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Understanding Your Mutual Fund Details

Prospectus

Availability

Quote

Morningstar Ratings

Growth Chart

Top Ten Holdings

Sector Weightings (Stock Funds)

Credit Rating (Bond Funds)

Performance

Risk & Tax Analysis

Porfolio Breakdown

Performance Quartile within category

Fund Facts

Fund Facts & Fees/Expenses

Order Cut-off Time

Market Capitalization Breakdown

Regional Exposure

Index Definitions

Frequently Asked Questions

  1. How is the price of a mutual fund share determined?
  2. What are mutual fund "cut off" times?
  3. What's the difference between a "load" fund and a "no-load" fund?
  4. Why do some fund details pages show a box titled "credit ratings" and some a category called "sector weightings"?

Terms

Prospectus

A legal document offering securities or mutual fund shares for sale. When you invest in a mutual fund, the prospectus will provide valuable information about the specific goals, fees, and practices of the fund. Federal and state securities regulators require that the prospectus include the fund's investment objectives, policies and restrictions, fees and expenses and how shares can be bought and sold. It should be read carefully prior to investing.

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Availability

A description identifying to whom the fund is available for purchase. As an example, some funds are only available to existing shareholders.

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Annual Dividend Return

The increase in value of an investment, expressed as a percentage per year. If the annual return is expressed as annual percentage yield, then the number takes into account the effects of compounding interest. If it is expressed as annual percentage rate, then the annual rate will usually not take into account the effect of compounding interest.

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NAV (Net Asset Value)

The total value of the assets, including stocks, bonds, and/or other securities, owned by a mutual fund, less all liabilities, divided by the number of outstanding shares. This value does not include any sales charges, such as a load or 12b-1 fee. The NAV is calculated once each day after the close of the market.

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Overall Rating (Risk-Adjusted Rating)

Morningstar proprietary ratings reflect historical risk-adjusted performance. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in distribution percentages.) The top 10% of the funds in an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating is a weighted average of the funds' three-, five-, and 10-year Morningstar rating metrics.

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Historical Return

The rate of return for a given mutual fund relative to all other funds within the same category. The designation is illustrated by a horizontal bar graph showing one of five designations from low to high.

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Historical Risk

This rating shows the volatility of a given mutual fund relative to all other funds within the same category. The rate of change is calculated for each fund in a given category and then the rates are compared to one another and assigned a designation from low to high. The level of risk is illustrated by a horizontal bar graph showing one of five bars highlighted.

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Morningstar Category

Morningstar's fund categories identify a fund based on the underlying securities in its portfolio. Domestic stock funds are categorized by the manager's investment methodology and the size of the companies in which the fund invests. International stock funds are defined by region. Bond funds are classified by tax status and time period for the fund's maturity or duration. Categories are assigned based on the fund's portfolio statistics and composition over the past three years.

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Historical Growth of $10,000

This graph represents the growth of a hypothetical $10,000 investment for the fund, the category average and a comparative index over a multi-year period. Total returns are adjusted for management, administrative and 12b-1 fees and other costs automatically deducted from fund assets. Total returns are not adjusted for sales loads and assume the reinvestment of capital gains and dividends.

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Top Ten Holdings

Presented in a list format with corresponding percentages, the "Top Ten Holdings" represent the 10 underlying securities that comprise the latest list of holdings in a mutual fund as reported by the fund.

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Sector Weightings

Presented in a list format with corresponding percentages, the sector weightings represent the percentage of a given fund's assets that are invested in the ten primary investment sectors as reported by the fund. The sectors are: consumer durables, consumer staples, energy, financials, industry cyclicals, services, retail, technology, health, and utilities.

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Credit Rating

This box shows a designated bond rating, such as "AA," followed by the percentage of the fund's total holdings that are comprised of bonds with that credit rating.

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Performance

The investment return and principal value of an investment will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance does not guarantee future performance. Indices are unmanaged, do not incur fees and cannot be invested in directly by and individual.

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Tax Efficiency

Tax efficiency is derived by dividing after-tax (or tax-adjusted) returns by pretax returns for the 3-year period. It excludes additional gains, taxes, or tax losses incurred upon selling a fund. The highest possible score would be 100%, which would apply to a fund that had no taxable distributions (such as many municipal-bond funds). Funds are assigned a score in the diagram based on the following tax efficiency percentage ranges: highest = 90% - 100%; above average = 80% - 89.9%; average = 70% - 79.9%; below average = 60% - 69.9%; lowest = 0% - 59.9%.

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Pre-Tax Returns

The Pre-Tax Total Return is the total return that an investor receives from investing in a mutual fund over a specific time period. It does not take into consideration any tax consequences for the investment. To calculate this number, we assume that all distributions paid by the fund are reinvested. This return is net of any fees and expenses paid by the investor.

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After-Tax Pre-Liquidation Total Return

Total return received by investing in a mutual fund over a specific time period. This number is calculated assuming the investor pays the maximum marginal federal income tax on every distribution made by the fund during the investment period, and that these distributions are reinvested. The calculation does not take into consideration the tax consequences for capital gains realized on a sale of shares. This return is net of any fees and expenses paid by the investor.

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After-Tax Post-Liquidation Total Return

Total return receive by investing in a mutual fund over a specific time period. This number is calculated assuming the investor pays the maximum marginal federal income tax on every distribution made by the fund during the investment period, and that these distributions are reinvested. At the end of the investment period, it is assumed that the investor sells the fund, pays any fee associated with selling the fund, and pays capital gain tax based on the maximum marginal federal income tax rate. This return is net of any fees and expenses paid by the investor.

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Tax Cost Ratio

Tax Cost Ratio represents the percentage-point reduction in returns that results from Federal income taxes (before shares in the fund are sold, and assuming the highest Federal tax bracket). Example: if a fund has a 10% pre-tax return, and taxes reduce that return to 9%, then the tax cost ratio is 1.00. 

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Mean

Investors have varying degrees of risk tolerance, yet they will always seek the maximum rate of return available on their investment. Mean is also commonly referred to as expected return, and is what an investor hopes to maximize for any given measure of risk.

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Standard Deviation (%)

A statistical measure of the historical volatility of a mutual fund or portfolio, usually computed using 36 monthly returns. More generally, a measure of the extent to which numbers are spread around their average.

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Sharpe Ratio (%)

A risk-adjusted measure developed by William F. Sharpe, calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance

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Beta (vs. S&P 500 Index)

Beta is a statistical measure that shows a fund's volatility relative to an index over the last 36 months. Equity funds are compared to the Standard & Poor's 500 Index. Bond funds are compared to the Lehman Brothers Aggregate index. By definition, the beta of the S&P 500 is 1.0. A fund with a beta of 1.10 tends to perform 10% better than the market in up markets and 10% worse in down markets. Usually, higher betas represent riskier investments. For funds that are not broadly diversified, a low beta may only indicate that the fund's volatility relative to the market is low, not that the fund has low risk.

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Alpha

Alpha is a measure of fund performance on a risk-adjusted basis. Alpha compares the risk-adjusted performance of a fund to a benchmark index (such as the S&P 500). The excess return of the fund relative to the return of the benchmark index is a fund’s alpha. A positive alpha means the fund has outperformed the index on a risk-adjusted basis.

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Convertibles

Securities which may be exchanged, by the issuer or the holder, for a given amount of a different, related security.

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Preferreds (Preferred Stock)

A class of stock that pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stockholders may have different voting rights. Not all securities have preferred stocks.

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Performance Quartile within Category

This provides a comparison of the fund's total annual return performance with other funds in its category. This calculation is based on all funds tracked by Morningstar in the given category. The fund's performance may fall into four categories: Top 25% (highest), Upper 50% (above average), Lower 50% (below average) and Bottom 25% (lowest). Total returns are adjusted for management, administrative and 12b-1 fees and other costs automatically deducted from fund assets. Total returns are not adjusted for sales loads.

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Fund Inception Date

The date a mutual fund commences operation.

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Schwab's Mutual Fund OneSource Select List™

The Mutual Fund OneSource Select List™ is Schwab's actively-managed list of carefully screened funds selected by the Schwab Center for Investment Research®. Funds chosen for the list have been rigorously screened to meet strict performance, risk and cost criteria. The funds are chosen for the list quarterly, performance data is updated monthly.

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30-day SEC Yield

The net investment income earned by a mutual fund over a 30-day period. The 30-day SEC Yield is expressed as an annual percentage rate based on the fund's share price. It is calculated by dividing the net investment income per share for the 30 days ended on the date of calculation by the maximum offering price per share on that date.

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Tax Equivalent Yield

A number showing the pretax amount that a taxable bond would have to pay to equal the yield of a tax-free bond. Calculate the Tax Equivalent Yield by subtracting your marginal tax bracket from 100, which gives you the tax bracket reciprocal. Then divide this number by the yield of the tax-free municipal bond. The resulting number is the yield which a taxable bond must pay to give you the same money after all taxes are paid. For the most part, the higher your tax bracket, the more attractive tax-free income becomes.

For example: Let's say you are in the 33% tax bracket and you are looking at a 7% tax-free bond. First, subtract 33 from 100, producing 67 (your tax bracket reciprocal) then, divide 7% by 67, which gives you a 10.4% yield. Now you know that you would need to find a taxable bond paying 10.4% to give you the same after-tax return as the 7% tax-free bond is offering.

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Average Maturity

"Maturity" is the length of time before a bond issuer must return the principal amount. There are two types of average maturity: Average weighted and Average effective. Average weighted maturity is a weighted average of the maturities of the bonds in a municipal bond fund's portfolio, compounded by weighing each maturity date (i.e., when the security comes due) by the market value of the security. Average effective maturity, used for taxable fixed income funds, is also a weighted average of all the maturities of bonds in a portfolio. Average effective maturity takes into consideration all mortgage payments, puts and adjustable coupons.

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Effective Duration

Effective duration is a measure of a fund’s interest-rate sensitivity. Longer duration indicates a fund that is more sensitive to shifts in interest rates. The relationship between funds with different durations is as follows: A fund with a duration of ten years is expected to be two times as volatile as a fund with a duration of five years.

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Annual Turnover

Turnover is a measure of the fund’s trading activity, and loosely represents the portion of a fund’s holdings that have changed over a year. A lower turnover ratio indicates a buy-and-hold strategy.

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Morningstar Style Box

The Morningstar Style Box™ reveals a fund’s investment strategy. For equity funds the vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style (value, blend, growth). For fixed-income funds the vertical axis shows the average credit quality of the bonds owned, and the horizontal axis shows interest rate sensitivity as measured by a bond’s duration (short, intermediate, long).

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Manager

The name of the fund manager and date when the manager or team began managing the fund.

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Index Funds

Mutual funds that seek to replicate the performance of established securities indices (e.g., Standard & Poor's 500® Index or Schwab 1000 Index®).

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Schwab Mutual Fund OneSource® service

A service that allows individuals to invest in mutual funds from many well-established fund companies without paying loads, transaction fees or commissions.

Schwab's Short Term Redemption Fee may be charged on each redemption of funds held for 90 days or less and bought through Schwab's Mutual Fund OneSource service with no transaction fee.

Trades in no load funds available through Mutual Fund OneSource® service (including Schwab Funds®), as well as certain other funds, are available without transaction fees when placed through schwab.com or our automated phone channels. Schwab reserves the right to change the funds we make available without transaction fees and to reinstate fees on any funds.

Charles Schwab & Co., Inc., member SIPC, receives remuneration from fund companies participating in the Mutual Fund OneSource service for recordkeeping and shareholder services and other administrative services. Schwab also may receive remuneration from transaction fee fund companies for certain administrative services.

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Maximum Sales Load

A sales load is like a commission investors pay when they purchase any type of security from a broker. Although sales loads most frequently are used to compensate outside brokers that distribute fund shares, some funds that do not use outside brokers still charge sales loads.

There are two general types of sales loads-a front-end sales load investors pay when they purchase fund shares and a back-end or deferred sales load investors pay when they redeem their shares.

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12b-1 Fees

A fee charged by the mutual fund company to pay for marketing, advertising and distribution services. The 12b-1 distribution fee ranges from 0.25% to 1.0% of the fund's assets.

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Redemption Fee

A charge imposed by the mutual fund if fund shares are sold within a certain period of time. The length of this holding period varies. See fund prospectus for details.

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Transaction fees

A fee charged for purchasing certain mutual fund shares. Transaction fees apply for each buy. Transaction fees may apply to certain no-load and low-load funds which do not participate in our Mutual Fund OneSource® service. Such funds are subject to Schwab's standard transaction fees in addition to any redemption fees imposed by the fund:

  Online Trades Automated Phone Trades Broker-Assisted Trades
Transaction Fee Funds1
(Buys)
$76.00 $76.00 Online fee+ $25.00
Transaction Fee Funds1
(Sells)
$0.00 $0.00 Online fee+ $25.00

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Gross Expense Ratio

This is the actual fund expenses as stated in the fund prospectus.

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Net Expense Ratio

This is the net fund expenses after any expenses were waived and/or partially absorbed by fund management.

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Short-term Redemption Fee

Schwab's short-term redemption fee will be charged on each redemption of funds bought through Schwab's Mutual Fund OneSource service (and certain other funds) that have been held for 90 days or less. Please note that funds, including Schwab Funds, may charge a redemption fee separate from and/or in addition to the OneSource STR fee.

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Automatic Investing

The Schwab Automatic Investment Plan is a payment option available for funds in Schwab's Mutual Fund OneSource service (Please speak to a Schwab Investment Consultant to find out about other funds that may be eligible). You can make automatic investments only in an eligible fund in which you are already a shareholder. Schwab's AIP will allow you to purchase additional fund shares in specific amounts for all funds twice a month, monthly or quarterly.

Automatic investing does not assure a profit or protect against loss in a declining market.

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Order Cut-off Time

When buying or selling most mutual funds available through Schwab, a 4:00 p.m. ET cutoff time applies, and pricing will be calculated at the close of the same business day on which you placed your trade. In some cases, however, earlier cutoff times apply. Also note that in a few cases, a 9:00 p.m. ET cutoff time applies and pricing is calculated at the close of the subsequent business day. For specific information on the cutoff time for a particular fund, view the Fund Summary report for that fund or call 800-435-4000. Please note that orders cannot be canceled or changed after the indicated cutoff time.

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Market Capitalization Breakdown

This shows the percent of the fund's stock holdings that fall into the giant-, large-, mid-, small-, and micro-cap classes, as determined by Morningstar. Giant-cap stocks are defined as the group that accounts for the top 40% of the capitalization of the market; large-cap stocks represent the next 30%; mid-cap stocks represent the next 20%; small-cap stocks represent the next 7%, and micro-cap stocks represent the remainder.

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Regional Exposure

This shows the percent of the fund's stock holdings that are invested in various geographic regions of the world, as determined by Morningstar. Some regions are separated into "developed" and "emerging." These assignments are based on per capita gross national income, as defined by the World Bank. The World Bank classifies countries as low income, middle income, upper middle income, and high income. With very few exceptions, the countries with high income are considered developed markets.

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Index Definitions

S&P 500 - The S&P 500 Index is a capitalization-weighted index of 500 widely traded stocks. Created by Standard & Poor's, it is considered to represent the performance of the stock market in general. It is not an investment product available for purchase.

S&P MidCap 400 - The S&P MidCap 400 represents the medium capitalization sector of the U.S. market. Created by Standard & Poor's, it is considered to represent the performance of mid-cap stocks generally. It is not an investment product available for purchase.

S&P SmallCap 600 - The S&P SmallCap 600 Index is a capitalization-weighted index consisting of 600 domestic stocks chosen for market size, liquidity and industry group representation. Created by Standard & Poor's, it is considered to represent the performance of small-cap stocks generally. It is not an investment product available for purchase.

S&P 500/BARRA Value - The S&P 500/BARRA Value Index is a capitalization-weighted index consisting of S&P 500 stocks that have lower price-to-book ratios and, in general, share other characteristics associated with "value" stocks. It is not an investment product available for purchase.

S&P 500/BARRA Growth - The S&P 500/BARRA Growth Index is a capitalization-weighted index consisting of S&P 500 stocks that have higher price-to-book ratios and, in general, share other characteristics associated with "growth" stocks. It is not an investment product available for purchase.

Schwab International Index® - This index includes common stocks of the 350 largest publicly traded companies from selected countries outside the United States. The selected countries all have developed securities markets. An index cannot be invested in directly.

Schwab 1000 Index® - This index includes the common stocks of the largest 1,000 publicly traded companies in the United States. An index cannot be invested in directly.
 
Schwab Small-Cap Index® - This index includes the common stocks of the second-largest 1,000 publicly traded companies in the United States, with size being determined by market capitalization (total market values of all shares outstanding). An index cannot be invested in directly.
 
Russell 1000 - The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies based on total market capitalization). Created by Frank Russell Company, it is not an investment product available for purchase.
 
Russell 1000 Growth - The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Created by Frank Russell Company, it is not an investment product available for purchase.
 
Russell 1000 Value - The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Created by Frank Russell Company, it is not an investment product available for purchase.

Russell 2000 - The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies based on total market capitalization). Created by Frank Russell Company, it is not an investment product available for purchase.

Russell 2500 - The Russell 2500 Index measures the performance of the 2,500 smallest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies based on total market capitalization). Created by Frank Russell Company, it is not an investment product available for purchase.
 
Russell 3000 - The Russell 3000 Index measures the performance of the 3,000 largest publicly traded U.S. companies based on total market capitalization. Created by Frank Russell Company, it is not an investment product available for purchase.
 
Russell Midcap Index - The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. Created by Frank Russell Company, it is not an investment product available for purchase.
 
NASDAQ Composite - The NASDAQ Composite is a market-capitalization price only index that reflects the aggregate performance of domestic common stocks traded on the regular NASDAQ market, as well as national market system traded foreign common stocks and ADRs. It is not an investment product available for purchase.
 
EAFE® - The MSCI Europe, Australasia, Far East (EAFE®) Index is a widely followed group of stocks from 20 developed market countries. It is not an investment product available for purchase.
 
MSCI Emerging Markets Free Index - The MSCI Emerging Markets Free (EMFSM) Index represents the performance of stocks in 25 emerging market countries available for investment by global investors. It is not an investment product available for purchase.
 
MSCI World Free Index - The MSCI World Free Index represents the performance of stocks in developed market countries (including the US) available for purchase by global investors. It is not an investment product available for purchase.
 
NYSE Utilities Index - The New York Stock Exchange (NYSE) Utilities Index is a capitalization weighted price-only index that measures the changes in the aggregate market value of NYSE common stocks which are classified as utility companies. It is not an investment product available for purchase.
 
DJWSI National Resources -The Dow Jones World Stock Index (DJWSI) consists of 29 countries and is divided into nine broad market sectors. The fund's benchmark index is based on the companies represented in two of these sectors - Basic Materials (excluding chemical companies) and Energy. It is not an investment product available for purchase.
 
Lehman Brothers Long-Term Government Securities - The Lehman Brothers Long-Term Government Securities Index is made up of public obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted issues, and all publicly issued debt of U.S. Government agencies and quasi-federal corporations, and corporate debt guaranteed by the U.S. Government with maturities greater than 10 years. It is not an investment product available for purchase.
 
Lehman Brothers Intermediate-Government/Corporate - The Lehman Brothers Intermediate Government/Corporate Index reflects price fluctuations of U.S. Treasury and government agency securities, corporate bonds and Yankee bonds with maturities of 1-10 years. It is not an investment product available for purchase.
 
Lehman Brothers Aggregate Bond - The Lehman Brothers Aggregate Bond Index reflects the price fluctuations of U.S. Treasury and government agency securities, corporate bond issues and mortgage-backed securities. It is not an investment product available for purchase.
 
Lehman Brothers 3-Year Municipal Bond - The Lehman Brothers 3-Year Municipal Bond Index is composed of more than 4,000 municipal bonds with maturities of 2 to 4 years and an average credit rating of AA1/AA2. It is not an investment product available for purchase.
 
Lehman Brothers 5-Year General Obligation - The Lehman Brothers 5-Year General Obligation (GO) Index is composed of more than 5,000 municipal bonds with maturities of 4 to 6 years and an average credit rating of AA1/AA2. It is not an investment product available for purchase.
 
Lehman Brothers Long-Term Municipal Bond - The Lehman Brothers Long-Term Municipal Bond Index is composed of more than 2,800 municipal bonds with maturities greater than 22 years. It has an average maturity of 27 years and an average credit rating of AA2/AA3. It is not an investment product available for purchase.
 
Wilshire REIT - The Wilshire REIT Index (Wilshire Real Estate Securities Index - REIT component) is a market capitalization-weighted index comprised of equity REITs. It does not include special purpose or healthcare REITs and is not an investment product available for purchase.
 
Wilshire 4500 - The Wilshire 4500 TR measures the performance of all U.S. headquartered equity securities with readily available price data, with the exception of S&P 500 securities. It is a total return capitalization weighted index with monthly values starting in December, 1983. It is not an investment product available for purchase.
 
Wilshire 5000 - The Wilshire 5000 Total Market Index measures the performance of all U.S. headquartered equity securities with readily available price data. Over 7,000 capitalization-weighted security returns are used to adjust the index. It is not an investment product available for purchase.

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FAQs

1. How is the price of a mutual fund share determined?

The price of a mutual fund share is determined using the Net Asset Value (NAV). The NAV is calculated by dividing the total assets of the mutual fund, including stocks, bonds or other securities owned by the fund, less liabilities, by the number of outstanding shares. The NAV does not include sales charges. Unlike stocks, the NAV of a given mutual fund is generally calculated only once a day after the market closes.

For a "no load" fund, you will pay the NAV per share. For a "load" fund you will pay the Public Offering Price (POP) which is the NAV plus the load.

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2. What are mutual fund "cut off" times?

To buy or sell a fund for the current trading day your order must be entered either on-line or with a Schwab representative by a trading deadline called the cut off time. For most funds, the cut-off is 4:00 p.m. EST. Some are earlier or later.

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3. What's the difference between a "load" fund and a "no-load" fund?

A "load" is a sales charge assessed by some mutual fund companies. A "no-load" fund does not assess a sales charge and other advertising and marketing fees (i.e., 12b-1 fees) in excess of .25% at either the purchase or sale of the fund shares.

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4. Why do some fund details pages show a box titled "credit ratings" and some a category called "sector weightings"?

The Portfolio detail page for a bond fund displays a category called "Credit Rating." This box shows a designated bond rating, such as "AA", "followed by the percentage of the fund's total holdings that are comprised of bonds with that credit rating.

 

A stock fund details page displays a box titled "Sector Weightings," which indicates the different industries represented in the portfolio. The sector, for example "Health Care", is listed on the left, followed by the percentage of the fund's holdings within that category.

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