Charles Schwab Investment Management Inc

Item 5 — Fees and Compensation                                    may receive fees from such third party based on
                                                                  assets attributable to such funds being managed
Pooled Investment Vehicles                                        pursuant to CSIM’s models. See “Participation
                                                                  or Interest in Client Transactions” section below for
As described above, CSIM serves as investment
                                                                  details on the strategic provider relationships.”
adviser to certain Registered Funds and provides
investment management and administrative services to              SMA Strategies Fees
those Registered Funds. The fees paid to CSIM by
the Registered Funds are ( i) based upon a percentage             In connection with the SMA Strategies it advises, CSIM
of each Registered Fund’s averaged daily net                      receives fees from Direct Clients, program sponsors
assets, (ii) described in their respective prospectuses           of Wrap Fee Programs, Broker/Custodian-
and statements of additional information, and (iii)               Related Programs, and Primary Advisors. CSIM does
reflected in their financial statements. For                      not negotiate fees with clients in Wrap Fee Programs, in
certain Registered Funds, CSIM and/or its affiliates              Broker/Custodian-Related Programs or generally
have agreed to reimburse those Registered Funds to the            those with a Primary Advisor. CSIM does not receive
extent that the Registered Funds’ total annual                    direct compensation from clients in Wrap Fee Programs
operating expenses exceed a specified limitation.                 or Broker/Custodian-Related Programs. In a Wrap

Fee Program, typically clients pay a single fee for              Schwab pays all costs and expenses incurred by CSIM
advisory, brokerage, and custodial services to                   in connection with the Selective Portfolios, SGP, and
the program sponsor, and the program sponsor pays                SMP Program offered through the Schwab
CSIM an advisory fee based on assets managed by CSIM             Managed Accounts Programs and other services
in the program. Client’s portfolio transactions may be           provided by CSIM to Schwab, plus an additional amount
executed without a commission charge in a wrap                   based on a fixed percentage of such costs and
fee arrangement depending on whether or not securities           expenses. Pursuant to an agreement between CSIM
are traded away from the program sponsor. In                     and Schwab, Schwab pays all costs and expenses
evaluating a Wrap Fee Program, the client should also            incurred by CSIM in connection with the SIP Program
consider that, depending upon the level of the wrap              and with other research services provided by CSIM, plus
fee charged by Wrap Fee Program sponsor, the amount              an additional amount based on a fixed percentage of
of portfolio activity in the client’s account, and other         such costs and expenses. Pursuant to an agreement
factors, the wrap fee may or may not exceed the                  between CSIM and Schwab, for Schwab Wealth
aggregate cost of such services if they were                     Portfolios, SPI, ThomasPartners Strategies, Wasmer
to be provided separately. Such clients should review            Schroeder Strategies, and Windhaven Strategies, CSIM
their Wrap Fee Program’s applicable disclosure brochure          is entitled to receive an annual fee from Schwab,
                                                                 payable monthly, based on strategy and a percentage
or reach out to their Primary Advisor. Fees for Direct
                                                                 on all Schwab Managed Account Program assets it
Clients and SMA Strategies only available through
                                                                 manages.
Schwab Managed Account Programs are described
below. Fees for Wrap Fee Programs, including                     Schwab also provides CSIM with human resources,
the Schwab Managed Account Programs, Broker/                     legal, compliance, and other administrative and
Custodian-Related Programs, or fees from                         technological support services. The amount paid by
Primary Advisors can differ from Direct Client fees and          Schwab to CSIM for the Selective Portfolios,
from each other. Clients may pay different fees                  SGP, SIP Program, and SMP Program offered through
depending on whether they invest in an SMA Strategy              the Schwab Managed Account Programs may be
as Direct Clients, clients of Primary Advisors, or               adjusted from time to time as more or fewer resources
through the Schwab Managed Account Programs,                     are required. Schwab may discount certain SMA
Schwab’s Managed Account Marketplace                             Strategies’ management fees for employees of Schwab
                                                                 and its affiliates. More specific information about
platform, other Wrap Fee Programs, and other Broker/
                                                                 the Schwab Managed Account Programs and the fees
Custodian-Related Programs.
                                                                 paid by clients who participate in the Schwab
Generally, CSIM’s fees are based on the value of the             Managed Account Programs appears in Schwab’s
assets held in a client’s account. To the extent permitted       disclosure brochures for those programs, which
under the Advisers Act, CSIM can negotiate and                   are provided to program clients directly by Schwab.
charge performance-based fees. CSIM has
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