SUPPLEMENT DATED APRIL 2018 TO THE COLLEGECHOICE ADVISOR 529 SAVINGS PLAN DISCLOSURE STATEMENT DATED OCTOBER 2017

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1 Please file this Supplement to the CollegeChoice Advisor 529 Savings Plan Disclosure Statement with your records. SUPPLEMENT DATED APRIL 2018 TO THE COLLEGECHOICE ADVISOR 529 SAVINGS PLAN DISCLOSURE STATEMENT DATED OCTOBER 2017 This Supplement describes important changes affecting the CollegeChoice Advisor 529 Savings Plan. Unless otherwise indicated, capitalized terms have the same meaning as those in the Disclosure Statement. On December 22, 2017, new federal tax reform legislation, Public Law (H.R. 1) was signed into law. The law amended Section 529 of the Code to permit withdrawals from 529 Plan accounts up to $10,000 per year per student (in the aggregate across all Qualified Tuition Programs for that student) for tuition expenses in connection with enrollment and attendance at an elementary or secondary public, private or religious school (K-12 Tuition). The law also permits rollovers from a 529 Plan account to an ABLE Plan account (as authorized by Section 529A of the Code) up to the annual $15,000 contribution limit. As of the date of this supplement, although the Indiana Department of Revenue has not provided specific guidance to taxpayers, (1) Account Owners should be able to withdraw assets from their Account to pay K-12 Tuition and treat the withdrawals as Qualified Expenses for Indiana state tax law purposes; (2) contributions intended to be ultimately withdrawn for K-12 Tuition should be eligible for the 20% Indiana state income tax credit; and (3) action by the Indiana General Assembly may be required to extend favorable Indiana state tax treatment to rollovers to ABLE Plan accounts. However, during its 2018 regular session, the Indiana General Assembly considered legislation that would not extend these favorable Indiana state tax treatments, retroactive to the effective date of H.R. 1. The Indiana General Assembly will convene for a special session in May 2018, after which the treatment of withdrawals to pay K-12 Tuition or contributions intended to be withdrawn for K-12 Tuition should become clear. We are working on updating this Disclosure Booklet to reflect the new U.S. tax law and updates to Indiana state tax law that may follow the May 2018 special session. However, because of the uncertainty regarding Indiana state tax law treatment of the changes to Section 529 made by H.R.1, it is important for Indiana taxpayers to consult their tax advisors before (1) making a withdrawal for K-12 Tuition,(2) making a contribution which they intend to ultimately withdraw for K-12 Tuition, and/or (3) rolling over assets from their Account to an ABLE Plan account. CSINA_

2 Please file this Supplement to the CollegeChoice Advisor 529 Savings Plan Disclosure Statement with your records. SUPPLEMENT DATED OCTOBER 2017 TO THE COLLEGECHOICE ADVISOR 529 SAVINGS PLAN DISCLOSURE STATEMENT DATED OCTOBER 2017 This Supplement describes important changes affecting the CollegeChoice Advisor 529 Savings Plan. Unless otherwise indicated, capitalized terms have the same meaning as those in the Disclosure Statement. NEW INDIVIDUAL PORTFOLIOS Two new Individual Portfolios are being created. Two existing Portfolios will transfer assets into the two new Portfolios, each of which will have a different Underlying Investment from the existing Portfolio. In the case of one of the existing Portfolios, 100% of the assets will transfer to the corresponding new Portfolio. With respect to the other Portfolio, 20% of the assets of the existing Portfolio will transfer into the new Portfolio and 80% will remain in the existing Portfolio. To facilitate a smooth transition you will not be able to access your account, either online or by phone, while the plan changes are being implemented, after 4:00 pm Eastern Time November 30 until 7:00 am Eastern Time December 4. For specific details on what will happen and when, refer to the disclosures below. The Individual Portfolio changes are as follows: Existing Portfolio BlackRock Large Cap Value Portfolio International Equity Index Portfolio Existing Portfolio s Underlying Investment BlackRock Large Cap Value Fund ishares Core MSCI Total Institutional Stock ETF New Portfolio Boston Company Dynamic Large Cap Value Portfolio Emerging Markets Equity Index Portfolio New Portfolio s Underlying Investment The Boston Company Dynamic Large Cap Value Separate Account Vanguard FTSE Emerging Markets ETF Percentage of Assets of Existing Portfolio Transferring to New Portfolio 100% 20% 1. On or about December 1, 2017, we will begin to offer two new Individual Portfolios Boston Company Dynamic Large Cap Value Portfolio and Emerging Markets Equity Index Portfolio. On or about December 1, 2017, we will begin to offer two new Individual Portfolios for Class A Units and Class C Units as follows: Portfolio Name Boston Company Dynamic Large Cap Value Portfolio Emerging Markets Equity Index Portfolio Investment Manager The Boston Company The Vanguard Group, Inc. 2. On or about December 1, 2017, the following replaces the section BlackRock Large Cap Value Portfolio under the section entitled Other Individual Portfolios on page 37 of the Disclosure Statement: Boston Company Dynamic Large Cap Value Portfolio Investment Objective: The Portfolio seeks to outperform the Russell 1000 Value Index by 200 to 400 basis points over a full market cycle (three to five years). Investment Strategy: The Portfolio invests 100% of its funds into The Boston Company Dynamic Large Cap Value Separate Account. It focuses on equity securities with attractive valuations relative to the market, sector and stock history. It seeks to avoid the value trap and "being early" by combining traditional valuation measures with companies that exhibit business improvement and strong fundamentals. It uses proprietary fundamental research resources that understand the past but are focused on the future. It recognizes that one size does not fit all. It is flexible in performing analyses so as to solve for the right 1

3 company, sector and macro variables. It also employs risk controls at all levels of the portfolio construction process to minimize unintended exposures and ensure performance is driven by stock selection while set up/down pricing targets ahead of establishing new positions. Principal Investment Risks. The Portfolio s all-weather investment process is fundamental in nature and highly risk-controlled. The greatest potential risk, given the Portfolio s investment process, is the unsystematic risk associated with its fundamental bottom-up stock selection. 3. On or about December 1, 2017, the following is inserted as a new subsection for the Emerging Markets Equity Index Portfolio between the subsections for International Equity Index Portfolio and Large Cap Equity Index Portfolio under the section entitled Individual Portfolios beginning on page 31 of the Disclosure Statement: Emerging Markets Equity Index Portfolio Investment Objective: The Portfolio seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in emerging market countries. Investment Strategy: The Portfolio invests 100% of its funds into the Vanguard FTSE Emerging Markets ETF. Through its ownership in the fund, the Portfolio employs an indexing investment approach designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index, a market-capitalization-weighted index that is made up of approximately 3,658 common stocks of large-, mid-, and small-cap companies located in emerging markets around the world. The fund invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield. Principle Investment Risks: An investment in the Portfolio could lose money over short or even long periods. You should expect the Portfolio s share price and total return to fluctuate within a wide range. The Portfolio is subject to the following risks, which could affect the Fund s performance: Stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The Portfolio s investments in foreign stocks can be riskier than U.S. stock investments. Foreign stocks tend to be more volatile and less liquid than U.S. stocks. The prices of foreign stocks and the prices of U.S. stocks may move in opposite directions. In addition, the Portfolio s target index may, at times, become focused in stocks of a particular market sector, which would subject the Portfolio to proportionately higher exposure to the risks of that sector. Emerging markets risk, which is the chance that the stocks of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the stocks of companies located in more developed foreign markets because, among other factors, emerging markets can have greater custodial and operational risks; less developed legal, tax, regulatory, and accounting systems; and greater political, social, and economic instability than developed markets. Country/regional risk, which is the chance that world events such as political upheaval, financial troubles, or natural disasters will adversely affect the value of securities issued by companies in foreign countries or regions. The Index s, and therefore the Portfolio s, heavy exposure to China, Taiwan, India, Brazil, and South Africa subjects the Portfolio to a higher degree of country risk than that of more geographically diversified international funds. Currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets. China A-shares risk, which is the chance that the Portfolio may not be able to access a sufficient amount of China A- shares to track its target index. China A-shares are only available to foreign investors through a quota license or the China Stock Connect program. Index sampling risk, which is the chance that the securities selected for the Portfolio, in the aggregate, will not provide investment performance matching that of the Portfolio s target index. 2

4 REMAPPING INTERNATIONAL EQUITY INDEX PORTFOLIO INTO INTERNATIONAL EQUITY INDEX PORTFOLIO AND EMERGING MARKETS EQUITY INDEX PORTFOLIO The International Equity Index Portfolio is changing in two ways. Twenty percent (20%) of its assets are transferring to the newly created Emerging Markets Equity Index Portfolio. At the same time, the Underlying Investment of the International Equity Index Portfolio is changing from ishares Core MSCI Total Institutional Stock ETF to Schwab International Equity ETF. 4. On or about December 1, 2017, twenty percent (20%) of the assets in the International Equity Index Portfolio will transfer into the Emerging Markets Equity Index Portfolio. On or about December 1, 2017, the International Equity Index Portfolio will invest substantially all of its assets in the Schwab International Equity ETF (see No. 12. below) and we will begin to offer the Emerging Markets Equity Index Portfolio. In order to more closely align Account Owner holdings in the newly redesigned Portfolios, twenty percent (20%) of all existing assets in the International Equity Index Portfolio will automatically be transferred to the Emerging Markets Equity Index Portfolio on or about Friday, December 1, 2017 (International Transition). Withdrawal or exchange requests received in good order after 4:00 p.m. Eastern Time on Thursday, November 30, 2017 and on Friday, December 1, 2017 will be processed on Monday, December 4, 2017, using the net asset value of the International Equity Index Portfolio as of Monday, December 4, Any contributions received in good order after 4:00 p.m. Eastern Time on Thursday, November 30, 2017 and on Friday, December 1, 2017 will be invested entirely in the International Equity Index Portfolio. The Emerging Markets Equity Index Portfolio will have an investment strategy and investment risks that are different than the International Equity Index Portfolio. You are allowed two investment exchanges per calendar year. Because this is a program initiated exchange, the International Transition will not count as one of your investment exchanges. If you wish, however, to invest your existing balance differently than as described above, you must contact us to request the change. This will count as one of your two annual investment exchanges. The International Transition will only affect assets in the International Equity Index Portfolio as of 4:00 p.m. Eastern Time on Thursday, November 30, Allocations of future contributions to the International Equity Index Portfolio will be contributed to the redesigned International Equity Index Portfolio (see No. 10 below). If you wish to change your allocations of future contributions you may do so at any time by logging onto our website at by submitting the Exchange/Future Contribution Allocation form by mail, or by calling REMAPPING BLACKROCK LARGE CAP VALUE PORTFOLIO INTO BOSTON COMPANY DYNAMIC LARGE CAP VALUE PORTFOLIO 5. On or about December 1, 2017, all of the assets in the BlackRock Large Cap Value Portfolio will transfer into the Boston Company Dynamic Large Cap Value Portfolio. All existing assets in the BlackRock Large Cap Value Portfolio will automatically be transferred to the Boston Company Dynamic Large Cap Value Portfolio on Friday, December 1, 2017 (Large Cap Value Transition). In order to facilitate the Large Cap Value Transition, you will not be able to request a withdrawal or exchange from the BlackRock Large Cap Value Portfolio after 4:00 p.m. Eastern Time on Thursday, November 30, Withdrawal or exchange requests received in good order after 4:00 p.m. Eastern Time on Thursday, November 30, 2017 and on Friday, December 1, 2017 will be processed on Monday, December 4, 2017, using the net asset value of the Boston Company Dynamic Large Cap Value Portfolio as of Monday, December 4, Any contributions received in good order after 4:00 p.m. Eastern Time on Thursday, November 30, 2017 and on Friday, December 1, 2017 will be invested entirely in the Boston Company Dynamic Large Cap Value Portfolio. The Boston Company Dynamic Large Cap Value Portfolio will have an investment strategy and investment risks that are different than the BlackRock Large Cap Value Portfolio. 3

5 You are allowed two investment exchanges per calendar year. Because this is a program-initiated exchange, the Large Cap Value Transition will not count as one of your investment exchanges. If you wish, however, to invest your existing balance differently than as described above, you must contact us to request the change. This will count as one of your two annual investment exchanges. The Large Cap Value Transition will only affect assets in the BlackRock Large Cap Value Portfolio on the date of the Large Cap Value Transition. If you wish to change your allocations of future contributions you may do so at any time by logging onto our website at by submitting the Exchange/Future Contribution Allocation form by mail, or by calling REDESIGN OF YEAR OF ENROLLMENT PORTFOLIOS On or about December 1, 2017 the Year of Enrollment Portfolios will change investment allocations and underlying funds. 6. On or about December 1, 2017, the following replaces the Year of Enrollment Target Allocations Chart on page 28 of the Disclosure Statement YEAR OF ENROLLMENT PORTFOLIOS TARGET ALLOCATIONS UNDERLYING ETF College ishares Core S&P Total U.S. Stock Market ETF 49% 38% 29% 23% 17% 11% 6% Schwab US REIT ETF 5% 4% 3% 2% 2% 1% 1% Schwab International Equity Index ETF Vanguard FTSE Emerging Market ETF Schwab Aggregate Bond ETF Vanguard Short-Term Inflation Protected Securities ETF ishares Core International Aggregate Bond ETF Schwab Short-Term Treasury ETF ishares Short Treasury Bond ETF 25% 19% 14% 11% 9% 6% 3% 6% 5% 3% 3% 2% 1% 1% 5% 11% 16% 18% 19% 17% 11% 5% 11% 16% 18% 19% 17% 11% 2% 3% 5% 5% 6% 5% 3% 3% 6% 9% 10% 11% 11% 7% 0% 3% 5% 10% 15% 31% 57% Total Equity/Fixed 85% 66% 49% 39% 30% 19% 11% 15% 34% 51% 61% 70% 81% 89% 4

6 The Program Manager monitors and rebalances the underlying asset allocations of the Year of Enrollment Portfolios on a quarterly basis. The Year of Enrollment Portfolios are rebalanced when the Portfolios fall outside the strategic targets by more than 1%. The asset allocations of the Year of Enrollment Portfolios automatically transition semi-annually to more conservative allocations as the Beneficiary approaches college enrollment. 7. On or about December 1, 2017, the following replaces the section entitled Year of Enrollment Portfolios on pages 30 and 31 of the Disclosure Statement: 2034 Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2034 Portfolio currently intends to hold approximately 49% of its assets in Underlying Investments that primarily invest in U.S. Equities, 31% of its assets in Underlying Investments that primarily invest in International Equities, 5% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 15% of its assets in Underlying Investments that invest primarily in Fixed Income Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2031 Portfolio currently intends to hold approximately 38% of its assets in Underlying Investments that primarily invest in U.S. Equities, 24% of its assets in Underlying Investments that primarily invest in International Equities, 4% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 34% of its assets in Underlying Investments that invest primarily in Fixed Income. 5

7 2028 Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2028 Portfolio currently intends to hold approximately 29% of its assets in Underlying Investments that primarily invest in U.S. Equities, 17% of its assets in Underlying Investments that primarily invest in International Equities, 3% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 51% of its assets in Underlying Investments that invest primarily in Fixed Income Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2025 Portfolio currently intends to hold approximately 23% of its assets in Underlying Investments that primarily invest in U.S. Equities, 14% of its assets in Underlying Investments that primarily invest in International Equities, 2% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 61% of its assets in Underlying Investments that invest primarily in Fixed Income Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2022 Portfolio currently intends to hold approximately 17% of its assets in Underlying Investments that primarily invest in U.S. Equities, 11% of its assets in Underlying Investments that primarily invest in International Equities, 2% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 70% of its assets in Underlying Investments that invest primarily in Fixed Income. 6

8 2019 Enrollment Portfolio Investment Objective: The Portfolio is designed for those Beneficiaries who expect to enter college in about Investment Strategy: The 2019 Portfolio currently intends to hold approximately 11% of its assets in Underlying Investments that primarily invest in U.S. Equities, 7% of its assets in Underlying Investments that primarily invest in International Equities, 1% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 81% of its assets in Underlying Investments that invest primarily in Fixed Income. College Portfolio Investment Objective: The College Portfolio is designed for those Beneficiaries who are in college now or expect to be in the very near future. Investment Strategy: The College Portfolio currently intends to hold approximately 6% of its assets in Underlying Investments that primarily invest in U.S. Equities, 4% of its assets in Underlying Investments that primarily invest in International Equities, 1% of its assets in Underlying Investments that primarily invest in Real Estate, and the remaining 89% of its assets in Underlying Investments that invest primarily in Fixed Income. 8. On or about December 1, 2017, the following is inserted before the section entitled Principal Risk Factors of the ishares Portfolios and Underlying Investments on page 34 of the Disclosure Statement: 7

9 Principal Risk Factors of the Year of Enrollment Portfolios Principal Risks: As with any investment, you could lose all or part of your investment in the Portfolio, and the Portfolio s performance could trail that of other investments. The Portfolio is subject to certain risks, including the principal risks noted below, any of which may adversely affect the Portfolio s NAV, trading price, yield, total return and ability to meet its investment objective. Agency Debt Risk, Asset Class Risk, Assets Under Management (AUM) Risk, Authorized Participant Concentration Risk, Call Risk, Cash Transaction Risk, China A-shares Risk, Concentration Risk, Country/Regional Risk, Credit Risk, Currency Hedging Risk, Currency Risk, Cyber Security Risk,, Derivatives Risk, Emerging Markets Risk, Equity Risk, ETF Trading Risk, Extension Risk, Financials Sector Risk, Geographic Risk, Foreign Investment Risk, High Portfolio Turnover Risk, Income Risk, Income Fluctuations Risk, Index-Related Risk, Index Sampling Risk, Industrials Sector Risk, Information Technology Sector Risk, Interest Rate Risk, Investment Style Risk, Issuer Risk, Large-Capitalization Companies Risk, Liquidity Risk, Management Risk, Market Capitalization Risk, Market Risk, Market Trading Risk, Mid-Cap Company Risk, Mortgage-Backed and Mortgage Pass- Through Securities Risk, Non-U.S. Issuer Risk, Operational Risk, Partners Risk, Passive Investment Risk, Prepayment and Extension Risk, Portfolio Turnover Risk, Real Estate Investment Risk, REITs Risk, Risk of Investing in Developed Countries, Risk of Investing in the United States, Sampling Index Tracking Risk, Securities Lending Risk, Security Risk, Small Cap Company Risk, Sovereign and Quasi-Sovereign Obligations Risk, Stock Market Risk, Structural Risk, Tax Risk, and Tracking Error Risk. For more information on each of the risks listed above see Principal Risk Factors of the Underlying Investments below. Principal Risk Factors of the Underlying Investments The information provided below is only a summary of the main risks of the Underlying Investments composed of ishares ETFs, Schwab and Vanguard products. Each Underlying Investment s current prospectus and statement of additional information contains additional information not summarized herein and identifies additional principal risks to which the respective Underlying Investment may be subject. Please work with your Financial Advisor to understand the specific risks associated with each Year of Enrollment Portfolio. Stock market risk Principal Risk Factors of the Vanguard ETFs Stock market risk is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The fund s investments in foreign stocks can be riskier than U.S. stock investments. Foreign stocks tend to be more volatile and less liquid than U.S. stocks. The prices of foreign stocks and the prices of U.S. stocks may move in opposite directions. In addition, the fund s target index may, at times, become focused in stocks of a particular market sector, which would subject the fund to proportionately higher exposure to the risks of that sector. Emerging markets risk Emerging markets risk is the chance that the stocks of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the stocks of companies located in more developed foreign markets because, among other factors, emerging markets can have greater custodial and operational risks; less developed legal, tax, regulatory, and accounting systems; and greater political, social, and economic instability than developed markets. Country or regional risk Country risk is the chance that world events such as political upheaval, financial troubles, or natural disasters will adversely affect the value of securities issued by companies in foreign countries or regions. The Index s, and therefore the fund s, heavy exposure to China, Taiwan, India, Brazil, and South Africa subjects the fund to a higher degree of country risk than that of more geographically diversified international funds. Currency risk 8

10 Currency Risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets. China A-shares risk China A-shares risk is the chance that the Fund may not be able to access a sufficient amount of China A-shares to track its target index. China A-shares are only available to foreign investors through a quota license or the China Stock Connect program. Index sampling risk Index sampling risk is the chance that the securities selected for an Underlying Investment, in the aggregate, will not provide investment performance matching that of the Underlying Investment s target index. Because ETF shares are traded on an exchange, they are subject to additional risks: The Fund s ETF shares are listed for trading on NYSE Arca and are bought and sold on the secondary market at market prices. Although it is expected that the market price of an ETF Share typically will approximate its NAV, there may be times when the market price and the NAV differ significantly. Thus, you may pay more or less than NAV when you buy ETF shares on the secondary market, and you may receive more or less than NAV when you sell those shares. Although the fund s ETF shares are listed for trading on NYSE Arca, it is possible that an active trading market may not be maintained. Trading of the fund s ETF shares may be halted by the activation of individual or market-wide trading halts (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of the fund s ETF shares may also be halted if (1) the shares are delisted from NYSE Arca without first being listed on another exchange or (2) NYSE Arca officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors. Agency Debt Risk Principal Risk Factors of the ishares ETFs Underlying Investments may invest in unsecured bonds or debentures issued by government agencies, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Bonds or debentures issued by government agencies, government-sponsored entities, or government corporations, including, among others, Fannie Mae and Freddie Mac, are generally backed only by the general creditworthiness and reputation of the government agency, government-sponsored entity, or government corporation issuing the bond or debenture and are not guaranteed by the U.S. Department of the Treasury (U.S. Treasury) or backed by the full faith and credit of the U.S. government. As a result, there is uncertainty as to the current status of many obligations of Fannie Mae, Freddie Mac and other agencies that are placed under conservatorship of the federal government. Government National Mortgage Association securities are generally backed by the full faith and credit of the U.S. Government. Asset Class Risk Securities and other assets in the Portfolio s underlying index or in an Underlying Investment may underperform in comparison to the general financial markets, a particular financial market or other asset classes. Assets Under Management Risk From time to time, an Authorized Participant (as defined below), a third- party investor, an Underlying Investment s adviser or an affiliate of an Underlying Investment s adviser, or a fund may invest in an Underlying Investment and hold its investment for a specific period of time in order to facilitate commencement of the Underlying Investment s operations or for the Underlying Investment to achieve size or scale. There can be no assurance that any such entity would not redeem its investment or that the size of the fund would be maintained at such levels, which could negatively impact the Underlying Investment. Authorized Participant Concentration Risk Only an Authorized Participant may engage in creation or redemption transactions directly with an ETF. An Underlying Investment has a limited number of institutions that may act as Authorized Participants on an agency basis (i.e., on behalf of other market participants). To the extent that Authorized Participants exit the business or are unable to proceed with creation and/or redemption orders with respect to an Underlying Investment and no other Authorized Participant is able to step forward to create 9

11 or redeem Creation Units (as defined in the Purchase and Sale of Fund Shares section of the Underlying Investment s Prospectus), an Underlying Investment s shares may be more likely to trade at a premium or discount to NAV and possibly face trading halts and/or delisting. An Authorized Participant is an entity chosen by an ETF sponsor to undertake the responsibility of obtaining the underlying assets needed to create an ETF. Authorized Participants are typically large institutional organizations, such as market makers or specialists. Bond Investment Risk The risks of fixed-income investing include short-term and prolonged price declines because of a rise in interest rates, issuer quality considerations, and other economic considerations. Call Risk During periods of falling interest rates, an issuer of a callable bond held by an Underlying Investment may call or repay the security before its stated maturity, and the Underlying Investment may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Underlying Investment s income, or in securities with greater risks or with other less favorable features. Cash Transactions Risk Each Underlying Investment expects to effect all of its creations and redemptions for cash, rather than in-kind securities. As a result, an Underlying Investment may have to sell portfolio securities at inopportune times in order to obtain the cash needed to meet redemption orders. This may cause an Underlying Investment to sell a security and recognize a capital gain or loss that might not have been incurred if it had made a redemption-in-kind. The use of cash creations and redemptions may also cause an Underlying Investment s shares to trade in the market at greater bid-ask spreads or greater premiums or discounts to the Underlying Investment s NAV. Concentration Risk An Underlying Investment may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Underlying Investment s investments more than the market as a whole, to the extent that the Underlying Investment s investments are concentrated in the securities of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector or asset class. Credit Risk Debt issuers and other counterparties may be unable or unwilling to make timely interest and/or principal payments when due or otherwise honor their obligations. Changes in an issuer s credit rating or the market s perception of an issuer s creditworthiness may also adversely affect the value of an Underlying Investment s investment in that issuer. The degree of credit risk depends on the issuer s financial condition and on the terms of the securities. Currency Hedging Risk When a derivative is used as a hedge against a position that an Underlying Investment holds, any loss generated by the derivative generally should be substantially offset by gains on the hedged investment, and vice versa. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. Hedges are sometimes subject to imperfect matching between the derivative and its reference asset, and there can be no assurance that an Underlying Investment s hedging transactions will be effective. Currency Risk Because an Underlying Investment s NAV is determined in U.S. dollars, an Underlying Investment s NAV could decline if one or more of the currencies of the non-u.s. markets in which an Underlying Investment invests depreciates against the U.S. dollar and the depreciation of one currency is not offset by appreciation in another currency and/or an Underlying Investment s attempt to hedge currency exposure to the depreciating currency or currencies is unsuccessful. Generally, an increase in the value of the U.S. dollar against the component currencies will reduce the value of a security denominated in the component currencies, as applicable. In addition, fluctuations in the exchange rates between currencies could affect the economy or particular business 10

12 operations of companies in a geographic region, including securities in which an Underlying Investment invests, causing an adverse impact on an Underlying Investment s investments in the affected region and the United States. As a result, investors have the potential for losses regardless of the length of time they intend to hold fund shares. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, an Underlying Investment s NAV may change quickly and without warning. Cyber Security Risk Failures or breaches of the electronic systems of an Underlying Investment, an Underlying Investment s adviser, distributor, and other service providers, market makers, Authorized Participants or the issuers of securities in which an Underlying Investment invests have the ability to cause disruptions and negatively impact an Underlying Investment s business operations, potentially resulting in financial losses to an Underlying Investment and its shareholders. While each Underlying Investment has established business continuity plans and risk management systems seeking to address system breaches or failures, there are inherent limitations in such plans and systems. Furthermore, an Underlying Investment cannot control the cyber security plans and systems of an Underlying Investment s service providers, the Index Provider, market makers, Authorized Participants or issuers of securities in which an Underlying Investment invests. Derivatives Risk An Underlying Investment may use currency forwards and Non-Deliverable Forwards to hedge the currency exposure resulting from investments in the foreign currency denominated securities held by an Underlying Investment. An Underlying Investment s use of these instruments, like investments in other derivatives, may reduce an Underlying Investment s returns, increase volatility and/or result in losses due to credit risk or ineffective hedging strategies. Volatility is defined as the characteristic of a security, a currency, an index or a market, to fluctuate significantly in price within a defined time period. Currency forwards, like other derivatives, are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A risk of an Underlying Investment s use of derivatives is that the fluctuations in their values may not correlate perfectly with the value of the currency or currencies being hedged as compared to that of the U.S. dollar. The possible lack of a liquid secondary market for derivatives and the resulting inability of an Underlying Investment to sell or otherwise close a derivatives position could expose an Underlying Investment to losses and could make derivatives more difficult for an Underlying Investment to value accurately. An Underlying Investment could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Blackrock s use of derivatives is not intended to predict the direction of securities prices, currency exchange rates, interest rates and other economic factors, which could cause an Underlying Investment s derivatives positions to lose value. Derivatives may give rise to a form of leverage and may expose an Underlying Investment to greater risk and increase its costs. The U.S. and certain other countries have adopted or are in the process of adopting regulatory reforms affecting the derivatives markets. These regulations may make derivatives more costly, may limit the availability of derivatives, and may otherwise adversely affect the value and performance of derivatives. Emerging Markets Risk Some foreign markets are considered to be emerging markets. Investment in these emerging markets is subject to a greater risk of loss than investments in more developed markets. This is due to, among other things, greater market volatility, lower trading volume, inflation, political and economic instability, greater risk of market shutdown, and more governmental limitations on foreign investment than those typically found in a developed market. Equity Securities Risk Investments in equity securities are subject to changes in value that may be attributable to market perception of a particular issuer or to general stock market fluctuations that affect all issuers. Investments in equity securities may be more volatile than investments in other asset classes. Extension Risk During periods of rising interest rates, certain debt obligations may be paid off substantially more slowly than originally anticipated and the value of those securities may fall sharply, resulting in a decline in an Underlying Investment s income and potentially in the value of an Underlying Investment s investments. 11

13 Financials Sector Risk Performance of companies in the financials sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation of any individual financial company or of the financials sector as a whole cannot be predicted. In recent years, cyber attacks and technology malfunctions and failures have become increasingly frequent in this sector and have caused significant losses to companies in this sector, which may negatively impact an Underlying Investment. Geographic Risk A natural or other disaster could occur in a geographic region in which an Underlying Investment invests, which could affect the economy or particular business operations of companies in the specific geographic region, causing an adverse impact on an Underlying Investment s investments in the affected region. High Portfolio Turnover Risk An Underlying Investment may engage in active and frequent trading of its portfolio securities. High portfolio turnover (considered by each Underlying Investment to mean higher than 100% annually) may result in increased transaction costs to an Underlying Investment, including brokerage commissions, dealer markups and other transaction costs on the sale of the securities and on reinvestment in other securities. Income Risk An Underlying Investment s income may decline when yields fall. This decline can occur because an Underlying Investment may subsequently invest in lower-yielding bonds when bonds in its portfolio mature, near maturity or are called, bonds in the Underlying Index are substituted, or an Underlying Investment otherwise needs to purchase additional bonds. Index-Related Risk There is no guarantee that an Underlying Investment will achieve a high degree of correlation to the Underlying Index and therefore achieve its investment objective. Market disruptions and regulatory restrictions could have an adverse effect on an Underlying Investment s ability to adjust its exposure to the required levels in order to track the Underlying Index. Errors in index data, index computations and/or the construction of the Underlying Index in accordance with its methodology may occur from time to time and may not be identified and corrected by the Index Provider for a period of time or at all, which may have an adverse impact on an Underlying Investment and its shareholders. Industrials Sector Risk The industrials sector may be adversely affected by changes in the supply of and demand for products and services, product obsolescence, claims for environmental damage or product liability and general economic conditions, among other factors. Interest Rate Risk An increase in interest rates may cause the value of securities held by an Underlying Investment to decline, may lead to heightened volatility in the fixed-income markets and may adversely affect the liquidity of certain fixed-income investments. The current historically low interest rate environment increases the risks associated with rising interest rates. Information Technology Sector Risk Information technology companies face intense competition and potentially rapid product obsolescence. They are also heavily dependent on intellectual property rights and may be adversely affected by the loss or impairment of those rights. Issuer Risk 12

14 The performance of an Underlying Investment depends on the performance of individual securities to which an Underlying Investment has exposure. Changes in the financial condition or credit rating of an issuer of those securities may cause the value of the securities to decline. Large-Capitalization Companies Risk Large-capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions. Large-capitalization companies may be more mature and subject to more limited growth potential compared with smaller capitalization companies. During different market cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets. Liquidity Risk Liquidity risk exists when particular investments are difficult to purchase or sell. This can reduce an Underlying Investment s returns because an Underlying Investment may be unable to transact at advantageous times or prices. Market Risk An Underlying Investment could lose money over short periods due to short-term market movements and over longer periods during more prolonged market downturns. Management Risk As an Underlying Investment may not fully replicate the Underlying Index, it is subject to the risk that the investment manager s investment strategy may not produce the intended results. Market Trading Risk An Underlying Investment faces numerous market trading risks, including the potential lack of an active market for fund shares, losses from trading in secondary markets, periods of high volatility and disruptions in the creation/redemption process. ANY OF THESE FACTORS, AMONG OTHERS, MAY LEAD TO AN UNDERLYING INVESTMENT S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. Non-Diversification Risk An Underlying Investment may invest a large percentage of its assets in securities issued by or representing a small number of issuers. As a result, an Underlying Investment s performance may depend on the performance of a small number of issuers. Non-U.S. Issuers Risk Securities issued by non-u.s. issuers carry different risks from securities issued by U.S. issuers. These risks include differences in accounting, auditing and financial reporting standards, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability, regulatory and economic differences, and potential restrictions on the flow of international capital. An Underlying Investment may be specifically exposed to European Economic Risk Operational Risk An Underlying Investment may be exposed to operational risks arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of an Underlying Investment s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. An Underlying Investment and the investment manager seek to reduce these operational risks through controls and procedures. However, these measures do not address every possible risk and may be inadequate to address these risks. Passive Investment Risk An Underlying Investment may not be actively managed, and the investment manager generally does not attempt to take defensive positions under any market conditions, including declining markets. 13

15 Real Estate Investment Risk Investment in equity securities in the real estate sector is subject to many of the same risks associated with the direct ownership of real estate, such as adverse changes in national, state, or local real estate conditions (resulting from, for example, oversupply of or reduced demand for space and changes in market rental rates); obsolescence of properties; changes in the availability, cost, and terms of mortgage funds; and the impact of tax, environmental, and other laws. Reliance on Trading Partners Risk An Underlying Investment may invest in countries or regions whose economies are heavily dependent upon trading with key partners. Any reduction in this trading may have an adverse impact on an Underlying Investment s investments. Through its portfolio companies trading partners, An Underlying Investment may be specifically exposed to Asian Economic Risk, European Economic Risk and North American Economic Risk. Risk of Investing in Developed Countries An Underlying Investment s investment in developed country issuers may subject an Underlying Investment to regulatory, political, currency, security, economic and other risks associated with developed countries. Developed countries tend to represent a significant portion of the global economy and have generally experienced slower economic growth than some less developed countries. In addition, developed countries may be adversely impacted by changes to the economic conditions of certain key trading partners, regulatory burdens, debt burdens and the price or availability of certain commodities. Risk of Investing in the United States An Underlying Investment may have significant exposure to U.S. issuers. Certain changes in the U.S. economy, such as when the U.S. economy weakens or when its financial markets decline, may have an adverse effect on the securities to which an Underlying Investment has exposure. Securities Lending Risk An Underlying Investment may engage in securities lending. Securities lending involves the risk that an Underlying Investment may lose money because the borrower of the loaned securities fails to return the securities in a timely manner or at all. An Underlying Investment could also lose money in the event of a decline in the value of collateral provided for loaned securities or a decline in the value of any investments made with cash collateral. These events could also trigger adverse tax consequences for an Underlying Investment. Sovereign and Quasi-Sovereign Obligations Risk An Underlying Investment may invest in securities issued by or guaranteed by non-u.s. sovereign governments and by entities affiliated with or backed by non U.S. sovereign governments, which may be unable or unwilling to repay principal or interest when due. In times of economic uncertainty, the prices of these securities may be more volatile than those of corporate debt obligations or of other government debt obligations. Structural Risk The countries in which an Underlying Investment invests may be subject to considerable degrees of economic, political and social instability. Tax Risk An Underlying Investment may invest in derivatives. The federal income tax treatment of a derivative may not be as favorable as a direct investment in an underlying asset. Derivatives may produce taxable income and taxable realized gain. Derivatives may adversely affect the timing, character and amount of income an Underlying Investment realizes from its investments. As a result, 14

16 a larger portion of an Underlying Investment s distributions may be treated as ordinary income rather than as capital gains. In addition, certain derivatives are subject to mark-to-market or straddle provisions of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code ). If such provisions are applicable, there could be an increase (or decrease) in the amount of taxable dividends paid by an Underlying Investment. Income from swaps is generally taxable. In addition, the tax treatment of certain derivatives, such as swaps, is unsettled and may be subject to future legislation, regulation or administrative pronouncements issued by the U.S. Internal Revenue Service ( IRS ). As part of an Underlying Investment s currency hedging strategy, an Underlying Investment may match foreign currency forward contracts with the non-u.s. dollar denominated securities whose currency risk is intended to be hedged wholly or partially by such contracts. If an Underlying Investment were to perform such matching for income tax purposes, this matching would potentially result in an Underlying Investment s deferral for U.S. federal income tax purposes of the realized gains or losses attributable to foreign currency forward contracts until such gains or losses offset the currency related losses on the matched non-u.s. dollar denominated securities. If the IRS were to disagree with such deferral treatment or the matching methodology used, an Underlying Investment s income could become undistributed and incur tax liabilities. An Underlying Investment may reevaluate, adjust, begin, or discontinue the matching of such contracts in the future. Tracking Error Risk Tracking error is the divergence of an Underlying Investment s performance from that of the applicable underlying index. Tracking error may occur because of differences between the securities and other instruments held in an Underlying Investment s portfolio and those included in the applicable underlying index, pricing differences, differences in transaction costs, an Underlying Investment s holding of uninvested cash, differences in timing of the accrual of or the valuation of dividends or interest, tax gains or losses, changes to the applicable underlying index or the costs to an Underlying Investment of complying with various new or existing regulatory requirements. This risk may be heightened during times of increased market volatility or other unusual market conditions. Tracking error also may result because an Underlying Investment incurs fees and expenses, while the applicable underlying index does not. Treasury Obligations Risk Treasury obligations may differ from other S-11 securities in their interest rates, maturities, times of issuance and other characteristics and may provide relatively lower returns than those of other securities. Similar to other issuers, changes to the financial condition or credit rating of a government may cause the value of an Underlying Investment s treasury obligations to decline. Valuation Risk The price an Underlying Investment could receive upon sale of a security or unwind of a financial instrument or other asset may differ from an Underlying Investment s valuation of the security, instrument or other asset and from the value used by the Underlying Index, particularly for securities or other instruments that trade in low volume or volatile markets or that are valued using a fair value methodology. In addition, the value of the securities or other instruments in an Underlying Investment s portfolio may change on days or during time periods when shareholders will not be able to purchase or sell an Underlying Investment s shares. Concentration Risk Principal Risk Factors of the Schwab ETFs To the extent that an Underlying Investment s or the index s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class (including the real estate industry, as described above), an Underlying Investment 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. Derivatives Risk 15