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Schwab's Financial and Other Relationships with Mutual Funds

No Transaction Fee Funds
Transaction Fee Funds
Load Funds
Schwab-Affiliated Funds
Share Classes, Investment Minimums, Fees and Expenses
Fund Marketing and Sponsorships
Fund Education
Additional Information

Schwab-Affiliate Funds

Schwab currently has two affiliated mutual fund families: the Schwab Funds® and the Laudus™ Funds (“Schwab-affiliate funds”). Schwab and its affiliates receive three types of fees from the Schwab-affiliate funds for the services they provide to the funds: (1) investment advisory and administration fees; (2) shareholder servicing fees; and (3) sweep administration fees with respect to the sweep money funds only. These fees are paid in full by the fund and therefore the fees are included in the fund’s operating expense ratio (OER), which affects overall fund performance. You should carefully consider fund OERs relative to other important investment considerations when making an investment decision.

The aggregate fees Schwab or its affiliates receive from Schwab-affiliate funds is greater than the remuneration Schwab receives from fund companies participating in Schwab’s OneSource services and other funds available through Schwab’s Mutual Fund Marketplace.

A. Investment Advisory Fees. Investment advisory fees are asset-based fees paid by a fund to its investment advisor for the investment-management functions it performs.

  1. Schwab Funds and Laudus Funds. The Schwab Funds and Laudus Funds are advised by Charles Schwab Investment Management, Inc. (“CSIM”), a registered investment adviser and subsidiary of The Charles Schwab Corporation. The advisory fee is part of the funds’ operating expense ratio (OER) and is disclosed in each fund’s prospectus and statement of additional information. To view the management fees CSIM receives for any particular Schwab Fund or Laudus Fund, please refer to the fund prospectus.

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

  1. Schwab Funds and Laudus Funds. Schwab Funds and Laudus Funds are part of Schwab’s Mutual Fund OneSource®  platform (“OneSource”). Consequently, like unaffiliated OneSourceand NTF funds, these funds may pay Schwab an asset-based fee for the shareholder services that Schwab provides for client assets held directly at Schwab. The Schwab Funds have adopted a Shareholder Servicing Plan pursuant to which the funds may pay shareholder servicing fees ranging from 0.02% to 0.25% annually on all funds except the Schwab Target Funds and Schwab Monthly Income Funds. The Laudus Funds pay a fee ranging up to 0.40% annually for the Shareholder Services that Schwab provides, of which all or a portion may be paid from the funds’ Distribution and Shareholder Service Plan (12b-1 Plan). These fees are part of the funds' OER and can be reviewed in the funds’ prospectus and/or statement of additional information.

 C. Sweep Administration Fees.

  1. Schwab Funds. Schwab also receives an asset-based fee from the Schwab Sweep Money Market Funds for sweep administration services. This fee ranges from 0.10% to 0.15% annually. This fee is in addition to the shareholder servicing fee described above, however, the combined fee will not exceed 0.40% annually. These fees are part of the funds' OER and can be reviewed in the funds’ prospectus and/or statement of additional information.

D. An Example.
The example assumes that you invest $10,000 in the fund for 1 year and then redeem all of your shares at the end of the year. The example is based on the fee structure as of February 26, 2016, assumes that there is no change in value of your investment at the end of the year, and assumes that the fund’s operating expenses remain the same. The figures are based on total annual fund operating expenses. 

Management Fees $47 (based on the current fee rate of 0.47% of the average assets of the fund per year)
Other Expenses $27 (based on the current fee rate of 0.27% of the average assets of the fund per year)
Distribution Fees $0
Total Annual Fund Operating Expenses $ 74 (based on the current fee rate of 0.74% of the average assets of the fund per year)

Keep in mind, these fees are not paid directly out of your account. Rather, the fees are paid by the fund out of fund assets and included in the fund’s OER, therefore the fees may be borne indirectly by fund shareholders. The OER of any fund generally reduces the fund’s performance by the amount of the fee. You should carefully consider fund OERs relative to other important investment considerations when making an investment decision.

E. Distribution Relationships. A distributor of a fund typically performs general marketing and distribution-related functions (sales), such as preparation of marketing materials and entering into agreements with selling group members for distribution of the fund.

  1. Schwab Funds. Schwab serves as the distributor for the Schwab Funds and the Laudus MarketMasters Funds. Schwab does not receive any compensation from the Schwab Funds or Laudus MarketMasters Funds for the distribution services Schwab provides.
  2. Laudus Funds. The Laudus Funds, other than the Laudus MarketMasters Funds, are distributed by ALPS Distributors, Inc., an unaffiliated third-party distributor.

F. Educational and Marketing Activities. Schwab-affiliate funds have access through Schwab’s internal fund wholesalers to Schwab’s financial consultants for the purpose of educating the consultants about Schwab’s mutual fund products. 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 does not receive special compensation from its affiliated funds to provide this access.

Schwab-affiliate funds also have access to Schwab clients through general marketing and advertising opportunities or client events that may not be offered to unaffiliated mutual funds, or that may be offered at no cost or a discounted price to Schwab-affiliate funds.