![]() | 1900 K Street, NW |
May 26, 2022
VIA EDGAR
Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attn: | Ms. Christina Fettig |
Re: | Sarbanes-Oxley Review of Select Series of Schwab Capital Trust (File Nos. 033-62470 and 811-07704); Schwab Investments (File Nos. 033-37459 and 811-06200); and Schwab Strategic Trust (File Nos. 333-160595 and 811-22311) (each, a “Registrant” and collectively, the “Registrants”) |
Dear Ms. Fettig:
This letter responds to comments that you conveyed orally via a telephone conference with Michael Cirelli, Jason Davis, Derek DeBenedictis, Catherine MacGregor, Robin Nesbitt and Dana Smith of Charles Schwab Investment Management, Inc., dba Schwab Asset Management (“Schwab”), and Stephen Cohen and Phillip Garber of Dechert LLP on April 29, 2022, concerning Schwab’s correspondence filed on April 8, 2022, in response to your comments provided on March 9, 2022, relating to your review of certain filings and other materials of select series of the Registrants (each, a “Fund”) listed on Exhibit A pursuant to the Sarbanes-Oxley Act of 2002. A summary of your comments, followed by the Registrants’ responses, is set forth below:
Prospectus
1. | Comment: Generally, it is the view of the staff of the Securities and Exchange Commission (the “SEC Staff”) that professional fees related to foreign tax reclaims should be disclosed as an expense in the Statement of Operations. Please explain the rationale or accounting guidance relied on to record those professional fees netted against investment income instead of as separate line item in the expense section of the Statement of Operations. |
Response: As noted on the telephone conference held on April 29, 2022, Schwab generally views professional fees and reimbursements made to the investment adviser in the amounts of less than 0.01% (i.e., one basis point) of the average net assets of a Fund to be immaterial. In this case, the total amount of professional fees and reimbursements associated with tax reclaims for any Fund amounted to less than one basis point, and in relation to the size of the Funds, Schwab deemed such amounts to be immaterial. These
fees are paid upfront by the Funds and are contractually waived by the investment adviser. In addition, these are non-routine fees, infrequent in occurrence and subject to repayment to the investment adviser only if the Fund successfully recovers income related to foreign tax reclaims. Professional fees associated with upfront professional fees for tax reclaims are presented as an expense and expense reduction along with an explanatory footnote in the Statement of Operations, and all details are presented on a gross basis in the notes to financial statements affiliated section. Repayment made to the investment adviser for previously waived upfront professional fees occurs when the Fund recognizes income. When income recognition occurs, the investment adviser is repaid for previously waived professional fees associated with foreign tax reclaims. Repayment of previously waived fee amounts are presented net of dividend income and are measured for separate disclosure when the amount exceeds one basis point of average net assets. All details related to Fund foreign tax reclaim activities during the period are disclosed on a gross basis in the financial notes affiliated section. Schwab confirms for future reports that if foreign tax professional fees repayments made to the investment adviser amount to more than one basis point of a Fund’s average net assets they will be disclosed as a separate line item in the expense section of the Statement of Operations and will include an explanatory footnote in the Financial Highlights.
2. | Comment: The SEC Staff notes that the Schwab response indicated that it would consider updates to the Funds’ Item 4.C disclosure about the nature of the services rendered by the principal accountant for the audit-related fees and the tax fees “consistent with industry practice.” The SEC Staff notes that such disclosure is required by Item 4.C under Form N-CSR. |
Response: The Funds will disclose more detail in future Form N-CSR filings in response to Item 4.C of Form N-CSR.
* * *
Should you have any questions or comments, please contact me at 202.261.3304.
Sincerely,
/s/ Stephen T. Cohen
Stephen T. Cohen
2
Exhibit A
File # | Registrant Name | Series ID | Series Name | FYE Reviewed | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000006551 | Laudus International MarketMasters Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000006549 | Schwab Balanced Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005514 | Schwab Core Equity Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005515 | Schwab Dividend Equity Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000019900 | Schwab Fundamental Emerging Markets Large Company Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000016768 | Schwab Fundamental International Large Company Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000019901 | Schwab Fundamental International Small Company Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000016766 | Schwab Fundamental US Large Company Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000016767 | Schwab Fundamental US Small Company Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005519 | Schwab Health Care Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000022039 | Schwab International Core Equity Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005914 | Schwab International Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005513 | Schwab Large-Cap Growth Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005916 | Schwab MarketTrack All Equity Portfolio | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005918 | Schwab MarketTrack Balanced Portfolio | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005919 | Schwab MarketTrack Conservative Portfolio | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005917 | Schwab MarketTrack Growth Portfolio | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005911 | Schwab S&P 500 Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005516 | Schwab Small-Cap Equity Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005912 | Schwab Small-Cap Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005521 | Schwab Target 2010 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000020935 | Schwab Target 2015 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005522 | Schwab Target 2020 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000020936 | Schwab Target 2025 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005523 | Schwab Target 2030 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000020937 | Schwab Target 2035 Fund | 10/31/2021 |
811-07704 | SCHWAB CAPITAL TRUST | S000005524 | Schwab Target 2040 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000039605 | Schwab Target 2045 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000039606 | Schwab Target 2050 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000039607 | Schwab Target 2055 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000054918 | Schwab Target 2060 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000071107 | Schwab Target 2065 Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000005913 | Schwab Total Stock Market Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000059731 | Schwab U.S. Large-Cap Growth Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000059732 | Schwab U.S. Large-Cap Value Index Fund | 10/31/2021 | ||||
811-07704 | SCHWAB CAPITAL TRUST | S000059733 | Schwab U.S. Mid-Cap Index Fund | 10/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000006818 | Schwab California Tax-Free Bond Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000068892 | Schwab Opportunistic Municipal Bond Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000056208 | Schwab Short-Term Bond Index Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000006815 | Schwab Tax-Free Bond Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000006819 | Schwab Treasury Inflation Protected Securities Index Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000056207 | Schwab U.S. Aggregate Bond Index Fund | 8/31/2021 | ||||
811-06200 | SCHWAB INVESTMENTS | S000006807 | Schwab 1000 Index Fund | 10/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000059091 | Schwab 1000 Index ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026639 | Schwab Emerging Markets Equity ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000071197 | Schwab International Dividend Equity ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026637 | Schwab International Equity ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026638 | Schwab International Small-Cap Equity ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026631 | Schwab U.S. Broad Market ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000034163 | Schwab U.S. Dividend Equity ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026632 | Schwab U.S. Large-Cap ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026633 | Schwab U.S. Large-Cap Growth ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026634 | Schwab U.S. Large-Cap Value ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026635 | Schwab U.S. Mid-Cap ETF | 8/31/2021 | ||||
811-22311 | SCHWAB STRATEGIC TRUST | S000026636 | Schwab U.S. Small-Cap ETF | 8/31/2021 |
2