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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

Transaction Fee Funds

Schwab receives various fees for the recordkeeping, shareholder services and other administrative services Schwab provides to transaction fee funds (Transaction Fee funds), which may include  low asset-based fees (or per position fees) and one-time set up fees. 

A. Asset-Based Fees. Most Transaction Fee funds pay Schwab a low, 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. Some transaction fee funds pay Schwab a set dollar amount per customer account in lieu of the asset-based fee, typically $20 per account, but which can range up to $30 per account annually (a "per position fee"). The per position fees may be subject to a quarterly minimum of $7,500 per fund. These asset-based and per position fees may be paid entirely out of fund assets, but all or a portion may be paid by the fund's investment advisor, distributor, or other service provider. In cases where these fees are paid in full or in part by a fund, the portion paid by the fund is included in the fund's operating expense ratio (OER) which can be found in the fund's prospectus. A fund's operating expenses are paid out of fund assets, and therefore, any portion of the per position or asset-based fee paid by the fund may be  borne indirectly by fund shareholders. The amount of a fund's OER also affects overall fund performance. You should carefully consider fund OERs relative to other important investment considerations when making an investment decision. 

Keep in mind that Schwab receives these asset-based or per position fees from transaction fee 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 transaction fee fund shares. To view Schwab's current transaction fee rates charged to investors, please refer to the Charles Schwab Pricing Guide.

Transaction Fee 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 trustees and Plan recordkeepers, some of which may be affiliated with Schwab, for the shareholder and administrative services they 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.

B. One-Time Fund Set-Up Fees. In addition to the asset-based or per position fee, Transaction Fee funds may pay one-time "establishment fees" for the addition of the funds to Schwab's Mutual Fund Marketplace. The establishment fees help cover the start-up costs associated with setting up the mutual fund on Schwab's brokerage systems. The establishment fees vary but generally do not exceed $10,000 for the first fund and $2,000 per additional fund within a fund family. 

C. An Example.
Assume that on January 1 you invest $10,000 in a fund and hold your position through December 31.  Based on Schwab's standard asset-based fee rate of 0.10% per year, and assuming no change in the fund's value over the course of the year, the Fund would pay Schwab $10 for the shareholder services Schwab provides to you.

As with the OneSource/NTF Fee, this $10 does not come out of your $10,000 investment in the funds, but is paid instead out of fund expenses (or by a fund affiliate). Keep in mind, if the fee is paid in full or in part by the fund, the portion paid by the fund is included in the fund's OER and borne indirectly by fund shareholders. The OER of any fund generally reduces the fund's performance. 

Remember also that you pay Schwab a transaction fee when you purchase and redeem shares of a Transaction Fee Fund, which also helps pay for the Shareholder Services. To view Schwab's current transaction fee rates, please consult the Charles Schwab Pricing Guide.