NOTES TO FINANCIAL STATEMENTS
For the six months ended February 28, 1998 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab California Short/Intermediate Tax-Free Bond Fund and Schwab California Long-Term Tax-Free
Bond Fund (the "Funds") are series of Schwab Investments (the "Trust"), a no-load, open-end management
investment company organized as a Massachusetts business trust on October 26, 1990 and registered under the
Investment Company Act of 1940 (the "Act"), as amended.
In addition to the Funds, the Trust also offers--the Schwab 1000 Fund-Registered Trademark-, Schwab Short-
Term Bond Market Index Fund, Schwab Total Bond Market Index Fund, Schwab Short/Intermediate Tax-Free
Bond Fund and Schwab Long-Term Tax-Free Bond Fund. The assets of each series are segregated and
accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those estimates.
SECURITY VALUATION--Bonds and notes are generally valued at prices obtained from an independent
bond-pricing service. These securities are valued at the mean between the most recent bid and asked prices, or if
such prices are not available, at prices for securities of comparable maturity, quality and type. Short-term
securities within 60 days or less of maturity are stated at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INTEREST INCOME--Security transactions are accounted for on a
trade date basis (date the order to buy or sell is executed). Realized gains and losses from security transactions
are determined on an identified cost basis. Interest income is accrued on a daily basis and includes amortization of