Schwab's financial and other relationships with ETFs and mutual funds.

At Charles Schwab & Co., Inc. ("Schwab"), we believe it's important for you to understand the compensation Schwab receives from mutual fund and exchange-traded fund (ETF) companies or their affiliated firms. This information can help you identify and evaluate any conflicts of interest that Schwab may have when you purchase a mutual fund or ETF through your Schwab account. This resource provides information about the financial relationships Schwab has with the mutual funds and ETFs available at Schwab, including mutual funds and ETFs managed by Schwab's affiliate, Charles Schwab Investment Management, Inc., dba Schwab Asset Management^®. 

Mutual Fund Compensation. Schwab receives fees from mutual fund companies or their affiliates for the recordkeeping, shareholder, and other administrative services that Schwab provides to shareholders of such funds ("Shareholder Services"). These services include data and reporting; transaction processing; settlement of trades; dividend distribution; record maintenance; and distribution of statements, confirmations, prospectuses, and other regulatory shareholder documents. In addition, Schwab receives marketing and promotional compensation from T. Rowe Price for promotion of their mutual funds to retail clients and the clients of registered investment advisors (RIAs) that custody assets at Schwab, and for providing additional mutual fund marketing support to T. Rowe Price. These fees create conflicts of interest and are discussed more fully in the mutual fund compensation disclosures that follow.

ETF Compensation. Certain third-party ETF sponsors or their affiliates make payments to Schwab for ETF-related opportunities such as data and reporting, education, and events. Schwab receives compensation from T. Rowe Price for promotion of their active ETFs to retail clients and the clients of RIAs that custody assets at Schwab, and for providing additional ETF marketing support to T. Rowe Price. Schwab also receives fees from active semi-transparent ETF sponsors for platform support and technology, shareholder communications, reporting, and similar administrative services for active semi-transparent ETFs available at Schwab. These fees create conflicts of interest and are discussed more fully in the ETF compensation disclosures that follow.

Schwab-Affiliated Fund Compensation. Schwab receives various forms of compensation from mutual funds and ETFs that are affiliated with Schwab ("Schwab-affiliated funds"): the Schwab Funds^® and Schwab ETFs^®. Schwab Asset Management, a subsidiary of The Charles Schwab Corporation and Schwab affiliate, serves as investment advisor to the Schwab-affiliated funds. Schwab Asset Management receives compensation for serving in such capacity which creates conflicts of interest. This document discusses the compensation received by both Schwab Asset Management and Schwab from the Schwab-affiliated funds.

Schwab's Strategic Provider Relationship. Schwab entered into a long-term strategic relationship with T. Rowe Price. Under this arrangement, T. Rowe Price makes payments to Schwab in exchange for Schwab promoting certain actively managed T. Rowe Price mutual funds and ETFs to Schwab's clients and the clients of Registered Investment Advisors that custody assets at Schwab, and for providing additional mutual fund and ETF marketing support to T. Rowe Price ("Strategic Provider Relationship"). This payment is significant and will increase over each year of the relationship if Schwab is successful in promoting T. Rowe Price funds, based upon asset growth in the T. Rowe Price Funds at Schwab. Schwab received payments of $12.4 million from T. Rowe Price for these promotional services during 2023. Payment in 2024 may be higher or lower depending on growth of T. Rowe Price assets at Schwab. This strategic relationship payment is in addition to and separate from payments T. Rowe Price makes to Schwab for shareholder and administrative services discussed elsewhere in this section.

Because the terms of the arrangement provide a considerable financial benefit to Schwab, this arrangement creates conflicts of interest as T. Rowe Price will have greater access to Schwab representatives and advisors that custody their clients' assets at Schwab, and Schwab will promote T. Rowe Price mutual funds and ETFs to our clients on Schwab.com and other digital properties. Clients may be more likely to select, and Schwab representatives or advisors that custody their clients' assets at Schwab may be more likely to recommend, funds that are familiar to them and that receive greater promotional support from Schwab. The Strategic Provider Relationship will not impact selection of any fund on the Schwab lists used by Schwab representatives to make recommendations to clients. In addition, the compensation received by Schwab representatives will not differ based on whether the fund is from a Schwab affiliate, third-party fund sponsor, or T. Rowe Price.

Schwab receives various fees for the recordkeeping, shareholder and other administrative services that Schwab provides to funds participating in Schwab's Mutual Fund OneSource^® service and other NTF funds, including certain institutional share classes that are available with no transaction fee to investors at Schwab. Fees paid to Schwab include asset-based fees (fees based on a percentage of the fund assets) and one-time establishment fees.

A. Asset-Based Fees. When you purchase and redeem shares of NTF funds, you don't pay a transaction fee (see the Charles Schwab Pricing Guide for more information on other fees that may apply). You can purchase and redeem shares of an NTF fund without paying a transaction fee because the fund, its advisor, or the fund's service provider pays Schwab a fee based on a percentage of the fund assets held by shareholders at Schwab to cover the costs of providing the Shareholder Services to you and other Schwab customers. This creates a conflict of interest in that clients could be more inclined to purchase an NTF fund, where Schwab receives greater compensation, compared to a fund with transaction fees. 

The OneSource/NTF fund fee may differ based on when the fund first became available at Schwab or other factors. Most NTF funds pay Schwab's standard OneSource/NTF fund fee of 0.40% per year; however, the annual fee can range up to 0.45% of the fund assets held at Schwab. At this standard rate, the fund or fund affiliate pays Schwab $40 each year for each $10,000 in fund assets held by an investor for the Shareholder Services provided by Schwab. In some cases, Schwab applies a minimum monthly fee of $2,000 per month per NTF fund if the asset-based fee calculated each month for that fund is less than the minimum monthly fee. This minimum monthly fee is applied starting with the first or seventh full month, depending on when the fund was added to the platform, after the fund is made available for purchase at Schwab. Certain Schwab tools like the Schwab Mutual Fund OneSource Select List and the Schwab Personalized Portfolio Builder limit eligible third-party funds to those that are part of Schwab's Mutual Fund OneSource service, while other screener and fund-finder tools default search results to the third-party funds that participate in Schwab's Mutual Fund OneSource service. Where Schwab limits eligibility for certain lists or defaults search results to funds that participate in the Mutual Fund OneSource service, Schwab has a conflict of interest as Schwab makes more from these funds.

NTF funds may pay a different asset-based fee on shares made available to retirement and other benefit plan ("Plan") participants through Schwab's retirement plan services business. The annual fees paid on Plan shares generally range from 0.10% to 0.50%—but in rare cases can range up to 1.10%—of the average fund assets held at Schwab. Schwab typically passes through all or a portion of those fees to Plan recordkeepers, some of which may be affiliated with Schwab, for the shareholder and administrative services they or other service providers provide to Plan participants. These shareholder and administrative services vary depending on the type of retirement or other benefit Plan, but typically include processing of Plan purchases, redemptions and exchanges, processing of dividends and distributions, delivery of Plan account statements, delivery of fund documents, administration of Plan benefits, and maintenance of Plan records.

Outside of the OneSource/NTF service, certain fund companies pay an asset-based fee for shareholder services on institutional share classes made available with no transaction fee ("Institutional NTF" or "INTF") and held by clients of investment advisors and other institutional investors, including certain large retail investors. Fees on new institutional class shares acquired or held at Schwab, are typically 0.17% per year but can range up to 0.19%. At a rate of 0.19%, the fund or fund affiliate pays Schwab $19 each year for each $10,000 in fund assets held by an investor for the Shareholder Services provided by Schwab. The asset-based annual shareholder services fee on existing assets converted from transaction fee funds could be up to 0.15%, but typically is 0.12%, while shareholder services fees on existing assets that converted from Schwab Mutual Fund OneSource to INTF could be up to 0.45%, but typically are 0.40%. At rates of 0.12% and 0.40%, the fund or fund affiliate pays Schwab $12 or $40 each year for each $10,000 in fund assets held by an investor for the Shareholder Services provided by Schwab.

B. One-Time Fund Establishment Fees. In addition to the asset-based OneSource/NTF fund fee, NTF funds pay one-time "establishment fees" for the addition of each fund to MFMP. These establishment fees help cover the start-up costs associated with setting up a mutual fund on Schwab's brokerage systems. The establishment fees vary, and in some cases may be waived, but generally do not exceed $25,000 for the first fund and $3,000 per each additional NTF fund within a fund family. When adding new INTF funds, the funds also pay Schwab establishment fees. The fee for the first fund that Schwab adds does not exceed $25,000 and the fee for each additional fund within a fund family that Schwab adds as NTF is $1,000.  When adding a new interval fund to Schwab's OneSource/NTF or INTF platforms, interval funds also pay Schwab establishment fees. The fee for the first interval fund that Schwab adds does not exceed $25,000 and the fee for each additional interval fund within a fund family that Schwab adds is $25,000. 

Schwab receives various fees for Shareholder Services that Schwab provides to TF funds. Fees paid to Schwab may include asset-based fees or per-position fees and one-time set up fees.

A. Asset-Based Fees. Most TF funds pay Schwab an annual asset-based fee, typically 0.10% annually of the average fund assets held at Schwab, although the fee can range up to 0.25% annually. At this standard rate of 0.10%, the fund or fund service provider pays Schwab $10 each year for each $10,000 in fund assets held by an investor for the Shareholder Services provided by Schwab. In some cases, Schwab applies a minimum monthly fee of $1,000 per month per TF fund, depending on when the fund was added to the platform. This minimum monthly fee is applied starting with the first full month after the fund is made available for purchase at Schwab and only if the asset-based fee calculated for the month is less than the minimum monthly fee. 

Keep in mind that Schwab receives these asset-based or per-position fees from TF funds or their affiliates or service providers, in addition to any transaction fee that you pay to Schwab when you purchase or redeem fund shares. The transaction fee you pay to Schwab, together with the asset-based or per-position fees received from the funds, helps compensate Schwab for the Shareholder Services it provides to customers who own TF fund shares. An increased transaction fee applies to purchases made by self-directed retail clients of funds from certain fund families that do not pay Schwab for recordkeeping, shareholder, and other administrative services on fund shares held by self-directed retail clients; however, Schwab may receive compensation on fund shares held by other client segments. To view Schwab's current transaction fee rates charged to investors, please refer to the Charles Schwab Pricing Guide.

B. One-Time Fund Establishment Fees. In addition to the asset-based or per-position fee, TF funds pay one-time "establishment fees" for the addition of each fund to MFMP. The establishment fees help cover the start-up costs associated with setting up a mutual fund on Schwab's brokerage systems. The establishment fees vary but generally do not exceed $25,000 for the first fund and $5,000 per each additional fund within a fund family. The fee for each additional fund within an INTF fund family that Schwab adds as TF is $2,000. When adding a new interval fund to Schwab's TF platform, interval funds also pay Schwab establishment fees. The fee for the first interval fund that Schwab adds does not exceed $25,000 and the fee for each additional interval fund within a fund family that Schwab adds is $25,000.  

Schwab no longer makes load mutual fund shares available for purchase by Schwab customers. However, if you previously purchased a load mutual fund through Schwab or another firm and hold those shares at Schwab, Schwab will receive compensation for services Schwab provides with respect to those fund shares. Schwab receives the following types of fees from a fund company or its affiliates on load mutual fund shares: (1) an asset-based shareholder servicing fee payable pursuant to a Rule 12b-1 Plan; and (2) an additional fee for the sub-accounting services Schwab provides to load mutual funds.

A. Shareholder Service Fees ("Rule 12b-1 fee"). Some load mutual funds pay Schwab for Shareholder Services out of a fund's assets, typically pursuant to a fund's distribution and/or servicing plan (a Rule 12b-1 plan). The amount payable under a fund's Rule 12b-1 plan is determined by each fund's board of trustees ("a Board"). The amount of the fee authorized by the Board under a Rule 12b-1 plan is disclosed in the fund's prospectus and varies from fund to fund and from share class to share class. The Rule 12b-1 fee is included in the fund's OER and borne indirectly by fund shareholders. You should also review a fund's prospectus for more information about that fund's Rule 12b-1 plan and fees.

B. Omnibus Processing or Networking Fees. Some load mutual funds also compensate Schwab for the sub-accounting services that Schwab provides to load mutual funds. These fees differ depending on the operating model deployed: omnibus or networked. In omnibus processing, Schwab performs record maintenance, transaction processing, dividends and other distribution processing, delivery of account statements and fund documents, among other services. For assets held in omnibus accounts, Schwab receives from load mutual funds either an annual per-account fee (typically $20 per account) or an annual asset-based fee (typically 0.10% annually of the average fund assets held at Schwab, although the fee can range up to 0.15% annually). In the alternative, Schwab may receive a networking fee for each sub-account maintained by Schwab, most often equal to $6 per sub-account annually. In a networking structure, the fund's agent (typically a transfer agent) performs most of the described services, and Schwab reflects these transactions on its books and records.

Beginning in the first half of 2023, most mutual funds available at Schwab will be eligible for an automatic investment plan, except for mutual funds from certain fund families that do not pay Schwab for recordkeeping, shareholder, and other administrative services Schwab provides. While these funds will not be eligible for this service, Schwab clients can still purchase these funds through other trading channels at Schwab. An automatic investment plan can be established for share classes available for purchases where a client has established a position in an eligible fund.

Some third-party ETF sponsors or their affiliates make payments to Schwab for ETF-related opportunities, including data and reporting and education and events. Certain ETF sponsors pay Schwab up to $750,000 annually for access to data and reports. The total amount of the fees paid by each ETF sponsor to Schwab for education and events will vary depending on the type and number of opportunities in which the ETF firm participates.

Schwab also receives compensation from active semi-transparent ETFs or their sponsors for platform support and technology, shareholder communications, reporting, and similar administrative services for active semi-transparent ETFs available at Schwab. This fee will vary, but typically is an asset-based fee of 0.10% annually of the assets held at Schwab.

As described in the Schwab's Strategic Provider Relationship section, Schwab receives marketing compensation from T. Rowe Price for promotion of their active ETFs to retail clients and the clients of RIAs that custody assets at Schwab, and for providing additional ETF marketing support to T. Rowe Price, which creates a conflict of interest. This payment is in addition to and separate from payments T. Rowe Price makes to Schwab for services related to active semi-transparent ETFs discussed above.

Schwab Funds

Schwab currently has an affiliated mutual fund family: the Schwab Funds^®. Schwab and its affiliate, Schwab Asset Management, receive fees from the Schwab Funds for the services they provide to the funds, as further discussed below.

The aggregate fees Schwab or its affiliates receive from Schwab Funds may be greater than the fees Schwab receives from other fund companies participating in Schwab's Mutual Fund OneSource^® service and other funds available through MFMP.

A. Investment Advisory and/or Administration Fees. Investment advisory and/or administration fees are asset-based fees paid by a fund to its investment advisor for the investment management and related administrative functions it performs.

1. Schwab Funds are advised by Schwab Asset Management, a registered investment advisor and affiliate of Schwab. The advisory fee is part of the funds' OER and is disclosed in each fund's prospectus.
2. Some of the Schwab Funds have adopted a unitary management fee. Schwab Asset Management receives a management fee from these Schwab Funds for the services it provides to the funds, and out of which Schwab Asset Management compensates other service providers to the funds. Any portion not paid out by Schwab Asset Management is retained by Schwab Asset Management to cover the expense of managing the funds, or as profit.

B. Shareholder Servicing Fees. These fees are paid to financial intermediaries to compensate them for providing sub-accounting and recordkeeping services, and for responding to shareholder requests for information about their fund investments and other types of shareholder account inquiries.

1. Schwab Funds participate in Schwab's Mutual Fund OneSource^® service. Some of the Schwab Funds pay Schwab an asset-based fee for the Shareholder Services that Schwab provides for client assets held directly at Schwab. Under this fee structure, Schwab would be incentivized to promote more participating funds, including Schwab Funds, which creates a conflict of interest.

Some of the Schwab Funds have adopted a Shareholder Servicing Plan or fee pursuant to which the funds pay shareholder servicing fees ranging up to 0.25% annually to Schwab. Payments under a Shareholder Servicing Plan are made for the Schwab Money Funds, Schwab Active Equity Funds, Schwab Active Fixed Income Funds, Schwab MarketTrack Portfolios, and Schwab International Opportunities Fund. These fees are part of the funds' OERs and can be reviewed in the funds' prospectuses and/or statements of additional information.

C. Sweep Administration Fees. Schwab also receives an annual asset-based fee of up to 0.10% from the Schwab Government Money Fund – Sweep Shares for sweep administration services. This fee is in addition to the shareholder servicing fee described above. However, the combined fee payable to Schwab will not exceed 0.25% annually. This fee is part of the Schwab Government Money Fund – Sweep Shares' OER and can be reviewed in the prospectus and/or statement of additional information.

Schwab ETFs

Schwab's affiliate, Schwab Asset Management, is also the investment advisor to the Schwab ETFs^®.

A. Management Fees
Schwab Asset Management receives a management fee from the Schwab ETFs for the services it provides to Schwab ETFs, and out of which Schwab Asset Management compensates other service providers to the ETFs. While Schwab is not a service provider to Schwab ETFs, Schwab benefits indirectly from the management fee received by its affiliate, Schwab Asset Management.

The management fee is reflected in Schwab ETFs' OERs and is disclosed in each ETF's prospectus and statement of additional information. To view the management fees Schwab Asset Management receives for any particular Schwab ETF, please refer to the appropriate Schwab ETF prospectus and/or statement of additional information.

Additional Services. Schwab Asset Management also makes payments to Schwab for administrative, professional, and support services provided by Schwab, in its capacity as an affiliated financial intermediary, with regard to Schwab's brokerage customers who are shareholders of the Schwab Funds and Schwab ETFs. These payments reimburse Schwab for its charges, costs, and expenses of providing Schwab personnel to perform marketing and sales activities under the direction of Schwab Asset Management, such as sales lead generation and sales support, assistance with public relations, marketing and/or advertising activities and presentations, educational training programs, conferences, and data analytics and support. Payments also are made by Schwab Asset Management to Schwab for Schwab Asset Management's allocated costs of general corporate services provided by Schwab, such as human resources, facilities, project management support, and technology.

Schwab-affiliated funds have access through Schwab Asset Management's internal fund wholesalers to Schwab's financial consultants for the purpose of educating the consultants about the Schwab-affiliated funds. This access may include presentations by portfolio managers, additional training and education, and creation of sales materials for use by financial consultants in their interactions with clients.

Schwab Funds and Schwab ETFs are more visible to Schwab clients through general marketing and advertising opportunities or client events that may not be offered to unaffiliated mutual funds and ETFs, or that may be offered at no cost or a discounted price to Schwab Funds and Schwab ETFs. This access creates a conflict of interest in that clients may be more likely to select, and Schwab representatives or advisors that custody their clients' assets at Schwab may be more likely to recommend, funds that are familiar to them, and Schwab and its affiliates earn more money from some Schwab Funds and Schwab ETFs than from third-party funds available to Schwab clients.  

A. Share Classes. Some mutual fund companies offer various share classes of the same fund, including retail and institutional classes. Retail shares are primarily built for and made available to individual investors, who may invest directly with the fund or through a financial intermediary like Schwab. Institutional shares generally are made available by the fund to investors such as large companies and organizations which tend to make larger investments in a fund, though sometimes a fund company will make these share classes available to individual retail investors. Institutional shares are also available to clients of RIAs that custody their clients' mutual fund assets at Schwab. Schwab does not make every share class available for purchase at Schwab, nor is every share class at Schwab available to the same type of investor as it might be through another intermediary or directly from the fund.

B. Fees and Expenses. Regardless of share class, fund shareholders pay the expenses associated with their particular share class indirectly. These expenses include fund management, recordkeeping, accounting and taxes, and together are often referred to as operating expenses and reflected in a fund's prospectus in the form of an OER. Fund operating expenses are deducted from fund assets on a daily basis, which effectively reduces returns to investors. Institutional share classes typically have lower overall fund operating expenses than retail share classes.

C. Investment Minimums. Schwab, as a broker-dealer, sets its own purchase investment minimums which may be higher or lower than the minimum that a fund company sets for one or more of its share classes. A fund can also request that Schwab set a higher investment minimum or impose other investment restrictions, such as limiting purchases to a specific type of investor. 

Generally, there are two categories of fund minimums at Schwab*:

1. OneSource service or other NTF funds (no load (or load-waived), no-transaction-fee funds) = $100 investment minimum for all accounts
2. Transaction Fee funds = $2,500 investment minimum for brokerage accounts; $1,000 for IRAs and custodial accounts

Choosing a share class of a fund that participates in Schwab's Mutual Fund OneSource^® service, other NTF fund and INTF services avoids a transaction fee but, depending on the fund, can result in paying a comparatively higher OER over time. As discussed elsewhere in this document, Schwab receives compensation from funds that participate in the Mutual Fund OneSource® service, other NTF fund and INTF services as well as many TF funds that are made available to Schwab clients with a transaction fee. This creates a conflict of interest in that Schwab receives greater compensation from fund share classes participating in the Mutual Fund OneSource service, other NTF fund and INTF services than it receives from comparable investments made in TF funds.

* If you are a client of an RIA that custodies assets at Schwab, including Schwab's affiliated advisors, Schwab sets the investment minimums lower (generally $1) unless the fund has requested that Schwab set a higher minimum. Ask your investment advisor if you are eligible to invest in a share class available through Schwab that carries lower expenses.

This information discusses the compensation Schwab receives from fund companies but does not include everything you need to know about buying mutual funds or ETFs through Schwab. While this document provides an overview of Schwab's financial relationships with the fund companies and ETF sponsors, you will want to review additional information about mutual funds and ETFs before investing.

Regardless of whether you purchase a fund through Schwab, another financial intermediary, or directly from the fund company itself, you'll want to carefully read each fund's prospectus to learn about the investment objectives, strategies, and risks of the fund, as well as other important information related to fund performance and fund management. The prospectus includes the ongoing fees charged by the fund (in the form of operating expenses) and any other fees charged by the fund, such as sales charges (loads) and redemption fees. You should also take advantage of additional publicly available information about mutual funds and ETFs available through securities regulators, industry associations, and other financial organizations. You can visit, for example, the educational websites of the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Securities Industry and Financial Markets Association, and the Investment Company Institute, all of which can help further develop your overall understanding of mutual funds and ETFs.

If you choose to purchase a fund at Schwab, you should be aware of fees that Schwab may charge you for investing in a mutual fund or ETF. For certain funds, these fees include a transaction fee, a live broker assistance fee, or a short-term redemption fee, all payable to Schwab. For more information on these or other fees relating to your Schwab account, see the Charles Schwab Pricing Guide.