The Schwab Self-Directed Brokerage Account Indicators An industry-leading benchmark on retirement plan participant investment activity within selfdirected brokerage accounts. Quarter Ending March 1, 2014 MEANT FOR INSTITUTIONAL AUDIENCES. 2014 Charles Schwab & Co., Inc. ( Schwab ) Member SIPC. All rights reserved. (1212-7835)
An industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts Table of Contents: March 31, 2014 Key Schwab Observations for Quarter Ending March 31, 2014 2 PCRA Participant Profile Information 3 PCRA Participants within Age Bands 4 Market Value Allocation - Asset Classes 5 Market Value Allocation - Equity Sectors 6 Market Value Allocation - ETF Sectors 7 Market Value Allocation - Mutual 8 Net Asset Flow - Asset Classes 9 Net Asset Flow - All Investment Categories 10
The Schwab Self-Directed Brokerage Account Indicators Key Schwab Observations for the First Quarter 2014: Participant Summary As the calendar turned to the New Year, January of 2014 started off with a 5% market pull-back, its worst start to a year since 2009. This was followed by concerns about the turmoil between Ukraine and Russia, worries about the Chinese economy, and confusion surrounding comments by the Fed about the next interest rate hike. Despite these events, the market finished a little better than flat with the S&P 500 Index up 1.8% in the first quarter. As a result, participant account balances in the Schwab Personal Choice Retirement Account (PCRA) were up 1.3% over last quarter and up 10. from a year ago bringing the average participant account balance to $194,545. Participants were active in their PCRA accounts during Q1 as trading volumes increased by 15., and average account positions grew by 1.5% from last quarter. In the Top 10 Equity Holdings, Facebook replaced the PowerShares QQQ Trust, while the number of participants aged 50 and older remained the largest age demographic in PCRA at 51.88%. Please note we have added a new feature to the Report this year that breaks out the Exchange-Traded (ETF) Sectors held by PCRA participants. Commentary around ETF Sectors breakout can be found below. Investing Behavior and General Investing Characteristics Asset Allocation One notable change from a year ago was participants shedding 2% of their cash positions and re-allocated them into ETFs growing them to 14% of total asset allocations. Mutual still remained the top asset allocation at 41%, while Equities came in at 25%, both remaining unchanged from a year ago. Equities There was a 7% shift among the various sector holdings by participants when compared to a year ago, as positions in Consumer Discretionary (3%), Industrials (2%) and Health Care (2%) all grew from last year. Information Technology was the largest sector holding at 23% in participant accounts, followed by Financials at 14% and Consumer Discretionary at 13%. Exchange-Traded (ETFs) As the Federal Reserve clarified their initial stance towards the end of the quarter around the tapering of Quantitative Easing and the impact it would have on interest rates, this news may have led participants to a 5% migration out of their Commodity holdings and reallocating into Large Cap ETFs. For the quarter, the top three ETF sector holdings were Large Caps at 30%, International Equity at 17%, and Industry Sector holdings at 14%. Mutual In a reversal from its trend last year, Taxable Bond dropped 5%, while Large Cap had a 4% jump, and Small Cap Stock grew slightly by 1%. In the remaining fund allocations, Specialized, Asset Allocation, and International were unchanged from a year ago. Asset Flows Compared to a year ago, net asset flows in Equities were down 5. totaling 48.1%, while Mutual grew to 46.4%. The top net asset flows by sector were ETFs at 25.2%, Asset Allocation at 11.5% and Large Cap Stock at 7.9%. All three accounted for almost half of all net asset flows. Source: Schwab PCRA data as of March 31, 2014 2014 Charles Schwab & Co., Inc. (Member SIPC). All rights reserved. (0614-3688) Page 2
PCRA Participants Profile Information* - All Average Age* 49 Top 10 Equity Holdings % of Equity Assets Average PCRA Account Balance $194,545 APPLE INC 5.7% S P D R S&P 500 ETF TR 1.4% Average Positions (per Account) BERKSHIRE HATHAWAY B 1.4% Equities 4.94 BANK OF AMERICA CORP 1.2% Mutual 2.99 GENERAL ELECTRIC COMPANY 1.1% Cash Investments 1.30 VANGUARD TOTAL STOCK MKTSTK 1.1% Fixed-Income 0.17 GOOGLE INC 1.1% Total 9.40 SCHW US BRD MKT ETF 1.0% FACEBOOK INC CLASS A 1.0% Average Trades in Quarter (per Account) SPDR GOLD TRUST 0.9% Equities 4.04 Mutual 2.38 Top 10 Mutual Fund Holdings % of MF Assets Fixed-Income 0.03 SCHWAB S&P 500 INDEX FD 2.4% Total 6.45 SCHWAB TOTAL STOCK MKT 1.1% PIMCO TOTAL RETURN FUND CL D 0.9% Median Percent Invested* OAKMARK INTL FD CLASS I 0.9% PCRA 74.9% PIMCO TOTAL RETURN FUND INSTL 0.8% Core Offering 25.2% YACKTMAN FOCUSED SERVICE CL 0.8% OAKMARK EQUITY & INCOME FD CL 0.7% VANGUARD 500 INDEX FD 0.7% PIMCO INCM CL D 0.7% DODGE & COX INTL STOCK 0. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, trading restrictions, charges and expenses. You can request a prospectus at www.schwab.com or by calling the Schwab Dedicated PCRA Call Center at 1-888-393-PCRA (7272). Please read the prospectus carefully before investing. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. Fixed-income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Securities reflected here are for information purposes only and are not, nor should they be construed as, recommendations to buy, sell, or continue to hold any investment nor do the accounts listed reflect individual securities accounts or holdings. Any similarity to an existing individual or account is purely coincidental. Page 3
PCRA Participants within Age Bands* - All As of March 31, 2014 March 31, 2014 60% 50% 51.88% 40% 30% 30.04% 20% 18.08% 10% 0% 20-39 40-49 50+ This chart illustrates the percent of PCRA participants within each age band. Page 4
Market Value Allocation - Asset Classes* - All (Year over Year) March 31, 2014 As of March 31, 2014 As of March 31, 2013 Cash Investments 18% Equities 25% Cash Investments 20% Equities 25% ETFs 14% ETFs 12% Mutual 41% 2% Mutual 41% 2% This chart illustrates the percent of PCRA participant assets in each noted asset class as a percentage of total PCRA assets. Percentages are calculated as of month end. Money market mutual funds are classified under Cash Investments. Page 5
Market Value Allocation - Equity Sectors* - All (Year over Year) As of March 31, 2014 As of March 31, 2013 Information Technology 23% Consumer Discretionary 13% Utilities 2% Consumer Staples Information Technology 23% Consumer Discretionary 10% Utilities 3% Consumer Staples 7% Mutual 3% Energy 9% Mutual Energy 10% Industrials 11% Industrials 9% Telecomm 3% Health Care 11% Materials 5% Financials 14% Telecomm 3% Health Care 9% Materials Financials 14% This chart illustrates the percent of PCRA participant assets in each equity sector, as classified by Standard & Poor s, as a percentage of total PCRA assets within equity securities. Percentages are calculated as of month-end. Page 6
Market Value Allocation - Exchange Traded (ETF) Sectors* - All (Year over Year) As of March 31, 2014 As of March 31, 2013 Mid-Cap Small-Cap 7% Commodity Currency 0% Domestic 11% International Equity 17% Commodity 11% Currency 0% Small-Cap Mid-Cap Domestic 12% International Equity 17% Large Cap 30% Asset Allocation 0% Sector 14% International 1% Other 8% Large Cap 25% Asset Allocation 0% Sector 13% International 1% Other 9% This chart illustrates the percent of PCRA participant assets in each ETF sector, as classified by Morningstar, as a percentage of total PCRA assets within ETF securities. Percentages are calculated as of month-end. Page 7
Market Value Allocation - Mutual * - All (Year over Year) March 31, 2014 As of March 31, 2014 As of March 31, 2013 Specialized 9% Taxable Bond 19% Asset Allocation 12% International 1 Taxable Bond 24% Asset Allocation 12% International 1 Specialized 9% Small Cap Stock 14% Large Cap Stock 30% Small Cap Stock 13% Large Cap Stock 2 This chart illustrates the percent of PCRA participant assets in each mutual fund category, as classified by Morningstar Inc., as a percentage of total PCRA longterm mutual fund assets. Percentages are calculated as of month end. Page 8
Net Asset Flow - Asset Class* - All As of March 31, 2014 March 31, 2014 Equities 48.1% Mutual 46.4% 6.5% Money Market -0.4% Options -0. -10% 0% 10% 20% 30% 40% 50% 60% This chart illustrates the percent of total net flows within each asset class over the three month period ending March 31, 2014. Net flow percentages are calculated by adding the purchases and sales amounts within each respective asset class and dividing by the total net flows over the period. Page 9
Net Asset Flow - All Categories* - All As of March 31, 2014 March 31, 2014 Money Marke -0.40% Equities - Other Equities - Utili 0.10% MF - Asset Allocation MF - Tax Free 0.20% MF - Large Cap Stock MF - Other 0.20% Equities - Mut 0.70% MF - International Equities - Mat MF 0.90% - Taxable Bond Equities - Con 1.30% MF - Specialized Equities - Tele 1.40% Equities - MF Indu- Small 2.20% Cap Stock Equities - Con 2.40% Equities - Energy Equities - Info 2.80% Equities - Health Care Equities - Fina 3.50% Equities - Hea Equities 3.80% - Financials Equities - Ene Equities 3.90% - Info Technology MF - Small Ca 4.70% Equities - Consumer Discretionary MF - Specializ 6.90% MF - Taxable Equities 7.30% - Industrials MF - Internatio Equities - Telecomm 7.60% Services MF - Large Ca 7.90% Equities - Consumer Staples MF - Asset Al 11.50% Equities - Oth 25.20% Equities - Materials Equities - Mutual 4.7% 3.9% 3.8% 3.5% 2.8% 2.4% 2.2% 1.4% 1.3% 0.9% 0.7% 7.9% 7. 7.3% 6.9% 11.5% 25.2% MF - Other 0.2% MF - Tax Free Bond 0.2% Equities - Utilities 0.1% Money Market -0.4% -5% 0% 5% 10% 15% 20% 25% 30% This chart illustrates the percent of total net flows within each investment category, as classified by Standard & Poor s and Morningstar Inc., over the three month period ending March 31, 2014. Net flow percentages are calculated by adding the purchases and sales amounts within each respective investment category and dividing by the total net flows over the period. Page 10
Endnotes For general informational purposes. Charts are provided for educational purposes and are not, nor should they be construed as, recommendations to buy, sell, or continue to hold any investment nor do the accounts listed reflect individual securities accounts or holdings. Any similarity to an existing individual or account is purely coincidental. This information is not intended to be a substitute for specific individualized tax or legal advice. Where specific advice is necessary or appropriate, Schwab recommends you consult with your own investment professional. *Applies to all charts. Data for Participant Profile and Age Band charts is based only on the Schwab Retirement Plan Services, Inc. PCRA participant population (approximately 41,646 accounts). Data for all other charts is based on all PCRAs in Schwab s entire PCRA participant population that have an account balance between $5,000 and $2 million (approximately 170,107 accounts). All data contained herein is for information purposes only and may not be copied, assigned, transferred, disclosed, or utilized without the express written approval of Schwab. Data is gathered for these reports from what we believe to be reliable sources; however, Schwab does not guarantee the accuracy, timeliness or completeness of the information. Charles Schwab & Co., Inc. is a registered broker-dealer, offering the Schwab Personal Choice Retirement Account (PCRA), as well as other brokerage and custody services, to its customers. The Charles Schwab Corporation (Charles Schwab) provides services to retirement other benefit plans and participants as well as equity compensation plan services and other financial and retirement services to corporations and executives through its separate but affiliated companies and subsidiaries, Schwab Retirement Plan Services, Inc.; Schwab Retirement Plan Company; Charles Schwab Bank; and Charles Schwab & Co., Inc. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). Source: Schwab PCRA data as of March 31, 2014 MEANT FOR INSTITUTIONAL AUDIENCES. 2014 Charles Schwab & Co., Inc. ( Schwab ) Member SIPC. All rights reserved. (1212-7835)