Mutual Funds Glossary Aggressive Growth Funds Stock mutual funds that seek high growth through aggressive investment strategies. These funds generally buy stocks of emerging companies that offer the potential for rapid growth. Annual Dividend Yield (available on stock funds only) Income (dividends) for the last 12 months expressed as a percentage of the net asset value at the end of the most recent quarter. It does not include capital gains distributions. This yield is not determined by the standard SEC calculation (which is based on the 30-day SEC yield quoted for bonds). Asked or Offering Price The price at which a mutual fund's shares can be purchased. The asked priceincludes the current net asset value per share plus any sales charge. Assets Total assets are recorded in millions of dollars and represent the fund's total asset base, net of fees and expenses. Automatic Reinvestment A shareholder-authorized purchase of additional shares using dividends and capital gains distributions. Average Annualized Total Return Total return, adjusted for any sales charges (loads) and redemption fees, on a hypothetical investment in the fund over the periods shown, assuming all dividends and distributions are reinvested when paid. Five- and ten-year return and return since inception of the fund (if the fund is less than 10 years old) are average annual compounded rates of return. 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. Balanced Funds The objective of these funds is to preserve initial principal, provide current income and provide long-term growth of principal and income. These funds buy a mix of bonds, preferred stocks and common stocks. Bear Market A period during which security prices are generally falling. Beta A statistical measure that shows a fund's volatility relative to the S & P 500 Index over the last 36 months. 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. Bid or Sell Price The price at which a mutual fund's shares are redeemed, or bought back, by the fund. The bid price is usually the current net asset value per share. Blue Sky Laws A body of state laws governing registration and distribution of mutual fund shares. All 50 states and the District of Columbia regulate mutual funds. Not all funds are registered for purchase in all states, so it's important to review the fund's registration to make sure it's available in your state of residence. Bull Market A period during which security prices are generally rising. California State Municipal Bond Funds These funds seek current income and are exempt from both federal and California taxes. The funds generally buy California municipal securities. Category
A classification of funds according to the securities they hold. Domestic equity categories denote the market capitalization of companies held by the fund and the manager's investment style. International equity funds are categorized by region. Bond fund categories are defined by tax status as well as the time period for the fund's maturity or duration. Compounding Earnings on an investment's earnings. For example, if you invest $1,000 at a fixed rate of 5% per year, your initial investment is worth $1,050 after one year. During the second year, assuming the same rate of return, earnings are based not on the original $1,000 investment, but also on the $50 in first-year earnings. Over time, compounding can produce significant growth in the value of an investment. Contrarian Investor who thinks and acts in opposition to the conventional wisdom; when the majority of investors are bearish, a contrarian is bullish and vice versa. Current Yield This is the income earned on the fund's investments divided by the share price. It's calculated by dividing the net investment income during a 30-day period by the net asset value per share at the end of the period. The result is then annualized, providing for semiannual compounding of interest. Dollar Cost Averaging A program of investing a set amount on a regular schedule regardless of the price of the shares at the time. In the long run, dollar cost averaging results in your buying more shares at low prices than you do at high prices. Emerging Markets Funds These funds seek growth by investing in equity securities of issuers in developing markets. Includes all countries except the United States, Canada, Japan, Australia, New Zealand and Western Europe.International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, difference in financial accounting standards, currency fluctuations and political and economic instability. Equity Income Funds
These funds seek a high level of current income without undue risk. They buy primarily dividend-paying stocks, bonds, and/or bonds convertible into stocks of companies with long-term growth potential. Europe Equity Funds These funds invest primarily in equity securities of Western European issuers. International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, difference in financial accounting standards, currency fluctuations and political and economic instability. Flexible Portfolio Funds These funds seek to provide flexibility to anticipate or respond to market conditions. The funds invest in stocks, money market instruments, and/or bonds, depending on market conditions. Fund Inception Date The date the fund started. Fund Type The description of the fund's investment orientation which is generally stated in the fund's prospectus. Funds Available Without Transaction Fees Some funds are available through Schwab without a transaction fee but have high 12b-1 fees (more than 0.25%) and are not no-load funds. Therefore, they are not included in the Mutual Fund OneSource service. General Corporate Bond Funds (Long Term) This type of fund seeks a high level of income by primarily investing in bonds of corporations. The average maturity of the bonds in the portfolio is usually greater than 10 years. General Corporate Bond Funds (Short/lntermediate)
This type of fund seeks a high level of income by primarily investing in bonds of corporations. The average maturity of the bonds in the portfolio is usually less than 10 years. General Government Bond Funds (Long Term) These funds seek to provide current income and stability of principal by investing in a blend of U.S. government-backed securities. The average maturity of the bonds in the portfolio is usually greater than 10 years. General Government Bond Funds (Short/Intermediate) Mutual funds that seek to provide current income and stability of principal by investing in a blend of U.S. government-backed securities. The average maturity of the bonds in the portfolio is usually less than 10 years. Global Equity Funds Funds that seek growth by investing primarily in equity securities of issuers located throughout the world, including the United States. International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, difference in financial accounting standards, currency fluctuations and political and economic instability. Growth and Income Funds Stock funds that seek growth of capital and current income. The funds generally buy common stocks with potential for growth and dividend payments. Growth Funds Stock funds that seek long-term growth without undue risk. The funds generally buy common stocks of companies that advisors believe have long-term growth potential. High-Quality Corporate Bond Funds (Long Term) These funds seek income by generally investing in fixed income securities, 80% of which is rated A or higher. The average maturity of the bonds in the portfolio is usually greater than 10 years.
High-Quality Corporate Bond Funds (Short/Intermediate) These funds seek income by generally investing in fixed income securities, 80% of which is rated A or higher. The average maturity of the bonds in the portfolio is usually less than 10 years. High-Yield Corporate Bond Funds (Junk Bonds) These funds seek income by generally investing 80% or more of their assets in bonds rated below BBB. Investments of this type are subject to a greater risk of loss of principal and interest. Purchasers should carefully assess the risks associated with an investment in this type of fund. High-Yield Municipal Bond Funds (Junk Bonds) These funds seek current income exempt from federal income taxes by investing primarily in lower quality tax-free bonds. Index Funds Funds that seek to match the returns of a market index (e.g., Standard & Poor's 500 Index or Schwab 1000 Index ). The funds usually invest in the securities that make up the corresponding index. When you invest in index funds, you are essentially seeking to "buy the market" and not trying to outperform it. International Equity Funds These funds seek growth by investing primarily in equity securities of issuers located in developedmarkets outside the United States. Includes Western Europe, Japan, Australia, New Zealand and Canada. International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, differences in financial standards, currency fluctuations and political and economic instability. International Global Bond Funds These funds seek current income and invest in debt securities of companies or countries outside the U.S. (if international) or both inside and outside the U.S. (if global). Investment Objective
General description of the fund's investment objectives and type of securities the fund invests in. Load A sales commission assessed by some mutual funds to compensate the financial planner who sells them. There are two common types of loads: front-end and back-end loads. A front-end load is charged when the fund is purchased, and a back-end load is a commission paid when a fund is sold. Front-end loads typically range from a high of about 8% to a low of about 2%. Management Fee The amount paid by a mutual fund to the investment adviser for its services; the industrywide average annual fee is about one-half of 1 percent of fund assets. Manager Since Name of the Fund Manager and the date when the manager began managing the fund. Maximum Load The maximum front-end sales charge, a one-time deduction from principal made upon initial investment into the fund. Mortgage-Backed Government Bond Funds (GNMA/ARM) These funds seek to provide income and stability of principal by investing primarily in mortgage-backed securities that are issued by U.S. government agencies. Municipal Bond Funds (Long Term) These funds seek income exempt from federal income taxes. The funds buy municipal bonds issued by states, municipalities, their agencies or instrumentalities. The average maturity of the bonds in the portfolio is usually greater than 10 years. Municipal Bond Funds (Short/Intermediate)
These funds seek income exempt from federal income taxes. The funds buy municipal bonds issued by states, municipalities, their agencies or instrumentalities. The average maturity of the bonds in the portfolio is usually 10 years or less. Mutual Fund An investment company that pools money from shareholders and invests in a variety of securities, including stocks, bonds and money market instruments. A mutual fund stands ready to buy back (redeem) its shares at their current net asset value, which depends on the total market value of the fund's investment portfolio at the time of redemption. As open-end investments, most mutual funds continuously offer new shares to investors. Mutual Fund OneSource Service A service at Schwab that allows individuals to invest in mutual funds from wellestablished fund companies without paying loads, transaction fees or commissions. Schwab's standard transaction fee will be charged on each redemption of fund shares bought with no transaction fee and held for 180 days or less. Schwab reserves the right to assess Schwab's normal transaction fees in the future, should short-term trading become excessive. Mutual Fund Select List TM A quarterly performance review of the historically high-performing no-load equity, bond, global and international stock funds available at Schwab. Approximately 90 funds are included on the list each quarter. Net Asset Value (NAV) The market value of mutual fund shares, calculated each business day by adding the value of all securities in the fund's portfolio, subtracting expenses and dividing the result by the number of shares outstanding. New York State Municipal Bond Funds These funds seek current income exempt from federal and New York state taxes. The funds generally buy New York state municipal securities. No-Load Mutual Fund
A mutual fund that does not assess a sales commission or load or a 12b-1 fee in excess of0.25%. Operating Expense Ratio (OER) A fund's annual expenses (operating expenses, management fees and 12b-1 fees, if any) expressed as a percentage of a fund's average net assets. The total return data provided reflects performance after operating expenses are deducted. Pacific Equity Funds These funds seek growth by investing in securities of issuers located in the Pacific region. International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, difference in financial accounting standards, currency fluctuations and political and economic instability. Portfolio Turnover Percent A measure of a fund's trading activity is computed by dividing the lesser of purchases or sales by average monthly assets. Although a higher percentage indicates more turnover, a ratio of 100% does not necessarily mean that all securities in the portfolio have been traded. Precious Metals/Gold Funds Funds that invest primarily in securities associated with gold, silver and other precious metals. These funds seek long-term capital appreciation. Prospectus A legal document that describes a mutual fund and offers its shares for sale. It contains information required by the Securities and Exchange Commission and state securities regulators, including the fund's investment objectives and policies, investment restrictions, fees and expenses, and how shares can be bought and sold. Purchase Requirements Dollar amount needed to buy initial and subsequent shares in the fund. Some purchase requirements at Schwab may differ from the minimums required when the fund is purchased directly from the mutual fund company.
Risk The possibility that an investment may fluctuate in value. Such factors as credit quality, currency exchange rates, inflation rates, or the direction of interest rates may increase an investment's volatility. The level of risk incurred by a shareholder varies from fund to fund. Redemption Fee Charge made when money is withdrawn from the fund. If no time period is specified, the fee will be charged regardless of how long the fund is held. SchwabFunds Family Schwab's proprietary family of mutual funds, designed to follow the Schwab commitment to value, low-cost investing and high-quality service. Schwab is the underwriter for the funds in this program, and therefore charges no transaction fees on these funds. Small Company Funds Stock mutual funds that seek capital appreciation by investing primarily in stocks of small companies, as determined by market capitalization. Specialized Funds (also called Sector Funds) These funds seek to limit their investments to a specific industry or economic sector, e.g., technology, real estate or health care. State Municipal Bond Funds These funds seek current income exempt from federal and state taxes. The funds generally purchase municipalities of one state. Symbol Abbreviation for the fund used to get price quotes, place orders and receive prospectuses.
Tax-Equivalent Yield The portion of the fund's distributions that are federally tax-exempt, divided by one minus the assumed tax rate of 39.6% (e.g., 1-39.6%=60.4%). This gives the equivalent taxable yield needed to net the same return. TeleBroker Schwab's 24-hour automated trading and information service* that allows Schwab investors to get quotes and place orders by phone for almost all mutual funds available through Schwab. Clients can place equity and option trades for only $29.95**, as well as receive 10% off any applicable mutual fund transaction fees. Funds that are part of Schwab's Mutual Fund OneSource service are also available for purchase on TeleBroker, free of any transaction fee. Also note that a short-term redemption fee would apply to all OneSource fund shares sold within 180 days of purchase. *Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade or maintenance, or for other reasons. ** Automated equity trades are $29.95 up to 1000 shares; 3 cents per share over 1,000 shares. Automated option trades are $29.95 for the first contract; $2.00 for each additional contract on trades of fewer than 30 contracts, or $1.75 on trades of 30 or more contracts. Platinum clients, call your team for option pricing information. For mutual funds and treasuries, you ll receive 10% off Schwab s standard commissions when using TeleBroker or Schwab by Phone. Not available to accounts managed by Investment Managers and enrolled with Schwab Institutional. 12b-1 Fee Named for a Securities and Exchange Commission Rule, a fee assessed to defray a mutual fund's marketing and distribution costs. Not all funds deduct this fee, which can reduce shareholders' returns over time. U.S. Treasury Bond Funds (Long Term) Funds that seek to provide current income and stability of principal by investing in U.S. Treasury securities. These securities are 100% guaranteed by the U.S. government. The average maturity of all the bonds in the portfolio is usually greater than 10 years.
U.S. Treasury Bond Funds (Short/Intermediate) Funds that seek to provide current income and stability of principal by investing in U.S. Treasury securities. These securities are 100% guaranteed by the U.S. government. The average maturity of all the bonds in the portfolio is usually 10 years or less.