39.20% 10.00%

SMRT Income Fund 25.00% 25.00% 0.00%

These changes are intended to help offset retirement savings shortfalls that may have resulted from:

• Increased life expectancies• Greater expenses in retirement, including health care costs• Inadequate retirement savings• Desire to use target-date retirement funds as lifelong investment vehicles

SMRT Funds - Strategic Asset Allocation Enhancements | Page 2 of 2

The Schwab Managed Retirement Trust Funds are collective trust funds managed and distributed by The Charles Schwab Trust Company (“CSTC”), a California state-chartered, non-depository trust company. CSTC acts as trustee and manager of the Funds. The Funds are not mutual funds, and their units are not registered under the 1933 Act, as amended or applicable securities laws of any state or other jurisdiction. The Funds are not registered under the 1940 Act, as amended, or other applicable law, and unit holders are not entitled to the protections of the 1940 Act. The Funds are not insured by CSTC, any of its affiliates, the FDIC or any other person. As defined in the Funds’ Declaration of Trust and Participation Agreement documents, the Funds are available for investment by eligible, qualified retirement plan trusts only. The unit value of the Funds will fluctuate, and investors may lose money. Various asset classes of the underlying funds, such as small-cap and international, may carry additional risks.

The Charles Schwab Corporation (Charles Schwab) provides services with respect to retirement plans and participants through its subsidiaries, Schwab Retirement Plan Services, Inc., The Charles Schwab Trust Company, and Charles Schwab & Co., Inc. (Member SIPC). Charles Schwab also provides equity compensation plan services and other financial and retirement services to corporations and executives through Charles Schwab & Co., Inc.

©2006 The Charles Schwab Trust Company. All rights reserved.

FLH 0948 (1106-7895) SLS36360PDF (12/06)

At Target Dates 2010, 2020, 2030 and 2040

Instead of reaching static 25% equity and 75% fixed income allocations at the target dates, the funds’ allocations will reach 40% equity and 60% fixed income. The funds will continue to become more conservative for 20 years beyond the target dates, until reaching 25% equity, 75% fixed income allocations that will not change. At that time, the target-date funds will merge with the SMRT Income Fund.

The chart below demonstrates the previous and adjusted asset allocation schedules (glide path).

2007 Glide Path

Previous Glide Path0%

20%

40%

60%

80%

100%

40 30 20 10 RetirementDate

-10 -20

SMRT Funds Glide Path ComparisonP

erce

ntag

eof

Equ

ity

Years to Retirement

If you have questions or would like more information, please contact your Schwab representative.Contact Us