Michael A. Morin

If you open an advisory account directly with CSIM, you will pay either an annual asset-based fee or a fixed fee for our services that is charged on either a monthly or quarterly basis depending on the strategy in which you are invested.

• The more assets there are in your account, the more you will pay in fees if you pay an asset-based fee, and we may therefore have an incentive to encourage you to increase the assets in your account.

• In addition to the fees described above, you may incur additional costs, which include fees charged by your custodian for account maintenance and may include transaction fees, commissions, or brokerage fees. You will also incur the costs associated with any MFs and ETFs, including management fees, fund expenses, and any applicable transaction-related fees and charges.

If you invest through a Wrap Fee Program, you may pay an asset-based wrap fee to the Wrap Fee Program sponsor. The wrap fee could exceed the aggregate costs of the services provided if they were to be obtained separately (although, in some cases, it is possible to obtain such services only through the particular Wrap Fee Program). The Wrap Fee Program sponsor will provide you information about the wrap fee and how frequently it is assessed.

You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.

When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations we provide you. Here are some examples to help you understand what this means. We and/or our affiliates earn money from:

• Strategies offered through an affiliated Wrap Fee Program sponsor.

• Management fees and/or shareholder servicing fees paid by proprietary MFs and ETFs held in your account.

• Shareholder servicing fees paid by third-party MFs held in your account or by the managers or sponsors of those MFs (revenue sharing).

• Other fees paid by third-party MF and ETF sponsors or their affiliates for opportunities such as sponsoring education and events and receiving reporting and for the marketing and promotion of certain MFs and ETFs from certain third-party MF and ETF sponsors.

• The “spread” on cash in your accounts — i.e., the difference between what we earn and what we pay you in interest — if your accounts are custodied with our affiliate.

• Remuneration such as liquidity or order flow rebates from a market or firm to which some orders are routed by our affiliate.

Accordingly, we may be incentivized to recommend certain products that may earn CSIM or its affiliates more revenue than if we invested your money in other products.

Portfolio managers receive a fixed base salary, are eligible to earn a discretionary bonus, and have the potential to participate in discretionary equity awards.

The discretionary bonus for portfolio managers may differ. One group of portfolio managers is eligible to earn a discretionary bonus that is funded based on the financial performance of The Charles Schwab Corporation (“CSC”) during the annual performance period (the “Corporate Bonus Plan”). Another group of portfolio managers is eligible to earn a discretionary bonus that is funded based on two independent components—the financial performance of CSC during the annual period and on portfolio manager research and performance results for the particular strategy (the “Portfolio Manager Incentive Plan”). Other portfolio managers are eligible to be on either the Corporate Bonus Plan or the Portfolio Manager Incentive Plan, and also receive a discretionary bonus based on the asset growth of certain strategies they manage.

While this compensation is discretionary, it may incentivize our portfolio managers to increase the performance or assets in certain accounts, including through riskier investments. To help mitigate such potential conflicts of interest, we maintain policies and procedures that stress that investment decisions are to be made in accordance with the fiduciary duties owed to our clients and without consideration of a portfolio manager’s pecuniary, investment, or other financial interests.