2021 Annual Report
New Products and Services—Highlights From 2021
|Invested in capabilities for newer investors with the launch of Schwab Starter Kit™|
|Expanded fixed income separately managed account strategies available to Charles Schwab & Co., Inc. clients with the
launch of 25 Wasmer Schroeder™ Strategies provided by Charles Schwab Investment Management, Inc.
|Introduced Schwab Ariel ESG ETF, the firm’s first ESG fund and first actively managed, semi-transparent (also referred to as
|Provided tailored solutions to independent Registered Investment Advisors aimed at serving them better than any other
custodian in the industry:
• Digital onboarding and account management
• Third-party integration ecosystem
• Modernized custodial platform
|Strengthened our banking and lending offer with an enhanced Investor Advantage Pricing tier|
|Launched My Financial Guide to help retirement plan participants save and invest using a financial health assessment that
leads to a customized plan for achieving their goals
|Introduced the Schwab Genesis Variable Annuity® and the Schwab Genesis Advisory Variable Annuity®—with costs that
are among the lowest in the industry
|Advanced TD Ameritrade integration to enhance the client experience across a range of client needs:
• Personalized onboarding and welcome experience
• Modernized trader experience on Schwab.com and mobile
• Enhanced features and scale to optimize clients’ channel of choice
Click here for important disclosures
Portfolio Management for the Wasmer SchroederTM Strategies is provided by Charles Schwab Investment Management, Inc. (“CSIM”). As of July 1, 2020, the portfolio management teams for the Wasmer Schroeder Strategies transitioned to CSIM, with CSIM assuming portfolio management services for the Strategies. CSIM is a registered investment adviser and an affiliate of Charles Schwab & Co., Inc. (“Schwab”). Both CSIM and Schwab are separate entities and subsidiaries of the Charles Schwab Corporation.
Investors should consider carefully information contained in the prospectus or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. You can obtain a prospectus or, if available, a summary prospectus by visiting schwabassetmanagement.com. Please read it carefully before investing.
Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares of ETFs are bought and sold at market price, which may be higher or lower than the net asset value (NAV).
The Schwab Ariel ESG ETF is an active semi-transparent ETF (also known as a non-transparent ETF) and has additional risks associated with it. These risks are discussed in the next four paragraphs.
Active semi-transparent ETFs operate differently from other exchange-traded funds (ETFs). Unlike other ETFs, an active semi-transparent ETF does not publicly disclose its entire portfolio composition each business day, which may affect the price at which shares of the ETF trade in the secondary market. Active semi-transparent ETFs have limited public trading history. There can be no assurance that an active trading market will develop, be maintained, or operate as intended. There is a risk that the market price of an active semitransparent ETF may vary significantly from the ETF’s net asset value and that its shares may trade at a wider bid/ask spread and, therefore, cost investors more to trade than shares of other ETFs. These risks are heightened during periods of market disruption or volatility.
Proxy Portfolio Risk: Unlike traditional ETFs, this fund does not disclose its portfolio holdings (Actual Portfolio) daily. The fund instead posts a Proxy Portfolio on its website each day. The Proxy Portfolio is designed to reflect the economic exposures and risk characteristics of the fund’s actual holdings on each trading day, but it is not the same as the fund’s Actual Portfolio. Although the Proxy Portfolio is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the Fund at or close to the underlying NAV per Share of the Fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the fund. ETF trading on the basis of a published Proxy Portfolio may trade at a wider bid/ask spread than ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and therefore may cost investors more to trade. Also, while the Fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Proxy Portfolio to identify a Fund’s trading strategy, which, if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders.
Proxy Portfolio Construction—The Proxy Portfolio is designed to recreate the daily performance of the Actual Portfolio. This is achieved by performing a “Factor Model” analysis of the Actual Portfolio. The Factor Model is comprised of three sets of factors or analytical metrics: market-based factors, fundamental factors, and industry/sector factors. The fund uses a “Model Universe” to generate its Proxy Portfolio. The Model Universe is comprised of securities that the fund can purchase and will be a financial index or stated portfolio of securities
from which fund investments will be selected. The results of the Factor Model analysis are then applied to the Model Universe. The Proxy Portfolio is then generated as a result of this Model Universe analysis, with the Proxy Portfolio being a small subset of the Model Universe. The Factor Model is applied to both the Actual Portfolio and the Model Universe to construct the fund’s Proxy Portfolio that performs in a manner substantially identical to the performance of its Actual Portfolio.
The Proxy Portfolio will only include investments the fund is permitted to hold. The fund’s SAI contains more information on the Proxy Portfolio and its construction. Proxy Portfolio and Proxy Overlap Information regarding the contents of the Proxy Portfolio and the percentage weight overlap between the holdings of the Proxy Portfolio and a Fund’s Actual Portfolio holdings that formed the basis for its calculation of NAV at the end of the prior Business Day (the Portfolio Overlap) are available by visiting the fund’s website.
Schwab Asset Management is the dba name for Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for Schwab Funds®, Schwab ETFsT,M and separately managed account strategies. Schwab Asset Management is a part of the broader Schwab Asset Management Solutions organization (SAMS), a collection of business units of The Charles Schwab Corporation aligned by a common function—asset management-related services—under common leadership. Schwab Funds are distributed by Charles Schwab & Co., Inc. (Schwab) Member SIPC. Schwab ETFs are distributed by SEI Investments Distribution Co. (SIDCO). CSIM and Schwab are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation, and are not affiliated with SIDCO.
Workplace Financial Services is a business enterprise which offers products and services through Schwab Retirement Plan Services, Inc.; Schwab Stock Plan Services; and Compliance Solutions. Schwab Retirement Plan Services, Inc., provides recordkeeping and related services with respect to retirement plans. Schwab Stock Plan Services is a division of Charles Schwab & Co., Inc. providing equity compensation plan services and brokerage solutions for corporate clients. Compliance Solutions comprises Schwab Designated Brokerage Services (DBS), a division of Charles Schwab & Co., Inc., and Schwab Compliance Technologies, Inc. (SchwabCT). DBS provides brokerage solutions for corporate clients who monitor their employees’ securities activity. SchwabCT provides technology solutions for corporate clients to help facilitate their compliance technology program implementation. Schwab Retirement Plan Services, Inc., Schwab Compliance Technologies, Inc., and Charles Schwab & Co., Inc. (“Schwab,” Member SIPC) are separate but affiliated entities, and each is a subsidiary of The Charles Schwab Corporation.
Protective and Protective Life refer to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life & Annuity Insurance Company (PLAIC).
The Schwab Genesis Variable Annuity® is issued by PLICO in all states except New York, where it is issued by PLAIC. Securities offered by Investment Distributors, Inc. (IDI), the principal underwriter for registered products issued by PLICO and PLAIC, its affiliates. PLICO is located in Nashville, TN; PLAIC and IDI are located in Birmingham, Alabama. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company.
Schwab Genesis is a flexible, premium deferred variable and fixed annuity contract issued under policy form series VDA-P-2006 (PLICO) and VDA-A-2006 (PLAIC). SecurePay Life benefits provided by rider form number VDA-P-6057 (PLICO) and VDA-A-6059 (PLAIC). Policy form numbers, product availability, and product features may vary by state.
Charles Schwab & Co., Inc. is a selling broker-dealer and general insurance agency and is not affiliated with the Protective Life Insurance Company or the Protective Life and Annuity Insurance Company. The contract is sold by Charles Schwab & Co., Inc. (“Schwab”) through its representatives and by Schwab’s affiliated General Insurance Agencies. All individuals selling this variable annuity must be licensed insurance agents and registered representatives.