CHARLES SCHWAB, HONG KONG, LTD.

Charles Schwab, Hong Kong, Ltd.
Type here for Search

Your Securities Transactions and Schwab's Compensation

Offshore Mutual Funds
Schwab Affiliated Money Market Funds
Fixed Income
Exchange-Traded Funds ("ETFs")

When individual investors purchase products or services from Charles Schwab, Hong Kong, Ltd. ("Schwab Hong Kong") and its affiliates, including Charles Schwab & Co., Inc. (Schwab U.S.) (Schwab Hong Kong together with its affiliates collectively hereinafter referred as "Schwab"), Schwab acts in agency capacity for all trades apart from certain fixed income trades where Schwab acts in principal capacity. Schwab may earn money from third parties or affiliates in addition to the fees paid by our clients. This compensation may apply to products or services that are bought, sold or introduced through Schwab, including offshore mutual funds, Schwab-affiliated money market funds, fixed income, or Exchange-Traded Funds ("ETFs").

As such, Schwab is NOT an independent intermediary. Any monetary benefits received or receivable from affiliates or third parties which may include product issuers, directly or indirectly, are explicit and quantifiable prior to the point of sales. For details, please refer to the following disclosure on monetary benefits. Schwab does not engage in a back-to-back transaction of the above-mentioned investment products except fixed income. Schwab does not receive from affiliates or third parties non-monetary benefits for distributing investment products.

Schwab Hong Kong may receive monetary compensation from Schwab U.S. in relation to the distribution of investment products to our clients. As such, Schwab Hong Kong is NOT an independent intermediary.

Please note that the information provided throughout this document describes how Schwab earns money from third parties, not how clients pay Schwab for services. Information about what clients pay Schwab can be found in Schwab Hong Kong Pricing Guide for Individual Investors at www.schwab.com.hk or in the disclosure brochures that describe Schwab's fee-based advice programs.

Schwab may discount its fees and charges from time to time at its absolute discretion.

Offshore Mutual Funds

Through Schwab's Offshore Mutual Fund Center, Schwab makes available a selection of load-waived offshore mutual funds. Schwab receives compensation from offshore mutual fund companies when clients invest in an offshore mutual fund. Schwab receives fees and other remuneration from offshore mutual fund companies or their affiliates for the recordkeeping, shareholder services, and other administrative services that Schwab provides to shareholders of the funds. These shareholder services include transaction processing, settlement of trades, dividend distribution, record maintenance, and distribution of statements, confirmations, prospectuses and other regulatory shareholder documents.

To compensate Schwab for these various shareholder services, the funds pay Schwab either an asset-based annual fee, which usually equals 0.60% of the average fund assets held at Schwab, but may be as high as 0.75% annually, or the funds pay Schwab any service fee or commission payable to a broker as disclosed in the fund’s offering documents. Schwab may also receive a networking fee for each subaccount, most often equal to $6 annually.

Schwab Affiliated Money Market Funds

Schwab Hong Kong clients have access to a sweep money market fund alternative, the Schwab U.S. Dollar Liquid Assets Fund (the "Fund"). Schwab Hong Kong will act in agent capacity for purposes of the Fund's transactions. The Fund is a sub-fund of Charles Schwab Worldwide Funds plc, an investment company with variable capital incorporated in Ireland. Charles Schwab Asset Management (Ireland) Limited ("CSAMIL") serves as the Fund's manager and Charles Schwab Investment Management, Inc. ("CSIM") serves as the Fund's investment manager. The Fund pays CSAMIL a fee for management services, the amount of which is described in the prospectus or supplement thereto and out of which CSAMIL compensates other service providers to the Fund, including CSIM.

Additionally, CSAMIL may pay Schwab U.S. up to 0.45% of the fund's average annual daily net asset value annually for investment and shareholder services that CS&Co. provides to shareholders invested in the Fund. Schwab U.S. may pass on revenue generated from the Fund to Schwab Hong Kong. Schwab U.S., Schwab Hong Kong, CSAMIL, CSIM and CS&Co. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

Fixed Income

Schwab reserves the right to act as principal on any fixed income transaction. When Schwab acts as principal in a back-to-back transaction, the bond price includes our transaction fee or a markup of $1 per bond ($10 minimum/ $250 maximum). In secondary market principal transactions, the price may include a profit to Schwab in the form of a bid-ask spread. When trading as principal, Schwab may also be holding the security in its own account prior to selling it to you and, therefore, may make (or lose) money depending on whether the price of the security has risen or fallen while Schwab has held it.

Exchange-Traded Funds ("ETFs")

Please note that Exchange-Traded Funds (ETFs) featured in the ETF Center are U.S.-listed securities and are not funds authorized by the Securities and Futures Commission ("SFC") in Hong Kong.

Schwab's affiliate, CSIM, serves as investment advisor to a family of Schwab-affiliated ETFs, which compensate CSIM out of the applicable operating expense ratios. CSIM will receive compensation from the fund on the amount you invest. The amounts paid to CSIM for Schwab ETFs™ will vary depending on the particular fund in which you invest and may range from 0.03% to 0.39% of assets annually. Specific information concerning the advisory fees paid to CSIM by each Schwab ETF is available in the applicable fund prospectus.

Schwab U.S, the Clearing Broker, has established the Schwab ETF OneSource™ program ("ETF OneSource") under which ETFs can be traded without a commission on buy and sell transactions placed online. Schwab receives payments from the third-party ETF sponsors or their affiliates participating in ETF OneSource for record-keeping, shareholder services and other administrative services that Schwab provides to participating ETFs. A portion of the fees paid to Schwab offsets some or all of Schwab's costs of promoting and administering the program. Schwab does not receive payment to promote any particular ETF to its customers.

ETF sponsors or their affiliates pay a fixed program fee to Schwab each year for each ETF participating in ETF OneSource. The program fees vary but can range up to US$15,000 per year for each participating ETF. ETF sponsors or their affiliates also pay Schwab an asset-based fee based on a percentage of total ETF assets purchased by Schwab customers after the ETF was added to ETF OneSource. The amount of the asset-based fee can range up to 0.04% annually.

Disclosure: This note is for your information only and is not intended as an offer, or a solicitation, to buy or sell any investment or specific product. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. This note may not be reproduced and/or circulated without prior authority of Charles Schwab, Hong Kong, Ltd. All information in this note is subject to change without notice.