CORRESP 1 filename1.htm

 

1900 K Street, NW
Washington, DC 20006
+1 202 261 3300 Main
+1 202 261 3333 Fax
www.dechert.com

 

 

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.

 

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Should you have any questions or comments, please contact me at 202.261.3304.

 

Sincerely,

 

 

/s/ Stephen T. Cohen

Stephen T. Cohen

 

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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

 

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