Comparative Profile Managed Account Select Quarterly Highlights The S&P 500 Index was virtually flat in the second quarter, gaining 0.10% as concerns about the end of the Federal Reserve s QE2 program, the strength of the U.S. economy and a possible sovereign debt default by Greece, spooked investors. High gas prices and severe weather weighed on consumer spending and made recession-weary companies reluctant to hire employees or expand domestically. The result was severe market volatility and a slump in trading as some investors favored bonds over stocks and others fled to the sidelines. The Russell 1000 Value Index fell 0.50% and lagged the Russell 1000 Index as investors continued to favor growth over value. The healthcare and consumer staples sectors rallied as investors shifted towards defensive stocks amid fears of economic weakness. Cyclical sectors including financials, industrials and technology declined. Category Description Large-cap equity strategies typically invest in companies with market capitalizations above $10 billion. The large-cap segment accounts for approximately 80% of the market capitalization of the total U.S. investable universe. Value securities tend to have relatively lower P/B values versus the broader market. Securities in the financials, energy and industrials sectors are often characterized as value securities. Style Map Each ellipse reflects the approximate area covered by a manager s investment style. These assessments are based on a combination of the managers returns-based style analysis, portfolio characteristics, and written commentary. Eaton Vance Management Eaton Vance Large-Cap Value Tax-Neutral Parametric Portfolio Associates Eaton Vance Large-Cap Value Tax-Aware Lord, Abbett & Co. LLC Lord Abbett Large-Cap Value Columbia Management Investment Advisers, LLC Columbia Select Large-Cap Value Systematic Financial Management, L.P. Systematic Large-Cap Value TCW Investment Management Co. TCW Relative Large-Cap Value Small Cap Mid Cap Large Cap Value Core Growth Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. The diagram on this page reflects the approximate area covered by each manager's investment style. The assessment is based on a combination of the manager's returns-based style analysis, portfolio characteristics and written commentary. It is for illustrative purposes only. Prepared by Charles Schwab Investment Advisory, Inc. ("CSIA")
Firm and Strategy Overview (A) Eaton Vance Management Eaton Vance Large-Cap Value Tax-Neutral The Portfolio management team of the Eaton Vance Large-Cap Value Tax Neutral strategy seeks to invest in companies with strong business franchises and attractive growth potential which may be temporarily selling at discounted valuations. The investment team evaluates traditional measures of value, overall business health, and changes in business momentum in an attempt to capture market inefficiencies in the large cap stock universe. Sector constraints are designed to limit unintended portfolio risks and ensure style consistency, while attempting to highlight stock selection as the primary driver of relative performance over time. (C) Lord, Abbett & Co. LLC Lord Abbett Large-Cap Value Lord Abbett Large-Cap Value's portfolio managers strive to identify undervalued companies by applying fundamental research and quantitative valuation techniques. The research team focuses on valuation analysis based on modeling earnings in varying market environments, and on identifying catalysts which might enable a stock to outperform over a 12 to 18 month time horizon. The investment universe is approximately 750 domestic large-cap names, with the occasional use of foreign multinational equities which are traded on U.S. exchanges. (E) Systematic Financial Management, L.P. Systematic Large-Cap Value Systematic Large-Cap Value s portfolio management focuses on identifying undervalued companies which exhibit a combination of low forward price/earnings ratios and positive earnings catalysts. Sector constraints attempt to neutralize unintended risk while allowing the investment team to focus on bottom-up, fundamental security selection to drive performance. Over a full market cycle, the strategy's objective is to deliver returns which consistently place in the top half against the large-cap value peer universe. (B) Parametric Portfolio Associates Eaton Vance Large-Cap Value Tax-Aware Portfolio management team of the Eaton Vance Large-Cap Value Tax-Aware strategy seeks to invest in companies with strong business franchises and attractive growth potential which may be temporarily selling at discounted valuations. The investment team evaluates traditional measures of value, overall business health, and changes in business momentum in an attempt to capture market inefficiencies in the large-cap stock universe. Parametric Portfolio Associates focuses on optimizing the tax efficiency of each account by striving to balance returns and taxes using tax lot accounting, short-term gain deferrals, tax-aware withdrawals, and systematic loss harvesting. (D) Columbia Management Investment Advisers, LLC Columbia Select Large-Cap Value Portfolio management for Columbia Large-Cap Value believes that short-term market inefficiencies can create long-term investment opportunities. A cornerstone of the process is early identification of catalysts that can accelerate the rate of earnings growth. The resulting portfolio is relatively concentrated and benchmark agnostic. (F) TCW Investment Management Co. TCW Relative Large-Cap Value TCW Relative Large-Cap Value's portfolio management (TCW) focuses on "Value Poised for Growth" which means companies that are attractively valued, are experiencing low earnings growth versus the past, and contain a catalyst that has the potential to enhance the value of the company. At the time of purchase, stocks must meet one or more valuation screens including: price/cash flow, price/sales, price/book value or price/earnings equal to or below the market's characteristics. Ultimately, the investment team looks to build a risk-managed, diversified portfolio which attempts to minimize individual stock risk, and market- and sector-specific risk. Characteristics Product Weighted Price-to- Assets Number of % of Cash Investment Market Dividend Book P/E ($mm) Holdings Top Ten Turnover Weight (%) Cap($bn) Yield Ratio Ratio (A) Eaton Vance LCV TN 31,880 74 23.58% 35% 2.51% 96.08 2.19% 1.64x 12.85x (B) Eaton Vance LCV TA 130 73 24.92% 25% 5.66% 94.31 2.27% 1.71x 12.96x (C) Lord Abbett Large-Cap Value 18,193 80 27.04% 35% 4.63% 81.34 1.83% 1.59x 13.49x (D) Columbia Select Large-Cap Value 3,512 36 39.96% 5% 0.00% 48.61 2.03% 1.62x 13.19x (E) Systematic Large-Cap Value 3,495 92 28.74% 118% 0.97% 55.98 1.61% 1.55x 12.41x (F) TCW Relative Large-Cap Value 5,034 50 29.91% 21% 2.70% 57.20 1.82% 1.58x 13.85x Russell 1000 Value Index N/A 656 N/A N/A N/A 73.36 2.31% 1.49x 13.20x Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 2 of 12
Performance Returns for Periods Ended June 30, 2011 30% 20% 10% 0 Last Quarter Last Year Last 3 Years Last 5 Years Last 7 Years Last 10 Years Eaton Vance LCV TN - Gross 0.04 25.50-1.19 3.03 6.59 5.58 Eaton Vance LCV TN - Net -0.21 24.32-2.19 2.01 5.54 4.54 Eaton Vance Large-Cap Value Tax-Aware - Gross 0.40 25.91-1.21 2.88 N/A N/A Eaton Vance Large-Cap Value Tax-Aware - Net 0.15 24.73-2.20 1.86 N/A N/A Lord Abbett Large-Cap Value - Gross -3.00 28.03 3.09 2.12 4.23 4.78 Lord Abbett Large-Cap Value - Net -3.25 26.83 2.06 1.10 3.20 3.74 Columbia Select Large-Cap Value - Gross -2.25 32.24 4.45 4.53 7.12 4.39 Columbia Select Large-Cap Value - Net -2.50 31.01 3.41 3.49 6.06 3.35 Systematic Large-Cap Value - Gross -0.33 35.40 2.59 2.47 5.64 4.89 Systematic Large-Cap Value - Net -0.58 34.15 1.56 1.45 4.59 3.85 TCW Relative Large-Cap Value - Gross -2.05 35.37 4.09 1.22 4.44 4.92 TCW Relative Large-Cap Value - Net -2.30 34.12 3.05 0.20 3.41 3.88 Russell 1000 Value Index -0.50 28.94 2.28 1.16 4.43 3.99 Past performance is no guarantee of future results. Performance is shown both gross and net of the maximum Managed Account Select fee; performance does not reflect the payment of other fees. Performance of periods greater than one year is annualized. Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 3 of 12
Performance Annual Returns for Each Calendar Year Indicated 20% 0-20% -40% 2010 2009 2008 2007 2006 Eaton Vance LCV TN - Gross 11.60 17.73-33.22 12.87 20.35 Eaton Vance LCV TN - Net 10.51 16.59-33.96 11.78 19.21 Eaton Vance Large-Cap Value Tax-Aware - Gross 11.14 18.21-33.88 12.91 20.07 Eaton Vance Large-Cap Value Tax-Aware - Net 10.05 17.07-34.61 11.82 18.93 Lord Abbett Large-Cap Value - Gross 17.79 20.94-35.00 4.48 18.86 Lord Abbett Large-Cap Value - Net 16.66 19.78-35.72 3.45 17.72 Columbia Select Large-Cap Value - Gross 19.44 26.48-37.02 12.90 12.86 Columbia Select Large-Cap Value - Net 18.29 25.28-37.72 11.81 11.77 Systematic Large-Cap Value - Gross 18.11 23.41-39.97 8.43 17.60 Systematic Large-Cap Value - Net 16.97 22.23-40.65 7.37 16.47 TCW Relative Large-Cap Value - Gross 17.69 33.60-41.56-2.76 19.91 TCW Relative Large-Cap Value - Net 16.56 32.35-42.23-3.73 18.77 Russell 1000 Value Index 15.51 19.69-36.84-0.17 22.25 Past performance is no guarantee of future results. Performance is shown both gross and net of the maximum Managed Account Select fee; performance does not reflect the payment of other fees. Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 4 of 12
Performance Statistics Statistics Relative to Russell 1000 Value Index For 5 Years Ended June 30, 2011 Risk Value Added Tracking Downside Standard Information Sharpe Beta R-Squared Error Risk Deviation Alpha Ratio Ratio Eaton Vance LCV TN - Gross 0.87 0.93 5.81 10.43 19.09 1.69 0.23 0.07 Eaton Vance LCV TN - Net 0.87 0.93 5.81 15.30 19.09 0.69 0.05 0.02 Eaton Vance LCV TA - Gross 0.88 0.93 5.72 10.62 19.26 1.56 0.21 0.06 Eaton Vance LCV TA - Net 0.88 0.93 5.72 10.62 19.26 0.56 0.04 0.00 Lord Abbett Large-Cap Value - Gross 0.95 0.97 3.51 11.77 20.39 0.86 0.21 0.02 Lord Abbett Large-Cap Value - Net 0.95 0.97 3.51 11.77 20.39-0.14-0.08-0.03 Columbia LCV - Gross 1.03 0.94 5.61 15.40 22.39 3.52 0.62 0.13 Columbia LCV - Net 1.03 0.94 5.61 15.40 22.39 2.52 0.43 0.08 Systematic Large-Cap Value - Gross 0.98 0.94 5.06 14.17 21.39 1.38 0.24 0.04 Systematic Large-Cap Value - Net 0.98 0.94 5.06 14.17 21.39 0.38 0.05-0.01 TCW Relative Large-Cap Value - Gross 1.07 0.96 5.05 14.30 23.14 0.37 0.07-0.02 TCW Relative Large-Cap Value - Net 1.07 0.96 5.05 14.30 23.14-0.63-0.12-0.06 Russell 1000 Value Index 1.00 1.00 0.00 14.45 21.12 0.00 0.00-0.03 Absolute Risk Vs. Return For Five Years Ended June 30, 2011 Higher Return/Lower Risk Higher Return/Higher Risk Down Market vs. Up Market Capture Relative to Russell 1000 Value Index For Five Years Ended June 30, 2011 Return (%) 1 2 3 4 Up Market Capture (%) 90 100 110 120 Lower Return/Lower Risk Lower Return/Higher Risk 19 20 21 22 23 Standard Deviation (%) 85 90 95 100 105 Down Market Capture (%) Past performance is no guarantee of future results. Performance is shown both gross and net of the maximum Managed Account Select fee; performance does not reflect the payment of other fees. Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 5 of 12
Portfolio Holdings Sector Allocations 25% 20% 15% 10% 5% Consumer Consumer Health Staples Discretionary Industrials Energy Materials Technology Utilities Financials Telecom Care Eaton Vance LCV TN 7.86 8.16 9.32 13.80 3.91 9.00 3.65 25.65 3.67 12.45 Eaton Vance Large-Cap Value Tax-Aware 8.83 6.07 9.83 14.61 4.72 7.25 3.43 22.72 3.79 13.09 Lord Abbett Large-Cap Value 4.57 10.83 10.90 16.27 6.35 6.29 1.94 22.40 2.80 13.02 Columbia Select Large-Cap Value 12.84 9.15 15.70 16.11 6.15 3.56 2.36 22.34 0.00 11.79 Systematic Large-Cap Value 4.93 10.44 8.32 13.73 6.87 9.91 3.15 24.58 3.95 13.15 TCW Relative Large-Cap Value 6.41 11.41 12.10 14.53 5.26 17.30 2.38 16.53 3.94 7.44 Russell 1000 Value Index 7.17 9.03 9.43 12.38 2.86 8.65 6.80 26.68 4.71 12.30 Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 6 of 12
Portfolio Characteristics Charts on this page based on gross performance and 3-year rolling average. Beta 1.0 0.8 2008 2009 2010 2011 Alpha 5.0% 2.5% 0-2.5% 2008 2009 2010 2011 Sharpe Ratio 0.5 0-0.5-1.0 2008 2009 2010 2011 Eaton Vance Large-Cap Value Tax-Neutral Eaton Vance Large-Cap Value Tax-Aware Lord Abbett Large-Cap Value Columbia Select Large-Cap Value Systematic Large-Cap Value TCW Relative Large-Cap Value Russell 1000 Value Index Past performance is no guarantee of future results. Please note that all charts on this page are based on gross performance and a 3-year rolling period. Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 7 of 12
Performance Characteristics Charts on this page based on gross performance and 3-year rolling average. Rolling Standard Deviation 20% 10% 2008 2009 2010 2011 Information Ratio 1.00 0.50 0-0.50 2008 2009 2010 2011 Eaton Vance Large-Cap Value Tax-Neutral Eaton Vance Large-Cap Value Tax-Aware Lord Abbett Large-Cap Value Columbia Select Large-Cap Value Systematic Large-Cap Value TCW Relative Large-Cap Value Russell 1000 Value Index Please note that all charts on this page are based on gross performance and a 3-year rolling period. Please read carefully the section entitled Important Disclosures which contains more information about the significance and limitations of the information on this page. Page 8 of 12
Quarterly Profile Managed Account Select Important Disclosures This document is designed to assist in evaluating the money managers (MMs) in this investment style category in the Managed Account Select (Select) program of Charles Schwab &. Co., Inc. (Schwab). It should not be distributed or used for any other purpose. Select clients should read Schwab's Managed Account Services disclosure brochure and the single strategy profile (MM Profile) as well as the manager disclosure brochure and any supplements for the MMs named in this profile. Charles Schwab Investment Advisory, Inc. (CSIA), an affiliate of Schwab, compiled the information in this document from the MMs and the market index providers discussed in this document, and from other third party sources CSIA believes to be reliable. Based on portfolio data provided to CSIA by the MMs, the holdings-based characteristics within this document may be calculated by and sourced from Wall Street On-Demand (WSOD). Neither Schwab nor CSIA can guarantee that the information is accurate, complete or timely or that using this information will lead to any particular result. Schwab and CSIA are not affiliated with the MMs, the market index providers or WSOD. WSOD sourced quarterly attribution and portfolio analyses (Sector Allocations) are presented within this document to help segregate and measure the effects of sector allocations, relative weightings and individual securities on the total return of the portfolio for the indicated timeframe. Data presented within this document represent information based on average portfolio weights during the quarter. The information shown within this document is not exact and should be considered an estimate of the relative weightings versus the market index. The analysis may be based on a representative account or model portfolio holding information for each strategy provided by the MMs. Where based on a representative account, the MM has selected an account that the MM believes accurately reflects the strategy. Sector Allocations. The sector allocation information provided within the Sector Allocations table is generated through WSOD and is derived from portfolio holdings and benchmark information provided by the MMs and market index provider, respectively. Portfolio holding information provided by each of the MMs may be based on a representative account or the model portfolio for its strategy. The sector weightings shown within the table are calculated on a benchmark-relative basis as of the end of the period indicated versus the appropriate market benchmark for the strategy. An overweight sector allocation relative to the market index is indicated by a higher dot within the table whereas an underweight sector relative to the market benchmark is indicated by a lower dot within the table. The WSOD sourced analyses are based on end of period holdings and will not include individual securities that were not held in the model portfolio or representative account for the entire timeframe. The analysis may omit securities that were sold during the period and did have a greater positive or negative impact on total performance than identified within this document for the indicated timeframe. As a result, this analysis may vary from the MM s own discussions of quarterly or annual performance. Representative holdings and weights are subject to change at any time. Pricing information and attribution methodology utilized by WSOD may vary from the MM or other sources. The MM reported representative account or model portfolio may be different relative to the accounts used to calculate the MM composite return or from individual client portfolios depending on differences in security purchase price, date of account opening, and individual client restrictions, if applicable. This Comparative Profile should only be used in conjunction with the MM Profiles for these strategies. The MM Profile contains more complete information regarding the MM s investment process, strategy and performance. For more information concerning any index referenced here see the Definitions section of the MM Profile. Composite returns for the MM s strategy may differ from actual returns in specific client accounts during the same period. Performance is shown both gross and net of the maximum Select fee (1.00% annually for equity investment strategies; 0.65% for fixed income and index-based strategies). For purposes of showing net of fee performance in this profile, the maximum Select fee is deducted from the manager s quarterly performance. In an actual account, the fee calculation will be different because (i) the Select fee is deducted from a client s account monthly based on a daily calculation of the value of the assets in the account; and (ii) amount of the fee will vary depending on the amount of assets in the account as shown in the table below. Client Assets In Select % Equity %Fixed Income/Index Based First $250,000 1.00 0.65 Next $250,000 0.85 0.65 Next $500,000 0.80 0.60 Next $1 million 0.75 0.55 Next $3 million 0.70 0.50 Above $5 million 0.65 0.45 The Select fee includes the following services: the MM s services, MM research from CSIA, Schwab brokerage and custody services, and Schwab s program administration services. The Select fee does not include: Fees from the client s investment advisor Certain special fees, such as for wire transfers Dealer markups/markdowns Commission costs for trades executed by an outside broker-dealer Certain costs imposed by third parties, including odd-lot differentials, SEC and exchange fees, ADR fees, reorganization fees and similar charges. For more information on fees, see Schwab's Managed Account Services disclosure brochure. Several performance statistics were calculated using quarterly performance data that is gross of fees. Had net of fee performance data been used in these calculations instead, the following differences would occur: Alpha would have been lower due to fee deductions. Standard Deviation would potentially change, depending on the specific deviation from the benchmark. The deviation, measured for each quarter, would be higher if the strategy net performance was lower relative to the benchmark, while it would be lower if the net performance was higher than the benchmark. Absolute Risk vs. Return would show lower returns due to fee deductions. Risk, as measured by standard deviation, could be higher or lower as described above. Down Market vs. Up Market Capture would show a lower up market capture ratio, and a higher down market capture ratio. Benchmark. For purposes of simplicity, a single benchmark may be displayed in this comparative profile, even though a different benchmark is used by the MM or CSIA for purposes of displaying performance in presentations that relate only to the particular strategy. Please review the MM Profile for each MM strategy displayed in this profile to see the benchmark that CSIA would normally use for displaying performance for that strategy. CSIA has noted differences in rounding for the reported benchmark used in this material. In some cases this rounding method may result in a marginal variance Page 9 of 12
Quarterly Profile Managed Account Select Important Disclosures on the reported benchmark performance (as compared to that stated by other reporting services). This can have the effect of making the performance of the strategy look marginally better or worse than if the benchmark had been rounded differently. Indexes are unmanaged, do not incur management fees, costs and expenses (or "transaction fees or other related expenses"), and cannot be invested in directly. Important Risk Disclosures. Diversification strategies do not assure a profit and do notprotect against losses in declining markets. Risk management includes aneffort to monitor and manage risk, but should not be confused with and doesnot imply low risk or the ability to control risk. Investment concentration incertain sectors is subject to greater volatility and therefore a greater degree ofrisk than portfolios that are more diversified across sectors. Characteristics. The portfolio characteristics displayed for the component strategies may vary from that shown in the respective strategy's individual manager profile for the same quarter due to the fact that the data is generated on different dates. Schwab Advisor Services (formerly known as Schwab Institutional ) includes the custody, trading and support services of Schwab. Page 10 of 12
Quarterly Profile Managed Account Select Definitions The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 90% of the U.S. market. Russell and the Russell 1000 Index are either registered trademarks or trade names of Russell Investments in the U.S. and/or other countries. Russell Investments is the owner of the trademarks, service marks, and copyrights related to their indices. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Russell and the Russell 1000 Value Index are either registered trademarks or trade names of Russell Investments in the U.S. and/or other countries. Russell Investments is the owner of the trademarks, service marks, and copyrights related to their indices. Alpha measures a portfolio's return in excess of the market return, adjusted for any difference in volatility versus the market. It is a measure of the manager's contribution to performance with reference to stock selection. A positive alpha value indicates that a portfolio was positively rewarded for the additional risk the portfolio incurred that is not attributable to the market. For example, if the market's return over the risk-free return is 10% and the portfolio beta is 1.5, then the manager would have to have a return over the risk-free return greater than 15% to have contributed to performance above and beyond the performance of the market. Annualized Return describes the return gained, on average, each year of a multi-year period. It is a geometric average rate of return that, if achieved annually, would have produced the same cumulative return if performance had been consistent over the entire period. Beta seeks to measure the sensitivity of portfolio returns to movements in the market index. A portfolio's beta attempts to gauge the expected change in return per 1% change in the return on the market. For example, if the beta of a portfolio is 1.5, a 10% increase in the return on the market is expected to result, on average, in a 15% increase in the return on the portfolio. Conversely, a 10% decrease in the market's return is expected to result, on average, in a 15% decrease in the return on the portfolio. Cash Investments Weight (Cash Weight) indicates the value of the cash and cash investments portion of the portfolio as a percentage of the overall strategy portfolio as of the last business day of the quarter. The figure is considered a snapshot as of a particular date and may change depending on the actions of the investment manager and the overall market. Please note that the amount held in the portfolio as cash and cash investments will result in a negative yield to the extent the Select program fee exceeds the return on the cash and cash investments held in your account. Please ask your Investment Advisor/Schwab Consultant about current rates on cash and cash investments for your account. Charles Schwab Investment Advisory, Inc. (CSIA) is an affiliate of Charles Schwab & Co., Inc. CSIA began providing asset manager evaluation and research services for Managed Account Select on January 1, 2010. From 2008 until 2009, asset manager evaluation and research services were provided by the Schwab Center for Financial Research, a division of Charles Schwab, & Co. Inc. The dividend yield for a portfolio is the market value weighted average of each stock's total annual expected regular dividends (based on the most recent regular dividend rate) divided by the stock's price. The Down Market Capture % is a statistical measure that compares the Page 11 of 12 manager's performance relative to the index during declining markets. The % is calculated by dividing the manager's quarterly returns by the returns of the benchmark during the down-market periods, and multiplying that factor by 100. Downside Risk attempts to differentiate between upside and downside volatility. Whereas standard deviation treats both upside and downside volatility the same, the downside risk statistic measures only the standard deviation of returns that are below zero. Positive returns are assigned a deviation of zero. Both the frequency and magnitude of underperformance affect the calculation of downside risk. EPS (Earning Per Share) is a calculation of the company's profit divided by outstanding shares of common stock. EV/EBITDA is a ratio of enterprise value to EBITDA which is earnings before interest, taxes, deprecation and amortization. Enterprise value is calculated as a firm's market capitalization plus debt, minority interest and preferred shares, minus total cash and cash investments. EV/Sales is a valuation measure that compares the enterprise value of a company to the company's sales. Enterprise value is calculated as a firm's market capitalization plus debt, minority interest and preferred shares, minus total cash and cash investments. Forecasted earnings growth is the market value weighted average of each stock s mean of numerous third party analysts long-term (3-5 year) growth rate forecasts (as compiled by a third party provider of earnings data). It is expressed as the expected average annual growth of earnings in percentage terms. Information Ratio (Info Ratio Sample) measures the manager's excess return per unit of risk not attributable to the market. The information ratio measure is based on the sample standard deviation methodology where the denominator used to calculate standard deviation is (N-1), as opposed to the population standard deviation methodology of using (N) for the denominator. The (N-1) tends to increase the standard deviation slightly, making it a conservative estimate relative to the population methodology of calculating standard deviation. The market capitalization of a company is the product of the number of shares of common stock issued by the company at a specific point in time multiplied by the per share price. The median of a group, such as the returns of a style group, is the observation point at which half of the remaining observations are higher and the other half of the observations are lower. P/B (Price to Book value) for a portfolio is the market value weighted harmonic average of each stock's price divided by the book value. P/CF (Price to Cash Flow) is calculated by dividing a company's market capitalization by its operating cash flow. P/E (Price to Earnings) for a portfolio is calculated as the holding weighted harmonic average of each stock's price divided by the trailing twelve month moving earnings per share from the prior year using an inner quartile methodology that excludes outlier valuations. The percent in top ten measures the cumulative percentage weight that the top ten securities comprise within the overall portfolio. R-squared is a statistical measure that indicates the extent to which the variability of the portfolio returns is explained by a benchmark index. The value will be between 0 and 1; the higher the number, the greater the extent to which portfolio returns are related to the market return. For example, an r-squared value of.75 indicates that 75% of the fluctuation in a portfolios return is explained by market action. Note that the r-squared measures the strength, not
Quarterly Profile Managed Account Select Definitions the positive or negative direction, of the relationship between assets and the market. Returns are a standard measure of performance, represented as a percentage change in value for the indicated period that includes capital appreciation or depreciation as well as realized gains and losses and income. Returns for periods greater than 1 year are presented in an annualized, or per year, format (see annualized return). Risk statistics examine performance characteristics of a manager relative to a benchmark (market indicator) over a specified historical period. The main unit of analysis is the excess return, which is the portfolio return minus the return on a risk-free asset as represented by the returns on 3-month Treasury Bills. Risk vs. return is the relationship of return versus the variability of the return as measured by standard deviation. ROE (Return On Equity) is a calculation of net income as a percentage of shareholders equity. ROIC (Return On Invested Capital) is a calculation of net income minus dividends divided by total capital. Sharpe Ratio (Sharpe Sample) is a commonly used measure of risk-adjusted return. It is calculated by subtracting the risk-free return (3 Month Treasury Bill) from the portfolio return and dividing the resulting excess return by the portfolio's risk level (standard deviation). The result is a measure of return gained per unit of risk taken. The Sharpe Ratio measure is based on the sample standard deviation methodology where the denominator used to calculate standard deviation is (N-1), as opposed to the population standard deviation methodology of using (N) for the denominator. The (N-1) tends to increase the standard deviation slightly, making it a conservative estimate relative to the population methodology of calculating standard deviation. Standard deviation (Std Dev Sample) is a statistical measure of portfolio risk. It reflects the average deviation of the returns from their mean for the historical period being considered. Standard deviation is used as an estimate of risk since it measures the width of the range of returns. The standard deviation measure is based on the sample standard deviation methodology where the denominator for this calculation is (N-1), as opposed to the population standard deviation methodology of using (N) for the denominator. The (N-1) tends to increase the standard deviation slightly, making it a conservative estimate relative to the population methodology of calculating standard deviation. Tracking Error measures the standard deviation of the return differences between the money manager's portfolio for this style and the indicated benchmark over the period specified. The tracking error measure is based on the sample standard deviation methodology where the denominator for this calculation is (N-1), as opposed to the population standard deviation methodology of using (N) for the denominator. The (N-1) tends to increase the standard deviation slightly, making it a conservative estimate relative to the population methodology of calculating standard deviation. Turnover represents the value of the lesser of purchases or sales as a percentage of the average market value over the preceding 12 months, unless as noted otherwise in the disclosures section. The turnover for any given 12 month period may or may not lie within the expected range of the long-term average annual turnover. The Up Market Capture % is a statistical measure that compares the manager's performance relative to the index during positively performing markets. The % is calculated by dividing the manager's quarterly returns by the returns of the benchmark during the up-market periods, and multiplying that factor by 100. Weighted average market capitalization (Wt Av Mkt Cap) is the market value weighted average of all of the individual stock market capitalizations in the portfolio. Page 12 of 12