Important account information you need to know. - Schwab · Important account information you need to know. • The Consolidated Statement of Financial Condition of Charles Schwab

October 2011

Important account information you need to know.

• TheConsolidatedStatementofFinancialConditionofCharlesSchwab&Co.,Inc.asofJune30,2011,isavailable.

ClientsmayobtainafreecopyoftheCharlesSchwab&Co.,Inc.ConsolidatedStatementofFinancialConditionasofJune30,2011,byvisitingourwebsiteatwww.schwab.com/sfc,bycalling1-800-435-4000,orbycontactingaSchwabrepresentative.

• NoticeofChangetoSchwab’sCash Features Disclosure Statements

• HowWeCompensateOurInvestmentProfessionals

• AmendmentstoYourAccountAgreements

Contents

Notifications

All InvestorsTheConsolidatedStatementofFinancialConditionofCharlesSchwab&Co.,Inc.asofJune30,2011,isavailable. . . . . . . . . . . . . . . . . 1

NoticeofChangetoSchwab’sCash Features Disclosure Statements. . . . . . . . . . . . . . . . . . . . . . . 3

HowWeCompensateOurInvestmentProfessionals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Amendments to the Following Account Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27SchwabOne®AccountSchwabAccountSchwabIRAandESAAccountSchwab403(b)(7)AccountSchwabRetirementPlanBrokerageAccountSchwabIndividual401(k)Account

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.

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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:InaccordancewiththerequirementsoftheSecuritiesandExchangeCommission,clientsmayobtainafreecopyoftheConsolidatedStatementofFinancialConditionofSchwabasofJune30,2011:

• Visitourwebsiteatwww.schwab.com/sfc;

• Callustoll-freeat1-800-435-4000orcontactaSchwabrepresentative;

• Clientsofanindependentinvestmentadvisor,pleasecallusat1-800-515-2157;

• Internationalclients,pleasecallusat+1-415-667-8400;UKresidentsshouldcall00800-0826-5001;Swissresidentsshouldcall0800-563711.

Regulatory RequirementsSchwabissubjecttoRule15c3-1undertheSecuritiesExchangeActof1934(theUniformNetCapitalRule).SchwabcomputesnetcapitalunderthealternativemethodpermittedbytheUniformNetCapitalRule.Thismethodrequiresthemaintenanceofminimumnetcapital,asdefined,ofthegreaterof2%ofaggregatedebitbalancesarisingfromclienttransactionsoraminimumdollarrequirement,whichisbasedonthe

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typeofbusinessconductedbythebroker-dealer.Underthealternativemethod,abroker-dealermaynotrepaysubordinatedborrowings,paycashdividends,ormakeanyunsecuredadvancesorloanstoitsparentcompanyoremployeesifsuchpaymentwouldresultinnetcapitaloflessthan5%ofaggregatedebitbalancesorlessthan120%ofitsminimumdollarrequirement.AtJune30,2011,2%ofaggregatedebitswas$258million,whichexceededtheminimumdollarrequirementforSchwabof$250,000.

AtJune30,2011,Schwab’snetcapitalwas$1.3billion(10%ofaggregatedebitbalances),whichwas$1.0billioninexcessofitsminimumrequirednetcapitaland$649millioninexcessof5%ofaggregatedebitbalances.AtJuly31,2011,Schwab’snetcapitalwas$1.3billion(10%ofaggregatedebitbalances),whichwas$1.1billioninexcessofitsminimumrequirednetcapitaland$677millioninexcessof5%ofaggregatedebitbalances.

For more informationTheannualreportasofDecember31,2010,preparedpursuanttoRule17a-5undertheSecuritiesExchangeActof1934,hasbeenfiledwiththeLosAngelesregionalofficeoftheSecuritiesandExchangeCommission,andisavailableforexaminationandcopyingatourheadquarters:211MainStreet,SanFrancisco,California94105.

The Charles Schwab CorporationFormoreinformationabouttheultimateparentcompanyofCharlesSchwab&Co.,Inc.,writetoTheCharlesSchwabCorporation,InvestorRelations,211MainStreet,SanFrancisco,California94105;call1-415-667-1959;[email protected];orvisitourwebsiteatwww.aboutschwab.com.

©2011CharlesSchwab&Co.,Inc.Allrightsreserved. MemberSIPC.CS15203-01(0811-5359) REG21871-20(10/11)

typeofbusinessconductedbythebroker-dealer.Underthealternativemethod,abroker-dealermaynotrepaysubordinatedborrowings,paycashdividends,ormakeanyunsecuredadvancesorloanstoitsparentcompanyoremployeesifsuchpaymentwouldresultinnetcapitaloflessthan5%ofaggregatedebitbalancesorlessthan120%ofitsminimumdollarrequirement.AtJune30,2011,2%ofaggregatedebitswas$258million,whichexceededtheminimumdollarrequirementforSchwabof$250,000.

AtJune30,2011,Schwab’snetcapitalwas$1.3billion(10%ofaggregatedebitbalances),whichwas$1.0billioninexcessofitsminimumrequirednetcapitaland$649millioninexcessof5%ofaggregatedebitbalances.AtJuly31,2011,Schwab’snetcapitalwas$1.3billion(10%ofaggregatedebitbalances),whichwas$1.1billioninexcessofitsminimumrequirednetcapitaland$677millioninexcessof5%ofaggregatedebitbalances.

For more informationTheannualreportasofDecember31,2010,preparedpursuanttoRule17a-5undertheSecuritiesExchangeActof1934,hasbeenfiledwiththeLosAngelesregionalofficeoftheSecuritiesandExchangeCommission,andisavailableforexaminationandcopyingatourheadquarters:211MainStreet,SanFrancisco,California94105.

The Charles Schwab CorporationFormoreinformationabouttheultimateparentcompanyofCharlesSchwab&Co.,Inc.,writetoTheCharlesSchwabCorporation,InvestorRelations,211MainStreet,SanFrancisco,California94105;call1-415-667-1959;[email protected];orvisitourwebsiteatwww.aboutschwab.com.


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Individual Investors and Clients of Investment Advisors

Notice of Change to Schwab’s Cash Features Disclosure Statements

WehavemadeimportantchangestotheCash Features Disclosure Statement for Individual InvestorsandtheCash Features Disclosure Statement for Schwab Institutional®(“DisclosureStatements”).

ThisNoticeamendstheDisclosureStatements,andanycontraryorconflictinglanguageintheDisclosureStatementsisreplaced.Thesechangesareeffectiveimmediately.

The Bank Sweep Feature, Relationship with SchwabReplacethefifthparagraphwiththefollowing:

“WeprovideadministrativeservicestoSchwabBankinsupportoftheoperationoftheBankSweepfea-ture.Wearecompensatedfortheseadministrativeservicesinanamountuptoa$20annualflatfeeforeachsecuritiesaccountthatsweepsintoaDepositAccountatSchwabBank.Wereservetherighttoincrease,decreaseorwaiveallorpartofthisfee.Wewillnotifyyouinadvanceofanyincrease.Weandcertainofouraffiliatesalsoprovideoperational,technologyandotherservicestoSchwabBankandreceivecompensationforthoseservices.Inaddition,certainofouremployeesandregisteredrepresenta-tivesmaybecompensatedinpartbased,directlyorindirectly,onassetsintheBankSweepfeatureortheprofitabilityoftheBankSweepfeatureforSchwab

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Bankandourjointparentcompany,TheCharlesSchwabCorporation.

“Otherthanapplicablefeesandchargesimposedbyusonyoursecuritiesaccounts,whicharedescribedinyourPricingGuide,therewillbenocharge,feeorcommissionimposedonyoursecuritiesaccountwithrespecttotheBankSweepfeature.”

The Bank Sweep Feature, Information About Schwab Bank1. Inthefirstsentence,replace“OfficeofThrift

Supervision”with“OfficeoftheComptrolleroftheCurrency.”

2. Inthethirdsentence,replace“OfficeofThriftSupervision”with“FederalReserveBoard.”

Benefi ts to Schwab Bank, Schwab, and The Charles Schwab CorporationReplacethesecondparagraphwiththefollowing:

“WeprovideadministrativeservicestoSchwabBankinsupportoftheoperationoftheBankSweepfea-ture.Wearecompensatedfortheseadministrativeservicesinanamountuptoa$20annualflatfeeforeachsecuritiesaccountthatsweepsintoaDepositAccountatSchwabBank.Wereservetherighttoincrease,decreaseorwaiveallorpartofthisfee.Wewillnotifyyouinadvanceofanyincrease.Weandcertainofouraffiliatesalsoprovideoperational,technologyandotherservicestoSchwabBankandreceivecompensationforthoseservices.Inaddition,certainofouremployeesandregisteredrepresenta-tivesmaybecompensatedinpartbased,directlyorindirectly,onassetsintheBankSweepfeatureortheprofitabilityoftheBankSweepfeatureforSchwabBankandourjointparentcompany,TheCharlesSchwabCorporation.

“Otherthanapplicablefeesandchargesimposedbyusonyoursecuritiesaccounts,whicharedescribedinyourPricingGuide,therewillbenocharge,feeorcommissionimposedonyoursecuritiesaccountwithrespecttotheBankSweepfeature.”

©2011CharlesSchwab&Co.,Inc.Allrightsreserved. MemberSIPC.CS15123-01(1011-5432) REG63278(09/11)

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How We Compensate Our Investment Professionals

SinceCharlesSchwab&Co.,Inc.(“Schwab”)wasfoundedmorethan30yearsago,we’vebeencom-mittedtoservingtheneedsoftheindividualinvestor.Webelieveitisimportantforallinvestorstounder-standhowthefinancialprofessionalwhoisassistingthemispaid.Thiscanbeonefactoraninvestorconsiderswhenevaluatingtheinformationorrecom-mendationsthataprofessionalprovides.

Inthisbrochure,weidentifythedifferentcategoriesofinvestmentprofessionalswhomayserveyouatSchwab—includingbothSchwabemployeesandindependentcontractorsandtheiremployeesoperat-ingSchwabIndependentBranches—anddescribehowtheyarecompensated.SomeoftheseplansarebasedonrevenueSchwabearnsfromclientsorfromproductsales.SchwabmaypayaSchwabrepresenta-tivemoreforsellingproductsorservicesonwhichSchwabmakesmoremoney.PleasenotethattheinformationbelowdescribeshowSchwabpaysemployeeprofessionalsandsharesrevenuewithindependentcontractorprofessionals,nothowyoupaySchwabfortheservicesyoureceive.InformationaboutwhatyoupaySchwabfortheservicesweprovidecanbefoundatwww.schwab.com/pricing.Weinviteyoutoreadthisinformationcarefullyandtocontactusat1-800-785-3965ifyouhaveanyques-tions.(Formultilingualservices,call1-800-662-6068.ForservicesoutsidetheU.S.,call+1-415-667-8400.U.K.residentsshouldcall00800-0826-5001;Swissresidentsshouldcall0800-563711.)

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Summary of ChangesCompensationplansandrevenue-sharingarrange-mentsforbothemployeeandindependentcontractorinvestmentprofessionalschangefromtimetotime.

EffectiveOctober1,2011,changesweremadetoSchwab’sincentivecompensationplans.Thefollow-ingisasummaryofthechanges:

· AddedActiveInvestorEducationSpecialists,SchwabManagedPortfolioServiceRepresentativesandIndependentBranchServicesRepresentativesasnewcategoriesofinvestmentprofessionals.

· Addedenrollmentofclientsinadvisedoffersandtemporaryincentiveprogramstothelistoftypesofactivitiesforwhichcertaininvestmentprofession-alsmayearnandreceiveincentivecompensation.

· AddedWindhavenPortfolios™tothelistoftypesofproductsforwhichFinancialConsultantsmaybecompensated

· AddednewcriteriaforassistingclientsforcertaininvestmentprofessionalstoqualifyforadditionalcompensationundertheCircleofExcellenceprogram.

Branch Representatives

Client Service Specialists

ClientServiceSpecialistsrespondtothespecificneedsofclientsandmaydirectclientstotheappro-priateSchwabrepresentative.Inadditiontoabasesalary,ClientServiceSpecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofser-vicequality,clientsatisfaction,salessupport,andteamwork.

Associate Financial Consultants

AssociateFinancialConsultantsassistclientsinourbranchoffices.TheymeetwithclientswhoarenotassignedtoaFinancialConsultant’sPracticeaswellaswithpotentialnewclientstoidentifyandanalyzetheirfinancialneeds.Inadditiontoabasesalary,AssociateFinancialConsultantsareeligibleforabonusbasedonthreecomponents:

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Manager Discretion—AnannualbonusprogramfundedbasedonSchwab’sperformanceanddeter-minedbasedonmanagerdiscretion,whichmayincludeconsiderationofservicequality,clientsatis-faction,teamwork,andabilitytoprovidehelpandguidancetoourclients.

Circle of Excellence—AprogramthroughwhichSchwabawardsadditionalcompensationtoalleligibleAssociateFinancialConsultantsbasedonhowwelltheycomparetotheirpeersinbringingNetNewAssetstoSchwab,enrollingclientsinandensuringsatisfactionwithAdvisedOffersandManagedAccounts(whereappropriate),andassistingclientsinutilizingtheproductsandservicesofferedbySchwabBank(whereappropriate).

Client Promoter Score—AprogramthatawardsadditionalcompensationtoAssociateFinancialConsultantsbasedonclientsatisfactioninthebranchaswellasmanagerdiscretion.

VP–Financial Consultants

FinancialConsultantsassistourclientsthroughourbranchofficelocationsandalsobyphone.EachFinancialConsultantsupportsaPractice,whichincludesclientswhoareassignedtothatFinancialConsultantasaprimarypointofcontact.FinancialConsultantsalsoassistclientswhoarenotintheirPractice.FinancialConsultantsarecompensatedbasedonfourcomponents:Service,Sales,CircleofExcellence,andClientPromoterScore.

Service

TheServicecomponentpaysaFinancialConsultant7%oftheapproximateannualrevenueattributedtoclientsintheirPractice.Forcompensationpurposes,Schwabestimatesrevenuebysortingassetsinclients’accountsintothecategoriesinTableA.ThecategoriesdonotcorrespondexactlytotherevenueearnedbySchwabforanyparticularsale,security,orservice.Wecallthis“proxyrevenue.”

SchwabusesproxyrevenueinsteadofrealrevenuesoFinancialConsultantsearnthesamecompensationforsimilarproducts.Forexample,aFinancialConsultantwillearnthesamecompensationforrecommendingaSchwabproprietarymutualfund,aSchwab

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OneSource®mutualfund,oratransaction-feemutualfund,eventhoughSchwabmakesmoremoneyontheSchwabproprietarymutualfunds.FinancialConsultantscouldreceivemorecompensationifaclientacceptscertainrecommendationsthattheymake,asshownbelowbytheproxyrevenuecategories.Forexample,aFinancialConsultantearnsmorefromrecommend-ingamutualfundoverindividualstocks,bonds,orexchange-tradedfunds.Asanotherexample,aFinancialConsultantearnsmoreforrecommendingtheinvestmentofcashinamoneyfundoveracertifi-cateofdeposit.AFinancialConsultantalsoearnsadditionalcompensationforservingclientsenrolledinSchwabPrivateClient™, whichreflectstheaddi-tionaltimethataFinancialConsultantmayspendservingclientsofSchwabPrivateClient™.

Table A

Assets Financial Consultant’s Compensation

Non-Fee-Based Services

StocksOptionsBondsCertificatesofDepositExchange-TradedFundsSchwabBankHighYieldInvestorChecking®AccountSchwabBankHighYieldInvestorSavings®Account

0.0028%ofassets

AllMutualFundsAllMoneyMarketFundsAllOtherCashFixedandVariableAnnuities1MarginBalances2

0.0350%ofassets

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Assets Financial Consultant’s Compensation

Fee-Based Services

AssetsinaccountsenrolledinSchwabPrivateClient™orSchwabAdvisorNetwork®3whereFinancialConsultantdoesnotpro-videongoingservice

0.0350%ofassets

AssetsinaccountsenrolledinSchwabManagedPortfolios™,SchwabManagedAccountSelect®,SchwabManagedAccountConnection™(formerlySchwabManagedAccountAffiliates®),orWindhavenPortfolios™4

0.0595%ofassets

AssetsenrolledinSchwabPrivateClient™whereFinancialConsultantpro-videsongoingservice

0.0770%ofassets

1Applicabletoinsurance-licensedFinancialConsultantsonly.

2Theproxyrevenueformarginappliesonlytomarginbalancesinaclient’saccountgreaterthan$5,000butnotgreaterthan10%ofaclient’smargin-borrowingcapacity.

3ReferralcreditforSchwabPrivateClient™advisedconversionsisonlyavailabletoFinancialConsultantswhorefertheclienttoanotherFinancialConsultantwhomaintainstheSchwabPrivateClient™relationship.ReferralsofSchwabAdvisorNetwork®accountstoSchwabBankAdministrativeTrusteeServicesareeligibleforcreditbasedontheamountofreferredassetswithin90daysoftheinitialfundingdateat85basispointsforthreeyearsfromthecreditstartdate.

4NotethatifanaccountthatisenrolledinSchwabManagedAccountSelect®orSchwabManagedAccountConnection™ispartofahouseholdthatincludesaccountsenrolledinSchwabPrivateClient™,thoseassetswillbemeasuredforcompensationpur-posesattheSchwabPrivateClientcreditrate.

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Example:Aclienthas$100,000instocks,$100,000inmutualfunds,and$100,000incash.Noneoftheassetsareenrolledinafee-basedservice.TheannualizedproxyrevenueSchwabreceivesfromthatclientis$1,040.TheFinancialConsultantreceives7%ofthat$1,040,whichequals$72.80inannualizedcompensation.Thecalculationis($100,000x0.000028forstocks)+($100,000x0.00035formutualfunds)+($100,000x0.00035forcash)=$72.80.

Iftheclientthensells$25,000ofstocksandbuysthesameamountofmutualfundseitherontheirownoraftertalkingtotheirFinancialConsultant,theannualizedproxyrevenueSchwabreceivesincreasesby$115to$1,155,andtheFinancialConsultant’sannualizedcompensationincreasesby$8.05to$80.85.

Sales

TheSalescomponentpaysaFinancialConsultantforNetNewAssets,AdviceEnrollments,andProductConversionsasdefinedinTableBandTableC.AFinancialConsultantcanearnSalesrevenuecreditforanyclientwithwhomtheFinancialConsultanthasarelationship,includingclientsintheFinancialConsultant’sPracticeandnewclientrelationshipsnotintheirPractice.AFinancialConsultantreceivesfrom15%to35%oftheSalesrevenuecreditbasedontheFinancialConsultant’sgraduatedpayoutschedule.Ingeneral,asset-basedrevenuecreditsarepaidoutover12monthsaslongastheFinancialConsultantstaysemployed;othercreditsarepaidinthemonthfollowingtheconversion.

Schwabmaycaptheamountofincentivecompensa-tionthataFinancialConsultantcanearnfromanyoneclientfromtheSalescomponent.

Table B

Asset Consolidation Financial Consultant’s Compensation (DependingontheFinancialConsultant’spayoutrate)

NetNewAssets 0.0375%to0.0875%ofNetNewAssets

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Table C

Advice and Products Financial Consultant’s Compensation (DependingontheFinancialConsultant’spayoutrate)

MutualFunds 0.0375%to0.0875%ofNetMutualFundpurchases—excludesmoneymarketfunds

AdviceReferrals—SchwabPrivateClient™,SchwabAdvisorNetwork®, SchwabManagedPortfolios™,SchwabManagedAccountSelect®,SchwabManagedAccountConnection™,orWindhavenPortfolios™

0.09%to0.21%ofNetAdviceEnrollments

SchwabAdvisorNetwork®, SchwabBankAdministrativeTrusteeServices

0.09%to0.21%ofconvertedreferralforNewtoSchwabAdvisorNetwork®assetswithin90daysofconversiondate

ReferralstoallSchwabManagedPortfolios™orWindhavenPortfolios

$38to$88forclientswhoarenewtoSchwabManagedPortfolios™orWindhavenPortfolios™;limitedtoonecreditperclient

TransfersofClientMarginBalancesintoSchwab

Marginbalancemulti-pliedby0.27%or0.63%

FixedorVariableAnnuitybylicensedFinancialConsultant

0.0375%to0.0875%ofNetAnnuitypurchases

SinglePremiumImmediateAnnuitybylicensedFinancialConsultant

0.105%to0.245%ofcontract

ReferralstoVariable,Fixed,andImmediateAnnuitiesbyunlicensedFinancialConsultants

$38to$88forconvertedreferral

ReferralstoTermLifeInsurance1


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IntroductionstoCharlesSchwabBankformort-gage,homeequitylinesofcredit,andpledgedassetloans.

FinancialConsultantswhoarealsoemployeesofSchwabBank:

$126to$1,925forrefer-ringaclienttoSchwabBankwhosubsequentlytakesoutamortgage,basedonthesizeoftheloan

$92to$214forreferringaclienttoSchwabBankwhosubsequentlytakesoutahomeequityloanorpledgedassetloan

Additionalquarterlycompensationbasedonnumberof2010year-to-dateclosedmortgagereferrals;paymentbasedonthehighesttierattainedyear-to-date:

$176for6mortgages

$902for10mortgages

$1,980for15mortgagesCheckingaccountopeningswithCharlesSchwabBank

$17to$40foreachcheckingaccountopened

529Accounts $17to$40foreach529Accountopened

ReferralstoourActiveInvestorSalesTeam

$113to$525dependingonhowmuchmoretheclienttradesafterthereferral

FinancialPlans2 $135to$315forconvertedreferral

EquityCompensationConsultations2


RetirementConsultations2


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ReferralsforForwardContracts,EquityCollars,andExchange-TradedFunds

Tieredpaymentforconvertedreferral:

0.0690%to0.1610%ofassetsupto$5million,

0.0068%to0.0158%ofassetsover$5million

ReferralsforStructuredNotesandStructuredCDs

Principalvalueofthenotemultipliedby0.075%to0.175%forconvertedreferral

ReferralstoCorporateandRetirementServices

0.105%to0.245%onNetNewAssets,limitedto$10million,forcon-vertedreferral

ReferralstoSchwabAdvisorServices™

ReferralofanAdvisortoSchwabAdvisorServices™basedonconvertedassets:

$341to$795forupto$30million,

$1,500to$3,500for$30+million

1FinancialConsultantsonlyreferclientstoprovidersforwhomSchwabperformsservicesandfromwhomitreceivescompensationforthoseservices.

2FinancialConsultantsarenotcompensatedforprovid-ingcomplimentaryretirementconsultations,financialplans,orequitycompensationconsultationstoclients.

Example:Aclientdeposits$100,000andpurchasesMutualFunds.IftheFinancialConsultant’spayoutrateis15%,theywouldearn$37.50forNetNewAssetSalesand$37.50forMutualFundSales,or$75.00intotal.Thisisbasedonmultiplying$100,000by0.0375%fromTableBandTableCforNetNewAssetsandMutualFundSales,respectively.

Circle of Excellence

TheCircleofExcellenceisaprogramthroughwhichSchwabawardsadditionalcompensationtothetop50%ofitseligiblebranchFinancialConsultants

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basedonhowwelltheycomparetotheirpeersintermsofsalescreditsandassetconsolidation.Thecriteriaaresubjecttochangeperiodically.Currently,eligibleFinancialConsultantsqualifybasedonRevenueCreditsfromtheFinancialConsultant’scombinedPracticeandNon-Practiceclients,salesofBankingProductsaslistedinTableC(excludingmortgageproductioncredit),andNetNewAssetsfromtheFinancialConsultant’sPracticeclients.

Client Promoter Score

TheClientPromoterScoreisaprogramthroughwhichSchwabawardsadditionalcompensationtothetop75%ofitsbranchesbasedonhowwelltheycompareagainsteachotherindelightingclientsasmeasuredbyClientPromoterScoresurveys.Abranchpoolisfundedbasedonbranchresults;thebonusisdeterminedbasedonindividualcontributiontothebranchClientPromoterScoreandmanagerdiscretion.

Financial Consultants (Phone-Based)

SomeFinancialConsultantsprovideservicesprimarilytoourclientswithassetsunder$250,000.Inaddi-tiontoabasesalary,theseFinancialConsultantsareeligibleforSalespaymentasdescribedunderFinancialConsultantSalesandaquarterlybonusdeterminedbymanagerdiscretion,whichmayincludeconsiderationofclientsatisfaction,teamwork,andsuccessfultransitionofclientstoaFinancialConsultantinabranch,whenappropriate.

International VP–Financial Consultants

InternationalFinancialConsultantsprovideservicesprimarilytoourclientsresidingoutsidetheUnitedStatesanditsterritoriesandpossessions.TheseFinancialConsultantsarepaidaccordingtothesameincentiveplanasotherFinancialConsultants,exceptforthesedifferences:TheServiceratesmayvarybasedonmarketlocations,andtherearenoCircleofExcellenceorClientPromoterScorecomponents;instead,thereisadiscretionarycomponentdeter-minedbymanagers,whomayconsiderNetNewAssets,clientsatisfaction,andteamwork.

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Service Representatives

Customer Service Representatives and Brokerage Service Representatives

CustomerServiceRepresentativesandBrokerageServiceRepresentativesprovideserviceoverthephonetomeetclientneeds,respondtotelephoneinquiriesfromclientsabouttheproductsandservicesweoffer,andmaycontactclientsbyphoneoremail.Inadditiontoabasesalary,theserepresentativesareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofproductivity,clientsatisfaction,qualityassurance,referrals,teamwork,andclientfeedback.Inaddition,theserepresentativesareeligibleforadditionalcompensationthatismeasuredatateamlevelandisbasedoncustomersatisfac-tion,internalqualityassessment,andproductivity.

Specialty Representatives

Electronic Acquisition Specialists

ElectronicAcquisitionSpecialistsinteractwithpros-pectsandclientsviaalivewebchannelandmakereferralsviatelephonetothelocalbranchnetworkorothergroupwithinSchwabtomeettheirneedswhenappropriate.Inadditiontoabasesalary,thesespecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofqualityofserviceandappropriatenessofreferrals.

Prospect Development Specialists

ProspectDevelopmentSpecialistsinteractwithprospectsandclientsviathetelephonechannels—primarilythroughinboundcalls—andmakereferralstoalocalbranchwhenappropriate.Theyworktounder-standclientneedsandprovideappropriatesolutions.Inadditiontoabasesalary,thesespecialistsareeligibleforabonusbasedontwocomponents:

• Manager Discretion—AnannualbonusprogramfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,which

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mayincludeconsiderationofservicequality,clientsatisfaction,teamwork,andabilitytoprovidehelpandguidancetoourclients.

• Circle of Excellence—AprogramthroughwhichSchwabawardsadditionalcompensationtoalleligibleProspectDevelopmentSpecialistsbasedonhowwelltheycomparetotheirpeersinbringingNetNewAssetstoSchwab,enrollingclientsinandensuringsatisfactionwithAdvisedOffersandManagedAccounts(whereappropriate),assistingclientsinutilizingSchwabBankLendingProducts(whereappropriate),fundingnewaccounts,andenrollingclientsinSchwab’sActiveInvestorplat-form(whereappropriate).

Investor Development Specialists

InvestorDevelopmentSpecialistsinteractwithpros-pectsandclientsviathetelephonechannels—primar-ilythroughoutboundcalling—andmakereferralstoalocalbranchwhenappropriate.Theyworktounder-standclientneedsandprovideappropriatesolutions.Inadditiontoabasesalary,thesespecialistsareeligibleforabonusbasedontwocomponents:

• Manager Discretion—AnannualbonusprogramfundedbasedonSchwab’sperformanceanddeter-minedbasedonmanagerdiscretion,whichmayincludeconsiderationofservicequality,clientsatisfaction,teamwork,andabilitytoprovidehelpandguidancetoourclients.

• Circle of Excellence—AprogramthroughwhichSchwabawardsadditionalcompensationtoalleligibleInvestorDevelopmentSpecialistsbasedonhowwelltheycomparetotheirpeersintermsofbringingNetNewAssetstoSchwab,enrollingclientsinandensuringsatisfactionwithAdvisedOffersandManagedAccounts(whereappropriate),assist-ingclientsinutilizingSchwabBankLendingProducts(whereappropriate),fundingnewaccounts,andenrollingclientsinSchwab’sActiveInvestorplatform(whereappropriate).

Financial Consultants (Participant Services)

FinancialConsultantsprovidehelptoparticipantsinretirementplansservicedbySchwabCorporate

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Services,Inc.(“SCS”).Forexample,ifaparticipantiseligibleforadistributionorarollover,theFinancialConsultantdiscussestheparticipant’soptions.Thesemayincludekeepingtheparticipant’sassetsintheirretirementplanorrollingovertoaSchwabIRA.IfaparticipantdecidestoopenaSchwabIRA,oncetheaccountisopenedtheFinancialConsultantmayrecommendinvestmentsorotherproductsandsolutions.Inadditiontoabasesalary,theseFinancialConsultantshavethepotentialtoearnadditionalmonthlyincentivecompensationbasedonthefollowingcriteria:

• Service quality—adiscretionarycomponentthatevaluatestheFinancialConsultant’sperformanceineducatingparticipantsabouttheiroptions,whichmayincludetakingadistribution,leavingtheirmoneyintheirplan,rollingovertoathird-partyplan,oropeningandrollingovertoaSchwabIRA.

• Sales activities—ameasurementofNetNewAssets;referralstoaComplimentaryPortfolioConsultation;referralstoaBranchFinancialConsultant’sPractice;referralstoActiveInvestororSchwabBankProductsthatresultinaconversionorsale;andactivityinAdvisedOffers(whenappro-priate).

SalescompensationmaybeincreasedforclientretentionandNetNewAssetsresultingfromout-boundcallingefforts.

VP–Financial Consultants (Executive Services)

ExecutiveServiceFinancialConsultantsprovidededicatedin-personrelationshipstoExecutivepartici-pantsofSchwabCorporateServices,Inc.(“SCS”)PlanSponsorstoservicetheir401(k)andequitycompensationplanneedsandworkwiththeseExecutivestoidentifyotherSchwabproductsandservicesgiventheirneeds.Inadditiontoabasesalary,ExecutiveServiceFinancialConsultantsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofclientsatisfaction,servicequality,andNetNewAssetstoSchwab.

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Advice Consultants

AdviceConsultantsprovideadviceand/oreducationtoparticipantsofretirementplansservicedbySCS.Servicesmayincludepersonalizedone-on-oneconsultations,evaluationofinvestments,portfolio/assetallocation,anddiscussionoffinancialgoals(includingretirement).Theseservicesrelatetobothinvestmentsinemployer-sponsoredretirementplansand/orotherassetsheldoutsideofthoseplans.Inadditiontobasesalary,AdviceConsultantsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthequalityofrepresentatives’inter-actionswithclients,utilizationofadvice,andbusi-nessdevelopmentopportunities.

Active Investor Representatives

ActiveInvestorRepresentativesidentifyclientswhosetradingneedsareanappropriatematchforanactivetradingservice.Theydonotprovidetradingadvice.ThegroupconsistsofregionallybasedActiveInvestorFieldSalesMarketManagerswhoworkwithlocalbranches,aswellasphone-basedActiveInvestorConsultants.

ActiveInvestorFieldSalesMarketManagerssupportadesignatedregionwhichconsistsofclientsassignedtolocalFinancialConsultants’Practices.TheseManagersworkwithFinancialConsultantsbyservingastheirprimarypointofcontactforActiveInvestorservices.ActiveInvestorFieldSalesMarketManagersalsoassistclientsnotassignedtoaFinancialConsultant’sPractice.Inadditiontoabasesalary,MarketManagersareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationoffre-quencyofone-on-oneclientconsultations,localmarketseminarsandeventshosted,marketarealead-flowgeneration,andqualityofinteractionswithclientsandbranches.

ActiveInvestorConsultantsinteractwithprospectsandclientsviathetelephonechannels,throughinboundandoutboundcalling.TheyworktounderstandclientneedsandmakereferralstotheActiveInvestor

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offer,whenappropriate.Inadditiontoabasesalary,theseconsultantshavethepotentialtoearnaddi-tionalmonthlyincentivecompensationbasedonthefollowingcriteria:

• IncreasedclienttradingactivityatSchwabduetorepresentativespromotingtheuseofActiveInvestorproductsandservices;

• NetNewAssets;

• NewtoFirmActiveInvestorclientrelationships;

• TransfersofexistingmarginbalancestoSchwab;and

• Referringaclientthatattendsanewclientcon-ciergemeeting,aconsultationwithanActiveInvestorFieldSalesMarketManager,anin-branchworkshop,oraliveonlineevent.

• Inaddition,enrollmentsineducationcanincreasemonthlysalescompensation;conversely,failuretomeetthethresholdofeducationenrollmentscandecreasemonthlysalescompensation.

ActiveInvestorEducationSpecialistspartnerwithActiveInvestorConsultantstohelpon-boardnewclients.EducationSpecialistsconductphone-basedcustomizedone-on-oneconsultationswithnewcli-entstoteachthemhowtoleverageSchwab’stradingplatforms,tools,andresearchresources.Inadditiontoabasesalary,EducationSpecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofquantityofone-on-oneclientconsultations,qualityofconsultationinteractions,clientengagement,andwhetherclientsleveragesubsequenteducation.

Fixed Income Specialists

RegionalBondSpecialistsprovideadviceandservicetoSchwabclientsspecifictotheirfixedincomeinvestingneeds.Inadditiontoabasesalary,thesespecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthesaleoffixedincomeproducts,relationshipmanagement,businessdevelopment,qualityassurance,teamwork,clientreviews,andfieldpartnerships.

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BondInvestmentSpecialistsadviseandserveclientswiththeirfixedincomeinvestingneedsbyrespondingtoinboundphonecalls.Inadditiontoabasesalary,thesespecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperfor-manceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthesaleoffixedincomeproducts,qualityassurance,theprincipalvalueoffixedincomerelatedtransactions,teamwork,andinitiative.

Note:RegionalBondSpecialistsandBondInvestmentSpecialistsdonotearncommissionsoneachtransaction,andtheircompensationisnotaffectedbywhetheranissueisunderwrittenbySchwab.Nordoesitmatterwhetheratransactionisexecutedasagent,risklessprincipal,orfromSchwab’sowninventory.

Insurance Services Annuity Specialists

AnnuitySpecialistsprovideclientswithinformationandadviceonannuitiesavailablethroughSchwab.Theyalsoprovideexistingannuityclientswithongo-ingserviceandsupport.Inadditiontoabasesalary,thesespecialistsareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperfor-manceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofNetNewAssets,individualcontributiontoannuitysalesfortheteam,teamwork,clientfeedback,andtraininginitiatives.

Portfolio Consulting Representatives

Portfolio Consultants

PortfolioConsultantsprovideinvestmentportfolioadvicetoclientswhoareenrolledinSchwabPrivateClient™. Theydonotreceivedifferentialcompensa-tionbasedonthesecuritiesthattheyrecommendtoenrolledclients.PortfolioConsultantsassesstheirclients’financialneeds,analyzetheirportfolios,deliverportfolioadvice,andprovideperiodicportfolioreviewstoclientsenrolledinSchwabPrivateClient™.PortfolioConsultantsarealsoemployeesofCharlesSchwabBank.Inadditiontoabasesalary,PortfolioConsultantsareeligibletoearnabonusthatisfundedbasedonSchwab’sperformanceanddeter-

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minedbasedonmanagerdiscretion,whichmayincludeconsiderationofthequalityoftherepresen-tative’sinteractionswithclients,retainingappropri-ateclientsinadvisedoffers,clientsatisfaction,teamwork,training,professionaldevelopment,accu-racy,andNetNewAssets.

Associate Portfolio Consultants

AssociatePortfolioConsultantsprovideongoingservicetoclientsinSchwabPrivateClient™. Inaddi-tiontoabasesalary,theyareeligibletoearnabonusthatisfundedbasedonSchwab’sperfor-manceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthequalityoftherepresentative’sinteractionswithclients,retainingappropriateclientsinadvisedoffers,clientsatisfac-tion,teamwork,training,professionaldevelopment,andaccuracy.

Financial Planners

FinancialPlannersworkwithourclientstoplanfortheirlong-termfinancialgoals.Inadditiontoabasesalary,theyareeligibletoearnabonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthequalityoftherepresentative’sinteractionswithclients,clientsatisfaction,teamwork,training,professionaldevelopment,andaccuracy.

Investment Consultants (Complimentary Consultations)

InvestmentConsultantsprovideclientswhoarenotcurrentlyassignedtoaFinancialConsultantwithacomplimentaryportfolioanalysisorretirementassessment.Theyconductaone-time,needs-basedportfolioassessmentandmakerecommendationsfromthefullarrayofadvicesolutionsofferedbythecompany.Theyproactivelycontactclientsbytele-phone,receivedirectcallsfromclients,andreceivecalltransfersfromclientswhohaveexpressedinter-estinportfolioconsultationtoanotherSchwabrepresentative.Inadditiontoabasesalary,theserepresentativesareeligibletoearnanannualbonusthatisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmay

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includeconsiderationofthequalityofrepresenta-tives’interactionswithclientsandutilizationofadviceandbusinessdevelopmentopportunities.

Schwab Managed Portfolio Service Representatives

SchwabManagedPortfolioServiceRepresentativesworkwithourclientsthatareinvestedinSchwabManagedPortfolios™, respondingtotelephoneinqui-riesabouttheproductandensuringon-goingsuitabil-ityoftheinvestment.Inadditiontoabasesalary,theyareeligibletoearnabonuswhichisfundedbasedonSchwab’sperformanceanddeterminedbasedonmanagerdiscretion,whichmayincludeconsiderationofthequalityofrepresentative’sinter-actionswithclients,clientsatisfaction,teamwork,training,professionaldevelopment,andaccuracy.

Other Compensation or AwardsFromtimetotime,oneormorecategoriesofourrepresentativesmayparticipateinshort-term,tempo-raryincentiveprogramsthatfocusonaparticularclassofproductsorservices,includingnewaccountsandnewassetstoSchwab.Thegoalofthesepro-gramsistoraiseawarenessaboutproductsandservicesandhowthatmayserveourclients’needsandtherebyincreasesales.

CertainrepresentativeswhodemonstrateexceptionalperformanceduringtheyearmayalsobeeligibletoearnanannualtripthroughSchwab’sChairman’sClub.Schwabmaydevelopadditionalrecognitioneventsorprogramsfromtimetotime.Formoreinformation,pleasevisitourwebsiteathttp://aboutschwab.com/about/compensation/compensation.html.

Schwab Independent Branch Services RepresentativesSchwabIndependentBranchServicesrepresentativesareindependentcontractorswhooperate,withtheiremployees,SchwabIndependentBranchespursuanttoafranchiseagreementwithSchwab.Theseinde-pendentcontractorsarecalledIndependentBranchLeaders,orIBLs.Theiremployeeswhoholdasecuri-tieslicensearecalledIndependentBranchServicesFinancialConsultants,orIBSFinancialConsultants.IBLsandIBSFinancialConsultantsarenotSchwab

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employees,buttheyareregisteredrepresentativesofSchwabforpurposesofsecuritiesregulations.IBLsreceiveaportionoftherevenuegeneratedbytheactivitiesandassetsinaccountsofSchwabclientsassignedtotheirIndependentBranches.IBSEmployeesalsomayshareintherevenueearnedbytheirIBLemployer.SchwabnotifiesclientswhentheyareassignedtoanIBL.

Independent Branch Leaders

IBLsarenotpaidoncommissionsforparticularsales,nordoesSchwabpaythemasalaryortheincentivecompensationearnedbyrepresentativeswhoareemployedbySchwab.Instead,theyearnrevenuefromtheirbusinessbasedontheoverallrevenueSchwabearnsfromclientswhoseaccountsareassignedtotheirIndependentBranch.IBLsthereforehaveanincentivetomakesuretheirclientaccountsintheaggregateholdassetsthatgenerateenoughrevenuesothattheirmonthlypayoutfromSchwab(asdescribedbelow)exceedsthefeesandexpensestheyowetoSchwaborareotherwiseresponsibleforunderthefranchiseagreementwithSchwab.

ForpurposesofrevenueearnedbytheIBLs,theassetsinaccountsassignedtothemaredividedintotwocategories:(1)“AdvisedAssets,”meaningassetsinaccountsenrolledinSchwabPrivateClient™orSchwabManagedPortfolios™,SchwabManagedAccountSelect®orSchwabManagedAccountConnection™(discretionarywrap-feeprograms),oraccountsmanagedbyanindependentthird-partyinvestmentadvisortowhomtheclientwasreferredthroughSchwabAdvisorNetwork®service;and(2)“Non-AdvisedAssets,”consistingofassetsnotintheAdvisedAssetcategorywhichincludestocks,bonds,mutualfundsandETFsaswellaspaymentforprovidingcashmanagementservices.

Eachmonth,SchwabcalculatesandappliesanAdvisedAssetrevenuerateandaNon-AdvisedAssetrevenueratetotheassetsinaccountsassignedtoallSchwabIndependentBranches.Thetworevenueratesarecalculatedbylookingat12-monthtrailingassetsandrevenuefromallSchwabIndependentBranchaccounts.Thisisdonebydividingtheadjustedrevenueamountforeachassetcategoryby

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theassociatedassets.(Certainproduct-levelexpensesaresubtractedandcertainrevenuesnotearnedatanindividualaccountlevelareexcluded.)SchwabthenappliestheserevenueratestothedailyaverageassetsineachcategoryinaccountsassignedtoindividualSchwabIndependentBranches,yieldinganadjustedrevenuefigureforeachassetcategory.Therevenuerateschangemonthly,buttheAdvisedAssetrevenuerateishigherbecauseSchwabgenerallygeneratesmorerevenueonAdvisedAssets.Thisisduetotheasset-basedfeespaidforadvisoryservicesandotherrevenuegener-atedbytheunderlyingassetsintheenrolledaccounts,suchasshareholderservicingfeespaidtoSchwabbycertainmutualfunds.AnIBL,therefore,earnsmoremoneybysuccessfullyrecommendingthataclientenrolloropenanaccountinoneoftheservicesintheAdvisedAssetcategory.

AfteraddingtogethertheadjustedrevenuefiguresforAdvisedandNon-AdvisedAssets,SchwabthenappliesamultiplierbasedonthetenureoftheIBL.Seethetablebelow.Forassetsofclientswhotransi-tiontoSchwabfromanIBL’spriorfirm,theIBLmayelectaconstantmultiplierof50%inexchangeforanincreasedabilitytoasksuchclientstotransitionawayfromSchwabifthefranchiseagreementends.

Tenure of IBL Multiplier

Year1 200%

Year2 150%

Year3 110%

Year4 75%

Year5 55%

Year6+ 50%

Finally,SchwabdeductscertainmonthlyfeesandexpensesfromthetotaladjustedrevenueamountthattheIBLowestoSchwabunderthefranchiseagreement.Thisresultsinanetpayoutforthemonth.

IBS Financial Consultants

IBSFinancialConsultantsreceiveasalarypaidbytheIBLand,asdeterminedbytheIBLastheir

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employer,maybeeligibleforabonusbasedonapercentageofeithertheirsalaryortheIBL’sNetPayout.

ThecriteriausedbytheIBLConsultanttodeterminetheamountofthebonusmayincludesuchfactorsasnetnewassets,netnewclientsacquiredthroughtheeffortsofanIBSFinancialConsultant,ortheportionoftheNetPayoutattributabletoclientsservicedbyanIBSFinancialConsultant.

Ifyouhavequestionsaboutinformationcontainedinthisbrochure,pleasecall1-800-785-3965.

Formediainquiries,pleasecalltheSchwabCorporatePublicRelationshotlineat1-415-667-9500.

Third-partytrademarksappearinginthisdocumentarethepropertyoftheirrespectiveowners.


27

October 2011

Amendments to theFollowing Account Agreements

• SchwabOne®Account

• SchwabAccount

• SchwabIRAandESAAccount

• Schwab403(b)(7)Account

• SchwabRetirementPlanBrokerageAccount

• SchwabIndividual401(k)Account

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DearInvestor,

ThisdocumenthighlightscertainchangestotheJanuary2011versionofthefollowingsixAccountAgreements:SchwabOne®Account(“SchwabOne®”),SchwabAccount(“SchwabAccount”),SchwabIndividualRetirementAccountandEducationSavingsAccount(“SchwabIRAandESA”),Schwab403(b)(7)Account(“Schwab403(b)(7)”),SchwabRetirementPlanBrokerageAccount(“SchwabRPB”)andSchwabIndividual401(k)Account(“SchwabIndividual401(k)”).

Theseamendments,whichincludebothchangestoandclarificationsofexistinglanguage,applytobothIndividualInvestoraccountsandaccountsmanagedbyInvestmentAdvisorsandenrolledwithSchwabInstitutional®,unlessotherwisenoted.

Effectiveimmediately,theseamendmentsandclarificationsreplaceandsupersedeallpreviouslypublishedportionsoftheAccountAgreementstowhichtheyapply.IntheeventofanyinconsistencyorconflictbetweenthetermsoftheseamendmentsandclarificationsandthetermsofyourexistingAccountAgreement(s),thetermssetforthinthisdocumentwillgovern.

Pleasereviewthisdocumentcarefully.

Ifyouhavequestionsabouttheinformationcon-tainedinthisdocumentoraboutanyofourproductsandservices,callyourSchwabrepresentativeat1-800-435-4000.Ifyouraccount(s)ismanagedbyanInvestmentAdvisorandenrolledinSchwabInstitutional®,pleasecall1-800-515-2157.Internationalclients,call+1-415-667-8400.

ForacurrentcopyofyourAccountAgreement,pleasevisitwww.schwab.com.IfyouraccountismanagedbyanInvestmentAdvisorandenrolledinSchwabInstitutional®,visitwww.schwaballiance.com.Forinternationalclients,visitwww.schwab-global.com.ForUKorSwissclients,visitwww.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,”replacethefourthbulletpointwiththefollowing:

“•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.Inthefirstsentenceofthefirstparagraphunder“Arbitration Agreement,”insertthephrase“(‘Related Third Parties’)”between“service providers”and“including.”

3.Inthefirstsentenceofthesecondparagraphunder“Arbitration Agreement,”inserttheword“heirs”between“attorneys-in-fact”and“successors.”

4.Under“Arbitration Agreement,”insertthefollowingparagraphafterthefifthparagraphinthissection:

“For FINRA arbitrations, FINRA will appoint a single public arbitrator in customer cases decided by one arbitrator. In customer cases decided by three arbitra-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.Insertthefollowingattheendofthissectionafterthe“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.

“You and Schwab agree that any actions between us and/or Related Third Parties shall be brought solely in

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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)

Replacetheheadingandfirstfiveparagraphswiththefollowing:

“Mutual Fund Fees, Orders, Distributions and Redemptions

“Youagreethat,inpurchasingandredeemingsharesofamutualfundthroughSchwab,Schwab’spoliciesandprocedureswillgovernsuchtransactionsandnotthoseofthemutualfundasdescribedinitsprospectus,whichmaybeeithermoreorlessbeneficialtoyouasaninvestor.Inparticular,youagreethatSchwab’spoliciesandproceduresonminimuminvestmentrequirements,exchangeoffundshares,dividendaccrualanddateforpaymentofaccrueddividendsuponredemptionofadailydividendfundmayvaryfromthoseapplicabletodirectfundshareholders.Youmayalsobechargedafund’sredemptionfeethatwouldnotbeimposedbythefundondirectshareholdershold-ingfundsharesunderthesamecircumstances.

“Schwabimposesshort-termredemptionfeesoncertainmutualfundtransactionsandreservestherighttorestrictindividualswhoengageinshort-term

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tradingofmutualfundsfrompurchasingsomeorallfundsavailablethroughSchwab.Ourshort-termredemptionpolicy,includingapplicablefeesandotherrestrictions,isavailableatwww.schwab.comanduponrequest.Schwabmayalsochargeatrans-actionfeeforcertainmutualfundtransactions;youwouldnotincurthisfeeifyoupurchasedsharesdirectlyfromafundcompany.Yourpurchaseandsaleofmutualfundsharesmaybesubjecttoaddi-tionalfeesthefundimposes,suchassalesloadsandcontingentredemptionfees,thatareseparatefrom,andinadditionto,thetransactionandotherfeeschargedtoyoubySchwab.Youagreetopay,andaresolelyresponsibleforpaymentof,allfeeschargedtoyoubySchwaband/oranyfund.

“Schwab’sdeadlineforreceivingcustomerorderstoplacewithamutualfundforexecutionatthepricenextcalculatedbythefundmaybeearlierthanthedeadlinesetbythefundinitsprospectus.ItisyourresponsibilitytoverifywithusthedeadlinebywhichyoumustplaceyourorderwithSchwabtoobtainthenextpricecalculated.Wegenerallywillattempttohaveordersreceivedbyuspriortoourdeadlineacceptedbythefundforexecutionatthepricenextcalculatedbythefund.However,youmayreceivealaterpricethanthepricenextcalculatedbythefundif,duetooperationalincompatibilitieswiththefundorotherlimitations,Schwabisunabletosupporttransmissionoftheordertothefundpriortothenextpricecalculatedbythefund.Itisyourresponsi-bilitytoverifywithuswhetheryourorderwillreceivethepricenextcalculatedbythefundpriortoplacingyourorderwithSchwab.

“Inaddition,amutualfundmaydeclinetoexecuteanorderforthepricenextcalculatedbyitifwedonotplacetheorderwiththefundbyaspecifiedtime.Youagreethatwewillnotbeliabletoyouforanylosses,includinglostprofits,ifthemutualfunddoesnotacceptyourorderforexecutionatthepricenextcalculatedbythefundafterourdeadlineforanyreason,including,butnotlimitedto,computersys-temdelaysorfailures,naturalcatastrophesorotheremergencies,orhumanerrorresultinginourlateplacementoftheorderwiththefund.Ifamutualfunddeclinestoacceptyourorderforexecutionatthepricenextcalculatedafterourdeadlinebecause

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wedidnotplacetheorderwiththefundbyaspeci-fiedtime,Schwabreservestheright,butisnotobligated,toplaceyourrejectedorderwiththefundforexecutionatthepricenextcalculatedbythefundafteritsacceptanceoftheorder.”

[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

Replacetheentirecontentofthesectionwiththefollowing:

“Note:Thissectiondoesnotapplytoanytaxquali-fiedaccountssubjecttotheprohibitedtransactionrulesoftheInternalRevenueCodeorERISA,oranyindebtednessarisingtherefrom.

“AssecurityfortherepaymentofallpresentorfutureindebtednessowedtousbyanyaccountholderundertheSchwabOne®AccountAgreementorotherwise,eachaccountholdergrantstousacontinuingsecurityinterestinandlienon,andarightofsetoffwithrespectto,allSecuritiesandOtherPropertythatare,noworinthefuture,held,carriedormaintainedforanypurposeinorthroughtheSchwabOne®Account,and,totheextentofsuchaccountholder’sinterestinorthrough,anypresentorfutureaccountwithusinwhichtheaccountholderhasaninterest.

“IfyouowemoneytoSchwabastheresultofactiv-ityinyourAccountandthereareassetsavailableinanyaccountthatyouholdatSchwabwhichcouldfullyorpartiallysatisfythedebt,youagreethatuponSchwab’swrittendemand,youwillexecutealldocumentsnecessarytoeffectadistributionfromyouraccountandagreetopayorcausesuchfundstobepaidimmediatelytoSchwabinordertosatisfyyourindebtednesstoSchwab.”

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

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IV. Schwab Account

A. Security for Indebtedness


“Note:Thissectiondoesnotapplytoanytaxquali-fiedaccountssubjecttotheprohibitedtransactionrulesoftheInternalRevenueCodeorERISA,oranyindebtednessarisingtherefrom.

“AssecurityfortherepaymentofallpresentorfutureindebtednessowedtousbyanyaccountholderundertheAccountAgreementorotherwise,eachaccountholdergrantstousacontinuingsecu-rityinterestinandlienon,andarightofsetoffwithrespectto,allSecuritiesandOtherPropertythatare,noworinthefuture,held,carriedormaintainedforanypurposeinorthroughtheSchwabAccount,and,totheextentofsuchaccountholder’sinterestinorthrough,anypresentorfutureaccountwithusinwhichtheaccountholderhasaninterest.

“IfyouowemoneytoSchwabastheresultofactivityinyourAccountandthereareassetsavailableinanyaccountthatyouholdatSchwabwhichcouldfullyorpartiallysatisfythedebt,youagreethatuponSchwab’swrittendemand,youwillexecutealldocu-mentsnecessarytoeffectadistributionfromyouraccountandagreetopayorcausesuchfundstobepaidimmediatelytoSchwabinordertosatisfyyourindebtednesstoSchwab.”

[Schwab Account (Cash Account, Section 7)]

V. Schwab IRA and ESA

A. Introduction

ReplacethecontentoftheIntroductionwiththefollowing:

“ThispublicationcontainsimportanttermsandconditionsthatapplytoSchwabIRAsandservicesforSchwabIRAs,includingtheTraditionalIRAandtheRothIRA.AnylanguageinthisAccountAgreementorrelatedagreementsthatmayconflictorbeinconsistentwiththeCharlesSchwab&Co.,Inc.IndividualRetirementPlan,includingwithoutlimita-

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tionSections5.2or5.8ofthatPlan,orSections408or4975oftheInternalRevenueCode,andtheregulationsthereunder,shallbeinterpretedtobeconsistentandincompliancewiththatPlanandthoseSectionsofthatCodeandregulationsthereun-der.TotheextentitisnotpossibletointerpretsuchlanguagetobeconsistentandcompliantwiththatPlanortheseCodeprovisionsandregulations,thensuchlanguageshallbeofnoforceoreffecttotheextentofsuchinconsistencyornoncompliance.ThisSectionshallbeeffectiveretroactivetothefirstdateonwhichtheagreementconcerningtheSchwabIRAwasenteredintobytheAccountHolder.

“ThispublicationalsocontainsimportanttermsandconditionsthatapplytoSchwabEducationSavingsAccountsandservicesforallSchwabEducationSavingsAccounts.AnylanguageinthisAccountAgreementorrelatedagreementsthatmayconflictorbeinconsis-tentwiththeCharlesSchwab&Co.,Inc.EducationSavingsAccountPlan,includingwithoutlimitationSections5.05or10.03ofthatPlan,orSections530or4975oftheInternalRevenueCode,andtheregu-lationsthereunder,shallbeinterpretedtobeconsistentandincompliancewiththatPlanandthoseSectionsofthatCodeandregulationsthereunder.TotheextentitisnotpossibletointerpretsuchlanguagetobeconsistentandcompliantwiththatPlanortheseCodeprovisionsandregulations,thensuchlanguageshallbeofnoforceoreffecttotheextentofsuchinconsistencyornoncompliance.ThisSectionshallbeeffectiveretroactivetothefirstdateonwhichtheagreementconcerningtheSchwabEducationSavingsAccountwasenteredintobytheAccountHolder.

“Pleasereadthispublicationcarefullyandretainitforfuturereference.”

[Schwab IRA and ESA (Introduction)]

B. Defi nitions

Replacethedefinitionofthefollowingterm:

IRA, IRA Account, and/or Schwab IRA—ThebrokerageAccountestablishedundertheCharlesSchwab&Co.,Inc.IndividualRetirementPlan(excludingSEP-IRAs)and/orEducationSavingsAccountPlan.

[Schwab IRA and ESA (Defi nitions)]

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VI. Schwab RPB

A. Introduction

ReplacethecontentoftheIntroductionwiththefollowing:

“ThispublicationcontainsimportanttermsandconditionsthatapplytoSchwabRetirementPlanBrokerageAccountsandservicesforthefollowingRetirementPlanBrokerageAccounts:theSEP-IRA,SIMPLEIRA,andQualifiedRetirementPlan(QRP)/Keoghbrokerageaccounts(referredtoasRetirementPlanBrokerageAccountsinthisdocument).AnylanguageinthisAccountAgreementorrelatedagree-mentsthatmayconflictorbeinconsistentwiththeCharlesSchwab&Co.,Inc.IndividualRetirementPlan,includingwithoutlimitationSections5.2or5.8ofthatPlan,SchwabSEP-IRABasicPlanDocument,SchwabSIMPLEIRABasicPlanDocument,CharlesSchwab&Co.,Inc.SIMPLEIndividualRetirementAccountCustodialAccountAgreement,anyotherretirementPlantowhichthispublicationappliesorSections401,408or4975oftheInternalRevenueCode,andtheregulationsthereunder,shallbeinter-pretedtobeconsistentandincompliancewiththeapplicablePlanandthoseSectionsoftheCodeandregulationsthereunder.Totheextentitisnotpos-sibletointerpretsuchlanguagetobeconsistentandcompliantwiththeapplicablePlanorthoseCodeprovisionsandregulations,thensuchlanguageshallbeofnoforceoreffecttotheextentofsuchincon-sistencyornoncompliance.ThisSectionshallbeeffectiveretroactivetothefirstdateonwhichtheagreementconcerningtheSchwabIRAwasenteredintobytheAccountHolder.Pleasereadthispublica-tioncarefullyandretainitforfuturereference.”

[Schwab Retirement Plan Brokerage (Introduction)]

B. Defi nitions

Replacethedefinitionofthefollowingterm:

“IRA, IRA Account, and/or Schwab IRA—ThebrokerageAccountestablishedforyourSEPorSIMPLEIRA.”

[Schwab Retirement Plan Brokerage (Defi nitions)]

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VII. Schwab 403(b)(7)

A. Mutual Fund Fees, Orders, Distributions and Redemptions


“Youagreethat,inpurchasingandredeemingsharesofamutualfundthroughSchwab,Schwab’spoliciesandprocedureswillgovernsuchtransactionsandnotthoseofthemutualfundasdescribedinitsprospec-tus,whichmaybeeithermoreorlessbeneficialtoyouasaninvestor.Inparticular,youagreethatSchwab’spoliciesandproceduresonminimuminvestmentrequirements,exchangeoffundshares,dividendaccrualanddateforpaymentofaccrueddividendsuponredemptionofadailydividendfundmayvaryfromthoseapplicabletodirectfundshare-holders.Youmayalsobechargedafund’sredemp-tionfeethatwouldnotbeimposedbythefundondirectshareholdersholdingfundsharesunderthesamecircumstances.

“Schwabimposesshort-termredemptionfeesoncertainmutualfundtransactionsandreservestherighttorestrictindividualswhoengageinshort-termtradingofmutualfundsfrompurchasingsomeorallfundsavailablethroughSchwab.Ourshort-termredemptionpolicy,includingapplicablefeesandotherrestrictions,isavailableatwww.schwab.comanduponrequest.Schwabmayalsochargeatrans-actionfeeforcertainmutualfundtransactions;youwouldnotincurthisfeeifyoupurchasedsharesdirectlyfromafundcompany.Yourpurchaseandsaleofmutualfundsharesmaybesubjecttoaddi-tionalfeesthefundimposes,suchassalesloadsandcontingentredemptionfees,thatareseparatefrom,andinadditionto,thetransactionandotherfeeschargedtoyoubySchwab.Youagreetopay,andaresolelyresponsibleforpaymentof,allfeeschargedtoyoubySchwaband/oranyfund.

“Youalsoacknowledgethatonlycertaininvestmentsqualifyasinvestmentsinregulatedinvestmentcom-panystockunder403(b)(7)oftheCodeandthatSchwaborathirdpartymayberequired,priortoexecutionofyourorder,tomakeadeterminationas

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towhetheraparticularinvestmentsoqualifies.Youacknowledgeandagreethatanysuchrequireddeter-minationmaycauseadelaybetweenthetimeyouinitiallyplaceyourorderandthetimetheordercanbeexecuted.Accordingly,youagreenottoholdSchwabliableforanychangeinthepriceofsuchinvestmentduringtheperiodofdeterminationandpriortotheexecutionofyourorder.

“Schwab’sdeadlineforreceivingcustomerorderstoplacewithamutualfundforexecutionatthepricenextcalculatedbythefundmaybeearlierthanthedeadlinesetbythefundinitsprospectus.ItisyourresponsibilitytoverifywithusthedeadlinebywhichyoumustplaceyourorderwithSchwabtoobtainthenextpricecalculated.Wegenerallywillattempttohaveordersreceivedbyuspriortoourdeadlineacceptedbythefundforexecutionatthepricenextcalculatedbythefund.However,youmayreceivealaterpricethanthepricenextcalculatedbythefundif,duetooperationalincompatibilitieswiththefundorotherlimitations,Schwabisunabletosupporttransmissionoftheordertothefundpriortothenextpricecalculatedbythefund.Itisyourresponsi-bilitytoverifywithuswhetheryourorderwillreceivethepricenextcalculatedbythefundpriortoplacingyourorderwithSchwab.

“Inaddition,amutualfundmaydeclinetoexecuteanorderforthepricenextcalculatedbyitifwedonotplacetheorderwiththefundbyaspecifiedtime.Youagreethatwewillnotbeliabletoyouforanylosses,includinglostprofits,ifthemutualfunddoesnotacceptyourorderforexecutionatthepricenextcalculatedbythefundafterourdeadlineforanyreason,including,butnotlimitedto,computersys-temdelaysorfailures,naturalcatastrophesorotheremergencies,orhumanerrorresultinginourlateplacementoftheorderwiththefund.Ifamutualfunddeclinestoacceptyourorderforexecutionatthepricenextcalculatedafterourdeadlinebecausewedidnotplacetheorderwiththefundbyaspeci-fiedtime,Schwabreservestheright,butisnotobligated,toplaceyourrejectedorderwiththefundforexecutionatthepricenextcalculatedbythefundafteritsacceptanceoftheorder.

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“Afundmayalsodeclineapurchaseorder,initssolediscretion,ifthepurchaseorderexceedsacertainsizeorforanyotherreason,andSchwabwillnotbeliableforanylosses,lostprofits,orotherdamagesthatallegedlyresultfromthefund’srejec-tionofthatpurchaseorder.Ifafunddeclinesyourpurchaseorderforanyreasonotherthanthetimeweplacedtheorderwiththefund,wewillcanceltheorderand,ifpracticable,attempttonotifyyou;wewillnotmakeanotherattempttoplacesuchadeclinedpurchaseorderwiththefund.

“Ifyouplaceanordertobuyorsellaspecificdollaramountofamutualfund,Schwabwillcalculatethenumberofsharesboughtorsoldbydividingthedollaramountoftheorderbythepriceandroundingtothenearestthreedecimalplaces.Duetoround-ing,theactualvalueofthesharesboughtorsoldmaybeslightlygreaterorlessthantheactualdollaramountofyourorder.Ifyouplaceanordertobuyorsellaspecificnumberofsharesofafund,Schwabwillcalculatethedollaramountofthepurchaseorsalebymultiplyingthenumberofsharesbythepriceandroundingtothenearesttwodecimalplaces.Duetorounding,theactualdollaramountmaybegreaterorlessthantheactualshareamountofyourorder.

“Schwabdoesnothaveanyobligationtoadvanceredemptionproceedsanddistributionsrelatedtomutualfundsharestoyouraccountbeforewehavereceivedthemfromthemutualfund.Intheeventwedoadvancesuchproceedsordistributions,suchamountswillconstituteindebtednessowedtousbyyou,securedasdescribedinthesectionentitled“SecurityforIndebtedness”untiltheyarereceivedfromthefund.Wereservetherighttoreversethetransactionpendingreceiptofpaymentfromthefund.Schwabisnotobligatedtopayanyinterestondistributionsfrommutualfundsorotherissuersincluding,butnotlimitedto,issuersofequitysecuri-ties)untilsuchdistributionsarereceivedbySchwab.

“Ifamutualfundexercisesitsrighttoredeemyourshares“inkind”bydeliveringtoSchwabportfoliosecuritiesinpaymentforyoursharesinsteadofcash,Schwabwillholdthesesecuritiesinyouraccountsubjecttoyourinstructions.If,however,Schwabdoesnotnormallycustodyoreffecttransactionsinsecuri-

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tiespaidtoyoubyyourmutualfund,Schwabwilltakesuchactionasitdeemsappropriatetoeffectdeliveryofsuchnon-standardsecuritytoyouortoanentityabletoassumecustodyoreffecttransactionsinthesecurity.Youagreetopayourcommissionandtrans-action,processing,custodyandotherfees,and/orthoseoftheentitytowhichyournon-standardsecurityisdelivered,astheyexistfromtimetotimeandapplytothetransactionsandservicesyoureceiveincon-nectionwiththesesecuritiespaidtoyoubythefund.”

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

VIII. Schwab Individual 401(k)

A. Mutual Fund Fees, Orders, Distributions and Redemptions

Replacethesecond,thirdandfourthparagraphswiththefollowing:

“Schwabimposesshort-termredemptionfeesoncertainmutualfundtransactionsandreservestherighttorestrictindividualswhoengageinshort-termtradingofmutualfundsfrompurchasingsomeorallfundsavailablethroughSchwab.Ourshort-termredemptionpolicy,includingapplicablefeesandotherrestrictions,isavailableatwww.schwab.comanduponrequest.Schwabmayalsochargeatrans-actionfeeforcertainmutualfundtransactions;youwouldnotincurthisfeeifyoupurchasedsharesdirectlyfromafundcompany.Yourpurchaseandsaleofmutualfundsharesmaybesubjecttoaddi-tionalfeesthefundimposes,suchassalesloadsandcontingentredemptionfees,thatareseparatefrom,andinadditionto,thetransactionandotherfeeschargedtoyoubySchwab.Youagreetopay,andaresolelyresponsibleforpaymentof,allfeeschargedtoyoubySchwaband/oranyfund.

“Schwab’sdeadlineforreceivingcustomerorderstoplacewithamutualfundforexecutionatthepricenextcalculatedbythefundmaybeearlierthanthedeadlinesetbythefundinitsprospectus.ItisyourresponsibilitytoverifywithusthedeadlinebywhichyoumustplaceyourorderwithSchwabtoobtainthenextpricecalculated.Wegenerallywillattempttohaveordersreceivedbyuspriortoourdeadlineacceptedby

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thefundforexecutionatthepricenextcalculatedbythefund.However,youmayreceivealaterpricethanthepricenextcalculatedbythefundif,duetoopera-tionalincompatibilitieswiththefundorotherlimita-tions,Schwabisunabletosupporttransmissionoftheordertothefundpriortothenextpricecalculatedbythefund.ItisyourresponsibilitytoverifywithuswhetheryourorderwillreceivethepricenextcalculatedbythefundpriortoplacingyourorderwithSchwab.

“Inaddition,amutualfundmaydeclinetoexecuteanorderforthepricenextcalculatedbyitifwedonotplacetheorderwiththefundbyaspecifiedtime.Youagreethatwewillnotbeliabletoyouforanylosses,includinglostprofits,ifthemutualfunddoesnotacceptyourorderforexecutionatthepricenextcalculatedbythefundafterourdeadlineforanyreason,including,butnotlimitedto,computersys-temdelaysorfailures,naturalcatastrophesorotheremergencies,orhumanerrorresultinginourlateplacementoftheorderwiththefund.Ifamutualfunddeclinestoacceptyourorderforexecutionatthepricenextcalculatedafterourdeadlinebecausewedidnotplacetheorderwiththefundbyaspeci-fiedtime,Schwabreservestheright,butisnotobligated,toplaceyourrejectedorderwiththefundforexecutionatthepricenextcalculatedbythefundafteritsacceptanceoftheorder.”

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

©2011CharlesSchwab&Co.,Inc.Allrightsreserved. MemberSIPC.CS15127-01(1011-5433) REG63279(10/11)

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.

©2011CharlesSchwab&Co.,Inc. Allrightsreserved. MemberSIPC. CS15113-01 BDL30900REG-20(10/11)

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Important account information you need to know. - Schwab · Important account information you need to know. • The Consolidated Statement of Financial Condition of Charles Schwab