Your Securities Transactions and Schwab's Compensation
When individual investors purchase products or services from Charles Schwab, Hong Kong, Limited and its affiliates (collectively "Schwab"), we 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, or fixed income. Schwab is always acting in agency capacity for all trades apart from certain fixed income trades where Schwab acts in principal capacity.
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 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.
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.
Through Schwab's Offshore Mutual Fund Center, Schwab offers a selection of load-waived offshore mutual funds. Schwab receives remuneration for the shareholder services provided to these funds. To compensate Schwab for 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 sub-account, most often equal to $6 annually.
Schwab Hong Kong clients have access to a sweep money market fund alternative, the Schwab U.S. Dollar Liquid Assets Fund (the “Fund”). The Fund is a sub-fund of Charles Schwab Worldwide Funds plc, an investment company with variable capital incorporated in Ireland, for which Schwab's affiliate, Charles Schwab Asset Management (Ireland) Limited (“CSAMI”), serves as Manager. The Fund pays CSAMI a fee for management services, the amount of which is described in the prospectus or supplement thereto and out of which CSAMI compensates other service providers to the Fund, including Charles Schwab Investment Management, Inc., (“CSIM”) the investment manager to the Fund and an affiliate of Schwab.
Additionally, the Fund may pay Schwab up to 0.45% annually for administrative services that Schwab provides to shareholders invested in the Fund.
Schwab reserves the right to act as principal on any fixed income transaction. 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.
Please note that Exchange Traded Funds (ETFs) featured in the ETF Center are U.S.-listed securities and are not funds authorized by the 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 0.04% to 0.48% of assets annually. Specific information concerning the advisory fees paid to CSIM by each Schwab ETF is available in the applicable fund prospectus.
Charles Schwab & Co., Inc. (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. Schwab receives payments from the third-party ETF sponsors or their affiliates participating in ETF OneSource for recordkeeping, 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 USD$250,000 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 0.15% 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. It 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.