Important account information you need to know.

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October 2011

Important account information

you need to know.

• The Consolidated Statement of Financial

Condition of Charles Schwab & Co., Inc.

as of June 30, 2011, is available.

Clients may obtain a free copy of the

Charles Schwab & Co., Inc. Consolidated

Statement of Financial Condition as of

June 30, 2011, by visiting our website

at www.schwab.com/sfc, by calling

1-800-435-4000, or by contacting a

Schwab representative.

• Notice of Change to Schwab’s

Cash Features Disclosure Statements

• How We Compensate Our Investment

Professionals

• Amendments to Your Account

Agreements

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Contents

Notifications All Investors The Consolidated Statement of Financial Condition of Charles Schwab & Co., Inc. as of June 30, 2011, is available . . . 1 Notice of Change to Schwab’s Cash Features Disclosure Statements . . . 3 How We Compensate Our Investment Professionals . . . 5 Amendments to the Following Account

Agreements . . . 27 Schwab One® Account Schwab Account Schwab IRA and ESA Account Schwab 403(b)(7) Account Schwab Retirement Plan Brokerage Account Schwab Individual 401(k) Account

Securities, products, and services, including Schwab Bank and Schwab Bank High Yield Investor Checking®,

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All Investors

The Consolidated Statement of

Financial Condition of Charles

Schwab & Co., Inc. (Schwab) as of

June 30, 2011, is available.

What this means for you:

In accordance with the requirements of the Securities and Exchange Commission, clients may obtain a free copy of the Consolidated Statement of Financial Condition of Schwab as of June 30, 2011: • Visit our website at www.schwab.com/sfc; • Call us toll-free at 1-800-435-4000 or contact a Schwab representative; • Clients of an independent investment advisor, please call us at 1-800-515-2157; • International clients, please call us at +1-415-667-8400; UK residents should call 00800-0826-5001; Swiss residents should call 0800-563711. Regulatory Requirements Schwab is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab computes net capital under the alternative method permitted by the Uniform Net Capital Rule. This method requires the maintenance of minimum net capital, as defi ned, of the greater of 2% of aggregate

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type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement. At June 30, 2011, 2% of aggregate debits was $258 million, which exceeded the minimum dollar requirement for Schwab of $250,000. At June 30, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.0 billion in excess of its minimum required net capital and $649 million in excess of 5% of aggregate debit balances. At July 31, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.1 billion in excess of its minimum required net capital and $677 million in excess of 5% of aggregate debit balances.

For more information

The annual report as of December 31, 2010, prepared pursuant to Rule 17a-5 under the Securities Exchange Act of 1934, has been fi led with the Los Angeles regional offi ce of the Securities and Exchange Commission, and is available for examination and copying at our headquarters: 211 Main Street, San Francisco, California 94105.

The Charles Schwab Corporation

For more information about the ultimate parent company of Charles Schwab & Co., Inc., write to The Charles Schwab Corporation, Investor Relations, 211 Main Street, San Francisco, California 94105; call 1-415-667-1959; email investor.relations@schwab.com; or visit our website at www.aboutschwab.com. ©2011 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CS15203-01 (0811-5359) REG21871-20 (10/11) type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement. At June 30, 2011, 2% of aggregate debits was $258 million, which exceeded the minimum dollar requirement for Schwab of $250,000. At June 30, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.0 billion in excess of its minimum required net capital and $649 million in excess of 5% of aggregate debit balances. At July 31, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.1 billion in excess of its minimum required net capital and $677 million in excess of 5% of aggregate debit balances.

For more information

The annual report as of December 31, 2010, prepared pursuant to Rule 17a-5 under the Securities Exchange Act of 1934, has been fi led with the Los Angeles regional offi ce of the Securities and Exchange Commission, and is available for examination and copying at our headquarters: 211 Main Street, San Francisco, California 94105.

The Charles Schwab Corporation

For more information about the ultimate parent company of Charles Schwab & Co., Inc., write to The Charles Schwab Corporation, Investor Relations, 211 Main Street, San Francisco, California 94105; call 1-415-667-1959; email investor.relations@schwab.com; or visit our website at www.aboutschwab.com. ©2011 Charles Schwab & Co., Inc.

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Individual Investors and Clients of

Investment Advisors

Notice of Change to Schwab’s

Cash Features Disclosure Statements

We have made important changes to the Cash

Features Disclosure Statement for Individual Investors

and the Cash Features Disclosure Statement for

Schwab Institutional® (“Disclosure Statements”).

This Notice amends the Disclosure Statements, and any contrary or confl icting language in the Disclosure Statements is replaced. These changes are effective immediately.

The Bank Sweep Feature, Relationship with Schwab Replace the fi fth paragraph with the following: “We provide administrative services to Schwab Bank in support of the operation of the Bank Sweep fea-ture. We are compensated for these administrative services in an amount up to a $20 annual fl at fee for each securities account that sweeps into a Deposit Account at Schwab Bank. We reserve the right to increase, decrease or waive all or part of this fee. We will notify you in advance of any increase. We and certain of our affi liates also provide operational, technology and other services to Schwab Bank and receive compensation for those services. In addition, certain of our employees and registered representa-tives may be compensated in part based, directly or indirectly, on assets in the Bank Sweep feature or the

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Bank and our joint parent company, The Charles Schwab Corporation. “Other than applicable fees and charges imposed by us on your securities accounts, which are described in your Pricing Guide, there will be no charge, fee or commission imposed on your securities account with respect to the Bank Sweep feature.”

The Bank Sweep Feature, Information About Schwab Bank 1. In the fi rst sentence, replace “Offi ce of Thrift Supervision” with “Offi ce of the Comptroller of the Currency.” 2. In the third sentence, replace “Offi ce of Thrift Supervision” with “Federal Reserve Board.” Benefi ts to Schwab Bank, Schwab, and The Charles Schwab Corporation

Replace the second paragraph with the following: “We provide administrative services to Schwab Bank in support of the operation of the Bank Sweep fea-ture. We are compensated for these administrative services in an amount up to a $20 annual fl at fee for each securities account that sweeps into a Deposit Account at Schwab Bank. We reserve the right to increase, decrease or waive all or part of this fee. We will notify you in advance of any increase. We and certain of our affi liates also provide operational, technology and other services to Schwab Bank and receive compensation for those services. In addition, certain of our employees and registered representa-tives may be compensated in part based, directly or indirectly, on assets in the Bank Sweep feature or the profi tability of the Bank Sweep feature for Schwab Bank and our joint parent company, The Charles Schwab Corporation. “Other than applicable fees and charges imposed by us on your securities accounts, which are described in your Pricing Guide, there will be no charge, fee or commission imposed on your securities account with respect to the Bank Sweep feature.” ©2011 Charles Schwab & Co., Inc.

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How We Compensate

Our Investment Professionals

Since Charles Schwab & Co., Inc. (“Schwab”) was founded more than 30 years ago, we’ve been com-mitted to serving the needs of the individual investor. We believe it is important for all investors to under-stand how the fi nancial professional who is assisting them is paid. This can be one factor an investor considers when evaluating the information or recom-mendations that a professional provides. In this brochure, we identify the different categories of investment professionals who may serve you at Schwab—including both Schwab employees and independent contractors and their employees operat-ing Schwab Independent Branches—and describe how they are compensated. Some of these plans are based on revenue Schwab earns from clients or from product sales. Schwab may pay a Schwab representa-tive more for selling products or services on which Schwab makes more money. Please note that the information below describes how Schwab pays employee professionals and shares revenue with independent contractor professionals, not how you pay Schwab for the services you receive. Information about what you pay Schwab for the services we provide can be found at www.schwab.com/pricing. We invite you to read this information carefully and to contact us at 1-800-785-3965 if you have any ques-tions. (For multilingual services, call 1-800-662-6068. For services outside the U.S., call +1-415-667-8400. U.K. residents should call 00800-0826-5001; Swiss residents should call 0800-563711.)

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Summary of Changes

Compensation plans and revenue-sharing arrange-ments for both employee and independent contractor investment professionals change from time to time. Effective October 1, 2011, changes were made to Schwab’s incentive compensation plans. The follow-ing is a summary of the changes: · Added Active Investor Education Specialists, Schwab Managed Portfolio Service Representatives and Independent Branch Services Representatives as new categories of investment professionals. · Added enrollment of clients in advised offers and temporary incentive programs to the list of types of activities for which certain investment profession-als may earn and receive incentive compensation. · Added Windhaven Portfolios™ to the list of types of products for which Financial Consultants may be compensated · Added new criteria for assisting clients for certain investment professionals to qualify for additional compensation under the Circle of Excellence program.

Branch Representatives

Client Service Specialists

Client Service Specialists respond to the specifi c needs of clients and may direct clients to the appro-priate Schwab representative. In addition to a base salary, Client Service Specialists are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of ser-vice quality, client satisfaction, sales support, and teamwork.

Associate Financial Consultants

Associate Financial Consultants assist clients in our branch offi ces. They meet with clients who are not assigned to a Financial Consultant’s Practice as well as with potential new clients to identify and analyze their fi nancial needs. In addition to a base salary,

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Manager Discretion—An annual bonus program funded based on Schwab’s performance and deter-mined based on manager discretion, which may include consideration of service quality, client satis-faction, teamwork, and ability to provide help and guidance to our clients. Circle of Excellence—A program through which Schwab awards additional compensation to all eligible Associate Financial Consultants based on how well they compare to their peers in bringing Net New Assets to Schwab, enrolling clients in and ensuring satisfaction with Advised Offers and Managed Accounts (where appropriate), and assisting clients in utilizing the products and services offered by Schwab Bank (where appropriate).

Client Promoter Score—A program that awards

additional compensation to Associate Financial Consultants based on client satisfaction in the branch as well as manager discretion. VP–Financial Consultants Financial Consultants assist our clients through our branch offi ce locations and also by phone. Each Financial Consultant supports a Practice, which includes clients who are assigned to that Financial Consultant as a primary point of contact. Financial Consultants also assist clients who are not in their Practice. Financial Consultants are compensated based on four components: Service, Sales, Circle of Excellence, and Client Promoter Score. Service The Service component pays a Financial Consultant 7% of the approximate annual revenue attributed to clients in their Practice. For compensation purposes, Schwab estimates revenue by sorting assets in clients’ accounts into the categories in Table A. The categories do not correspond exactly to the revenue earned by Schwab for any particular sale, security, or service. We call this “proxy revenue.” Schwab uses proxy revenue instead of real revenue so Financial Consultants earn the same compensation for similar products. For example, a Financial Consultant will earn the same compensation for recommending

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OneSource® mutual fund, or a transaction-fee mutual fund, even though Schwab makes more money on the Schwab proprietary mutual funds. Financial Consultants could receive more compensation if a client accepts certain recommendations that they make, as shown below by the proxy revenue categories. For example, a Financial Consultant earns more from recommend-ing a mutual fund over individual stocks, bonds, or exchange-traded funds. As another example, a Financial Consultant earns more for recommending the investment of cash in a money fund over a certifi -cate of deposit. A Financial Consultant also earns additional compensation for serving clients enrolled in Schwab Private Client™, which refl ects the addi-tional time that a Financial Consultant may spend serving clients of Schwab Private Client™. Table A Assets Financial Consultant’s Compensation Non- Fee-Based Services Stocks Options Bonds Certificates of Deposit Exchange-Traded Funds Schwab Bank High Yield Investor Checking® Account Schwab Bank High Yield Investor Savings® Account 0.0028% of assets All Mutual Funds All Money Market Funds All Other Cash Fixed and Variable Annuities1 Margin Balances2 0.0350% of assets

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Assets Financial Consultant’s Compensation Fee-Based Services Assets in accounts enrolled in Schwab Private Client™ or Schwab Advisor Network®3 where Financial Consultant does not pro-vide ongoing service 0.0350% of assets Assets in accounts enrolled in Schwab Managed Portfolios™, Schwab Managed Account Select®, Schwab Managed Account Connection™ (formerly Schwab Managed Account Affiliates®), or Windhaven Portfolios™4 0.0595% of assets Assets enrolled in Schwab Private Client™ where Financial Consultant pro-vides ongoing service 0.0770% of assets 1 Applicable to insurance-licensed Financial Consultants only. 2 The proxy revenue for margin applies only to margin balances in a client’s account greater than $5,000 but not greater than 10% of a client’s margin-borrowing capacity. 3 Referral credit for Schwab Private Client™ advised conversions is only available to Financial Consultants who refer the client to another Financial Consultant who maintains the Schwab Private Client™ relationship. Referrals of Schwab Advisor Network® accounts to Schwab Bank Administrative Trustee Services are eligible for credit based on the amount of referred assets within 90 days of the initial funding date at 85 basis points for three years from the credit start date. 4 Note that if an account that is enrolled in Schwab Managed Account Select® or Schwab Managed Account Connection™ is part of a household that includes accounts enrolled in Schwab Private Client™, those assets will be measured for compensation pur-poses at the Schwab Private Client credit rate.

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Example: A client has $100,000 in stocks, $100,000 in mutual funds, and $100,000 in cash. None of the assets are enrolled in a fee-based service. The annualized proxy revenue Schwab receives from that client is $1,040. The Financial Consultant receives 7% of that $1,040, which equals $72.80 in annualized compensation. The calculation is ($100,000 x 0.000028 for stocks) + ($100,000 x 0.00035 for mutual funds) + ($100,000 x 0.00035 for cash) = $72.80. If the client then sells $25,000 of stocks and buys the same amount of mutual funds either on their own or after talking to their Financial Consultant, the annualized proxy revenue Schwab receives increases by $115 to $1,155, and the Financial Consultant’s annualized compensation increases by $8.05 to $80.85. Sales The Sales component pays a Financial Consultant for Net New Assets, Advice Enrollments, and Product Conversions as defi ned in Table B and Table C. A Financial Consultant can earn Sales revenue credit for any client with whom the Financial Consultant has a relationship, including clients in the Financial Consultant’s Practice and new client relationships not in their Practice. A Financial Consultant receives from 15% to 35% of the Sales revenue credit based on the Financial Consultant’s graduated payout schedule. In general, asset-based revenue credits are paid out over 12 months as long as the Financial Consultant stays employed; other credits are paid in the month following the conversion. Schwab may cap the amount of incentive compensa-tion that a Financial Consultant can earn from any one client from the Sales component. Table B

Asset Consolidation Financial Consultant’s Compensation (Depending on the Financial

Consultant’s payout rate) Net New Assets 0.0375% to 0.0875% of

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Table C

Advice and Products Financial Consultant’s Compensation (Depending on the Financial Consultant’s payout rate) Mutual Funds 0.0375% to 0.0875% of Net Mutual Fund purchases—excludes money market funds Advice Referrals— Schwab Private Client™, Schwab Advisor Network®, Schwab Managed Portfolios™, Schwab Managed Account Select®, Schwab Managed Account Connection™, or Windhaven Portfolios™ 0.09% to 0.21% of Net Advice Enrollments Schwab Advisor Network®, Schwab Bank Administrative Trustee Services 0.09% to 0.21% of converted referral for New to Schwab Advisor Network® assets within 90 days of conversion date Referrals to all Schwab Managed Portfolios™ or Windhaven Portfolios $38 to $88 for clients who are new to Schwab Managed Portfolios™ or Windhaven Portfolios™; limited to one credit per client Transfers of Client Margin

Balances into Schwab Margin balance multi-plied by 0.27% or 0.63% Fixed or Variable Annuity by licensed Financial Consultant 0.0375% to 0.0875% of Net Annuity purchases Single Premium Immediate Annuity by licensed Financial Consultant 0.105% to 0.245% of contract Referrals to Variable, Fixed, and Immediate Annuities by unlicensed Financial Consultants $38 to $88 for converted referral Referrals to Term Life Insurance1 $20 to $47 for converted referral

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Advice and Products Financial Consultant’s Compensation (Depending on the Financial Consultant’s payout rate) Introductions to Charles Schwab Bank for mort-gage, home equity lines of credit, and pledged asset loans. Financial Consultants who are also employees of Schwab Bank: $126 to $1,925 for refer-ring a client to Schwab Bank who subsequently takes out a mortgage, based on the size of the loan $92 to $214 for referring a client to Schwab Bank who subsequently takes out a home equity loan or pledged asset loan Additional quarterly compensation based on number of 2010 year-to-date closed mortgage referrals; payment based on the highest tier attained year-to-date: $176 for 6 mortgages $902 for 10 mortgages $1,980 for 15 mortgages Checking account openings with Charles Schwab Bank $17 to $40 for each checking account opened 529 Accounts $17 to $40 for each 529 Account opened Referrals to our Active

Investor Sales Team $113 to $525 depending on how much more the client trades after the referral

Financial Plans2 $135 to $315 for

converted referral Equity Compensation

Consultations2 $135 to $315 for converted referral

Retirement

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Advice and Products Financial Consultant’s Compensation (Depending on the Financial Consultant’s payout rate) Referrals for Forward Contracts, Equity Collars, and Exchange-Traded Funds Tiered payment for converted referral: 0.0690% to 0.1610% of assets up to $5 million, 0.0068% to 0.0158% of assets over $5 million Referrals for Structured Notes and Structured CDs Principal value of the note multiplied by 0.075% to 0.175% for converted referral Referrals to Corporate

and Retirement Services 0.105% to 0.245% on Net New Assets, limited to $10 million, for con-verted referral Referrals to Schwab

Advisor Services™ Referral of an Advisor to Schwab Advisor Services™ based on converted assets: $341 to $795 for up to $30 million, $1,500 to $3,500 for $30+ million 1 Financial Consultants only refer clients to providers for whom Schwab performs services and from whom it receives compensation for those services. 2 Financial Consultants are not compensated for provid-ing complimentary retirement consultations, financial plans, or equity compensation consultations to clients. Example: A client deposits $100,000 and purchases Mutual Funds. If the Financial Consultant’s payout rate is 15%, they would earn $37.50 for Net New Asset Sales and $37.50 for Mutual Fund Sales, or $75.00 in total. This is based on multiplying $100,000 by 0.0375% from Table B and Table C for Net New Assets and Mutual Fund Sales, respectively. Circle of Excellence The Circle of Excellence is a program through which Schwab awards additional compensation to the top

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based on how well they compare to their peers in terms of sales credits and asset consolidation. The criteria are subject to change periodically. Currently, eligible Financial Consultants qualify based on Revenue Credits from the Financial Consultant’s combined Practice and Non-Practice clients, sales of Banking Products as listed in Table C (excluding mortgage production credit), and Net New Assets from the Financial Consultant’s Practice clients.

Client Promoter Score

The Client Promoter Score is a program through which Schwab awards additional compensation to the top 75% of its branches based on how well they compare against each other in delighting clients as measured by Client Promoter Score surveys. A branch pool is funded based on branch results; the bonus is determined based on individual contribution to the branch Client Promoter Score and manager discretion.

Financial Consultants (Phone-Based)

Some Financial Consultants provide services primarily to our clients with assets under $250,000. In addi-tion to a base salary, these Financial Consultants are eligible for Sales payment as described under Financial Consultant Sales and a quarterly bonus determined by manager discretion, which may include consideration of client satisfaction, teamwork, and successful transition of clients to a Financial Consultant in a branch, when appropriate.

International VP–Financial Consultants

International Financial Consultants provide services primarily to our clients residing outside the United States and its territories and possessions. These Financial Consultants are paid according to the same incentive plan as other Financial Consultants, except for these differences: The Service rates may vary based on market locations, and there are no Circle of Excellence or Client Promoter Score components; instead, there is a discretionary component deter-mined by managers, who may consider Net New Assets, client satisfaction, and teamwork.

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Service Representatives

Customer Service Representatives and Brokerage Service Representatives Customer Service Representatives and Brokerage Service Representatives provide service over the phone to meet client needs, respond to telephone inquiries from clients about the products and services we offer, and may contact clients by phone or email. In addition to a base salary, these representatives are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of productivity, client satisfaction, quality assurance, referrals, teamwork, and client feedback. In addition, these representatives are eligible for additional compensation that is measured at a team level and is based on customer satisfac-tion, internal quality assessment, and productivity.

Specialty Representatives

Electronic Acquisition Specialists

Electronic Acquisition Specialists interact with pros-pects and clients via a live web channel and make referrals via telephone to the local branch network or other group within Schwab to meet their needs when appropriate. In addition to a base salary, these specialists are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of quality of service and appropriateness of referrals.

Prospect Development Specialists

Prospect Development Specialists interact with prospects and clients via the telephone channels— primarily through inbound calls—and make referrals to a local branch when appropriate. They work to under-stand client needs and provide appropriate solutions. In addition to a base salary, these specialists are eligible for a bonus based on two components: • Manager Discretion—An annual bonus program funded based on Schwab’s performance and

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may include consideration of service quality, client satisfaction, teamwork, and ability to provide help and guidance to our clients. • Circle of Excellence—A program through which Schwab awards additional compensation to all eligible Prospect Development Specialists based on how well they compare to their peers in bringing Net New Assets to Schwab, enrolling clients in and ensuring satisfaction with Advised Offers and Managed Accounts (where appropriate), assisting clients in utilizing Schwab Bank Lending Products (where appropriate), funding new accounts, and enrolling clients in Schwab’s Active Investor plat-form (where appropriate).

Investor Development Specialists

Investor Development Specialists interact with pros- pects and clients via the telephone channels—primar-ily through outbound calling—and make referrals to a local branch when appropriate. They work to under-stand client needs and provide appropriate solutions. In addition to a base salary, these specialists are eligible for a bonus based on two components: • Manager Discretion—An annual bonus program funded based on Schwab’s performance and deter-mined based on manager discretion, which may include consideration of service quality, client satisfaction, teamwork, and ability to provide help and guidance to our clients. • Circle of Excellence—A program through which Schwab awards additional compensation to all eligible Investor Development Specialists based on how well they compare to their peers in terms of bringing Net New Assets to Schwab, enrolling clients in and ensuring satisfaction with Advised Offers and Managed Accounts (where appropriate), assist-ing clients in utilizing Schwab Bank Lending Products (where appropriate), funding new accounts, and enrolling clients in Schwab’s Active Investor platform (where appropriate).

Financial Consultants (Participant Services)

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Services, Inc. (“SCS”). For example, if a participant is eligible for a distribution or a rollover, the Financial Consultant discusses the participant’s options. These may include keeping the participant’s assets in their retirement plan or rolling over to a Schwab IRA. If a participant decides to open a Schwab IRA, once the account is opened the Financial Consultant may recommend investments or other products and solutions. In addition to a base salary, these Financial Consultants have the potential to earn additional monthly incentive compensation based on the following criteria: • Service quality—a discretionary component that evaluates the Financial Consultant’s performance in educating participants about their options, which may include taking a distribution, leaving their money in their plan, rolling over to a third-party plan, or opening and rolling over to a Schwab IRA. • Sales activities—a measurement of Net New Assets; referrals to a Complimentary Portfolio Consultation; referrals to a Branch Financial Consultant’s Practice; referrals to Active Investor or Schwab Bank Products that result in a conversion or sale; and activity in Advised Offers (when appro-priate). Sales compensation may be increased for client retention and Net New Assets resulting from out-bound calling efforts.

VP–Financial Consultants (Executive Services)

Executive Service Financial Consultants provide dedicated in-person relationships to Executive partici-pants of Schwab Corporate Services, Inc. (“SCS”) Plan Sponsors to service their 401(k) and equity compensation plan needs and work with these Executives to identify other Schwab products and services given their needs. In addition to a base salary, Executive Service Financial Consultants are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of client satisfaction, service quality, and Net New Assets to Schwab.

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Advice Consultants Advice Consultants provide advice and/or education to participants of retirement plans serviced by SCS. Services may include personalized one-on-one consultations, evaluation of investments, portfolio/ asset allocation, and discussion of fi nancial goals (including retirement). These services relate to both investments in employer-sponsored retirement plans and/or other assets held outside of those plans. In addition to base salary, Advice Consultants are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of the quality of representatives’ inter- actions with clients, utilization of advice, and busi-ness development opportunities.

Active Investor Representatives

Active Investor Representatives identify clients whose trading needs are an appropriate match for an active trading service. They do not provide trading advice. The group consists of regionally based Active Investor Field Sales Market Managers who work with local branches, as well as phone-based Active Investor Consultants. Active Investor Field Sales Market Managers support a designated region which consists of clients assigned to local Financial Consultants’ Practices. These Managers work with Financial Consultants by serving as their primary point of contact for Active Investor services. Active Investor Field Sales Market Managers also assist clients not assigned to a Financial Consultant’s Practice. In addition to a base salary, Market Managers are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of fre-quency of one-on-one client consultations, local market seminars and events hosted, market area lead-fl ow generation, and quality of interactions with clients and branches. Active Investor Consultants interact with prospects and clients via the telephone channels, through inbound and outbound calling. They work to understand

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offer, when appropriate. In addition to a base salary, these consultants have the potential to earn addi-tional monthly incentive compensation based on the following criteria: • Increased client trading activity at Schwab due to representatives promoting the use of Active Investor products and services; • Net New Assets; • New to Firm Active Investor client relationships; • Transfers of existing margin balances to Schwab; and • Referring a client that attends a new client con-cierge meeting, a consultation with an Active Investor Field Sales Market Manager, an in-branch workshop, or a live online event. • In addition, enrollments in education can increase monthly sales compensation; conversely, failure to meet the threshold of education enrollments can decrease monthly sales compensation. Active Investor Education Specialists partner with Active Investor Consultants to help on-board new clients. Education Specialists conduct phone-based customized one-on-one consultations with new cli-ents to teach them how to leverage Schwab’s trading platforms, tools, and research resources. In addition to a base salary, Education Specialists are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of quantity of one-on-one client consultations, quality of consultation interactions, client engagement, and whether clients leverage subsequent education.

Fixed Income Specialists

Regional Bond Specialists provide advice and service to Schwab clients specifi c to their fi xed income investing needs. In addition to a base salary, these specialists are eligible to earn an annual bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of the sale of fi xed income products, relationship management, business

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Bond Investment Specialists advise and serve clients with their fi xed income investing needs by responding to inbound phone calls. In addition to a base salary, these specialists are eligible to earn an annual bonus that is funded based on Schwab’s perfor-mance and determined based on manager discretion, which may include consideration of the sale of fi xed income products, quality assurance, the principal value of fi xed income related transactions, teamwork, and initiative. Note: Regional Bond Specialists and Bond Investment Specialists do not earn commissions on each transaction, and their compensation is not affected by whether an issue is underwritten by Schwab. Nor does it matter whether a transaction is executed as agent, riskless principal, or from Schwab’s own inventory.

Insurance Services Annuity Specialists

Annuity Specialists provide clients with information and advice on annuities available through Schwab. They also provide existing annuity clients with ongo-ing service and support. In addition to a base salary, these specialists are eligible to earn an annual bonus that is funded based on Schwab’s perfor-mance and determined based on manager discretion, which may include consideration of Net New Assets, individual contribution to annuity sales for the team, teamwork, client feedback, and training initiatives.

Portfolio Consulting Representatives

Portfolio Consultants Portfolio Consultants provide investment portfolio advice to clients who are enrolled in Schwab Private Client™. They do not receive differential compensa-tion based on the securities that they recommend to enrolled clients. Portfolio Consultants assess their clients’ fi nancial needs, analyze their portfolios, deliver portfolio advice, and provide periodic portfolio reviews to clients enrolled in Schwab Private Client™. Portfolio Consultants are also employees of Charles Schwab Bank. In addition to a base salary, Portfolio Consultants are eligible to earn a bonus that is

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mined based on manager discretion, which may include consideration of the quality of the represen- tative’s interactions with clients, retaining appropri-ate clients in advised offers, client satisfaction, teamwork, training, professional development, accu-racy, and Net New Assets.

Associate Portfolio Consultants

Associate Portfolio Consultants provide ongoing service to clients in Schwab Private Client™. In addi-tion to a base salary, they are eligible to earn a bonus that is funded based on Schwab’s perfor-mance and determined based on manager discretion, which may include consideration of the quality of the representative’s interactions with clients, retaining appropriate clients in advised offers, client satisfac-tion, teamwork, training, professional development, and accuracy. Financial Planners Financial Planners work with our clients to plan for their long-term fi nancial goals. In addition to a base salary, they are eligible to earn a bonus that is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of the quality of the representative’s interactions with clients, client satisfaction, teamwork, training, professional development, and accuracy.

Investment Consultants (Complimentary Consultations) Investment Consultants provide clients who are not currently assigned to a Financial Consultant with a complimentary portfolio analysis or retirement assessment. They conduct a one-time, needs-based portfolio assessment and make recommendations from the full array of advice solutions offered by the company. They proactively contact clients by tele-phone, receive direct calls from clients, and receive call transfers from clients who have expressed inter-est in portfolio consultation to another Schwab representative. In addition to a base salary, these representatives are eligible to earn an annual bonus that is funded based on Schwab’s performance and

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include consideration of the quality of representa-tives’ interactions with clients and utilization of advice and business development opportunities.

Schwab Managed Portfolio Service Representatives

Schwab Managed Portfolio Service Representatives work with our clients that are invested in Schwab Managed Portfolios™, responding to telephone inqui- ries about the product and ensuring on-going suitabil-ity of the investment. In addition to a base salary, they are eligible to earn a bonus which is funded based on Schwab’s performance and determined based on manager discretion, which may include consideration of the quality of representative’s inter-actions with clients, client satisfaction, teamwork, training, professional development, and accuracy.

Other Compensation or Awards

From time to time, one or more categories of our representatives may participate in short-term, tempo-rary incentive programs that focus on a particular class of products or services, including new accounts and new assets to Schwab. The goal of these pro-grams is to raise awareness about products and services and how that may serve our clients’ needs and thereby increase sales. Certain representatives who demonstrate exceptional performance during the year may also be eligible to earn an annual trip through Schwab’s Chairman’s Club. Schwab may develop additional recognition events or programs from time to time. For more information, please visit our website at http://aboutschwab.com/ about/compensation/compensation.html.

Schwab Independent Branch Services

Representatives

Schwab Independent Branch Services representatives are independent contractors who operate, with their employees, Schwab Independent Branches pursuant to a franchise agreement with Schwab. These inde-pendent contractors are called Independent Branch Leaders, or IBLs. Their employees who hold a securi-ties license are called Independent Branch Services

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employees, but they are registered representatives of Schwab for purposes of securities regulations. IBLs receive a portion of the revenue generated by the activities and assets in accounts of Schwab clients assigned to their Independent Branches. IBS Employees also may share in the revenue earned by their IBL employer. Schwab notifi es clients when they are assigned to an IBL.

Independent Branch Leaders

IBLs are not paid on commissions for particular sales, nor does Schwab pay them a salary or the incentive compensation earned by representatives who are employed by Schwab. Instead, they earn revenue from their business based on the overall revenue Schwab earns from clients whose accounts are assigned to their Independent Branch. IBLs therefore have an incentive to make sure their client accounts in the aggregate hold assets that generate enough revenue so that their monthly payout from Schwab (as described below) exceeds the fees and expenses they owe to Schwab or are otherwise responsible for under the franchise agreement with Schwab. For purposes of revenue earned by the IBLs, the assets in accounts assigned to them are divided into two categories: (1) “Advised Assets,” meaning assets in accounts enrolled in Schwab Private Client™ or Schwab Managed Portfolios™, Schwab Managed Account Select® or Schwab Managed Account Connection™ (discretionary wrap-fee programs), or accounts managed by an independent third-party investment advisor to whom the client was referred through Schwab Advisor Network® service; and (2) “Non-Advised Assets,” consisting of assets not in the Advised Asset category which include stocks, bonds, mutual funds and ETFs as well as payment for providing cash management services. Each month, Schwab calculates and applies an Advised Asset revenue rate and a Non-Advised Asset revenue rate to the assets in accounts assigned to all Schwab Independent Branches. The two revenue rates are calculated by looking at 12-month trailing assets and revenue from all Schwab Independent Branch accounts. This is done by dividing the

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the associated assets. (Certain product-level expenses are subtracted and certain revenues not earned at an individual account level are excluded.) Schwab then applies these revenue rates to the daily average assets in each category in accounts assigned to individual Schwab Independent Branches, yielding an adjusted revenue fi gure for each asset category. The revenue rates change monthly, but the Advised Asset revenue rate is higher because Schwab generally generates more revenue on Advised Assets. This is due to the asset-based fees paid for advisory services and other revenue gener-ated by the underlying assets in the enrolled accounts, such as shareholder servicing fees paid to Schwab by certain mutual funds. An IBL, therefore, earns more money by successfully recommending that a client enroll or open an account in one of the services in the Advised Asset category. After adding together the adjusted revenue fi gures for Advised and Non-Advised Assets, Schwab then applies a multiplier based on the tenure of the IBL. See the table below. For assets of clients who transi-tion to Schwab from an IBL’s prior fi rm, the IBL may elect a constant multiplier of 50% in exchange for an increased ability to ask such clients to transition away from Schwab if the franchise agreement ends.

Tenure of IBL Multiplier

Year 1 200% Year 2 150% Year 3 110% Year 4 75% Year 5 55% Year 6+ 50% Finally, Schwab deducts certain monthly fees and expenses from the total adjusted revenue amount that the IBL owes to Schwab under the franchise agreement. This results in a net payout for the month.

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employer, may be eligible for a bonus based on a percentage of either their salary or the IBL’s Net Payout. The criteria used by the IBL Consultant to determine the amount of the bonus may include such factors as net new assets, net new clients acquired through the efforts of an IBS Financial Consultant, or the portion of the Net Payout attributable to clients serviced by an IBS Financial Consultant. If you have questions about information contained in this brochure, please call 1-800-785-3965. For media inquiries, please call the Schwab Corporate Public Relations hotline at 1-415-667-9500. Third-party trademarks appearing in this document are the property of their respective owners. ©2011 Charles Schwab & Co., Inc.

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October 2011

Amendments to the

Following Account

Agreements

• Schwab One® Account

• Schwab Account

• Schwab IRA and ESA Account

• Schwab 403(b)(7) Account

• Schwab Retirement Plan Brokerage

Account

• Schwab Individual 401(k) Account

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Dear Investor, This document highlights certain changes to the January 2011 version of the following six Account Agreements: Schwab One® Account (“Schwab One®”), Schwab Account (“Schwab Account”), Schwab Individual Retirement Account and Education Savings Account (“Schwab IRA and ESA”), Schwab 403(b)(7) Account (“Schwab 403(b)(7)”), Schwab Retirement Plan Brokerage Account (“Schwab RPB”) and Schwab Individual 401(k) Account (“Schwab Individual 401(k)”). These amendments, which include both changes to and clarifi cations of existing language, apply to both Individual Investor accounts and accounts managed by Investment Advisors and enrolled with Schwab Institutional®, unless otherwise noted. Effective immediately, these amendments and clarifi cations replace and supersede all previously published portions of the Account Agreements to which they apply. In the event of any inconsistency or confl ict between the terms of these amendments and clarifi cations and the terms of your existing Account Agreement(s), the terms set forth in this document will govern. Please review this document carefully. If you have questions about the information con-tained in this document or about any of our products and services, call your Schwab representative at 1-800-435-4000. If your account(s) is managed by an Investment Advisor and enrolled in Schwab Institutional®, please call 1-800-515-2157. International clients, call +1-415-667-8400. For a current copy of your Account Agreement, please visit www.schwab.com. If your account is managed by an Investment Advisor and enrolled in Schwab Institutional®, visit www.schwaballiance.com. For international clients, visit www.schwab-global.com. For UK or Swiss clients, visit www.schwab.co.uk.

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I. Schwab One®

, Schwab Account, Schwab

IRA and ESA, Schwab 403(b)(7), Schwab

RPB and Schwab Individual 401(k)

A. Arbitration

1. Under “Required Arbitration Disclosures,” replace the fourth bullet point with the following:

“• The arbitrators do not have to explain the reason(s) for their award unless, in an eligible case, a joint request for an explained decision has been submit-ted by all parties to the panel at least 20 days prior to the fi rst scheduled hearing date.”

2. In the fi rst sentence of the fi rst paragraph under “Arbitration Agreement,” insert the phrase “(‘Related Third Parties’)” between “service providers” and “including.” 3. In the fi rst sentence of the second paragraph under “Arbitration Agreement,” insert the word “heirs” between “attorneys-in-fact” and “successors.” 4. Under “Arbitration Agreement,” insert the following paragraph after the fi fth paragraph in this section: “For FINRA arbitrations, FINRA will appoint a single public arbitrator in customer cases decided by one arbitrator. In customer cases decided by three tors, investors have the option of choosing an arbitra-tion panel with two public arbitrators and one non-public arbitrator (Majority-Public Panel Rule) or a panel of all public arbitrators (Optional All-Public Panel Rule). If the customer declines to elect a panel selection method in writing by the applicable dead-line, the Majority-Public Panel Rule for selecting arbitrators will apply.”

5. Insert the following at the end of this section after the “Arbitration Agreement”:

“Waiver of Class Action or Representative Action. Neither you nor Schwab shall be entitled to arbitrate any claims as a class action or representative action, and the arbitrator(s) shall have no authority to consoli-date more than one parties’ claims or to proceed on a representative or class action basis.

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our individual capacities. You and Schwab hereby waive any right to bring a class action, or any type of representative action against each other or any Related Third Parties in court. You and Schwab waive any right to participate as a class member, or in any other capacity, in any class action or representative action brought by any other person, entity or agency against Schwab or you.”

[Schwab One® (Brokerage Services, Section 25), Schwab Account (Cash Account, Section 20), IRA and ESA (Cash Account, Section 17), Schwab 403(b)(7) (Cash Account, Section 17), Schwab RPB (Cash Account, Section 16), Schwab Individual 401(k) (Cash Account, Section 16)]

II. Schwab One®

, Schwab Account, Schwab

IRA and ESA and Schwab RPB

A. Mutual Fund Fees, Orders, Distributions and Redemptions (Schwab One® and Schwab RPB) and Mutual Fund Orders, Distributions and Redemptions (Schwab Account and Schwab IRA and ESA)

Replace the heading and fi rst fi ve paragraphs with the following:

“Mutual Fund Fees, Orders, Distributions and Redemptions “You agree that, in purchasing and redeeming shares of a mutual fund through Schwab, Schwab’s policies and procedures will govern such transactions and not those of the mutual fund as described in its prospectus, which may be either more or less benefi cial to you as an investor. In particular, you agree that Schwab’s policies and procedures on minimum investment requirements, exchange of fund shares, dividend accrual and date for payment of accrued dividends upon redemption of a daily dividend fund may vary from those applicable to direct fund shareholders. You may also be charged a fund’s redemption fee that would not be imposed by the fund on direct shareholders hold-ing fund shares under the same circumstances. “Schwab imposes short-term redemption fees on

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trading of mutual funds from purchasing some or all funds available through Schwab. Our short-term redemption policy, including applicable fees and other restrictions, is available at www.schwab.com and upon request. Schwab may also charge a trans-action fee for certain mutual fund transactions; you would not incur this fee if you purchased shares directly from a fund company. Your purchase and sale of mutual fund shares may be subject to addi-tional fees the fund imposes, such as sales loads and contingent redemption fees, that are separate from, and in addition to, the transaction and other fees charged to you by Schwab. You agree to pay, and are solely responsible for payment of, all fees charged to you by Schwab and/or any fund. “Schwab’s deadline for receiving customer orders to place with a mutual fund for execution at the price next calculated by the fund may be earlier than the deadline set by the fund in its prospectus. It is your responsibility to verify with us the deadline by which you must place your order with Schwab to obtain the next price calculated. We generally will attempt to have orders received by us prior to our deadline accepted by the fund for execution at the price next calculated by the fund. However, you may receive a later price than the price next calculated by the fund if, due to operational incompatibilities with the fund or other limitations, Schwab is unable to support transmission of the order to the fund prior to the next price calculated by the fund. It is your responsi-bility to verify with us whether your order will receive the price next calculated by the fund prior to placing your order with Schwab. “In addition, a mutual fund may decline to execute an order for the price next calculated by it if we do not place the order with the fund by a specifi ed time. You agree that we will not be liable to you for any losses, including lost profi ts, if the mutual fund does not accept your order for execution at the price next calculated by the fund after our deadline for any reason, including, but not limited to, computer sys-tem delays or failures, natural catastrophes or other emergencies, or human error resulting in our late placement of the order with the fund. If a mutual fund declines to accept your order for execution at

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we did not place the order with the fund by a speci-fi ed time, Schwab reserves the right, but is not obligated, to place your rejected order with the fund for execution at the price next calculated by the fund after its acceptance of the order.”

[Schwab One® (Brokerage Services, Section 38), Schwab Account (Cash Account, Section 33), IRA and ESA (Cash Account, Section 28), Schwab RPB (Cash Account, Section 27)]

III. Schwab One®

A. Security for Indebtedness

Replace the entire content of the section with the following: “Note: This section does not apply to any tax quali-fi ed accounts subject to the prohibited transaction rules of the Internal Revenue Code or ERISA, or any indebtedness arising therefrom. “As security for the repayment of all present or future indebtedness owed to us by any account holder under the Schwab One® Account Agreement or otherwise, each account holder grants to us a continuing security interest in and lien on, and a right of setoff with respect to, all Securities and Other Property that are, now or in the future, held, carried or maintained for any purpose in or through the Schwab One® Account, and, to the extent of such account holder’s interest in or through, any present or future account with us in which the account holder has an interest. “If you owe money to Schwab as the result of activ-ity in your Account and there are assets available in any account that you hold at Schwab which could fully or partially satisfy the debt, you agree that upon Schwab’s written demand, you will execute all documents necessary to effect a distribution from your account and agree to pay or cause such funds to be paid immediately to Schwab in order to satisfy your indebtedness to Schwab.”

[Schwab One® (Brokerage Services, Section 8), Schwab Account (Cash Account, Section 7)]

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IV. Schwab Account

A. Security for Indebtedness

Replace the entire content of the section with the following: “Note: This section does not apply to any tax quali-fi ed accounts subject to the prohibited transaction rules of the Internal Revenue Code or ERISA, or any indebtedness arising therefrom. “As security for the repayment of all present or future indebtedness owed to us by any account holder under the Account Agreement or otherwise, each account holder grants to us a continuing secu-rity interest in and lien on, and a right of setoff with respect to, all Securities and Other Property that are, now or in the future, held, carried or maintained for any purpose in or through the Schwab Account, and, to the extent of such account holder’s interest in or through, any present or future account with us in which the account holder has an interest. “If you owe money to Schwab as the result of activity in your Account and there are assets available in any account that you hold at Schwab which could fully or partially satisfy the debt, you agree that upon Schwab’s written demand, you will execute all docu-ments necessary to effect a distribution from your account and agree to pay or cause such funds to be paid immediately to Schwab in order to satisfy your indebtedness to Schwab.”

[Schwab Account (Cash Account, Section 7)]

V. Schwab IRA and ESA

A. Introduction Replace the content of the Introduction with the following: “This publication contains important terms and conditions that apply to Schwab IRAs and services for Schwab IRAs, including the Traditional IRA and the Roth IRA. Any language in this Account Agreement or related agreements that may confl ict or be inconsistent with the Charles Schwab & Co., Inc.

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tion Sections 5.2 or 5.8 of that Plan, or Sections 408 or 4975 of the Internal Revenue Code, and the regulations thereunder, shall be interpreted to be consistent and in compliance with that Plan and those Sections of that Code and regulations thereun-der. To the extent it is not possible to interpret such language to be consistent and compliant with that Plan or these Code provisions and regulations, then such language shall be of no force or effect to the extent of such inconsistency or noncompliance. This Section shall be effective retroactive to the fi rst date on which the agreement concerning the Schwab IRA was entered into by the Account Holder. “This publication also contains important terms and conditions that apply to Schwab Education Savings Accounts and services for all Schwab Education Savings Accounts. Any language in this Account Agreement or related agreements that may confl ict or be inconsis-tent with the Charles Schwab & Co., Inc. Education Savings Account Plan, including without limitation Sections 5.05 or 10.03 of that Plan, or Sections 530 or 4975 of the Internal Revenue Code, and the regu-lations thereunder, shall be interpreted to be consistent and in compliance with that Plan and those Sections of that Code and regulations thereunder. To the extent it is not possible to interpret such language to be consistent and compliant with that Plan or these Code provisions and regulations, then such language shall be of no force or effect to the extent of such inconsistency or noncompliance. This Section shall be effective retroactive to the fi rst date on which the agreement concerning the Schwab Education Savings Account was entered into by the Account Holder. “Please read this publication carefully and retain it for future reference.”

[Schwab IRA and ESA (Introduction)]

B. Defi nitions

Replace the defi nition of the following term:

IRA, IRA Account, and/or Schwab IRA—The brokerage Account established under the Charles Schwab & Co., Inc. Individual Retirement Plan (excluding SEP-IRAs) and/or Education Savings Account Plan.

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VI. Schwab RPB

A. Introduction Replace the content of the Introduction with the following: “This publication contains important terms and conditions that apply to Schwab Retirement Plan Brokerage Accounts and services for the following Retirement Plan Brokerage Accounts: the SEP-IRA, SIMPLE IRA, and Qualifi ed Retirement Plan (QRP)/ Keogh brokerage accounts (referred to as Retirement Plan Brokerage Accounts in this document). Any language in this Account Agreement or related agree-ments that may confl ict or be inconsistent with the Charles Schwab & Co., Inc. Individual Retirement Plan, including without limitation Sections 5.2 or 5.8 of that Plan, Schwab SEP-IRA Basic Plan Document, Schwab SIMPLE IRA Basic Plan Document, Charles Schwab & Co., Inc. SIMPLE Individual Retirement Account Custodial Account Agreement, any other retirement Plan to which this publication applies or Sections 401, 408 or 4975 of the Internal Revenue Code, and the regulations thereunder, shall be inter-preted to be consistent and in compliance with the applicable Plan and those Sections of the Code and regulations thereunder. To the extent it is not pos-sible to interpret such language to be consistent and compliant with the applicable Plan or those Code provisions and regulations, then such language shall be of no force or effect to the extent of such incon-sistency or noncompliance. This Section shall be effective retroactive to the fi rst date on which the agreement concerning the Schwab IRA was entered into by the Account Holder. Please read this publica-tion carefully and retain it for future reference.”

[Schwab Retirement Plan Brokerage (Introduction)]

B. Defi nitions

Replace the defi nition of the following term:

“IRA, IRA Account, and/or Schwab IRA—The brokerage Account established for your SEP or SIMPLE IRA.”

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VII. Schwab 403(b)(7)

A. Mutual Fund Fees, Orders, Distributions and Redemptions Replace the entire content of the section with the following: “You agree that, in purchasing and redeeming shares of a mutual fund through Schwab, Schwab’s policies and procedures will govern such transactions and not those of the mutual fund as described in its prospec-tus, which may be either more or less benefi cial to you as an investor. In particular, you agree that Schwab’s policies and procedures on minimum investment requirements, exchange of fund shares, dividend accrual and date for payment of accrued dividends upon redemption of a daily dividend fund may vary from those applicable to direct fund share- holders. You may also be charged a fund’s redemp-tion fee that would not be imposed by the fund on direct shareholders holding fund shares under the same circumstances. “Schwab imposes short-term redemption fees on certain mutual fund transactions and reserves the right to restrict individuals who engage in short-term trading of mutual funds from purchasing some or all funds available through Schwab. Our short-term redemption policy, including applicable fees and other restrictions, is available at www.schwab.com and upon request. Schwab may also charge a trans-action fee for certain mutual fund transactions; you would not incur this fee if you purchased shares directly from a fund company. Your purchase and sale of mutual fund shares may be subject to addi-tional fees the fund imposes, such as sales loads and contingent redemption fees, that are separate from, and in addition to, the transaction and other fees charged to you by Schwab. You agree to pay, and are solely responsible for payment of, all fees charged to you by Schwab and/or any fund. “You also acknowledge that only certain investments qualify as investments in regulated investment com-pany stock under 403(b)(7) of the Code and that Schwab or a third party may be required, prior to execution of your order, to make a determination as

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to whether a particular investment so qualifi es. You acknowledge and agree that any such required deter-mination may cause a delay between the time you initially place your order and the time the order can be executed. Accordingly, you agree not to hold Schwab liable for any change in the price of such investment during the period of determination and prior to the execution of your order. “Schwab’s deadline for receiving customer orders to place with a mutual fund for execution at the price next calculated by the fund may be earlier than the deadline set by the fund in its prospectus. It is your responsibility to verify with us the deadline by which you must place your order with Schwab to obtain the next price calculated. We generally will attempt to have orders received by us prior to our deadline accepted by the fund for execution at the price next calculated by the fund. However, you may receive a later price than the price next calculated by the fund if, due to operational incompatibilities with the fund or other limitations, Schwab is unable to support transmission of the order to the fund prior to the next price calculated by the fund. It is your responsi-bility to verify with us whether your order will receive the price next calculated by the fund prior to placing your order with Schwab. “In addition, a mutual fund may decline to execute an order for the price next calculated by it if we do not place the order with the fund by a specifi ed time. You agree that we will not be liable to you for any losses, including lost profi ts, if the mutual fund does not accept your order for execution at the price next calculated by the fund after our deadline for any reason, including, but not limited to, computer sys-tem delays or failures, natural catastrophes or other emergencies, or human error resulting in our late placement of the order with the fund. If a mutual fund declines to accept your order for execution at the price next calculated after our deadline because we did not place the order with the fund by a speci-fi ed time, Schwab reserves the right, but is not obligated, to place your rejected order with the fund for execution at the price next calculated by the fund after its acceptance of the order.

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“A fund may also decline a purchase order, in its sole discretion, if the purchase order exceeds a certain size or for any other reason, and Schwab will not be liable for any losses, lost profi ts, or other damages that allegedly result from the fund’s rejec-tion of that purchase order. If a fund declines your purchase order for any reason other than the time we placed the order with the fund, we will cancel the order and, if practicable, attempt to notify you; we will not make another attempt to place such a declined purchase order with the fund. “If you place an order to buy or sell a specifi c dollar amount of a mutual fund, Schwab will calculate the number of shares bought or sold by dividing the dollar amount of the order by the price and rounding to the nearest three decimal places. Due to round-ing, the actual value of the shares bought or sold may be slightly greater or less than the actual dollar amount of your order. If you place an order to buy or sell a specifi c number of shares of a fund, Schwab will calculate the dollar amount of the purchase or sale by multiplying the number of shares by the price and rounding to the nearest two decimal places. Due to rounding, the actual dollar amount may be greater or less than the actual share amount of your order. “Schwab does not have any obligation to advance redemption proceeds and distributions related to mutual fund shares to your account before we have received them from the mutual fund. In the event we do advance such proceeds or distributions, such amounts will constitute indebtedness owed to us by you, secured as described in the section entitled “Security for Indebtedness” until they are received from the fund. We reserve the right to reverse the transaction pending receipt of payment from the fund. Schwab is not obligated to pay any interest on distributions from mutual funds or other issuers including, but not limited to, issuers of equity securi-ties) until such distributions are received by Schwab. “If a mutual fund exercises its right to redeem your shares “in kind” by delivering to Schwab portfolio securities in payment for your shares instead of cash, Schwab will hold these securities in your account subject to your instructions. If, however, Schwab does

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ties paid to you by your mutual fund, Schwab will take such action as it deems appropriate to effect delivery of such non-standard security to you or to an entity able to assume custody or effect transactions in the security. You agree to pay our commission and trans-action, processing, custody and other fees, and/or those of the entity to which your non-standard security is delivered, as they exist from time to time and apply to the transactions and services you receive in con-nection with these securities paid to you by the fund.”

[Schwab 403(b)(7) (Cash Account, Section 28)]

VIII. Schwab Individual 401(k)

A. Mutual Fund Fees, Orders, Distributions and Redemptions Replace the second, third and fourth paragraphs with the following: “Schwab imposes short-term redemption fees on certain mutual fund transactions and reserves the right to restrict individuals who engage in short-term trading of mutual funds from purchasing some or all funds available through Schwab. Our short-term redemption policy, including applicable fees and other restrictions, is available at www.schwab.com and upon request. Schwab may also charge a trans-action fee for certain mutual fund transactions; you would not incur this fee if you purchased shares directly from a fund company. Your purchase and sale of mutual fund shares may be subject to addi-tional fees the fund imposes, such as sales loads and contingent redemption fees, that are separate from, and in addition to, the transaction and other fees charged to you by Schwab. You agree to pay, and are solely responsible for payment of, all fees charged to you by Schwab and/or any fund. “Schwab’s deadline for receiving customer orders to place with a mutual fund for execution at the price next calculated by the fund may be earlier than the deadline set by the fund in its prospectus. It is your responsibility to verify with us the deadline by which you must place your order with Schwab to obtain the next price calculated. We generally will attempt to have

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the fund for execution at the price next calculated by the fund. However, you may receive a later price than the price next calculated by the fund if, due to opera- tional incompatibilities with the fund or other limita-tions, Schwab is unable to support transmission of the order to the fund prior to the next price calculated by the fund. It is your responsibility to verify with us whether your order will receive the price next calculated by the fund prior to placing your order with Schwab. “In addition, a mutual fund may decline to execute an order for the price next calculated by it if we do not place the order with the fund by a specifi ed time. You agree that we will not be liable to you for any losses, including lost profi ts, if the mutual fund does not accept your order for execution at the price next calculated by the fund after our deadline for any reason, including, but not limited to, computer sys-tem delays or failures, natural catastrophes or other emergencies, or human error resulting in our late placement of the order with the fund. If a mutual fund declines to accept your order for execution at the price next calculated after our deadline because we did not place the order with the fund by a speci-fi ed time, Schwab reserves the right, but is not obligated, to place your rejected order with the fund for execution at the price next calculated by the fund after its acceptance of the order.”

[(Schwab Individual 401(k) (Cash Account, Section 27)]

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Securities, products, and services, including Schwab Bank and Schwab Bank High Yield Investor Checking®, are not available in all countries and are subject to country-specific restrictions.

©2011 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CS15113-01 BDL30900REG-20 (10/11)

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References