global multi-asset investing in a volatile interest...

GLOBAL MULTI-ASSET INVESTING

IN A VOLATILE INTEREST RATE

ENVIRONMENT

Windhaven Investment Management, Inc. and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

© 2013 Windhaven Investment Management, Inc. All rights reserved. (0913-6252)

WINDHAVEN INVESTMENT MANAGEMENT - HIGHLIGHTS

2

*Approximate AUM as of 8/31/2013

• Windhaven is a wholly owned subsidiary of The Charles Schwab Corporation

• Over $17 Billion in assets under management*

• Over 50 employees located in the Boston headquarters, Menlo Park and San

Francisco

• 3 broadly diversified strategies, each with an 11 Year Track Record

WINDHAVEN INVESTMENT PHILOSOPHY

3

The 3 D’s of Investment Management:

D

D D

Diversification

Dynamic Asset

Allocation

Downside Risk

Management

INTEREST RATE POLICY

4

HISTORY OF U.S. INTEREST RATES

5

Source: Global Financial and Bloomberg. Updated through 8/31/2013.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

U.S. 10 Year Bond Rates Since 1800

1981

15.8%

1945

1.6%

August 2013

2.8%

INTEREST RATE POLICY

U.S. Federal Reserve’s Dual Mandate:

• Achieve maximum employment

• Maintain stable prices

Goals of Interest Rate Control/Quantitative Easing (QE)

• Stimulate equity markets and

ultimately the economy

• Provide Liquidity

• Discourage holding cash

• May cause inflation over time

Lower Interest Rates/QE

• Cool off an overheating economy

• Encourage Saving

• Discourage borrowing

• May cause deflation over time

Higher Interest Rates

6

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

GLOBAL INTEREST RATES The world’s major central banks have lowered rates to stimulate their respective

economies

U.S. Federal

Reservea

European

Central Bankc

Bank of

Japanb

Peoples Bank

of Chinad

7

a. U.S. Federal Funds Rate b. Bank of Japan Base Rate c. European Central Bank Main refinancing rate d. Peoples Bank of China 6 month best lending rate Source: Bloomberg. As of 8/31/2013.

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

ADVENT OF LOW REAL (INFLATION ADJUSTED)

INTEREST RATES Today, a record number of central banks are promoting negative real interest

rates

8

United

Statesa

Japanb

Germanyc

Chinad

a. U.S. Federal Funds Rate-U.S. 10yr Breakeven inflation index b. Bank of Japan Base Rate-(Japanese 5yr Gvt Bond Index-Japanese 5yr Inflation Protected Gvt Bond index) c. European Central Bank (ECB) Main

refinancing rate-German 10yr Breakeven Inflation Index d. Peoples Bank of China (PBOC) 6 month best lending rate-Chinese YoY CPI Source: Bloomberg. As of 8/31/2013

Expected inflation is used for the inflation rate. Where expected inflation is not available, the Consumer Price Index (CPI) is used.

//upload.wikimedia.org/wikipedia/en/b/ba/Flag_of_Germany.svg

IMPACT OF LOW INTEREST RATES

9

Source: Bloomberg. As of 8/31/2013.

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

S&

P 5

00

U.S

. U

nem

plo

ym

ent

Rate

/ F

ed F

unds R

ate

U.S. Unemployment Rate, Fed Funds Rate and the S&P 500

Fed Funds Rate Unemployment Rate S&P 500

10

LOW INTEREST RATE PERFORMANCE

Data Source: Bloomberg. Past performance is not indicative of future return.

a. S&P 500 Total Return Index. b. U.S. 10-yr Treasury Bonds. c. U.S. 3-Month T-Bill. d. NAREIT Equity REIT. e. MSCI EAFE stock market index f. Citi World Government Bond Index ex. U.S. g. Gold monthly performance.

h. S&P GSCI Total Return Index. i. U.S. CPI.

U.S.

Equitiesa

U.S.

T-Bondsb REITsd U.S.

T-Billsc EAFEe Intl Gov’t

Bondsf

GSCI

Total

Returnh

Goldg Inflationi

Low Interest Rate Return (1/1/09 to 8/31/13)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Japanese R

eal

Rate

Nik

kei 225

Nikkei 225 Japanese Real Rate

IMPACT OF LOW INTEREST RATES: THE CASE FOR JAPAN

11

Japanese Real Rate=Bank of Japan Base Rate-(Japanese 5yr Gvt Bond Index-Japanese 5yr Inflation Protected Gvt Bond index)


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

800

850

900

950

1000

1050

1100

1150

1200

1250

Fed F

unds R

ate

S&

P 5

00

FED EXIT STRATEGY

12

Lessons from past exits: 2004

S&P 500

Fed Funds

Rate

Fed

Discussion

Fed

Action

Source: Bloomberg.

GLOBAL MULTI-ASSET

INVESTING

13

GLOBAL MULTI-ASSET INVESTING

EMERGING

MARKETS

* Hard Assets are physical assets.

EQUITY

US

FIXED INCOME REAL ESTATE HARD ASSETS* CURRENCY

INTERNATIONAL

DEVELOPED

• The pursuit of investment opportunities globally and across asset classes

• Seeking high risk-adjusted returns

14

WHY GLOBAL MULTI-ASSET INVESTING?

15

• Extraordinarily low global interest rate environment presents special challenges and

opportunities to investors

• Understanding the potential impact of changes in monetary policies is key to

identifying investment opportunities and risks

• Unprecedented financial and economic imbalances affected by legislative and

political constraints create an unusually uncertain environment

• Attempt to protect against a potentially rising rate environment

• Given unprecedented imbalances, opportunities may exist outside of conventional

asset classes/geographic regions

These relationships do not always hold true and there are periods of time

when all asset classes might decline simultaneously. See additional

explanatory notes and disclosures at the end of this document.

* Hard Assets are physical assets.

THE IMPORTANCE OF DYNAMIC

ASSET ALLOCATION

MARKET

CYCLES

Inflation/Currency

Devaluation/Geopolitical

Uncertainty

Economic

Slowdown/Deflation

Stable

Economic

Growth

Credit

Contraction

Hard Assets* Outperform

Government Bonds

Outperform

Government

Bills & Notes

Outperform

Equities

Outperform

16

STRATEGY CONSTRUCTION:

ATTEMPTING TO ACCOUNT FOR UNCERTAINTY

17

Windhaven strategies are broken up into two components:

Diversified

Conservative

Diversified

Growth

Diversified

Aggressive

Core Core Core

Tactical Tactical Tactical

1. Core: A broad range of asset classes we feel clients should hold over longer time periods.

2. Tactical: Asset classes we feel have the best chance of performing well over the next

12-months on a risk-adjusted basis.

Asset classes and the proportional weightings for the core and tactical components of the strategies may change at any time without notice subject to the discretion of Windhaven Investment Management.

PRESERVING CAPITAL IS CRITICAL

18

• September 2000 – September 2002:

– The S&P 500® Total Return* declined nearly

45%

– Returned to the September 2000 level

in October 2006

– Assuming a normal distribution this decline is

a roughly 1 in 276 year occurrence**

• November 2007 – February 2009:

– The S&P 500 Total Return* declined over 50%

– Returned to the November 2007 level in

August 2012

– Assuming a normal distribution this decline is

a roughly 1 in 1,200 year occurrence***

* S&P 500 Total Return Index. Source: Bloomberg.

** From 9/1/2000 – 9/30/2002 (25 months), the S&P 500 TR declined 44.73%. From 1/1/1972 – 12/31/2010, the mean for 25 month returns was 24.9% and the standard deviation for 25 month returns was 28.6%. This suggests a 1 in 132.72 twenty-five

month chance of occurrence or equivalently, 1 in 276.5 years assuming a normal distribution.

*** From 11/1/2007 – 2/28/2009 (16 months), the S&P 500 TR declined 50.95%. From 1/1/1972 – 12/31/2010, the mean for 16 month returns was 15.4% and the standard deviation for 16 month returns was 21.7%. This suggests a 1 in 895.13 sixteen

month chance of occurrence or equivalently, 1 in 1193.5 years assuming a normal distribution.

Decline Required Rise

to Break Even

-10% 11%

-20% 25%

-30% 43%

-40% 66%

-50% 100%

-60% 150%

-70% 233%

-80% 400%

OPPORTUNITIES IN A LOW

INTEREST RATE

ENVIRONMENT

19

A CASE FOR EQUITIES IN A LOW-INTEREST

RATE ENVIRONMENT

20

As of 8/31/2013. Data source: Bloomberg.

a. U.S. 3 Month T-Bill

b. U.S. 10 Year T-Bond

c. S&P 500 Index

d. MSCI Emerging Markets Total Return Index

e. Expected inflation = U.S. 10yr Treasury Yield - U.S. 10yr TIPS Yield.

0.2%

2.8%

6.2%

8.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

U.S. T-Bills U.S. Bonds S&P 500 Index Emerging Market Stocks

Current Interest/Earnings Yields

a b c d

2.1% Expected Inflation

Real

Earnings

Yield = 4.1%

Real

Earnings

Yield = 6.5% e

Real Earnings Yield = 0.7%

1.0%

2.0%

3.0%

4.0%

$20

$40

$60

$80

$100

$120

U.S

. 10-Y

r Y

ield

U.S

. and I

nt'l

RE

IT P

erform

ance

21

U.S. REITS

U.S. 10-Yr Bonds

Real Estate vs. U.S. 10-Year Bonds

COST OF CAPITAL

Int’l Real Estate


S&P 500 TR RETURNS OVER TIME

22

Source: Bloomberg. As of 8/31/2013

$50

$100

$150

$200

Since 2002

S&P 500 TR

23

S&P 500 TR RETURNS OVER TIME RELATIVE TO GOLD

Source: Bloomberg. As of 8/31/2013

$0

$20

$40

$60

$80

$100

$120

Indexed Since 2002

S&P 500 TR Gold

24

HISTORICAL ASSET CLASS PERFORMANCE

Data Source: Bloomberg. Past performance is not indicative of future return. The correlations represented here have not always held true in the past and may not hold in the future.

For information regarding the significance of the chosen time periods, please refer to disclosure #5 at the end of this document. See additional explanatory notes and disclosures at the end of this document.

During certain time periods, many asset classes can lose value simultaneously. The 12 month charts on this page are not meant to suggest that when stocks go down bonds and gold necessarily go up. Different characteristics

of the economic cycle can cause asset classes to move inconsistently relative to each other. There is no guarantee that over the next 40 years each of the asset classes shown here will increase in value.

a. S&P 500 Total Return Index. b. U.S. 10-yr Treasury Bonds. c. U.S. 3-Month T-Bill. d. NAREIT Equity REIT. e. MSCI EAFE stock market index f. Citi World Government Bond Index ex. U.S. g. Gold monthly performance. h.

S&P GSCI Total Return Index. i. U.S. CPI.

U.S.

Equitiesa

U.S.



Bondsf

GSCI

Total

Returnh Goldg Inflationi

12 Month Return

(1/1/02 to 12/31/02)

40 Year Annualized Return

(1/1/72 to 12/31/12)

12 Month Return

(1/1/08 to 12/31/08)

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

0.0%

4.0%

8.0%

12.0%

16.0%

U.S.

Equitiesa

U.S.



Bondsf

GSCI

Total

Returnh Goldg Inflationi

PERFORMANCE OF

GLOBALLY DIVERSIFIED

STRATEGIES

25

26

DIVERSIFIED CONSERVATIVE PERFORMANCE (1/1/2002 – 8/31/2013)

a

$1.9M

$1.9M

$1.8M

Windhaven

Diversified

Conservative

Global

Conservative

Benchmarkb

Barclays U.S.

Aggregate

Bond Index

The graph shown is displayed as semilog along the y-axis to better compare cumulative portfolio performance across time.

a. The time period shown is the longest time period for which all three Windhaven® strategies existed concurrently.

b. The Global Conservative Benchmark is composed of 20% MSCI All Country World Index (ACWI), 75% Barclays U.S. Aggregate Bond Index, and 5% GSCI Total Return Index (GSCI), rebalanced monthly.

Performance of the Windhaven Diversified Conservative strategy is based on actual composite returns, net of all fees and expenses.

Past performance is not indicative of future returns and the value of investments and the income derived from them can go down as well as up. Future returns are not guaranteed and a loss of principal may occur. Please see additional explanatory

notes and disclosures at the end of this document. Indexes are unmanaged and do not incur management fees, costs, and expenses. Hypothetical growth of $1M assumes client was invested beginning 1/1/2002. Information is based on historical index

performance. You cannot invest directly in an index. Dividends and interest are assumed to have been reinvested, and the chart does not reflect the effects of taxes.

For information regarding the other Windhaven strategies and corresponding benchmarks, please see the appendix.

$0.5M

$1.0M

$2.0M

$0.5M

$1.0M

$2.0M

DIVERSIFIED GROWTH PERFORMANCE

27



b. The Global Growth Benchmark is composed of 55% MSCI ACWI, 40% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly.

c. Blended Benchmark is comprised of 60% S&P 500 Total Return Index and 40% Barclays U.S. Aggregate Bond Index.

Performance of the Windhaven Diversified Growth strategy is based on actual composite returns, net of all fees and expenses.





$2.3M

$2.0M

$1.9M

Windhaven

Diversified

Growth

Global

Growth

Benchmarkb

Blended

Benchmark

(60% U.S.

Equities, 40%

U.S. Bonds)c

(1/1/2002 – 8/31/2013)a

$0.5M

$1.0M

$2.0M

DIVERSIFIED AGGRESSIVE PERFORMANCE

28

(1/1/2002 – 8/31/2013)a

$2.7M

$2.0M

$1.8M

Windhaven

Diversified

Aggressive

Global

Aggressive

Benchmarkb

S&P 500 Total

Return Index



b. The Global Aggressive Benchmark is composed of 70% MSCI ACWI, 20% Citigroup WGBI, and 10% S&P GSCI Total Return Index, rebalanced monthly

Performance of the Windhaven Diversified Aggressive strategy is based on actual composite returns, net of all fees and expenses.





WINDHAVEN PERFORMANCE

a The time period shown is the longest time period for which all three Windhaven® strategies existed concurrently.

b Performance is based on the actual return of the respective Windhaven Diversified Composite, net of all fees and expenses.

c The Global Conservative Benchmark is comprised of 20% MSCI All Country World Index (ACWI), 75% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly.

d Blended Benchmark is comprised of 60% S&P 500 Total Return Index and 40% Barclays U.S. Aggregate Bond Index.

e The Global Growth Benchmark is composed of 55% MSCI ACWI, 40% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly.

f The Global Aggressive Benchmark is comprised of 70% MSCI ACWI, 20% Citigroup World Government Bond Index (CWGBI), and 10% S&P GSCI Total Return Index, rebalanced monthly.

Indexes are unmanaged and do not incur management fees, costs, and expenses. Benchmark Data source: Bloomberg.

Past performance is not indicative of future returns. Please see back cover for important information regarding portfolios and benchmarks.

29

Compound Annual Returns: (as of 8/31/2013)Last 12

monthsLast 3 years Last 5 years Last 10 years Since 1/1/2002

a

Windhaven Diversified Conservativeb 0.4% 3.8% 3.1% 5.0% 5.5%

Barclays U.S. Aggregate Bond Index -2.5% 2.6% 4.9% 4.8% 5.0%

Global Conservative Benchmarkc 1.0% 4.9% 4.4% 5.5% 5.6%

Windhaven Diversified Growthb 4.0% 7.7% 4.2% 6.9% 7.4%

Blended (60% U.S. Equities, 40% U.S. Bonds)d 9.9% 12.1% 6.8% 6.5% 5.4%

Global Growth Benchmarke 7.2% 8.1% 4.1% 6.5% 5.9%

Windhaven Diversified Aggressiveb 6.6% 9.4% 4.9% 8.2% 8.8%

S&P 500 Total Return Index 18.7% 18.4% 7.3% 7.1% 5.2%

Global Aggressive Benchmarkf 9.3% 9.4% 2.7% 6.8% 6.2%

LONG-TERM CUMULATIVE PERFORMANCE

Diversified Conservativeb

Barclays Agg Bond Index

Global Conservative Benchmarkc

Diversified Growthb

60/40 Blended Benchmarkd

Global Growth Benchmarke

Diversified Aggressiveb

S&P 500 Total Return Index

Global Aggressive Benchmarkf

Windhaven strategies since 2002a

Windhaven Strategies Total Returns:

1/1/2002 through 8/31/2013a


b. Performance is based on the actual return of the respective Windhaven Diversified Composite, net of all fees and expenses. c. The Global Conservative Benchmark is comprised of 20% MSCI All Country World Index (ACWI),

75% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly. d. Blended Benchmark is comprised of 60% S&P 500® Total Return Index and 40% Barclays U.S. Aggregate Bond Index. e.

The Global Growth Benchmark is composed of 55% MSCI ACWI, 40% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly. f. The Global Aggressive Benchmark is comprised of 70%

MSCI ACWI, 20% Citigroup World Government Bond Index (CWGBI), and 10% S&P GSCI Total Return Index, rebalanced monthly.

Indexes are unmanaged and do not incur management fees, costs, and expenses. Benchmark Data Source: Bloomberg.

Past performance is not indicative of future returns. Please see back cover for important information regarding portfolios and benchmarks.

30

87.6%

129.2%

167.8%

77

.6%

85

.4%

79

.7%

88

.1%

95

.4%

10

2.8

%

Windhaven Strategies

Domestic Benchmark

Global Benchmark

TAKEAWAYS FROM TODAY’S DISCUSSION

31

Central banks utilize monetary policy to attempt to influence their nations’

economies.

Controlling interest rates is one of the primary tools central banks have at their

disposal.

Interest rates can have a dramatic impact on global asset classes. Understanding

this impact is key to constructing a portfolio which has the potential to benefit from

interest rate change.

Windhaven analyzes the effects of global interest rates as one piece of research

and modeling. Findings are incorporated into the Windhaven strategies.

THANK YOU

Windhaven Investment Management, Inc.

One International Place

33rd Floor

Boston, MA 02110

32

RISK/RETURN METRICS – ACTUAL

a The time period shown is the longest time period for which all three Windhaven strategies existed concurrently. b The blended benchmark combines the S&P 500 Total Return and the Barclays U.S. Aggregate Bond indices. c Global Conservative

consists of 20% ACWI, 75% Barclays U.S. Aggregate Bond Index and 5% S&P GSCI Total Return Index, rebalanced monthly. Global Growth consists of 55% ACWI , 40% Barclays U.S. Aggregate Bond Index and 5% S&P GSCI Total Return Index,

rebalanced monthly. Global Aggressive consists of 70% ACWI, 20% CWGBI and 10% S&P GSCI Total Return Index, rebalanced monthly. d The time period shown here is short. Maximum drawdown is calculated as the worst cumulative peak-to-

trough decline from any month-end data point to any other month-end point. Diversified Conservative - We would anticipate potential drawdowns in the Diversified Conservative strategy could be in the range of 10% or more. The actual Maximum

Drawdown since inception (2001) of this strategy was -10.4%. Maximum drawdown for the Barclays U.S. Aggregate Bond Index was -12.7% (August 1, 1979 – February 29, 1980). Maximum drawdown for Global Conservative was -15.1% (June

1, 2008 – February 28, 2009). Diversified Growth - We would anticipate potential drawdowns in the Diversified Growth strategy could be in the range of 25% or more. The actual Maximum Drawdown since the inception (1996) of this strategy was

-25.4%. Maximum drawdown for the Blended benchmark was -32.5% (November 1, 2007 – February 28, 2009). Maximum drawdown for Global Growth was -35.4% (November 1, 2007 – February 28, 2009). Diversified Aggressive - The time

period shown here is short. We would anticipate the potential drawdowns in this strategy could be in the range of 35% or more. The actual Maximum Drawdown since the inception (2002) of this strategy was -33.3%. Maximum drawdown for the

S&P 500 Total Return Index was -50.9% (November 1, 2007 – February 28, 2009). Maximum drawdown for Global Aggressive was -45.6% (November 1, 2007 – February 28, 2009). e The up and down capture is a measure of how well a manager

was able to replicate or improve on phases of positive benchmark returns (up capture), and how badly the manager was affected by phases of negative benchmark returns (down capture). Note that a negative Down Capture suggests an average

positive annualized return for the manager during the benchmark’s negative months.

Past return and risk statistics are not indicative of future return and risk. Please refer to the additional explanatory notes and disclosures section at the end of this presentation for definitions of key terms. Benchmark Data Source: Bloomberg

33

(1/1/2002 - 8/31/2013a)

Risk/Return MetricWindhaven

Diversified

Conservative

Barclays U.S.

Aggregate

Bond Index

Global

Conservative

Benchmarkc

Windhaven

Diversified

Growth

Blended (60%

Equities, 40%

Bonds)b

Global Growth

Benchmarkc

Windhaven

Diversified

Aggressive

S&P 500 Total

Return Index

Global

Aggressive

Benchmarkc

Compound Annual

Return5.5% 5.0% 5.6% 7.4% 5.4% 5.9% 8.8% 5.2% 6.2%

Maximum Drawdownd -10.4% -3.8% -15.1% -25.4% -32.5% -35.4% -33.3% -50.9% -45.6%

Beta to S&P 500 Total

Return Index0.19 -0.02 0.23 0.45 0.59 0.60 0.59 1.00 0.80

Volatility (Annual

Standard Deviation)5.2% 3.6% 4.8% 9.1% 9.2% 9.9% 11.2% 15.3% 13.3%

Sharpe Ratio 0.72 0.89 0.77 0.61 0.39 0.41 0.62 0.22 0.33

Alpha to S&P 500 3.1 3.4 3.1 4.1 1.7 2.1 5.0 0.0 1.8

Up Capture to S&P 500

Total Return Indexe 28% 9% 28% 56% 60% 61% 74% 100% 80%

Down Capture to S&P

500 Total Return Indexe 13% -19% 13% 43% 59% 58% 58% 100% 76%

WINDHAVEN EVALUATES A

LARGE UNIVERSE OF ASSET CLASSES EQUITY FIXED INCOME REAL ESTATE HARD ASSETS* CURRENCY

U.S.

• Total Market

• Large Cap

• Small Cap

• Dividend Appreciation

• NASDAQ 100

• Gov’t Treasury Bonds

• Gov’t Treasury Notes

• Gov’t TIPS

• Aggregate Bonds

• Investment Grade Corp. Bonds

• High Yield Bonds

• NAREIT Equity ----- • US Dollar T-Bills

• Short Maturity (<1yr)

GLOBAL

• Europe, Australasia and

the Far East (EAFE)

• Emerging Markets Large

Cap

• Emerging Markets Small

Cap

• Global Gov’t ex-U.S. Bonds

• Global Gov’t ex-U.S. Inflation-

linked Bonds

• Emerging Markets Local

Currency Bonds

• Emerging Market USD

Denominated Bonds

• Asian (ex. Japan) Local Currency

Bonds

• Global Real Estate

ex North America

• Fixed Commodity

Basket

• Dynamic

Commodity Basket

• Gold

• Emerging Market

T-Bills

INTERNATIONAL

DEVELOPED

• Germany

• United Kingdom

• Japan

• German Gov’t Bonds

• Japan Gov’t Bonds ----- -----

• Euro T-Bills

• Pound T-Bills

• Yen T-Bills

INTERNATIONAL

EMERGING

• Singapore

• Hong Kong

• China

• India

• Brazil

• S. Korea

----- ----- -----

• Chinese Yuan T-Bills

• Indian Rupee T-Bills

• Brazilian Real T-Bills

34

Not actual investments. The asset classes shown here cannot be invested in directly, so Windhaven uses exchange-traded funds (ETFs), exchange-traded notes (ETNs), registered funds, and individual securities to implement

the investment strategy. These investment vehicles have their own associated fees and costs and will not exactly match the performance of the index they represent.

* Hard assets are physical assets.

WINDHAVEN STRATEGIES

35

Model Allocation as of August 2013. Allocation does not necessarily reflect our current investment views and should not be used as the basis for investment decisions. Holdings of individual client portfolios may differ, sometimes significantly, from

those shown in the model allocations. Allocations are subject to change without notice. The indices shown here are not investable, so Windhaven uses ETFs, ETNs, registered funds and individual securities to implement the investment strategy.

These investment vehicles have their own fees and costs associated with them and will not exactly match the performance of the index they represent.

Cash investments are highly liquid, short term securities and may include, but are not limited to, U.S. government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper, and other money market instruments.

Windhaven Diversified Conservative

Wilshire 5000

S&P 500 Russell 2000

Nasdaq 100

Dividend Appreciation

S&P 500 Low Volatility

DAX

FTSE 100

Japan Hedged Equity

U.S. REITs

Gold

DB Commodity Index

U.S. High Quality Corp Bonds

1-3yr Corporate

U.S. Aggregate Bond Index

US Investment Grade Floating Rate

Notes

U.S. Managed Cash

U.S. T-Notes

U.S. T-Bonds U.S. TIPS

Cash Investments***


36





Windhaven Diversified Growth

Wilshire 5000

S&P 500

Russell 2000

Nasdaq 100



EAFE

DAX

FTSE 100

Japan Hedged Equity

Emerging Mkt Equities Emerging Mkt

Consumer Equities U.S. REITs

Gold

DB Commodity Index

Asian Local Bonds

U.S. Short Duration High Yield Bonds


1-3yr Corporate



Cash Investments****


37





Windhaven Diversified Conservative Windhaven Diversified Growth Windhaven Diversified Aggressive

Wilshire 5000

S&P 500 Russell 2000

Nasdaq 100



DAX

FTSE 100

Japan Hedged Equity

U.S. REITs

Gold

DB Commodity Index


1-3yr Corporate


US Investment Grade Floating Rate

Notes

U.S. Managed Cash

U.S. T-Notes


Cash Investments*** Wilshire 5000

S&P 500

Russell 2000

Nasdaq 100



EAFE

DAX

FTSE 100

Japan Hedged Equity

Emerging Mkt Equities Emerging Mkt

Consumer Equities U.S. REITs

Gold

DB Commodity Index

Asian Local Bonds

U.S. Short Duration High Yield Bonds


1-3yr Corporate



Cash Investments****

Wilshire 5000

S&P 500

Russell 2000

Nasdaq 100


S&P 500 Low Volatility EAFE DAX

FTSE 100

Japan Hedged Equity

Emerging Mkt Equities

Emerging Mkt Consumer Equities

U.S. REITs

Gold

DB Commodity Index

Asian Local Bonds

U.S. High Quality Corporate Bonds 1-3yr Corporate

U.S. T-Bonds

Cash Investments***

BROAD ALLOWABLE ASSET CLASS RANGES

Provides greater flexibility and a more dynamic approach to

portfolio management

Asset class ranges are subject to change without notice at the discretion of Windhaven Investment Management, Inc.

Note: Short term cash positions whether in US dollars or other currency are included in relevant fixed income section. In between rebalancing periods, minimum and maximum ranges may be exceeded based on market activity.

The categories used in this report may include a variety of market exposures. For instance, Hard Assets includes exposures to gold, various types of commodities and energy.

Holdings of individual client portfolios may differ, sometimes significantly, from those shown in the model allocations.

See additional explanatory notes and disclosures at the end of this document.

38

ASSET CLASSESDIVERSIFIED

CONSERVATIVE

DIVERSIFIED

GROWTH

DIVERSIFIED

AGGRESSIVE

U.S. Equities 2 – 24% 12 – 45% 20 – 60%

Non-U.S. Equities 0 – 28% 2 – 48% 4 – 62%

Equity Range 2 – 34% 19 – 64% 28 – 88%

U.S. Fixed Income 59 – 93% 24 – 71% 2 – 60%

Non-U.S. Fixed Income 0 – 28% 0 – 43% 0 – 56%

Fixed Income Range 59 – 93% 27 – 74% 5 – 64%

Hard Assets 3 – 17% 4 – 24% 4 – 30%

Real Estate 0 – 14% 0 – 19% 0 – 24%

J F M A M J J A S O N D

2002 0.6% 1.3% 1.9% 1.0% 1.7% -1.8% -2.1% 2.1% -0.3% -0.9% 0.8% 2.4% 6.8% 10.3% 5.1%

2003 0.4% 0.8% -1.4% 1.1% 3.8% 0.6% 0.0% 2.7% 0.9% 2.1% 2.1% 1.7% 15.8% 4.1% 10.7%

2004 -0.3% 1.9% 1.1% -4.9% 0.9% 0.0% -0.1% 1.2% 1.8% 1.1% 1.2% 0.3% 4.2% 4.3% 7.3%

2005 -0.8% 1.4% -0.6% -0.3% 0.6% 1.1% 0.7% 1.3% 1.0% -1.9% 1.4% 1.3% 5.4% 2.4% 5.3%

2006 2.7% -0.6% 0.9% 1.9% -1.2% 0.0% 1.0% 0.5% -0.2% 0.9% 2.3% 0.2% 8.5% 4.3% 6.6%

2007 0.1% 0.4% 0.6% 0.9% 0.3% -0.1% 0.4% 1.0% 3.3% 2.1% -0.3% -0.1% 8.8% 7.0% 9.2%

2008 0.7% 1.5% 0.3% 0.0% 0.3% -0.6% -0.9% -1.1% -1.7% -6.4% 2.1% 3.8% -2.3% 5.2% -8.7%

2009 -2.2% -1.7% 2.0% 0.4% 3.5% -0.3% 1.9% 0.3% 1.7% -0.5% 2.9% -1.4% 6.7% 5.9% 12.1%

2010 -1.0% 0.3% 0.5% 0.9% -1.9% 0.0% 1.1% 0.2% 2.6% 1.4% -1.2% 0.9% 3.8% 6.5% 8.4%

2011 -1.0% 0.8% 0.2% 2.4% -0.4% -0.7% 1.5% 0.4% -3.1% 2.4% -0.2% -0.3% 2.0% 7.8% 4.5%

2012 2.5% 0.4% 0.2% 0.6% -1.3% 0.9% 1.3% 0.7% 0.3% -0.5% 0.4% 0.2% 6.0% 4.2% 6.5%

2013 0.9% -0.1% 0.8% 1.6% -1.8% -2.2% 1.8% -1.0% -0.1%* -2.8%* -0.2%*


2002 0.4% 1.0% 2.9% 0.3% 1.4% -2.4% -4.0% 2.0% -1.3% -0.7% 1.9% 1.9% 3.1% -9.8% -5.6%

2003 0.1% 0.7% -1.4% 2.6% 5.4% 1.0% 0.9% 3.9% 0.7% 3.9% 3.3% 2.3% 25.8% 18.5% 21.0%

2004 -0.6% 2.3% 1.0% -6.0% 1.9% 0.2% -0.8% 1.3% 3.0% 1.7% 2.7% 1.0% 7.7% 8.3% 11.1%

2005 -1.5% 2.8% -1.2% -0.8% 0.8% 1.9% 2.0% 1.6% 2.0% -3.1% 2.4% 2.3% 9.4% 4.0% 8.3%

2006 4.6% -1.0% 1.6% 3.3% -2.6% -0.1% 1.1% 0.6% -0.4% 1.9% 3.5% 0.9% 14.0% 11.1% 12.2%

2007 0.0% -0.3% 1.2% 1.8% 1.3% 0.0% 0.1% 0.8% 5.5% 3.8% -2.6% -0.1% 11.9% 6.2% 10.9%

2008 -1.8% 1.6% -0.2% 1.5% 1.0% -2.3% -1.8% -2.2% -4.7% -11.2% -0.6% 5.0% -15.4% -22.1% -25.8%

2009 -4.6% -5.0% 3.4% 3.6% 6.5% -0.3% 4.0% 0.6% 2.8% -1.0% 4.3% -0.9% 13.2% 18.4% 22.1%

2010 -2.7% 1.2% 2.6% 1.3% -5.0% -1.2% 3.4% -1.2% 5.9% 2.4% -1.4% 2.8% 8.0% 12.1% 10.6%

2011 -1.2% 1.4% 1.0% 3.8% -1.3% -1.3% 1.5% -0.9% -6.1% 5.5% -0.3% -0.8% 0.7% 4.7% -0.8%

2012 4.4% 1.2% 0.5% 0.4% -3.2% 2.1% 1.5% 1.5% 1.1% -0.9% 0.8% 0.8% 10.5% 11.3% 10.7%

2013 2.0% -0.2% 1.5% 2.4% -2.1% -3.0% 3.4% -1.7% 2.1%* 8.3%* 3.8%*


2002 1.0% 1.3% 2.2% 0.4% 2.7% -2.7% -3.9% 2.4% -3.0% -0.3% 1.9% 1.6% 3.3% -22.1% -7.6%

2003 -0.1% 0.9% -1.0% 3.3% 5.7% 1.4% 1.9% 4.7% 0.3% 4.1% 3.4% 3.1% 31.2% 28.7% 29.2%

2004 -0.5% 3.0% 1.1% -7.0% 2.2% 0.2% -0.9% 1.1% 3.9% 1.8% 3.6% 1.2% 9.7% 10.9% 14.8%

2005 -1.8% 3.6% -1.7% -1.2% 0.9% 2.4% 3.0% 1.4% 2.9% -3.6% 3.1% 2.8% 12.1% 4.9% 8.8%

2006 5.8% -1.1% 2.8% 3.9% -3.6% -0.1% 1.1% 0.7% -0.2% 2.4% 4.1% 1.9% 18.8% 15.8% 14.1%

2007 0.0% -0.5% 2.0% 2.4% 2.3% 0.2% -0.3% 0.9% 7.0% 4.7% -4.0% -0.4% 14.7% 5.5% 13.7%

2008 -3.8% 1.5% -0.3% 2.4% 1.2% -3.5% -2.0% -2.6% -5.4% -12.7% -1.5% 5.1% -20.7% -37.0% -33.7%

2009 -6.3% -6.0% 4.5% 5.7% 7.9% -0.4% 5.3% 0.6% 3.5% -1.6% 4.8% 0.0% 18.2% 26.5% 25.9%

2010 -3.9% 1.7% 3.3% 1.2% -6.1% -2.0% 4.5% -2.1% 7.6% 2.8% -1.5% 4.2% 9.1% 15.1% 11.1%

2011 -1.3% 1.7% 1.2% 4.4% -1.9% -1.7% 0.9% -2.1% -8.1% 7.4% -0.5% -1.1% -1.8% 2.1% -3.9%

2012 5.4% 1.7% 1.0% 0.1% -4.7% 2.9% 1.4% 2.1% 1.7% -1.2% 0.8% 1.4% 13.0% 16.0% 11.6%

2013 2.5% -0.5% 2.1% 3.0% -2.0% -3.4% 4.3% -2.0% 3.8%* 16.2%* 5.4%*

Windhaven Diversified Aggressive Annual

Return

S&P 500

Total Return

Index

Global

Aggressive

Benchmarkb

Windhaven Diversified Conservative Annual

Return

Barclays U.S.

Agg. Bond

Index

Global

Conservative

Benchmarkb

Windhaven Diversified GrowthAnnual

Return

Blended

Benchmarka

Global Growth

Benchmarkb

WINDHAVEN COMPOSITE MONTHLY PERFORMANCE DATA

39

a. The blended benchmark combines the S&P 500 and the Barclays U.S. Aggregate Bond indices. b. Global Conservative Benchmark is comprised of 20% MSCI ACWI, 75% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index,

rebalanced monthly. Global Growth Benchmark is comprised of 55% MSCI ACWI, 40% Barclays U.S. Aggregate Bond Index, and 5% S&P GSCI Total Return Index, rebalanced monthly. Global Aggressive Benchmark is comprised of 70% MSCI ACWI, 20%

Citigroup WGBI, and 10% S&P GSCI Total Return Index, rebalanced monthly.

Performance of the Windhaven Composites is based on actual returns, net of all fees and expenses. Past performance is not indicative of future return. Benchmark Data Source: Bloomberg

* Partial year total return, not annualized.

Date range shown reflects the longest time period that all three Windhaven strategies existed concurrently. See additional explanatory notes and disclosures at the end of this document.

40

ADDITIONAL EXPLANATORY NOTES AND DISCLOSURES 1. Windhaven Investment Management, Inc. (“Windhaven”) and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

2. This presentation is neither an offer to sell nor a solicitation of an offer to buy any securities.

3. Past performance is not indicative of future returns and the value of investments and the income derived from them can go down as well as up. Future returns are not guaranteed and a loss of principal may occur.

4. The material in this presentation is based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. The material provided herein is for informational purposes only. Sources: Bloomberg, Global Financial.

5. Additional notes from page 24:

-We chose the year 2002 and 2008 as examples of short term periods in which equities performed very poorly. The purpose is to show that while equities declined, several other asset classes increased in value and there was a benefit to being broadly diversified. We do not mean to suggest that when equities decline these assets will always increase in value or that they will do so by the same percentages as shown. There are some time periods when nearly all asset classes decline simultaneously, but this is unusual.

-The selection of 1/1/72 as a start date for the time period of the bottom bar chart corresponds with the timing of the U.S. abandoning the gold standard, allowing its currency to float freely. We view this as the beginning of the modern investment environment in which we presently operate. The purpose of the bottom chart is to show that for long-term investors one could have made returns like the U.S. equity markets by owning a broadly diversified portfolio of asset classes since many asset classes did as well as U.S. stocks. We are suggesting that over the long term, investors do not have to take on the volatility of an all-equity portfolio to make “equity-like” returns. The top and bottom charts combined are meant to suggest that broad diversification will generally help investors experience less volatility in the short term, without giving up the opportunity to make solid returns over the long term. This notion is consistent with Modern Portfolio Theory.

6. Opinions expressed are current opinions as of the date appearing in this material only.

7. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. Reference to an index does not imply that the Windhaven strategy will achieve returns, volatility or other results similar to the index. The composition of a benchmark index may not reflect the manner in which a Windhaven strategy is constructed in relation to expected or achieved returns, investment holdings, asset allocation guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change over time.

8. Criteria for choosing the benchmarks for each Windhaven strategy are as follows: Diversified Conservative - The Barclays U.S. Aggregate Bond Index was chosen as the benchmark for the Diversified Conservative strategy because clients will generally use the Diversified Conservative strategy as a substitute for or a complement to a bond portfolio. Diversified Growth - A blended benchmark (60% S&P 500 Total Return Index and 40% Barclays U.S. Aggregate Bond Index) was chosen as the benchmark for the Diversified Growth strategy because clients will generally use the Diversified Growth strategy as a substitute for a "balanced fund." Our target risk for the Diversified Growth strategy is "balanced fund" risk. Diversified Aggressive - The S&P 500 Total Return Index was chosen as the benchmark for the Diversified Aggressive strategy because clients will generally use the Diversified Aggressive strategy as a substitute for or a complement to an all-equity portfolio.

9. The following global benchmarks for each Windhaven strategy were chosen for comparative purposes: Global Conservative – The Global Conservative benchmark is composed of 20% MSCI All Country World Index (ACWI), 75% Barclays U.S. Aggregate Bond Index, and 5% GSCI Total Return Index (GSCI), rebalanced monthly. Global Growth - The Global Growth benchmark is composed of 55% MSCI All Country World Index (ACWI), 40% Barclays U.S. Aggregate Bond Index, and 5% GSCI Total Return Index (GSCI), rebalanced monthly. Global Aggressive – The Global Aggressive benchmark is composed of 70% MSCI All Country World Index (ACWI), 20% Citigroup World Government Bond Index (CWGBI), and 10% GSCI Total Return Index (GSCI), rebalanced monthly.

10. The volatility of the benchmark indices may be materially different from the individual performance attained by a specific investor. In addition, strategy holdings may differ significantly from the securities that comprise the indices. The indices have not been selected to represent an appropriate benchmark with which to compare an investor’s performance, but rather are disclosed to allow for comparison of the investor’s performance to that of certain well-known and widely recognized indices.

11. You cannot invest directly in an index.

12. The Windhaven Diversified Conservative strategy performance, portfolio characteristics, portfolio volatility, and other portfolio data shown were derived from the Windhaven Diversified

Conservative Composite. The Windhaven Diversified Growth strategy performance, portfolio characteristics, portfolio volatility, and other portfolio data shown were derived from the Windhaven

Diversified Growth Composite. The Windhaven Diversified Aggressive strategy performance, portfolio characteristics, portfolio volatility, and other portfolio data shown were derived from the

Windhaven Diversified Aggressive Composite. Windhaven’s Diversified Conservative Composite includes all discretionary, fee paying accounts with the Diversified Conservative Strategy,

including those clients that are no longer with the firm. Windhaven’s Diversified Growth Composite includes all discretionary, fee paying accounts with the Diversified Growth Strategy, including

those clients that are no longer with the firm. Windhaven’s Diversified Aggressive Composite includes all discretionary, fee paying accounts with the Diversified Aggressive Strategy, including

those clients that are no longer with the firm.

41

ADDITIONAL EXPLANATORY NOTES AND DISCLOSURES 13. Accounts are included in each composite after the first full month of performance to the present or to the cessation of the client relationship with the firm. Investment results are time weighted

performance calculations representing total return. Composites are valued monthly and portfolio returns are asset weighted by using beginning of month market values plus weighted cash

flows. Monthly geometric linking of performance results is used to calculate annual returns. Total return figures, i.e., performance calculations, are calculated using trade date accounting. All

realized and unrealized capital gains and losses as well as all dividends and interest from investments and cash balances are included. Composite performance results are presented in United

States currency. The performance figures presented are net of brokerage commissions and all other expenses, including the firm’s investment advisory fee. The investment results shown are

not necessarily representative of an individually managed account's rate-of-return. Securities used to implement the strategies can differ based on account size, custodian, and client guidelines.

14. Performance results for the Windhaven strategies referred to herein and their respective benchmarks reflect total return figures. This means their performance includes the reinvestment of

dividends, interest and other earnings. Performance results for all periods are time-weighted based on monthly portfolio valuations.

15. Performance of each of the Windhaven strategies relative to its respective performance benchmark may have been impacted positively or negatively by economic and market conditions which

affect either the benchmark or the Windhaven strategy to a greater degree. For example, in 2002 and 2008, the S&P 500 Total Return Index declined over 20%. Since Windhaven’s Diversified

Growth and Diversified Aggressive strategies do not invest to the same extent as their benchmark in U.S. stocks, the impact of this decline on these strategies was less than on the benchmark.

See notes #8 and 9 on strategy benchmarks and their selection criteria.

16. Windhaven’s Diversified Conservative strategy does not invest solely in bonds, so its performance relative to the benchmark will be impacted by this difference. Windhaven’s Diversified Growth

and Diversified Aggressive strategies do not invest to the same degree as the benchmark in U.S. stocks, so their performance relative to the benchmark will be impacted by this difference.

17. Windhaven’s strategies may not invest to the same degree as their Global benchmarks in stocks, bonds and commodities, so their performance relative to the benchmark will be impacted by

this difference.

18. Windhaven’s strategies may invest more heavily in real estate and currencies than their Global benchmarks so their performance relative to the Global benchmarks may be impacted by this

difference.

19. Windhaven’s risk management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk or the ability to control risk.

20. Asset classes and the proportional weightings in the strategies may change at any time without notice subject to the discretion of Windhaven Investment Management.

21. Windhaven Investment Management does not provide tax advice to its clients. All investors are strongly urged to consult with their tax advisors regarding any potential investment.

22. This material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations

concerning the manner in which any client’s account should or would be handled, as appropriate strategies depend upon the client’s specific circumstances and investment objectives.

23. 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.

24. Investments in foreign assets may incur greater risks than domestic investments. Investing in emerging markets may accentuate these risks.

25. Hard assets can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.

26. Risks of REIT’s are similar to those associated with direct ownership of real estate, such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate

assets, supply and demand, and the management skill and credit worthiness or the issuer.

27. Windhaven Investment Management, Inc. is registered with the Securities and Exchange Commission. However, please note that in no way has the Securities and Exchange Commission

approved or endorsed Windhaven, its strategies or any of its marketing materials. Any representation to the contrary is a criminal offense.

28. Diversification strategies do not assure a profit and do not protect against losses in declining markets.

29. Windhaven Diversified strategies are available through Schwab’s Managed Account ConnectionTM program (“Connection”). Please read Schwab’s disclosure brochure for important information

and disclosures relating to Connection and Schwab Managed Account ServicesTM.

30. Portfolio management is provided by Windhaven, an affiliate of Charles Schwab & Co., Inc. (“Schwab”). Windhaven Investment Management, Inc. is a registered investment advisor and an

affiliate of Schwab.

31. Please refer to Windhaven’s ADV Part 2 for more information.

Glossary

1. Alpha – A measure of a fund's risk-adjusted return. Alpha can be used to measure the value added or subtracted by a fund’s manager. It is calculated by measuring the difference between a

fund's actual returns and its expected performance given its level of market risk as measured by beta. An alpha of 1.0 means the fund produced a return 1% higher per year than its beta would

predict. An alpha of –1.0 means the fund produced a return 1% lower per year.

2. Barclays U.S. Aggregate Bond Index – This market capitalization-weighted index (formerly the Lehman Brothers Aggregate Bond Index; name change November 1, 2008) includes Treasury

securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in the United States. Municipal bonds and Treasury Inflation-

Protected Securities are excluded due to tax treatment issues. On page 10 the U.S. Aggregate Bond Index refers to the Barclays U.S. Aggregate Bond Index.

42

ADDITIONAL EXPLANATORY NOTES AND DISCLOSURES 3. Beta – Beta measures the risk of a particular investment relative to the market as a whole (the “market” can be any index or specified benchmark). It describes the sensitivity of the investment

to broad market movements. For example, in equities, the stock market is assigned a Beta of 1.0. An investment which has a Beta of 0.5 will tend to participate in broad market movements but

only half as much as the overall market.

4. Citigroup World Government Bond Index - The Citigroup World Government Bond Index is a market capitalization weighted index consisting of the government bond markets. Country eligibility is determined based on market capitalization and investability criteria. All issues have a remaining maturity of at least one year.

5. Commodities –Any hard asset, such as grains, foodstuffs, livestock, oils, and metals, which are traded on the national exchanges.

6. Compound Annual Return (CAR) – The percentage that a given amount or number would need to increase each year over a multi-year period in order to reach a corresponding cumulative total.

7. Dax – The DAX is the Deutsche Boerse's blue-chip index containing the 30 largest German issues admitted to the Official Market or the Regulated Market at the Frankfurt Stock Exchange.

8. Deutsche Bank Global Government ex-US Inflation-Linked Bond Capped Index – The DB Global Government ex-US Inflation-Linked Bond Capped Index measures the total return performance of inflation-linked government bonds from developed and emerging market countries outside the United States.

9. Deutsche Bank Liquid Commodity Index - Optimum Yield Diversified Excess Return™ (or "DB Liquid Commodity Index") – is managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world.

10. Dow Jones UBS Commodity Index (DJ-UBSCI) – A commodities index composed of futures contracts on 19 physical commodities traded on U.S. exchanges. Employing both liquidity and dollar-adjusted production data to determine its individual component weightings, the DJ-UBSCI index differs from other commodities indexes, such as the S&P GSCI Total Return Index (GSCI), as it allows for varying component weightings but maintains restrictions such as maximum and minimum component weightings.

11. EAFE – The MSCI EAFE is a stock market index of foreign stocks, from the perspective of a North American investor. The index is market capitalization weighted and targets coverage of 85% of the market capitalization of the equity market of all countries that are a part of the index. It is maintained by Morgan Stanley Capital International; the EAFE acronym stands for "Europe, Australasia, and Far East".

12. Enhanced Short Maturity – This is an actively managed fund that seeks greater income and total return potential than money market funds, and may be appropriate for non-immediate cash allocations. Primarily invests in short duration investment grade debt securities. The average portfolio duration will vary based on economic forecasts and active investment process decisions, and will not normally exceed one year. Portfolio holdings are disclosed on a daily basis, and will not use options, futures, or swaps.

13. Exchange Traded Fund (ETF) - A fund that tracks an index, but can be traded like a stock.

14. Expected Inflation - Expected inflation = Treasury Yield - TIPS Yield

15. FTSE – The FTSE 100 Index is an index of the 100 largest companies (by market capitalization) in the United Kingdom.

16. Hang Seng – An index of the share prices of largest securities listed on the Hong Kong Stock Exchange. The index is weighted by market capitalization.

17. High Yield Bond – A bond with a lower credit rating than an investment grade bond. Because these bonds have a relatively higher risk of default, the yield that they pay is higher than that of

investment grade bonds.

18. Investment Grade Bond – A fixed income security that has been rated by a credit rating agency indicating a relatively low risk of default. In the case of Standard & Poor's ratings, bonds rated

either "AAA", "AA", "A", or "BBB" would be considered investment grade. Bonds rated below that are considered to have a greater risk of default and are therefore not considered investment

grade.

19. JP Morgan Government Bond Index Emerging Markets (GBI-EM) Global Diversified – This index is a comprehensive emerging market debt benchmark that tracks local currency bonds issued

by Emerging Market governments. GBI-EM Global is a benchmark that includes only those countries that are directly accessible by most of the international investor base.

20. JP Morgan Emerging Local Markets Index Plus (ELMI+) – This index tracks total returns for local-currency-denominated money-market instruments in the emerging markets.

21. JP Morgan Emerging Markets Bond Index – This index tracks the markets for Brady bonds and other similar sovereign restructured bonds of emerging market countries.

22. Maximum Drawdown – A measure of risk which captures the largest percentage drop of an investment from any peak to trough in a given period. It is generally calculated using month-end

data. It will show in percentage terms how much money you would have lost (as a percentage) until you return to the investment’s breakeven point. For example, if you began with a $100,000

investment and you lost $30,000 before that investment returns to its breakeven level, then your “maximum drawdown” would be measured as 30%.

23. MSCI All Country World ex-US Index (ACWI ex-US) – The MSCI All Country World ex-US Index (ACWI ex-US) consists of approximately 2,000 securities across 47 markets, with emerging

markets representing approximately 18%. MSCI attempts to capture approximately 85% of the market capitalization in each country.

24. MSCI All Country World Index (ACWI) – A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging

markets. As of June 2007 the MSCI ACWI consisted of 48 country indices comprising 23 developed and 25 emerging market country indices. The developed market country indices included

are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,

Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary,

India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

25. NAREIT – The NAREIT Equity REIT Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market.

43

ADDITIONAL EXPLANATORY NOTES AND DISCLOSURES 26. NASDAQ 100 – The NASDAQ-100 is a stock market index of 100 of the largest domestic and international non-financial companies listed on the NASDAQ stock exchange based on market

capitalization.

27. Nikkei – The Nikkei 225 Index is composed of the 225 largest stocks on the Tokyo Stock Exchange.

28. Real Earnings Yield – Earnings yield is defined as the earnings per share over the past 12 month period divided by the current market price per share. When the current rate of inflation is removed the result is real earnings yield.

29. Russell 2000 – The Russell 2000 Index is an index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index.

30. S&P 500 Index – The S&P 500 is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. The S&P 500 Total Return Index is the total return version of S&P 500 index. Dividends are reinvested on a daily basis. All regular cash dividends are assumed reinvested in the S&P 500 index on the ex-date.

31. S&P/Citigroup BMI Emerging Markets Small Cap (<2 Billion) Index - The S&P ® Emerging Markets Under USD2 Billion Index is a float adjusted market cap weighted index that represents the small capitalization segment of emerging countries included in the S&P Global BMI Index. The Global BMI Index captures the full universe of institutionally investable stocks in developed and emerging markets with float-adjusted market capitalizations of at least $100 million.

32. S&P GSCI Total Return Index (GSCI) – The S&P GSCI Total Return Index (GSCI) is a composite index of commodity sector returns, representing an un-leveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.

33. Sharpe Ratio – A return / risk ratio developed by William Sharpe. The return (numerator) is defined as the incremental average return over and above the risk-free rate (T-Bills). Risk (denominator) is defined as the standard deviation of these investment returns, i.e., portfolio manager return over and above the risk-free rate (T-Bills). This ratio is also known as the Information Ratio, where the benchmark return is being substituted for the risk-free rate. What you are looking for here is excess return generated per unit of risk. In other words, are returns generated by smart investment decisions or by taking on excess investment risk. In an investment analysis, a higher Sharpe Ratio would indicate a manager or an investment achieving higher rates of return per unit of investment risk.

34. Standard Deviation – Standard Deviation measures the dispersal or uncertainty in a random variable (in this case, investment returns). It measures the degree of variation of returns around the mean or (average) return. The higher the volatility of the investment returns, the higher the standard deviation will be. For this reason, standard deviation is often used as one measure of investment risk. A more volatile stock or investment would have a higher standard deviation.

35. U.S. TIPS, or Treasury Inflation-Protected Securities, are used to protect a fixed income investment from inflation. TIPS pay a fixed rate of interest. The value of the principal of a TIPS is adjusted semiannually, based on changes in the Consumer Price Index. The interest rate is applied to the inflation-adjusted principal, not the original face value. So, if inflation occurs throughout the life of your security, every interest payment will be greater than the one before it. The converse is true however, in the event of deflation. Upon maturity, Treasury will pay the greater of either the inflation-adjusted principal or the original face value.

36. Up Capture / Down Capture – The up and down capture is a measure of how well a manager was able to replicate or improve on phases of positive benchmark returns, and how badly the manager was affected by phases of negative benchmark returns. Up (Down) Capture is the average annualized return of Windhaven’s strategy during the months the respective benchmark is positive (negative) divided by the average positive (negative) annualized return of the benchmark. Note that a negative Down (Up) Capture suggests an average positive (negative) annualized return for Windhaven’s strategy during the benchmark’s negative (positive) months.

37. Wilshire 5000 – A total market index that holds more than 6,500 U.S. stocks.

9/11/2013

44

WINDHAVEN INVESTMENT MANAGEMENT, INC.

WINDHAVEN DIVERSIFIED CONSERVATIVE COMPOSITE

ANNUAL DISCLOSURE PRESENTATION

Windhaven Diversified Conservative Composite was constructed on March 31, 2005 and consists of fully discretionary accounts under the management of Windhaven Investment Management, Inc. (“Windhaven”) and its predecessor investment adviser

(including wrap accounts and accounts no longer with the firm) that are or were invested in what is now known as the Windhaven Diversified Conservative strategy. Windhaven maintains a complete list and description of composites, which is available

upon request. Past performance is not indicative of future results. Performance is expressed in U.S. Dollars.

The Windhaven Diversified Conservative strategy attempts to earn a return in excess of inflation over time while maintaining a focus on downside risk management. It is structured to benefit from economic prosperity while striving to protect against a

variety of economic scenarios, including recession, deflation, credit contraction, inflation and geopolitical uncertainties. The strategy provides diversification and balance and may have exposure to U.S. and international stocks, bonds, real estate, hard

assets and multiple currencies. However, equity exposure is modest, and emphasis is placed on fixed income securities.

The Charles Schwab Corporation acquired the assets of Windward Investment Management on November 10, 2010 and formed Windhaven, a new, wholly owned subsidiary. Windhaven is an investment adviser registered under the Investment

Advisers Act of 1940. The benchmark was changed starting January 1, 2008. The Diversified Conservative strategy was previously compared to the Ibbotson Intermediate-term U.S. Government Bond Index. The Barclays U.S. Aggregate Bond Index

is more widely used as a benchmark for measuring the performance of conservative portfolios and has more diversified holdings than the Ibbotson U.S. Intermediate-term Government Bond Index. The Global Conservative benchmark was added

February 1, 2011 for comparison purposes. The Global Conservative benchmark is composed of 20% MSCI All Country World Index (ACWI), 75% Barclays U.S. Aggregate Bond Index and 5% S&P GSCI Total Return Index (GSCI) and is rebalanced

monthly. The S&P GSCI is a composite index of commodity sector returns. The MSCI ACWI is net of withholding taxes. The withholding tax rates used for the MSCI ACWI Index are applicable to Luxembourg holding companies, as Luxembourg applies

the highest withholding tax rates. More information regarding the benchmarks shown is available upon request.

Performance is presented net of all expenses applicable to each account in the composite including, without limitation, the firm’s management fee, trading fees and brokerage commissions, (mark-ups and mark-downs,) and include the reinvestment of

all income. Wrap accounts managed by Windhaven are charged a program fee by their sponsors ranging from 25bps to 150bps. The wrap program fees generally include: investment management; custody and other administrative fees and sponsor

related trading costs (transaction costs for trades not executed by the sponsor may be charged separately). Net performance was calculated using actual expenses, including the actual management and/or wrap fee program fees charged. The annual

composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon

request.

Outside of the wrap programs in which Windhaven participates, Windhaven’s standard management fee is 1.00% on the first $5,000,000, 0.85% on the next $5,000,000, 0.75% on the next $15,000,000, 0.60% on the next $25,000,000, and 0.50% on the

remaining assets over $50,000,000. Windhaven also serves as a sub-advisor to third-party investment advisors, family offices, and broker-dealers. These accounts are included in the Windhaven Diversified Conservative Composite. Clients of third-

party firms pay an annual investment advisory fee to Windhaven between 0.50% and 0.80% depending on the individual account size, and the total of a specific third-party firm’s assets managed by Windhaven, and may also pay an advisory fee to the

third-party firm in addition to Windhaven’s investment management fee. Fees for sub-advisory work and introductions through intermediary channels are set at the discretion of Windhaven Investment Management. Actual investment advisory fees

incurred by clients may vary.

Windhaven Investment Management, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Windhaven Investment Management, Inc.

has been independently verified for the periods January 1, 2002 through December 31, 2011 by Ashland Partners & Company LLP. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS

standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Windhaven Diversified Conservative composite has been examined for the

periods January 1, 2002 through December 31, 2011. The verification and performance examination reports are available upon request.

Year

End

Total Firm

Assets

(millions)

% Wrap

Portfolios

Composite Assets

Composite

Net

Annual Performance Results 3 Yr. Standard Deviation*

USD

(millions)

Number of

Accounts

Barclays U.S.

Bond

Benchmark

Global

Conservative

Benchmark

Composite

Dispersion

Composite

Net

Barclays Agg

Bond

Global

Conservative

Benchmark

2011 8,585 82.6% 1,395 4,363 2.0% 7.8% 4.5% 0.4% 5.2% 2.8% 5.4%

2010 4,689 65.1% 714 1,166 3.80% 6.5% 8.4% 0.4% 6.5% 4.2% 7.4%

2009 3,480 5.3% 592 1038 6.7% 5.9% 12.1% 0.8% 6.4% 4.1% 7.1%

2008 2,446 2.8% 489 766 -2.3% 5.2% -8.7% 0.9% 5.8% 4.0% 5.9%

2007 1,835 1.3% 206 303 8.8% 7.0% 9.2% 0.6% 3.6% 2.8% 2.8%

2006 1,033 3.1% 143 240 8.5% 4.3% 6.6% 0.8% 4.6% 3.2% 3.1%

2005 539 0.0% 109 188 5.4% 2.4% 5.3% 0.8% 5.0% 4.1% 3.8%

2004 278 0.0% 95 162 4.2% 4.3% 7.3% 0.6% 5.4% 4.3% 3.7%

2003 167 0.0% 53 60 15.8% 4.1% 10.7% 0.6%

2002 73 0.0% 10 17 6.8% 10.3% 5.1% 0.5%

* 3-Year Standard Deviation is only shown where three years of data are available.

45


WINDHAVEN DIVERSIFIED GROWTH COMPOSITE


Year

End

Total Firm

Assets

(millions)

% Wrap

Portfolios

Composite Assets

Composite

Net


USD

(millions)

Number of

Accounts

Blended

Benchmark

Global

Growth

Benchmark

Composite

Dispersion

Composite

Net

Blended

Benchmark

Global Growth

Benchmark

2011 8,585 80.9% 4,002 12,053 0.7% 4.7% -0.8% 0.4% 10.7% 11.3% 12.2%

2010 4,689 62.9% 2,038 3,060 8.0% 12.1% 10.6% 0.4% 12.4% 13.6% 15.1%

2009 3,480 6.70% 1,456 2,685 13.2% 18.4% 22.1% 0.8% 11.7% 12.4% 13.9%

2008 2,446 1.70% 901 1,931 -15.4% -22.1% -25.8% 1.0% 10.2% 9.5% 11.2%

2007 1,835 0.90% 712 1,148 11.9% 6.2% 10.9% 0.7% 6.7% 4.6% 5.0%

2006 1,033 0.10% 448 822 14.0% 11.1% 12.2% 0.5% 7.1% 4.3% 4.8%

2005 539 0.00% 265 565 9.4% 4.0% 8.3% 0.4% 7.3% 5.6% 5.7%

2004 278 0.00% 118 277 7.7% 8.3% 11.1% 0.6% 7.5% 8.5% 7.7%

2003 167 0.00% 32 111 25.8% 18.5% 21.0% 1.2%

2002 73 0.00% 9 41 3.1% -9.8% -5.6% 0.7%

Windhaven Diversified Growth Composite was constructed on December 31, 2005 and consists of fully discretionary accounts under the management of Windhaven Investment Management, Inc. (“Windhaven”) and its predecessor investment adviser

(including wrap accounts and accounts no longer with the firm) that are or were invested in what is now known as the Windhaven Diversified Growth strategy. Windhaven maintains a complete list and description of composites, which is available upon

request. Past performance is not indicative of future results. Performance is expressed in U.S. Dollars.

The Windhaven Diversified Growth strategy seeks to achieve equity-like returns over full market cycles with less risk (risk is measured in terms of maximum drawdown and volatility). The strategy provides diversification and balance and may have

exposure to U.S. and international stocks, bonds, real estate, hard assets and multiple currencies.


Advisers Act of 1940. The benchmark was changed starting January 1, 2007 and then again January 1, 2008. The Diversified Growth Composite was previously compared to the S&P 500 Total Return Index and the Blended Index. The S&P 500 has

been removed. The target return and target risk level of the Windhaven Diversified Growth strategy is more closely aligned and correlated with the blended (60% S&P 500 Total Return/40% Barclays U.S. Aggregate Bond Index) benchmark than with

the S&P 500, which is 100% equities. Over time, the S&P 500 Index has experienced substantially higher drawdowns than the Windhaven Diversified Growth strategy. The blended benchmark is calculated on a monthly basis. The blended benchmark

previously used the Ibbotson Intermediate-term U.S. Government Bond Index. It now uses the Barclays U.S. Aggregate Bond Index which is more widely used as a benchmark. The Global Growth benchmark was added February 1, 2011 for

comparison purposes. The Global Growth benchmark is composed of 55% MSCI All Country World Index (ACWI), 40% Barclays U.S. Aggregate Bond Index and 5% S&P GSCI Total Return Index (GSCI). The S&P GSCI is a composite index of

commodity sector returns. The MSCI ACWI is net of withholding taxes. The rates used for the MSCI ACWI Index are applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The Global Growth Benchmark is rebalanced

on a monthly basis. More information regarding the benchmarks shown is available upon request.





request.


remaining assets over $50,000,000. Windhaven also serves as a sub-advisor to third-party investment advisors, family offices, and broker-dealers. These accounts are included in the Windhaven Diversified Growth Composite. Clients of third-party

firms pay an annual investment advisory fee to Windhaven between 0.50% and 0.80% depending on the individual account size, and the total of a specific third-party firm’s assets managed by Windhaven, and may also pay an advisory fee to the third-

party firm in addition to Windhaven’s investment management fee. Fees for sub-advisory work and introductions through intermediary channels are set at the discretion of Windhaven Investment Management. Actual investment advisory fees incurred

by clients may vary.



standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Windhaven Diversified Growth composite has been examined for the periods

January 1, 2002 through December 31, 2011. The verification and performance examination reports are available upon request.


46


WINDHAVEN DIVERSIFIED AGGRESSIVE COMPOSITE


Year

End

Total Firm

Assets

(millions)

% Wrap

Portfolios

Composite Assets

Composite

Net


USD

(millions)

Number of

Accounts

S&P 500 Total

Return

Global

Aggressive

Benchmark

Composite

Dispersion

Composite

Net

S&P 500 Total

Return

Global

Aggressive

Benchmark

2011 8,585 76.7% 2,598 6,873 -1.8% 2.1% -3.9% 0.4% 13.9% 18.7% 16.9%

2010 4,689 58.5% 1,571 2,352 9.1% 15.1% 11.1% 0.5% 15.3% 21.9% 20.1%

2009 3,480 2.6% 1,143 2,100 18.2% 26.5% 25.9% 0.8% 14.4% 19.6% 18.2%

2008 2,446 6.9% 781 1,622 -20.7% -37.0% -33.7% 0.9% 12.5% 15.1% 14.6%

2007 1,835 7.1% 705 1,032 14.7% 5.5% 13.7% 0.7% 8.7% 7.7% 7.0%

2006 1,033 2.2% 266 525 18.8% 15.8% 14.1% 0.9% 8.8% 6.8% 6.6%

2005 539 0.0% 81 176 12.1% 4.9% 8.8% 1.2% 8.6% 9.0% 7.7%

2004 278 0.0% 12 27 9.7% 10.9% 14.8% 1.2% 8.6% 14.9% 10.2%

2003 167 0.0% 31 11 31.2% 28.7% 29.2% N.A.

2002 73 0.0% 14 Five or Fewer 3.3% -22.1% -7.6% N.A.

Windhaven Diversified Aggressive Composite was constructed on March 31, 2005 and consists of fully discretionary accounts under the management of Windhaven Investment Management, Inc. (“Windhaven”) and its predecessor investment adviser

(including wrap accounts and accounts no longer with the firm) that are or were invested in what is now known as the Windhaven Diversified Aggressive strategy. Windhaven maintains a complete list and description of composites, which is available

upon request. Past performance is not indicative of future results. Performance is expressed in U.S. Dollars.

The Windhaven Diversified Aggressive strategy strives to aggressively exploit global capital market investment opportunities while exhibiting less volatility and maximum drawdown than conventional equity portfolios over full market cycles. The strategy

provides diversification and balance and may have exposure to U.S. and international stocks, bonds, real estate, hard assets and multiple currencies.


Advisers Act of 1940. The Windhaven Diversified Aggressive Composite is measured against the S&P 500 Total Return Index based on the approximate equivalent risk between the benchmark and the strategy. The Global Aggressive benchmark was

added February 1, 2011 for comparison purposes. The Global Aggressive benchmark is composed of 70% MSCI All Country World Index (ACWI), 20% Citigroup World Government Bond Index (CWGBI) and 10% S&P GSCI Total Return Index (GSCI).

The S&P GSCI is a composite index of commodity sector returns. The MSCI ACWI is net of withholding taxes. The rates used for the MSCI ACWI Index are applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The

CWGBI Index is not net of foreign withholding taxes. The Global Aggressive Benchmark is rebalanced on a monthly basis. More information regarding the benchmarks shown is available upon request.





request.


remaining assets over $50,000,000. Windhaven also serves as a sub-advisor to third-party investment advisors, family offices, and broker-dealers. These accounts are included in the Windhaven Diversified Aggressive Composite. Clients of third-party

firms pay an annual investment advisory fee to Windhaven between 0.50% and 0.80% depending on the individual account size, and the total of a specific third-party firm’s assets managed by Windhaven, and may also pay an advisory fee to the third-

party firm in addition to Windhaven’s investment management fee. Fees for sub-advisory work and introductions through intermediary channels are set at the discretion of Windhaven Investment Management. Actual investment advisory fees incurred

by clients may vary.



standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Windhaven Diversified Aggressive composite has been examined for the periods

January 1, 2002 through December 31, 2011. The verification and performance examination reports are available upon request.

N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.


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