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STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
THE SCHWAB MONEY FUNDS:
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab California Tax-Exempt Money Fund-Sweep Shares
Schwab Retirement Money Fund(TM)
Schwab Institutional Advantage Money Fund(TM)
Schwab New York Tax-Exempt Money Fund-Sweep Shares
September 1, 1995
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectuses, which may be amended from time to
time, dated June 6, 1995, as amended September 1, 1995 for Schwab Money Market
Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab
Tax-Exempt Money Fund-Sweep Shares, and Schwab California Tax-Exempt Money
Fund-Sweep Shares; and the Prospectuses dated April 6, 1995, as amended
September 1, 1995 for Schwab Retirement Money Fund and Schwab Institutional
Advantage Money Fund; and the Prospectus dated September 1, 1995 for Schwab New
York Tax-Exempt Money Fund-Sweep Shares (each a "Fund" and collectively, the
"Funds"), eight separately managed investment portfolios of The Charles Schwab
Family of Funds (the "Trust"). With respect to the Schwab Tax-Exempt Money Fund,
Schwab California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money
Fund, each of which is offered in two classes of shares, this Statement of
Additional Information relates to the Sweep Shares of each of those Funds. As of
the date of this Statement of Additional Information, the Value Advantage Shares
of the Schwab California Tax-Exempt Money Fund are not being offered to the
public. Prior to June 6, 1995, the Schwab Tax-Exempt Money Fund, Schwab
California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund were
not offered in multiple classes of shares. The existing shares of those Funds
are redesignated as Sweep Shares. The other Funds listed above are not offered
in multiple classes of shares. To obtain a copy of one or more of the
above-referenced Prospectuses, please contact Charles Schwab & Co., Inc.
("Schwab") at 800-2 NO-LOAD (800-266- 5623), 24 hours a day or 101 Montgomery
Street, San Francisco, CA 94104.
SCHWABFunds(R)
800-2 NO-LOAD (800-266-5623)
TABLE OF CONTENTS
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MUNICIPAL SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 14
PORTFOLIO TRANSACTIONS AND TURNOVER . . . . . . . . . . . . . . . . . . . 20
DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 21
SHARE PRICE CALCULATION . . . . . . . . . . . . . . . . . . . . . . . . . 26
YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . 32
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
APPENDIX - RATINGS OF INVESTMENT SECURITIES . . . . . . . . . . . . . . . 142
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MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
may purchase include, without limitation, debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which Municipal Securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. The Schwab Tax-Exempt Money Fund, the
Schwab California Tax-Exempt Money Fund and the Schwab New York Tax- Exempt
Money Fund may not be desirable investments for "substantial users" of
facilities financed by private activity bonds or industrial development bonds or
for "related persons" of substantial users for whom dividends attributable to
interest on such bonds may not be tax-exempt. Shareholders should consult their
own tax advisers regarding the potential effect on them (if any) of any
investment in these Funds.
Municipal Securities generally are classified as "general obligation"
or "revenue." General obligation bonds are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
bonds are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Private activity bonds and industrial development
bonds that are Municipal Securities are in most cases revenue bonds and
generally do not constitute the pledge of the credit of the issuer of such
bonds.
Examples of Municipal Securities that are issued with original
maturities of one year or less are short-term tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes,
pre-refunded municipal bonds and tax-free commercial paper. Tax anticipation
notes typically are sold to finance working capital needs of municipalities in
anticipation of receiving property taxes on a future date. Bond anticipation
notes are sold on an interim basis in anticipation of a municipality issuing a
longer term bond in the future. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue such as those available under
the Federal Revenue Sharing Program. Construction loan notes are instruments
insured by the Federal Housing Administration with permanent financing by
"Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae" (the
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Government National Mortgage Association) at the end of the project construction
period. Pre-refunded municipal bonds are bonds that are not yet refundable, but
for which securities have been placed in escrow to refund an original municipal
bond issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Schwab
Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the
Schwab New York Tax-Exempt Money Fund may purchase other Municipal Securities
similar to the foregoing, which are or may become available, including
securities issued to pre-refund other outstanding obligations of municipal
issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under the state constitutions of
present systems of financing public education has been initiated or adjudicated
in a number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which ultimately could
affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.
RISK FACTORS
The Schwab California Tax-Exempt Money Fund and the Schwab New York
Tax- Exempt Money Fund's concentration in securities issued by a single state
and its political subdivisions provides a greater level of risk than does a fund
that is diversified across numerous states and municipal entities. The ability
of a single state and its municipalities to meet their obligations will depend
on the availability of tax and other revenues, economic, political, and
demographic conditions within the state, and the underlying fiscal condition of
the state and its municipalities.
CALIFORNIA MUNICIPAL SECURITIES
In addition to general economic pressures which affect the State of
California's ability to raise revenues to meet its financial obligations,
certain California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could also result in
the adverse effects described below. The following information is only a brief
summary, is not be a complete description, and is based on information drawn
from official statements and prospectuses relating to securities offerings of
the State of California that have come to the attention of the Trust and were
available before the date of this Statement of Additional Information. The Trust
has not independently verified the accuracy and completeness of the information
contained in those statements and prospectuses.
As used in this section, "California Municipal Securities" includes not
only issues which are secured by a direct payment obligation of the State, but
also obligations of issuers that rely in whole or in part on State revenues for
payment of their obligations. A portion of the State's General Fund surplus is
distributed to
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counties, cities and their various taxing entities; whether and to what extent a
portion of the State's General Fund will be distributed in the future to them is
unclear.
Overview. From mid-1990 to late 1993, the State suffered a recession
with the worst economic, fiscal and budget conditions since the 1930's.
Construction, manufacturing (especially aerospace), exports and financial
services, among others, all have been severely affected. Job losses were the
worst of any post-war recession.
The recession seriously affected State tax revenues and caused an
increase in expenditures for health and welfare programs. As a result, the State
has experienced recurring budget deficits. The State Controller reports that
expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93. The State
General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit
of about $1.8 billion. A further consequence of the large budget imbalances has
been that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs.
As a result of the deterioration in the State's budget and cash
situation, the State's credit ratings have been reduced. Since October, 1992,
all three major nationally recognized statistical rating organizations have
lowered the State's general obligation bond rating from the highest ranking of
"AAA" to "A" by Standard & Poor's Corporation ("S&P"), "A1" by Moody's Investors
Service ("Moody's"), and "A" by Fitch Investors Service, Inc. ("Fitch").
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit imposed by Article XIII B of the State
Constitution on "proceeds of taxes." Various expenditures, including but not
limited to debt service on certain bonds and appropriations for qualified
capital outlay projects, are not included in the appropriations limits.
1994-95 FISCAL YEAR
Revenues. The 1994-95 Budget Act projected General Fund revenues and
transfers in 1994-95 of $41.9 billion, or about $2.1 billion more than 1993- 94,
as revised. This projection includes the receipt of approximately $360 million
in new federal aid to reimburse the State for certain costs related to
undocumented foreign immigrants. The State's initial analysis of the federal
1995 fiscal year budget indicates that about $98 million was appropriated to the
State for certain of those costs, but that only about $33 million of that amount
will be received by the State during its 1994-95 fiscal year, with the remainder
to be received in its 1995-96 fiscal year. The 1994-95 Budget Act also projected
Special Fund revenues of $12.1 billion, a decrease of 2.4 percent from 1993-94.
Expenditures. The 1994-95 Budget Act projected General Fund
expenditures of $40.9 billion (a 1.6 percent increase from projected 1993-94
expenditures), in order to keep a balanced budget which pays off the accumulated
deficit, within available revenues. The 1994-95 Budget Act also projected
Special Fund expenditures of $12.3 billion, a 4.7 percent decrease from 1993-94.
The 1994-95 Budget Act balanced the budget with a number of major adjustments,
including the receipt of about $1.1 billion in health and welfare costs, and an
increase of about $526 million in Proposition 98 General Fund support for K-14
schools.
Cash resources at the beginning of the 1994-95 fiscal year were
insufficient to meet all obligations without external borrowing, such as
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occurred in 1992. The 1994-95 Budget Act assumed that the State would use a cash
flow borrowing program in 1994-95 which combined one-year notes and two-year
warrants, which have now been issued. Issuance of the warrants allows the State
to defer repayment of about $1 billion of its accumulated budget deficit into
the 1995-96 fiscal year. Additional legislation was passed with the 1994-95
Budget Act designed to ensure that the warrants will be repaid in the 1995-96
fiscal year.
The 1995-96 Governor's proposed budget contains a reforecast of
revenues and expenditures for the 1994-95 fiscal year. The reforecast estimates
that General Fund revenues and transfers will increase from the 1994-95 Budget
Act estimate of $41.9 billion to over $42.3 billion, but also estimates that
General Fund expenditures will increase to $41.7 billion from the 1994-95 Budget
Act estimate of $40.9 billion.
1995-96 FISCAL YEAR
Revenues. The Governor's proposed budget for 1995-96 estimates General
Fund revenues and transfers of $42.5 billion, a slight increase over 1994-95, as
revised. This slight increase reflects a proposal to shift to the counties
greater responsibility for welfare and social services (including a transfer of
about $1 billion in State revenues to counties) and the first year of a proposal
to cut personal and corporate income tax rates by 15 percent. Without these two
proposals, General Fund revenues and transfers would be projected at
approximately $43.8 billion. Special Fund revenues are estimated at $13.5
billion, an increase of 10.7 percent from 1994-95 revenues.
Expenditures. The Governor's proposed budget for 1995-96 estimates
General Fund expenditures of $41.7 billion. Special Fund expenditures are
estimated at $13.8 billion, an increase of 12.2 percent from 1994-95. The
proposed budget projects that the General Fund will end the 1995-96 fiscal year
with a slight surplus, and that all of the accumulated budget deficits will have
been repaid. A report issued in February 1995 by the California Legislative
Analyst, however, notes that the Governor's proposed budget for 1995-96 is
subject to a number of major risks, including receipt of expected federal
immigration aid and other federal actions that would allow State health and
welfare cuts.
The foregoing discussions of the 1994-95 budget and the proposed
1995-96 budget are based upon the Budget Act for 1994-95 and the Governor's
proposed 1995-96 budget, respectively, and should not be construed as a
statement of fact. The assumptions used to construct a budget, which include
estimates and projections of revenues and expenditures, may be affected by
numerous factors, including future economic conditions in the State and the
Nation. There can be no assurances that any estimates will be achieved.
ISSUES AFFECTING LOCAL
GOVERNMENTS AND SPECIAL DISTRICTS
Proposition 13. Certain California Municipal Securities may be
obligations of issuers that rely in whole or in part on ad valorem real property
taxes as a source of revenue. In 1978, California voters approved Proposition
13, which limits ad valorem taxes on real property and restricts the ability of
taxing entities to increase property tax revenues.
With certain exceptions, the maximum ad valorem tax on real property is
limited to 1% of the full cash value to be collected by the counties and
apportioned according to law. One exception is for debt service on bonded
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indebtedness if approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by substantial damage, destruction or other factors or adjusted when
there is a "change in ownership " or "new construction."
The State, in response to the significant reduction in local property
tax revenues as a result of the passage of Proposition 13, enacted legislation
to provide local government with increased expenditures from the General Fund.
This post-proposition 13 fiscal relief has ended.
Proposition 62. This initiative, approved by voters in 1986, placed
further restrictions on the ability of local governments to raise taxes and
allocate approved tax receipts. Several recent decisions of the California
Courts of Appeal have held that parts of Proposition 62 are unconstitutional,
however.
Propositions 98 and 111. These initiatives changed the State
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues. The
initiatives require that the State establish a prudent state reserve fund for
public education.
Appropriations Limit. Local governmental bodies are also subject to
annual appropriations limits. If a local government's revenues in any year
exceed the amount permitted to be spent, the excess must be returned to the
public through a revision of tax rates or fee schedules over the subsequent two
years.
Conclusion. The effect of these constitutional and statutory changes
and of budget developments on the ability of California issuers to pay interest
and principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent. For example, in December 1994, Orange County filed for
bankruptcy. The California Tax-Exempt Money Fund's concentration in California
municipal securities provides a greater level of risk than a fund that is
diversified across numerous states and municipal entities.
ADDITIONAL ISSUES
Mortgages and Deeds of Trust. The California Tax-Exempt Money Fund may
invest in issues which are secured in whole or in part by a mortgage or deed of
trust on real property. California law limits the remedies of a creditor secured
by a mortgage or deed of trust, which may result in delays in the flow of
revenues to an issuer.
Lease Financings. Some local governments and districts finance certain
activities through lease arrangements. It is uncertain whether such lease
financings are debt that require voter approval.
Seismic Risk. It is impossible to predict the time, magnitude or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck Los Angeles, causing significant damage
to structures and facilities in a four county area. The possibility exists that
another such earthquake could create a major dislocation of the California
economy.
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NEW YORK MUNICIPAL SECURITIES
The State of New York has experienced fiscal problems for several years
as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Though the State
enjoyed good growth throughout the early to mid-1980's, unemployment has risen
drastically and over 250,000 jobs have been lost in the past four years. The
State's economy is highly developed with a large emphasis in service, trade,
financial services, and real estate. While very diverse, extensive job losses in
each of these areas has placed a burden on the State to maintain employment,
company development and a stable tax base.
As reflected in its financial results, the State has a large
accumulated deficit. The overall wealth of the State's population as reflected
by the per capita income offers a positive credit enhancement and is among the
highest in the nation. The debt per capita, though, is also among the highest
and poses a large burden on its residents.
The importance of New York City to the State's economy is also an
important consideration since it represents a significant portion of the overall
economy of the State. The City has struggled to maintain fiscal stability and
has performed adequately in contrast to the difficult economic conditions in the
New York/New Jersey metropolitan area. Any major changes to the financial
condition of the City would ultimately have an effect on the State. The overall
financial condition of the State can also be illustrated by the changes of its
debt ratings. During the last several years during which the State experienced
its financial difficulties, its general obligation long-term debt ratings as
determined by Moody's declined from A1 to A in 1990 while S&P downgraded the
State's debt from A to A- in early 1992. The State has the second lowest long
term debt rating among those states with outstanding general obligation ratings.
The short-term debt ratings are within the top two rating categories: MIG-2 for
Moody's and SP-1 for S&P. In February 1991, Moody's lowered its rating on New
York City general obligation bonds from A to Baa1.
The Schwab New York Tax-Exempt Money Fund's concentration in securities
issued by the State of New York and its political subdivisions provides a
greater level of risk than a fund which is diversified across numerous states
and municipal entities. The ability of the State of New York or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political, and demographic conditions within the
state; and the underlying fiscal condition of the state and its municipalities.
ASSET-BACKED COMMERCIAL PAPER
AND OTHER SECURITIES
The Schwab Money Market Fund, the Schwab Retirement Money Fund and the
Schwab Institutional Advantage Money Fund can invest a portion of their assets
in asset-backed commercial paper and other money market fund Eligible Securities
(as that term is hereinafter defined). The credit quality of most asset-backed
commercial paper depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these
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underlying assets to make payments, such securities may contain elements of
credit support.
Such credit support falls into two classes: liquidity protection and
protection against ultimate default on the underlying assets. Liquidity
protection refers to the provision of advances, generally by the entity
administering the pool of assets, to ensure that scheduled payments on the
underlying pool are made in a timely fashion. Protection against ultimate
default ensures payment on at least a portion of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or letters of
credit obtained from third parties, through various means of structuring the
transaction, or through a combination of such approaches. The degree of credit
support provided on each issue is based generally on historical information
respecting the level of credit risk associated with such payments. Delinquency
or loss in excess of that anticipated could adversely affect the return on an
investment in an Asset-Backed Security.
INVESTMENT RESTRICTIONS
Except as otherwise noted, the restrictions below are fundamental and cannot be
changed without approval of the holders of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940, as amended,
hereinafter the "1940 Act") of the Fund to which they apply.
THE SCHWAB MONEY MARKET FUND, THE SCHWAB GOVERNMENT MONEY FUND, THE SCHWAB
RETIREMENT MONEY FUND(TM) , AND THE SCHWAB INSTITUTIONAL ADVANTAGE MONEY
FUND(TM) MAY NOT:
(1) Purchase securities or make investments other than in accordance with
its investment objective and policies.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of its
assets would be invested in the securities of such issuer.
(3) Purchase, in the aggregate with all other Schwab Money Funds, more than
10% of any class of securities of any issuer. All debt securities and
all preferred stocks are each considered as one class.
(4) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that each Fund reserves freedom of action to invest
up to 100% of its assets in certificates of deposit or bankers'
acceptances issued by domestic branches of U.S. banks and U.S. branches
of foreign banks (which the Fund has determined to be subject to the
same regulation as U.S. banks), or obligations of or guaranteed by, the
U.S. Government, its agencies or instrumentalities in accordance with
its investment objective and policies.
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(5) Invest more than 5% of its total net assets in securities of issuers
(other than obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities) that with their
predecessors have a record of less than three years continuous
operation.
(6) Enter into repurchase agreements if, as a result thereof, more than 10%
of its net assets valued at the time of the transaction would be
subject to repurchase agreements maturing in more than seven days and
invested in securities restricted as to disposition under the federal
securities laws (except commercial paper issued under Section 4(2) of
the Securities Act of 1933). Each Fund will invest no more than 10% of
its net assets in illiquid securities.
(7) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except commercial paper
issued under Section 4(2) of the Securities Act of 1933).
(8) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or its Investment Manager or the
Sub-Adviser individually own beneficially more than 1/2 of 1% of the
securities of such issuer and together beneficially own more than 5% of
the securities of such issuer.
(9) Invest in commodities or commodity contracts, futures contracts, real
estate or real estate limited partnerships, although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(10) Invest for the purpose of exercising control or management of another
issuer.
(11) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets.(1)
(12) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objectives
and policies), except that the Schwab Retirement Money Fund and the
Schwab Institutional Advantage Money Fund may (i) purchase a portion of
an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are publicly distributed or
customarily purchased by institutional investors, and (ii) lend its
portfolio securities.
(13) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets in order to meet redemption requests without
immediately selling any portfolio securities. The Fund will not borrow
for leverage purposes or purchase securities or make investments while
reverse repurchase agreements or borrowings are outstanding. Any
borrowings by the Schwab Money Market Fund or the
---------------------------
1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
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Schwab Government Money Fund will not be collateralized. If, for any
reason, the current value of the total net assets of the Schwab Money
Market Fund, the Schwab Government Money Fund, the Schwab Retirement
Money Fund, or the Schwab Institutional Advantage Money Fund falls
below an amount equal to three times the amount of its indebtedness
from money borrowed, such Fund will, within three business days, reduce
its indebtedness to the extent necessary.
(14) Write, purchase or sell puts, calls or combinations thereof.
(15) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(16) Invest in interests in oil, gas, mineral leases or other mineral
exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(17) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
Except for restrictions (4) and (13), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation.
THE SCHWAB TAX-EXEMPT MONEY FUND, THE SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND,
AND THE SCHWAB NEW YORK TAX-EXEMPT MONEY FUND MAY NOT:
(1) Purchase securities or make investments other than in accordance with
its investment objectives and policies.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
the Schwab California Tax-Exempt Money Fund and the Schwab New York
Tax-Exempt Money Fund, provided no more than 25% of the Fund's total
assets would be invested in the securities of a single issuer, up to
50% of the value of the Fund's assets may be invested without regard to
this 5% limitation. For purposes of this limitation, the Fund will
regard the entity which has the primary responsibility for the payment
of interest and principal as the issuer.
(3) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or
more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of
governments are not considered to be securities subject to this
industry concentration restriction) or in any one state (although the
limitation as to investments in a state or its political subdivision
shall not apply to the Schwab California Tax-Exempt Money Fund or the
Schwab New York Tax-Exempt Money
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Fund), nor may it enter into a repurchase agreement if more than 10% of
its net assets would be subject to repurchase agreements maturing in
more than seven days.
(4) Invest more than 5% of its total assets in industrial development bonds
sponsored by companies which with their predecessors have less than
three years continuous operation, although each Fund may invest more
than 25% of its total net assets in industrial development bonds.
(5) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to the Schwab California Tax-Exempt Money
Fund and the Schwab New York Tax-Exempt Money Fund.
(6) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or of its Investment Manager
individually owns beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.
(7) Invest in commodities or commodity futures contracts or in real estate
except that each Fund may invest in Municipal Securities secured by
real estate or interests therein.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets.(2)
(10) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(11) Borrow money except from banks for temporary purposes (but not for the
purpose of purchase of investments) and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Fund are
permitted within the limitations of this paragraph. No such Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.
(12) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.
------------------------
2 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
11
<PAGE> 12
(13) Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance
of transactions.
(14) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.
(15) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(16) Issue senior securities as defined in the 1940 Act.
Except for restrictions (6) and (11), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation. None of the
Schwab Money Funds has a present intention of borrowing during the coming year
and, in any event, each Fund would limit borrowings as required by the
restrictions previously stated.
THE U.S. TREASURY MONEY FUND MAY NOT:
(1) Purchase securities other than obligations issued by the United States
Treasury and securities backed by the "full faith and credit" guarantee
of the United States Government that mature in 397 days or less.(3)
(2) Make loans to others (except through the purchase of debt obligations).
(3) Issue senior securities as defined in the 1940 Act.
(4) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(5) Invest in commodities or in real estate.
(6) Invest for the purpose of exercising control over management of another
company.
The following restrictions are non-fundamental, and may be changed by the Board
of Trustees.
The U.S. Treasury Money Fund may not:
--------------------------
3 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
12
<PAGE> 13
(1) Invest more than 10% of its assets in securities which are not readily
marketable, including securities which are restricted as to
disposition; or
(2) Engage in short sales, except for short sales against the box.
Each Schwab Money Fund will only purchase securities that present minimal credit
risks and (except in the case of the Schwab U.S. Treasury Money Fund) which are
First Tier or Second Tier Securities (otherwise referred to as "Eligible
Securities").(4) An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less (12 months or
less in the case of the Schwab Money Market and Government Money
Funds): (a) that is rated by the requisite nationally recognized
statistical rating organizations ("NRSROs") designated by the
Securities and Exchange Commission (the "SEC") (currently Moody's, S&P,
Duff and Phelps Credit Rating Co., Fitch, Thomson Bankwatch, and, with
respect to debt issued by banks, bank holding companies, United Kingdom
building societies, broker-dealers and broker-dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate,
IBCA, Inc.) in one of the two highest rating categories for short-term
debt obligations (the requisite NRSROs being any two or, if rated by
one, that one NRSRO), or (b) that itself was unrated by any NRSRO, but
was issued by an issuer that has outstanding a class of short-term debt
obligations (or any security within that class) meeting the
requirements of subparagraph 1(a) above that is of comparable priority
and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less (12 months or less in the
case of the Schwab Money Market and Government Money Funds) and (a)
whose issuer received a rating within one of the two highest rating
categories from the requisite NRSROs for short-term debt obligations
with respect to a class of short-term debt obligations (or any security
within that class) that is now comparable in priority and security with
the subject security; or (b) that has long-term ratings from the
requisite NRSROs that are in one of the two highest categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) and to
represent minimal credit risks.
A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating is sufficient if only one NRSRO rates the security)
or has been determined by the Investment Manager, pursuant to guidelines adopted
by the Board of Trustees, to be of comparable quality to such a security. A
Second Tier Security is any other Eligible Security.
------------------------------
4 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
13
<PAGE> 14
The Schwab Money Market Fund, Schwab Government Money Fund, Schwab Retirement
Money Fund , and Schwab Institutional Advantage Money Fund will limit their
investments in the First Tier Securities of any one issuer to no more than five
percent of their assets. (Repurchase agreements collateralized by non-
Government securities will be taken into account when making this calculation.)
Moreover, each Fund's total holdings of Second Tier Securities will not exceed
5% of its assets, with investment in the Second Tier Securities of any one
issuer being limited to the greater of 1% of the Fund's assets or $1 million. In
addition, the underlying securities involved in repurchase agreements
collateralized by non-Government securities will be First Tier Securities at the
time the repurchase agreements are executed.
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and trustees of the Trust, their principal
occupations over the past five years and their affiliations, if any, with The
Charles Schwab Corporation, Schwab, and Charles Schwab Investment Management,
Inc., are as follows:
<TABLE>
<CAPTION>
POSITION WITH
-------------
NAME THE TRUST PRINCIPAL OCCUPATION
---- ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Founder, Chairman, Chief Executive
Age: 57 Trustee Officer and Director, The Charles
Schwab Corporation; Founder,
Chairman and Director, Charles
Schwab & Co., Inc. and Charles
Schwab Investment Management, Inc.;
Chairman and Director, The Charles
Schwab Trust Company and Mayer &
Schweitzer, Inc. (a securities
brokerage subsidiary of The Charles
Schwab Corporation); Director, The
Gap, Inc. (a clothing retailer),
Transamerica Corporation (a
financial services organization) and
AirTouch Communications (a
telecommunications company).
ELIZABETH G. SAWI** President and Executive Vice President - Mutual
Age: 43 Trustee Funds, Charles Schwab & Co., Inc.
and The Charles Schwab Corporation;
President, Charles Schwab Investment
Management, Inc. Prior to April
1994, Ms. Sawi was Executive Vice
President - Marketing and
Advertising for Charles Schwab &
Co., Inc. and The Charles Schwab
Corporation.
DONALD F. DORWARD Trustee President and Chief Executive
Age: 63 Officer, Dorward & Associates
(advertising and marketing/consulting).
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer
Age: 63 and Director, Semloh Financial,
Inc. (international financial
services).
</TABLE>
--------------------
*Mr. Schwab is an "interested person" of the Trust.
**Ms. Sawi is an "interested person" of the Trust.
14
<PAGE> 15
<TABLE>
<S> <C> <C>
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens &
Age: 56 Co. (real estate investment).
Prior to 1993, Mr. Stephens was
Chairman and Chief Executive Officer
of the Bank of San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer
Age: 51 and Director, Wilsey Bennett, Inc.
(truck and air transportation, real
estate investment and management,
and investments).
A. JOHN GAMBS Treasurer and Executive Vice President - Finance
Age: 49 Principal and Chief Financial Officer, The
Financial Charles Schwab Corporation;
Officer Executive Vice President, Chief
Financial Officer and Director,
Charles Schwab & Co., Inc.; Chief
Financial Officer and Director,
Charles Schwab Investment
Management, Inc.; and Chief
Financial Officer, The Charles
Schwab Trust Company.
WILLIAM J. KLIPP*** Senior Vice Senior Vice President, Charles
Age: 39 President, Chief Schwab & Co., Inc. and Chief
Operating Operating Officer, Charles Schwab
Officer and Investment Management, Inc. Prior
Trustee to 1993, Mr. Klipp was Treasurer
of Charles Schwab & Co., Inc. and
Mayer & Schweitzer, Inc. Prior to
1990, he was Vice President,
Director Funding, Merrill Lynch &
Co., Inc.
STEPHEN B. WARD Senior Vice Senior Vice President, Charles
Age: 39 President & Schwab Investment Management, Inc.
Chief Investment Prior to 1991, Mr. Ward was Vice
Officer President and Portfolio Manager
for Federated Investors.
FRANCES COLE Secretary Chief Counsel and Compliance
Age: 39 Officer, Assistant Corporate
Secretary, Charles Schwab
Investment Management, Inc. Prior to
1991, Ms. Cole was Senior Counsel
for Equitec Securities Company.
TIMOTHY B. PAWLOSKI Assistant Vice President of Finance-
Age: 36 Treasurer SchwabFunds , 1991 to 1993, Mr.
Pawloski was Director of Finance for
Charles Schwab & Co., Inc. and from
1987 to 1991, he served as a Senior
Manager at Price Waterhouse LLP.
PAMELA E. HERLICH Assistant Assistant Corporate Secretary, The
Age: 41 Secretary Charles Schwab Corporation and
Charles Schwab & Co., Inc.;
Corporate Secretary, Charles Schwab
Investment Management, Inc., Mayer &
Schweitzer and The Charles Schwab
Trust Company. Prior to 1993, Ms.
Herlich was Assistant Corporate
Secretary for Mayer & Schweitzer,
Inc. and The Charles Schwab Trust
Company.
</TABLE>
-----------------------------
***Mr. Klipp is an "interested person" of the Trust.
15
<PAGE> 16
<TABLE>
<S> <C> <C>
DAVID H. LUI Assistant Senior Counsel - Charles Schwab
Age: 34 Secretary Investment Management, Inc. From
1991 to 1992, he was Assistant
Secretary and Assistant Corporate
Counsel for the Franklin Group of
Mutual Funds. Prior to 1991, he was
an Associate of Thelen, Marrin,
Johnson & Bridges (a San Francisco
law firm).
CHRISTINA M. PERRINO Assistant Senior Counsel - Charles Schwab
Age: 34 Secretary Investment Management, Inc. Prior
to 1994, she was Counsel and
Assistant Secretary for North
American Security Life Insurance
Company and Secretary for North
American Funds.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in
the same capacity as described for the Trust for Schwab Investments, Schwab
Capital Trust, Schwab Annuity Portfolios, and Schwab Advantage Trust (which has
not commenced operations). The address of each individual listed above is 101
Montgomery Street, San Francisco, California 94104
COMPENSATION TABLE(1)
---------------------
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Accrued Estimated
as Part of Fund Annual Benefits
Aggregate Expenses from Upon Retirement Total
Name of Person, Compensation the Fund from the Fund Compensation from the
Position from the trust Complex(2) Complex(2) Fund Complex(2)
--------------- -------------- ---------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
Elizabeth G. Sawi, 0 N/A N/A 0
President and Trustee
William J. Klipp, 0 N/A N/A 0
Senior Vice President,
Chief Operating Officer,
and Trustee
Donald F. Dorward, 26,000 N/A N/A 58,000
Trustee
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
Robert G. Holmes, 26,000 N/A N/A 58,000
Trustee
Donald R. Stephens, 26,000 N/A N/A 58,000
Trustee
Michael W. Wilsey, 26,000 N/A N/A 58,000
Trustee
</TABLE>
1. Figures are for the Trust's fiscal year ended December 31, 1994.
2. "Fund Complex" comprises all 19 funds of the Trust, Schwab
Investments, Schwab Capital Trust, and Schwab Annuity Portfolios.
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to participate in the Fee Deferral Plan. In the
event an Independent Trustee does elect to participate in the Plan, the Plan
would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities"). "SchwabFunds"
include the series or classes of shares of beneficial interest of the Trust,
Schwab Investments, Schwab Capital Trust, and Schwab Advantage Trust (which has
not commenced operations).
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. These transactions would otherwise be limited or
prohibited by the investment policies and/or restrictions of the Funds. See
"Investment Restrictions."
INVESTMENT MANAGER
Charles Schwab Investment Management, Inc. (the "Investment Manager"),
a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the
Funds' investment adviser and administrator pursuant to two separate yet
otherwise substantially similar Investment Advisory and Administration
Agreements (the "Advisory Agreements") between it and the Trust.
17
<PAGE> 18
The Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and currently provides investment
management services to the SchwabFunds , a family of 18 mutual funds with over
$28 billion in assets as of July 31, 1995. The Investment Manager is an
affiliate of Schwab, the Trust's distributor and shareholder services and
transfer agent.
Each Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of the majority (as defined in the 1940 Act) of
the outstanding voting securities of each Fund subject thereto. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement or interested persons (as defined
in the 1940 Act) of any such party, by vote cast in person at a meeting called
for the purpose of voting on such approval. Each Advisory Agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Fund subject thereto, and will terminate
automatically upon assignment.
Pursuant to an Advisory Agreement dated June 15, 1994, the Investment
Manager is entitled to receive from the Schwab Money Market Fund a graduated
annual fee, payable monthly, of 0.46% of such Fund's average daily net assets
not in excess of $2 billion, 0.45% of such net assets over $2 billion but not in
excess of $3 billion, and 0.40% of such net assets over $3 billion; the
Investment Manager is entitled to receive from the Schwab Government Money Fund
and the Schwab Tax-Exempt Money Fund a graduated annual fee, payable monthly, of
0.46% of the average daily net assets of each such Fund's average daily net
assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but
not in excess of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1992, the investment advisory
fees paid by the Schwab Money Market Fund, Schwab Government Money Fund and
Schwab Tax-Exempt Money Fund were $13,717,000 (fees were reduced by
$10,480,000); $4,137,000 (fees were reduced by $2,875,000); and $2,700,000 (fees
were reduced by $4,310,000), respectively.
For the fiscal year ended December 31, 1993, the investment advisory
fees paid by the Schwab Money Market Fund, Schwab Government Money Fund and
Schwab Tax-Exempt Money Fund were $19,368,000 (fees were reduced by
$11,025,000); $4,558,000 (fees were reduced by $2,863,000); and $3,494,000 (fees
were reduced by $5,424,000), respectively.
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by the Schwab Money Market Fund, Schwab Government Money Fund and
Schwab Tax-Exempt Money Fund were $28,697,000 (fees were reduced by
$13,405,000); $5,434,000 (fees were reduced by $2,922,000); and $5,421,000 (fees
were reduced by $6,646,000), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of each of the Schwab California
Tax-Exempt Money Fund, the Schwab New York Tax-Exempt Money Fund, and the Schwab
U.S. Treasury Money Fund's average daily net assets not in excess of $1 billion,
0.41% of such net assets over $1 billion but not in excess of $2 billion, and
0.40% of such net assets over $2 billion. In addition, the Investment Manager is
entitled to receive from the Schwab Retirement Money Fund and the Schwab
Institutional
18
<PAGE> 19
Advantage Money Fund a graduated annual fee, payable monthly, of 0.46% of each
such Fund's average daily net assets not in excess of $2 billion, 0.45% of such
net assets over $2 billion but not in excess of $3 billion, and 0.40% of such
net assets over $3 billion.
For the fiscal year ended December 31, 1992, the investment advisory
fees paid by the Schwab California Tax-Exempt Money Fund and Schwab U.S.
Treasury Money Fund were $995,000 (fees were reduced by $1,697,000); and
$147,000 (fees were reduced by $255,000), respectively.
For the fiscal year ended December 31, 1993, the investment advisory
fees paid by the Schwab California Tax-Exempt Money Fund and Schwab U.S.
Treasury Money Fund were $1,437,000 (fees were reduced by $2,450,000); and
$483,000 (fees were reduced by $687,000), respectively. During the fiscal year
ended December 31, 1993, no investment advisory fees were paid by the Schwab
Institutional Advantage Money Fund and the Schwab Retirement Money Fund.
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by the Schwab California Tax-Exempt Money Fund, Schwab U.S. Treasury
Money Fund, Schwab Institutional Advantage Money Fund, and Schwab Retirement
Money Fund were $2,254,000(fees were reduced by $3,274,000); $1,016,000 (fees
were reduced by $1,442,000); $124,000 (fees were reduced by $96,000); and
$75,000 (fees were reduced by $21,000), respectively.
EXPENSES
The Trust pays the expenses of its operations, including the fees and
expenses of independent accountants, counsel, custodian and the cost of reports
and notices to shareholders, costs of calculating net asset value, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Trust and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. The Trust's expenses generally are
allocated among the Funds on the basis of relative net assets at the time of
allocation, except that expenses directly attributable to a particular Fund or
class of a Fund are charged to that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
19
<PAGE> 20
PFPC, Inc., at 103 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS
TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and the Trust's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when engaged to do so by the Trust. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, 1001 Pennsylvania Avenue, N.W., Suite 1200 South,
Washington, D.C. 20004, is counsel to the Trust.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of each Schwab Money Fund in relation to movements in the general
level of interest rates, to invest money obtained from the sale of Fund shares,
to reinvest proceeds from maturing portfolio securities and to meet redemptions
of Schwab Money Fund shares. Portfolio transactions may increase or decrease the
yield of a Schwab Money Fund depending upon management's ability to correctly
time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of each Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager generally selects broker-dealers for the Funds primarily on the basis of
the quality and reliability of services provided, including execution capability
and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for each Schwab Money Fund are reached
independently from those for other accounts managed by the Investment Manager.
Such other accounts may also make investments in instruments or securities at
the same time as a Schwab Money Fund. When two or more accounts managed by the
Investment Manager have funds available for investment in similar instruments,
available
20
<PAGE> 21
instruments are allocated as to amount in a manner considered equitable to each
account. In some cases this procedure may affect the size or price of the
position obtainable for a Schwab Money Fund. However, it is the opinion of the
Board of Trustees that the benefits conferred by the Investment Manager outweigh
any disadvantages that may arise from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Schwab Money Fund's
portfolio turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of a Schwab Money Fund
is determined ("Business Day"), such Fund's net investment income will be
declared as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) as a daily dividend to shareholders of record as of the
last calculation of net asset value prior to the declaration. In the case of the
Schwab Institutional Advantage Money Fund , for shareholders satisfying certain
conditions, investment income will be declared as a daily dividend to
shareholders of record as of that day's calculation of net asset value.
Conditions which must be met in order to receive a dividend for the day on which
the order is received by the Transfer Agent are 1) a minimum investment of
$100,000, 2) receipt by Schwab or the Charles Schwab Trust Company before 1:30
p.m. Eastern time, and 3) payment in immediately available funds. Shareholders
will receive dividends in additional shares unless they elect to receive cash.
For each Fund, dividends will normally be reinvested monthly in full shares of
the Fund (for the Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt
Money Fund and Schwab New York Tax-Exempt Money Fund dividends will normally be
reinvested monthly in full Sweep Shares of the Fund) at the net asset value on
the 15th day of each month, if a Business Day, otherwise on the next Business
Day. If cash payment is requested, checks will normally be mailed on the
Business Day following the reinvestment date. Each Schwab Money Fund will pay
shareholders who redeem all of their shares all dividends accrued to the time
of the redemption within seven days.
Each Schwab Money Fund calculates its dividends based on its daily net
investment income. For this purpose, the net investment income of a Fund (other
than the Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt Money Fund
and Schwab New York Tax-Exempt Money Fund) consists of: (1) accrued interest
income, plus or minus amortized discount or premium, minus (2) accrued expenses
allocated to that Fund. For this purpose, for the Schwab Tax-Exempt
21
<PAGE> 22
Money Fund, Schwab California Tax-Exempt Money Fund and Schwab New York Tax
Exempt Money Fund, the net investment income of the Sweep Shares of each Fund
consists of (1) accrued interest income plus or minus amortized discount or
premium (excluding market discount) minus accrued expenses allocable to the
Sweep Shares of that Fund. If a Schwab Money Fund realizes any capital gains,
such gains will be distributed at least once during the year as determined by
the Board of Trustees. Any realized short-term capital losses to the extent not
offset by realized capital gains will be carried forward. It is not anticipated
that a Schwab Money Fund will realize any long-term capital gains, but if it
does so, these gains will be distributed annually. Expenses of the Trust are
accrued each day. Should the net asset value of a Schwab Money Fund deviate
significantly from market value, the Board of Trustees could decide to value the
investments at market value and any unrealized gains and losses could affect the
amount of the Fund's distributions.
FEDERAL INCOME TAXES
It is the policy of each Fund to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, each of the
Funds must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash or cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to a value not greater than 5%
of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or securities of any other regulated investment company)
or of two or more issuers that the Fund controls, within the meaning of the
Code, and that are engaged in the same, similar or related trades or businesses.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range of
the Fund's investments. If a Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its net investment
income and net realized capital gains, if any, which it distributes to
shareholders, provided that the Fund meets certain minimum distribution
requirements. To comply with these requirements, a Fund must distribute at least
(a) 90% of its "investment company taxable income" (as that term is defined
in the Code) and (b) 90% of the excess of its (i) tax-exempt interest income
over (ii) certain deductions attributable to that income (with certain
exceptions), for its taxable year. Each Fund intends to make sufficient
distributions to shareholders to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net
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<PAGE> 23
income for the year ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior year, the Fund
will be subject to a nondeductible 4% excise tax on the undistributed amounts.
Each Fund intends generally to make distributions sufficient to avoid imposition
of this excise tax.
Any distributions declared by the Funds in October, November or
December to shareholders of record during those months and paid during the
following January are treated, for tax purposes, as if they were received by
each shareholder on December 31 of the year declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.
The Funds do not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder (1) who
fails to provide a correct taxpayer identification number certified under
penalty of perjury; (2) who provides an incorrect taxpayer identification
number; (3) who is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (4) who
fails to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The Funds may engage in investment techniques that may alter the timing
and character of the Funds' income. The Funds may be restricted in their use of
these techniques by rules relating to their qualification as regulated
investment companies.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) generally are subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains generally are not subject to U.S. taxation, unless the recipient
is an individual who meets the Code's definition of "resident alien." Different
tax consequences may result if the foreign shareholder is engaged in a trade or
business within the United States. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by a Fund may also be
subject to state, local and foreign taxes, and their treatment under applicable
tax laws may differ from the federal income tax treatment.
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY
FUND AND SCHWAB NEW YORK TAX-EXEMPT
MONEY FUND
The Code permits a regulated investment company that invests at least
50% of its assets at
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<PAGE> 24
the close of each quarter in Municipal Securities to pass
through to its investors, on a tax-exempt basis, net Municipal Securities
interest income. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund or the Schwab New York Tax-Exempt
Money Fund and designated as an exempt-interest dividend in a written notice
mailed to shareholders after the close of such Fund's taxable year, but not to
exceed in the aggregate the net Municipal Securities interest income received by
each such Fund during the taxable year. The percentage of the total dividends
paid for any taxable year that qualified as exempt-interest dividends will be
the same for all shareholders receiving dividends from each Fund during such
year, regardless of the period for which the Shares were held. If for any
taxable year the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt
Money Fund or the Schwab New York Tax-Exempt Money Fund does not qualify for the
special federal tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal tax at regular corporate rates
(without any deduction for distributions to its shareholders) when distributed,
and Municipal Securities interest income, although not taxed to the Funds, would
be taxable to shareholders.
This discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of Fund shares. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund and its shareholders,
and the discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a Fund.
STATE TAXES
With respect to the Schwab California Tax-Exempt Money Fund, if, at the
close of each quarter of its taxable year, at least 50% of the value of the
total assets of the Fund consists of obligations the interest on which is exempt
from California personal income taxation under the Constitution or laws of
California or of the United States ("California Exempt Obligations"), then the
Fund will be qualified to pay dividends exempt from State of California personal
income tax to its non-corporate shareholders (hereinafter referred to as
"California exempt-interest dividends"). The Schwab California Tax-Exempt Money
Fund intends to qualify under the above requirement so that it can pay
California exempt-interest dividends. If the Schwab California Tax-Exempt Money
Fund fails to so qualify, no part of its dividends will be exempt from State of
California personal income tax.
With respect to the Schwab New York Tax-Exempt Money Fund, there is no
analogous requirement, so all dividends representing interest on New York
Municipal Securities that is exempt from New York personal income taxation will
be exempt from New York personal income taxes in the hands of non-corporate
shareholders ("New York exempt-interest dividends").
Not later than 60 days after the close of its taxable year, the Schwab
California and New York Tax- Exempt Money Funds will notify each shareholder of
the portion of the dividends paid by it to the shareholder with respect to such
taxable year which is exempt from State of California personal income tax or New
York personal income tax, respectively.
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<PAGE> 25
The total amount of California exempt-interest dividends paid by the
Schwab California Tax-Exempt Money Fund to all of its shareholders with respect
to any taxable year cannot exceed the amount of interest received by the Fund
during such year on California Exempt Obligations, less any expenses or
expenditures (including any expenditures attributable to the acquisition of
additional securities for the Schwab California Tax-Exempt Money Fund) that are
deemed to have been paid from such interest. Dividends paid by the Schwab
California Tax-Exempt Money Fund in excess of this limitation will be treated as
ordinary dividends subject to State of California personal income tax at
ordinary rates. For purposes of this limitation, expenses or other expenditures
paid during any year generally will be deemed to have been paid with funds
attributable to interest received by the Fund from California Exempt Obligations
for such year in the same ratio as such interest from California Exempt
Obligations for such year bears to the total gross income earned by the Fund for
the year. The effect of this accounting convention is that amounts of interest
from California Exempt Obligations received by the Schwab California Tax-Exempt
Money Fund that would otherwise be available for distribution as California
exempt-interest dividends will be reduced by the expenses and expenditures
deemed to have been paid from such amounts.
To the extent, if any, dividends paid to shareholders by the Schwab
California Tax-Exempt Money Fund or New York Tax-Exempt Money Fund are derived
from long-term and short-term capital gains, such dividends will not constitute
California or New York exempt-interest dividends. Rules similar to those
regarding the treatment of such dividends for federal income tax purposes are
also applicable for State of California and New York personal income tax
purposes. Moreover, interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Schwab California Tax-Exempt Money Fund or New
York Tax-Exempt Money Fund is not deductible for state personal income tax
purposes if the Fund distributes California or New York exempt- interest
dividends to the shareholder during his or her taxable year.
The foregoing is only a summary of some of the important state personal
income tax considerations generally affecting the Schwab California Tax-Exempt
and New York Tax-Exempt Money Funds and their shareholders. No attempt is made
to present a detailed explanation of the state personal income tax treatment of
the Schwab California Tax-Exempt and New York Tax-Exempt Money Funds or their
shareholders, and this discussion is not intended as a substitute for careful
planning. Further, it should be noted that the portion of the Schwab California
Tax-Exempt and New York Tax-Exempt Money Funds' dividends constituting
California or New York exempt-interest dividends, respectively, is excludable
from income for State of California or State of New York personal income tax
purposes only.
Any dividends paid to shareholders of the Funds subject to state
franchise tax will be taxed as ordinary dividends to such shareholders,
notwithstanding that all or a portion of such dividends is exempt from state
personal income tax. Accordingly, potential investors in the Schwab California
Tax-Exempt or New York Tax-Exempt Money Funds, including, in particular,
corporate investors which may be subject to California or New York franchise
tax, should consult their tax advisers with respect to the application of such
tax to the receipt of dividends from the Funds and as to their own state tax
situation, in general.
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<PAGE> 26
SHARE PRICE CALCULATION
Each Schwab Money Fund values its portfolio instruments at amortized
cost, which means that they are valued at their acquisition cost, as adjusted
for amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of a Fund's investments at amortized
cost with market values. Market valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and a Schwab Money Fund's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees of the Trust believed would result in
a material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If a Schwab Money
Fund's net asset value per share (computed using market values) declined, or
were expected to decline, below $1.00 (computed using amortized cost), the Board
of Trustees might temporarily reduce or suspend dividend payments in an effort
to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Schwab Money Fund's net asset value per share
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share.
YIELD
The historical performance of a Fund may be shown in the form of yield,
effective yield and, for the Sweep Shares of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund, taxable equivalent yield and taxable equivalent effective yield.
These measures of performance are described below.
YIELD
Yield refers to the net investment income generated by a hypothetical
investment in the Fund (or, in the case of the Schwab Tax-Exempt Money Fund, the
Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money
Fund, the Sweep Shares of the Fund) over a specific 7-day period. This net
investment income is then annualized, which
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<PAGE> 27
means that the net investment income generated during the 7-day period is
assumed to be generated in each 7-day period over an annual period, and is shown
as a percentage of the investment.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Sweep Shares of the Schwab
Tax-Exempt Fund is computed by dividing that portion of the yield of the class
(computed as described above) that is tax-exempt by an amount equal to one minus
the stated federal income tax rate (normally assumed to be the maximum
applicable marginal tax bracket rate) and adding the result to that portion, if
any, of the yield of the class that is not tax-exempt. The taxable equivalent
yield of the Sweep Shares of the Schwab California Tax-Exempt Money Fund is
calculated by dividing that portion of the yield of the class (computed as
described above) which is tax-exempt by an amount equal to one minus the stated
combined State of California and federal income tax rate (normally assumed to be
the maximum federal marginal rate of 39.6% and the California marginal rate of
11.0%, although other rates may be used at times), and adding the result to that
portion, if any, of the yield of the class that is not tax-exempt. The taxable
equivalent yield of the Sweep Shares of the Schwab New York Tax-Exempt Money
Fund is calculated by dividing that portion of the yield of the class (computed
as described above) which is tax-exempt by an amount equal to one minus the
stated combined New York municipal, State of New York and federal income tax
rate (normally assumed to be the maximum federal marginal rate of 39.6%, the
State of New York marginal rate of 7.594% and the New York municipal marginal
rate of 4.46%, although other rates may be used at times), and adding the result
to that portion, if any, of the yield of the class that is not tax-exempt.
The taxable equivalent yield of the Sweep Shares of the Schwab Tax-Exempt Fund
is computed by dividing that portion of the yield of the class (computed as
described above) that is tax-exempt by an amount equal to one minus the stated
federal income tax rate (normally assumed to be the maximum applicable marginal
tax bracket rate) and adding the result to that portion, if any, of the yield of
the class that is not tax-exempt. The taxable equivalent yield of the Sweep
Shares of the Schwab California Tax-Exempt Money Fund is calculated by dividing
that portion of the yield of the class (computed as described above) which is
tax-exempt by an amount equal to one minus the stated combined State of
California and federal income tax rate (normally assumed to be the maximum
federal marginal rate of 39.6% and the California marginal rate of 11.0%,
although other rates may be used at times), and adding the result to that
portion, if any, of the yield of the class that is not tax-exempt. The taxable
equivalent yield of the Sweep Shares of the Schwab New York Tax-Exempt Money
Fund is calculated by dividing that portion of the yield of the class (computed
as described above) which is tax-exempt by an amount equal to one minus the
stated combined New York municipal, State of New York and federal income tax
rate (normally assumed to be the maximum federal marginal rate of 39.6%, the
State of New York marginal rate of 7.594% and the New York municipal marginal
rate of 4.46%, although other rates may be used at times), and adding the result
to that portion, if any, of the yield of the class that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, the Schwab Tax-Exempt Money Fund generally assumes an effective tax rate
of 39.6%, the Schwab California Tax-Exempt Money Fund generally assumes an
effective tax rate (combining the federal 39.6% rate and the California 11.0%
rate, and assuming the taxpayer deducts California state taxes paid) of 46.24%,
and the Schwab New York Tax-Exempt Money Fund generally assumes an effective tax
rate (combining the federal 39.6% rate, the New York state 7.594% rate and the
New York municipal 4.46% rate, and assuming the taxpayer deducts New York state
and municipal taxes paid) of 46.88%. Investors in the Schwab New York Tax-Exempt
Money Fund should understand that, under legislation enacted in New York State
and New York City, the maximum effective tax rates for 1996 and 1997 will be
46.27% and 45.79%, respectively. The tax rate cuts reflected herein are subject
to postponement or elimination. The effective tax rates used in determining such
yields do not reflect the tax costs resulting from the full or partial loss of
the benefits of personal exemptions, itemized deductions and California
exemption credits that may result from the receipt of additional taxable income
by taxpayers with adjusted gross incomes exceeding $114,700 or ($57,350 for
married
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filing separate returns) in 1995. Actual taxable equivalent yields and taxable
equivalent effective yields may be higher for taxpayers subject to the loss of
these benefits than the rates reported by the Funds.
TAX-EXEMPT VERSUS TAXABLE YIELD
Investors may want to determine which investment--tax exempt or
taxable--will provide a higher after-tax return. To determine the tax-equivalent
yield, or taxable equivalent effective yield, simply divide the yield or
effective yield of Sweep Shares of the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund or the Schwab New York Tax-Exempt Money Fund by
1 minus your marginal federal tax rate (or combined state and federal tax rate
in the case of the Schwab California Tax-Exempt Money Fund, or combined
municipal, state, and federal tax rate in the case of the Schwab New York
Tax-Exempt Money Fund). Note, however, that as discussed above full or partial
loss by certain investors of the described federal tax benefits could cause the
resulting figure to understate the after-tax return produced by the Sweep Shares
of the Fund in question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1994 is presented below. The taxable equivalent yield and
taxable equivalent effective yield figures are based, in the case of the Schwab
Tax-Exempt Money Fund, upon an assumed 1994 effective tax rate of 39.6%, and in
the case of the Schwab California Tax-Exempt Money Fund, upon an assumed
effective tax rate of 46.24%. (Based on the maximum rates in effect for 1994.
See the discussion above relating to federal and State of California tax rates.)
For the 7-day period ended June 30, 1995, the Schwab New York
Tax-Exempt Money Fund's 7-day yield was 3.46%, the 7-day effective yield was
3.52%, the 7-day taxable yield was 6.51%, and the 7-day taxable equivalent
effective yield was 6.63%.
<TABLE>
<CAPTION>
Taxable
Taxable Equivalent
Yield Effective Yield Equivalent Yield Effective Yield
----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Schwab Money Market Fund 5.08% 5.21% -- --
Schwab Government Money Fund 4.96% 5.08% -- --
Schwab U.S. Treasury Money 4.92% 5.04% -- --
Fund
Schwab Tax-Exempt Money Fund 4.22% 4.31% 6.99% 7.14%
Schwab California Tax-Exempt 4.20% 4.29% 7.81% 7.98%
Money Fund
</TABLE>
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<PAGE> 29
GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of Trust
(other than amendments changing the name of the Trust or any of its investment
portfolios, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5)
determining whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) such additional matters as may be required by law,
the Declaration of Trust, the Bylaws or any registration of the Trust with the
SEC or any state or as the Board of Trustees may consider desirable. The
shareholders also would vote upon changes to a Fund's fundamental investment
objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that the presence at a shareholder meeting in person
or by proxy of at least 30% of the shares entitled to vote on a matter shall
constitute a quorum, unless otherwise provided by the 1940 Act or other
applicable law. Thus, even if less than a majority of shareholders were
represented, a meeting of the Trust's shareholders could occur. Attending
shareholders would in such case be permitted to take action not requiring the
vote of more than a majority of a quorum. Some matters requiring a larger vote
under the Declaration of Trust, such as termination or reorganization of the
Trust, and certain amendments of the Declaration of Trust, could not be decided
at such a meeting; nor could matters which under the 1940 Act require the vote
of a "majority of the outstanding voting securities," as defined in the 1940
Act. The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any
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<PAGE> 30
of its investment portfolios) by notice to the shareholders without shareholder
approval.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote, because
it is limited to circumstances in which a disclaimer is inoperative and the
Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 1995, The Charles Schwab Trust Company, 1 Montgomery
Street, 7th Floor, San Francisco, CA 94104, directly or beneficially owned
82.25% of Schwab Retirement Money Fund(TM).
As of July 31, 1995 for the Schwab Institutional Advantage Money Fund
(TM), The Charles Schwab Trust Company, 1 Montgomery Street, 7th Floor, San
Francisco, CA 94104, directly or beneficially owned 78.66% and Queens-Long
Island Med Group 401K Plan, 106 EAB Plaza, 12th Floor, Uniondale, NY 11556,
directly or beneficially owned 13.74% of the Fund.
In addition, as of July 31, 1995, the officers and trustees of the
Trust, as a group, owned less than 1% of each Fund's outstanding voting
securities.
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<PAGE> 31
SCHWABFUNDS(R). SchwabFunds offers a variety of series and classes of
shares of beneficial interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(TM)(2)
Schwab Small-Cap Index Fund(TM)(2)
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(3)
Schwab California Long-Term Tax-Free Bond Fund(3)
MONEY MARKET FUNDS(4)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(TM)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares(3)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)(3)
Schwab Retirement Money Fund(TM)(5)
Schwab Institutional Advantage Money Fund(TM)(5)
Schwab New York Tax-Exempt Money Fund-Sweep Shares(6)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)(6)
1 The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
2 The Schwab International Index Fund and the Schwab Small-Cap Index Fund
are separate investment portfolios of Schwab Capital Trust.
3 Available only to California residents and residents of selected other
states.
4 All listed money market funds are separate investment portfolios of The
Charles Schwab Family of Funds.
5 Designed for institutional investors only.
6 Available only to New York residents and residents of selected other
states.
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<PAGE> 32
PURCHASE AND REDEMPTION OF SHARES
With the exception of the Schwab Retirement Money Fund(TM) and the
Schwab Institutional Advantage Money Fund(TM), each Fund's minimum initial
investment is $1,000 and subsequent investments of $100 or more may be made.
For the Schwab Retirement Money Fund and the Schwab Institutional Advantage
Money Fund the minimum initial investment is $1 and $25,000 for each Fund,
respectively, and subsequent investments of $1 or more may be made. These
minimum requirements may be changed at any time and are not applicable to
certain types of investors. For all retirement plan, Schwab One(R) and
certain other types of accounts, any account credit balance in excess of
$1.00 and subsequent amounts of $1.00 on any business day will be automatically
invested on a daily basis, in the Schwab Money Fund selected (except that
this feature is not available for the Schwab Retirement Money Fund or the
Schwab Institutional Advantage Money Fund). The Trust may waive the minimums
for purchases by trustees, directors, officers or employees of the Trust,
Schwab or the Investment Manager. The Trust has made an election with the
SEC to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of its net assets at the beginning of such period. This election is irrevocable
without the SEC's prior approval. Redemption requests in excess of the stated
limits may be paid, in whole or in part, in investment securities or in cash,
as the Trust's Board of Trustees may deem advisable; however, payment will be
made wholly in cash unless the Board of Trustees believes that economic or
market conditions exist that would make such a practice detrimental to the
best interests of the Fund. If redemption proceeds are paid in investment
securities, such securities will be valued as set forth in the Prospectus of
the Fund affected under "Share Price Calculation" and a redeeming shareholder
would normally incur brokerage expenses if he or she converted the securities
to cash. The Schwab Institutional Advantage Money Fund and the Schwab
Retirement Money Fund may also elect to invoke a seven day period for cash
settlement of individual redemption requests in excess of $250,000 or 1% of
each Fund's net assets, whichever is less.
OTHER INFORMATION
The Prospectuses of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectuses. Certain portions of the
Registration Statement have been omitted from the Prospectuses and this
Statement of Additional Information pursuant to the rules and regulations of the
SEC. The Registration Statement including the exhibits filed therewith may be
examined at the office of the SEC in Washington, D.C.
Statements contained in the Prospectuses or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration
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<PAGE> 33
Statement of which the Prospectuses and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
33<PAGE> 34
SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE
OBLIGATIONS--76.0%(a)
ASSET BACKED SECURITIES--15.7%
Alpha Finance Corp.
6.23%, 05/15/95 $ 32,000 $ 31,279
Apreco, Inc.
6.03%, 01/27/95 53,200 52,969
6.29%, 03/01/95 20,000 19,797
Asset Securitization
Cooperative Corp.
5.76%, 01/24/95 13,000 12,953
5.72%, 01/25/95 28,000 27,894
5.71%, 01/25/95 29,500 29,389
Banc One Funding Corp.
5.72%, 01/27/95 100,000 99,592
5.54%, 01/27/95 20,000 19,921
5.88%, 02/24/95 26,000 25,774
Barton Capital Corp.
6.02%, 01/13/95 30,107 30,047
Beta Finance, Inc.
5.11%, 02/03/95 12,000 11,945
5.18%, 02/06/95 29,500 29,351
5.24%, 02/09/95 18,000 17,901
5.25%, 02/22/95 26,000 25,808
5.24%, 02/22/95 25,500 25,312
5.20%, 03/08/95 15,000 14,861
5.34%, 03/13/95 32,000 31,672
5.45%, 03/20/95 30,000 29,656
5.34%, 03/20/95 26,000 25,707
5.60%, 03/24/95 7,000 6,913
6.03%, 04/26/95 12,500 12,266
6.13%, 05/16/95 24,000 23,465
Blue Hawk Funding Corp.
6.12%, 01/06/95 39,279 39,246
Corporate Asset Funding Co.
5.47%, 01/26/95 30,800 30,685
Corporate Receivables Corp.
6.02%, 01/13/95 25,000 24,950
ESC Securitization, Inc.
5.48%, 01/18/95 50,000 49,873
5.58%, 01/24/95 40,000 39,859
5.86%, 02/14/95 50,000 49,647
5.95%, 02/16/95 50,000 49,625
5.91%, 03/02/95 75,000 74,273
Enterprise Funding Corp.
5.84%, 01/05/95 14,100 14,091
6.12%, 01/09/95 30,049 30,008
6.08%, 01/09/95 16,842 16,819
5.47%, 01/10/95 25,109 25,075
5.97%, 01/13/95 31,786 31,723
6.13%, 01/17/95 5,000 4,986
5.77%, 01/26/95 50,000 49,802
5.78%, 02/06/95 42,622 42,379
5.93%, 02/15/95 12,267 12,177
6.29%, 03/02/95 11,079 10,965
6.32%, 03/06/95 37,826 37,408
Falcon Asset
Securitization Corp.
5.69%, 01/09/95 23,225 23,196
5.97%, 01/23/95 63,000 62,771
6.03%, 01/25/95 25,025 24,925
First Deposit Master Trust
Series 1993-3
5.71%, 01/11/95 16,000 15,975
5.95%, 02/15/95 17,000 16,875
5.93%, 02/15/95 12,400 12,309
5.82%, 02/16/95 14,000 13,897
Fleet Funding Co.
5.70%, 01/05/95 45,000 44,972
5.52%, 01/09/95 13,534 13,518
Preferred Receivables Corp.
5.68%, 01/09/95 16,000 15,980
5.53%, 01/11/95 46,275 46,205
Ranger Funding Corp.
5.61%, 01/12/95 8,000 7,986
5.59%, 01/12/95 10,000 9,983
5.58%, 01/27/95 15,013 14,953
6.01%, 02/27/95 11,000 10,897
Receivables Capital Corp.
6.09%, 01/05/95 35,116 35,092
Sheffield Receivables Corp.
6.02%, 01/20/95 29,000 28,908
6.03%, 01/27/95 50,000 49,783
5.91%, 02/28/95 10,000 9,906
United Airlines First
Funding Corp.
5.69%, 01/10/95 22,517 22,485
5.74%, 01/25/95 27,000 26,898
WCP Funding Inc.
6.03%, 01/24/95 30,000 29,885
----------
1,775,462
----------
AUTOMOTIVE--8.9%
BMW U.S. Capital Corp.
6.11%, 01/06/95 30,000 29,975
5.16%, 01/23/95 11,000 10,966
6.03%, 01/24/95 21,050 20,969
5.58%, 01/26/95 34,567 34,435
5.20%, 02/07/95 14,000 13,927
5.60%, 03/22/95 50,000 49,394
5.60%, 03/23/95 25,000 24,693
5.66%, 04/03/95 20,000 19,719
6.05%, 05/15/95 16,000 15,650
Ford Credit Europe PLC
5.93%, 01/10/95 38,000 37,944
5.57%, 01/17/95 26,000 25,936
5.57%, 01/20/95 50,000 49,855
5.91%, 02/16/95 20,500 20,348
5.93%, 02/28/95 35,000 34,671
Ford Motor Credit Co.
5.83%, 01/09/95 10,000 9,987
5.90%, 02/21/95 82,000 81,324
6.56%, 04/28/95 45,000 44,061
General Motors
Acceptance Corp.
6.14%, 01/06/95 25,000 24,979
5.74%, 01/10/95 26,000 25,963
5.74%, 01/11/95 25,000 24,961
5.71%, 01/11/95 25,000 24,961
5.71%, 01/12/95 25,000 24,957
5.58%, 01/25/95 30,000 29,890
5.58%, 01/26/95 30,000 29,885
5.78%, 02/07/95 50,000 49,707
5.78%, 02/08/95 50,000 49,699
5.91%, 02/13/95 50,000 49,652
5.99%, 02/17/95 36,000 35,723
5.94%, 02/21/95 10,000 9,917
5.99%, 02/23/95 50,000 49,566
5.99%, 02/28/95 14,000 13,867
Renault Acceptance B.V.
5.55%, 01/17/95 8,000 7,981
5.62%, 01/24/95 6,300 6,278
</TABLE>
34
<PAGE> 35
SchwabFunds(R) 2
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Renault Credit International
5.92%, 02/10/95 $ 19,500 $ 19,373
----------
1,001,213
----------
BANKING--AUSTRALIA--0.8%
National Australia Funding
(Delaware)
5.24%, 02/10/95 40,000 39,773
Westpac Capital Corp.
5.88%, 02/24/95 50,000 49,565
----------
89,338
----------
BANKING--BELGIUM--1.2%
Generale Bank, Inc.
5.85%, 03/03/95 63,000 62,387
6.30%, 03/30/95 30,000 29,548
5.77%, 04/06/95 50,000 49,261
----------
141,196
----------
BANKING--CANADA--3.4%
Canadian Imperial
Holdings Inc.
5.88%, 02/01/95 150,000 149,244
5.88%, 02/03/95 150,000 149,196
6.12%, 03/01/95 33,000 32,674
Toronto-Dominion Holdings
5.21%, 03/01/95 50,000 49,584
----------
380,698
----------
BANKING--DENMARK--0.4%
Den Danske Corp.
6.21%, 01/04/95 25,000 24,987
6.21%, 01/05/95 25,000 24,983
----------
49,970
----------
BANKING--DOMESTIC BANK
HOLDING COMPANY--1.4%
Chemical Banking Corp.
6.01%, 02/28/95 75,000 74,285
6.01%, 03/02/95 12,000 11,882
NationsBank Corp.
5.90%, 02/21/95 24,000 23,802
5.66%, 04/05/95 50,000 49,282
----------
159,251
----------
BANKING--DOMESTIC--2.7%
Bankers Trust New York Corp.
6.33%, 03/02/95 100,000 98,962
6.31%, 03/03/95 65,000 64,316
Fleet Financial Group, Inc.
6.12%, 01/11/95 44,000 43,925
6.13%, 01/30/95 25,000 24,877
Government Development
Bank for Puerto Rico
5.71%, 01/12/95 42,000 41,927
5.85%, 01/17/95 26,000 25,933
----------
299,940
----------
BANKING--FRANCE--0.6%
Indosuez N.A. Inc.
5.90%, 02/23/95 24,000 23,794
Societe Generale
5.18%, 02/01/95 40,000 39,826
----------
63,620
----------
BANKING--GERMANY--0.4%
Siemens Corp.
5.78%, 04/04/95 15,000 14,782
5.79%, 04/07/95 30,000 29,550
----------
44,332
----------
BANKING--JAPAN--3.4%
AES Shady Point /
(Bank of Tokyo LOC)
5.28%, 01/12/95 12,392 12,372
6.13%, 01/20/95 13,000 12,958
Bancal Tri-State Corp. /
(Mitsubishi Bank
Keepwell Agreement)
5.89%, 02/14/95 37,000 36,738
Bridgestone/Firestone, Inc. /
(Sumitomo Bank LOC)
6.07%, 01/20/95 40,000 39,872
DIC Americas, Inc. /
(Fuji Bank LOC)
5.92%, 01/20/95 24,300 24,225
5.75%, 01/31/95 10,000 9,953
5.93%, 02/15/95 25,000 24,818
Deerfield Capital Corp. /
(Sumitomo Bank LOC)
6.16%, 01/04/95 45,950 45,926
6.14%, 01/05/95 55,480 55,442
6.13%, 01/23/95 15,700 15,641
Mitsubishi Motors Credit of
America Inc. /
(Mitsubishi Bank LOC)
5.52%, 01/13/95 20,000 19,964
Ridge Capital II / (Dai-Ichi
Kangyo Bank LOC)
6.16%, 01/04/95 26,200 26,187
6.16%, 01/23/95 10,000 9,963
Tri-Lateral Capital (U.S.A.),
Inc. / (Industrial Bank of
Japan LOC)
5.53%, 01/03/95 11,153 11,150
6.02%, 01/19/95 20,537 20,475
5.94%, 02/24/95 16,302 16,159
----------
381,843
----------
BANKING--NETHERLANDS--0.2%
ABN-Amro North America
Finance Inc.
5.51%, 01/03/95 25,000 24,992
----------
BANKING--SPAIN--2.6%
BEX America Finance, Inc.
6.01%, 01/03/95 54,000 53,982
6.06%, 01/06/95 24,000 23,980
Central Hispano N.A.
Capital Corp.
6.03%, 01/30/95 50,000 49,758
6.03%, 01/31/95 50,000 49,750
6.40%, 03/27/95 120,000 118,215
----------
295,685
----------
BANKING--UNITED KINGDOM--0.9%
Abbey National N.A. Corp.
5.59%, 03/07/95 10,000 9,902
Banco Nacional de Mexico S.A. /
(Barclays Bank LOC)
6.05%, 01/04/95 25,000 24,987
6.09%, 01/06/95 30,000 29,975
</TABLE>
35
<PAGE> 36
SchwabFunds(R) 3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Yorkshire Building Society
5.23%, 03/06/95 $ 30,000 $ 29,728
6.35%, 03/08/95 12,175 12,035
----------
106,627
----------
CHEMICALS--0.2%
BASF Corp.
5.87%, 04/03/95 20,000 19,709
----------
COMPUTER AND OFFICE EQUIPMENT--0.4%
CSC Enterprises
6.04%, 01/11/95 12,500 12,479
5.58%, 01/12/95 10,000 9,983
6.13%, 01/24/95 20,000 19,922
----------
42,384
----------
DATA PROCESSING--0.8%
Electronic Data Systems Corp.
5.58%, 01/17/95 35,000 34,914
5.53%, 01/17/95 20,000 19,952
5.53%, 01/17/95 24,000 23,942
5.86%, 02/15/95 11,000 10,921
----------
89,729
----------
ELECTRICAL AND ELECTRONICS--3.0%
MCA Funding Corp.
5.68%, 01/04/95 35,000 34,984
5.16%, 01/10/95 15,000 14,981
5.20%, 01/11/95 16,000 15,977
5.20%, 01/13/95 20,000 19,966
5.17%, 01/24/95 22,000 21,929
5.57%, 01/26/95 15,600 15,541
5.21%, 02/23/95 23,500 23,324
5.20%, 03/02/95 21,000 20,823
5.20%, 03/07/95 25,000 24,771
5.20%, 03/09/95 25,300 25,061
5.34%, 03/13/95 15,000 14,846
5.34%, 03/15/95 27,000 26,715
5.34%, 03/16/95 27,000 26,711
5.39%, 03/21/95 15,000 14,827
5.88%, 04/26/95 20,000 19,635
Sony Capital Corp.
5.54%, 01/05/95 15,000 14,991
----------
335,082
----------
FINANCE (COMMERCIAL)--10.7%
CIT Group Holdings, Inc.
5.29%, 01/19/95 50,000 49,870
5.58%, 01/24/95 47,000 46,835
General Electric Capital Corp.
5.57%, 01/11/95 50,000 49,924
5.57%, 01/12/95 50,000 49,916
5.16%, 01/20/95 30,000 29,920
5.56%, 01/23/95 40,000 39,866
5.56%, 01/30/95 30,000 29,868
5.56%, 01/31/95 30,000 29,863
5.09%, 02/01/95 43,000 42,816
5.21%, 02/08/95 17,000 16,909
5.23%, 02/09/95 39,000 38,785
5.16%, 02/09/95 40,000 39,781
5.24%, 02/10/95 39,000 38,779
6.29%, 04/04/95 21,000 20,666
General Electric
Capital Services
5.16%, 01/23/95 35,000 34,892
5.16%, 01/24/95 30,000 29,903
5.56%, 01/26/95 25,000 24,905
5.58%, 01/31/95 32,000 31,853
5.16%, 02/03/95 35,000 34,838
5.16%, 02/07/95 20,103 19,999
5.16%, 02/08/95 16,000 15,915
5.16%, 02/10/95 25,000 24,860
5.19%, 02/27/95 47,000 46,623
5.82%, 04/06/95 50,000 49,255
6.24%, 05/23/95 30,000 29,284
Hanson Finance (UK) PLC
5.48%, 01/18/95 18,000 17,954
5.88%, 02/24/95 63,000 62,452
6.09%, 02/27/95 34,000 33,677
6.11%, 03/01/95 34,000 33,665
6.36%, 03/07/95 48,000 47,457
6.30%, 03/08/95 26,000 25,704
6.15%, 03/10/95 50,000 49,429
Transamerica Finance Corp.
5.57%, 01/17/95 11,000 10,973
5.28%, 02/08/95 30,000 29,837
5.25%, 02/08/95 25,000 24,865
----------
1,202,138
----------
FINANCE (CONSUMER)--1.9%
Sears Roebuck
Acceptance Corp.
5.53%, 01/18/95 70,000 69,820
5.53%, 01/19/95 50,000 49,864
5.53%, 01/20/95 46,000 45,868
5.68%, 01/30/95 6,000 5,973
5.66%, 01/31/95 40,000 39,814
----------
211,339
----------
PHARMACEUTICALS--0.9%
American Home Products Corp.
5.87%, 01/04/95 9,000 8,996
6.17%, 03/21/95 50,000 49,336
6.18%, 03/23/95 50,000 49,319
----------
107,651
----------
SECURITIES
BROKERAGE-DEALER--14.8%
BT Securities Corp.
5.92%, 01/17/95 25,000 24,934
6.17%, 03/03/95 25,000 24,742
Bear Stearns Companies Inc.
5.57%, 01/10/95 20,000 19,973
5.46%, 01/18/95 20,000 19,949
5.58%, 01/25/95 20,000 19,927
5.78%, 02/13/95 30,000 29,796
5.21%, 02/27/95 25,000 24,799
6.31%, 03/17/95 50,000 49,354
CS First Boston, Inc.
5.56%, 01/12/95 22,000 21,963
5.90%, 01/30/95 10,000 9,953
Dean Witter, Discover & Co.
5.93%, 01/18/95 50,000 49,861
5.93%, 01/19/95 50,000 49,853
Goldman Sachs Group, L.P.
5.97%, 01/13/95 112,000 111,778
6.03%, 01/25/95 50,000 49,800
6.03%, 01/26/95 50,000 49,792
5.90%, 02/02/95 135,000 134,296
5.90%, 02/03/95 3,000 2,984
5.49%, 03/14/95 50,000 49,465
5.36%, 03/14/95 10,000 9,896
</TABLE>
36
<PAGE> 37
SchwabFunds(R) 4
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Lehman Brothers Holdings Inc.
5.81%, 01/18/95 $ 41,000 $ 40,889
5.91%, 01/20/95 20,000 19,938
Merrill Lynch & Co., Inc.
5.55%, 01/25/95 51,000 50,814
5.55%, 01/26/95 23,000 22,913
5.58%, 01/30/95 25,000 24,889
5.58%, 01/31/95 25,000 24,885
Morgan Stanley Group Inc.
6.36%, 03/08/95 25,000 24,713
6.36%, 03/09/95 100,000 98,835
6.35%, 03/10/95 100,000 98,819
6.54%, 04/10/95 25,000 24,560
6.54%, 04/11/95 100,000 98,222
5.74%, 04/17/95 30,000 29,507
Nomura Holdings America, Inc.
5.51%, 01/05/95 25,000 24,985
5.74%, 01/25/95 23,000 22,913
5.75%, 01/31/95 25,000 24,882
5.88%, 02/14/95 16,000 15,887
Paine Webber Group Inc.
5.56%, 01/04/95 20,000 19,991
5.66%, 01/10/95 37,000 36,948
5.52%, 01/10/95 24,000 23,967
5.53%, 01/19/95 25,000 24,932
Salomon Inc.
6.05%, 01/03/95 17,421 17,415
6.13%, 01/23/95 40,000 39,851
6.19%, 01/30/95 40,000 39,802
6.52%, 02/07/95 45,000 44,702
6.37%, 02/27/95 25,000 24,751
----------
1,673,125
----------
STUDENT LOANS--0.1%
Student Loan Corp.
6.04%, 01/03/95 14,000 13,991
----------
TOBACCO--0.1%
American Brands, Inc.
5.62%, 01/19/95 15,000 14,958
----------
UTILITIES (NON-MUNICIPAL)--0.3%
Southern California Gas Co.
6.09%, 02/02/95 33,000 32,823
----------
PAPER AND WOOD PRODUCTS--0.2%
Bowater Inc.
5.47%, 01/09/95 21,000 20,974
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $8,578,070) 8,578,070
----------
VARIABLE RATE
OBLIGATIONS--10.2%(b)
ASSET BACKED SECURITIES--0.6%
Advanta Credit Card
Master Trust
6.33%, 01/07/95 24,000 24,000
Money Market Credit Card
Trust Series 1989-1
6.22%, 06/12/95 40,909 40,909
----------
64,909
----------
BANKING--DOMESTIC--1.9%
6700 Cherry Avenue
Partners Variable Rate
Taxable Demand Bonds
Series 1993 /
(Wells Fargo LOC)
6.60%, 01/07/95 10,500 10,500
Comerica Bank
5.83%, 01/03/95 50,000 49,951
5.82%, 01/03/95 50,000 49,975
PNC Bank, N.A.
5.82%, 01/03/95 100,000 99,984
----------
210,410
----------
BANKING--FRANCE--0.4%
New Jersey Economic
Development Authority
(GE Aerospace) Series A /
(Banque Nationale
de Paris LOC)
6.08%, 01/03/95 31,525 31,525
New Jersey Economic
Development Authority
(GE Aerospace) Series B /
(Banque Nationale
de Paris LOC)
6.08%, 01/03/95 10,000 10,000
----------
41,525
----------
BANKING--JAPAN--0.2%
Baldwin Park Redevelopment
Agency 1993 Refunding
Revenue Bonds
(Baldwin Park
Hotel Project) /
(Sumitomo Bank LOC)
6.34%, 01/10/95 15,200 15,200
Town of Islip Industrial
Development Agency
1992 Taxable Adjustable
Rate Industrial Revenue
Bonds (Nussdorf
Associates/Quality King
Distributors, Inc. Facility)/
(Bank of Tokyo LOC)
6.65%, 01/05/95 6,780 6,780
----------
21,980
----------
BANKING--UNITED KINGDOM--0.7%
Abbey National Treasury
Services PLC
5.85%, 01/03/95 50,000 49,996
5.82%, 01/03/95 44,500 44,470
----------
94,466
----------
CITY OR COUNTY
GENERAL OBLIGATIONS--0.8%
City of Irvine (Orange
County, California)
Taxable Notes
Series 1994 (d)
6.20%, 01/25/95 47,455 47,455
</TABLE>
37
<PAGE> 38
SchwabFunds(R) 5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Orange County, California
Taxable Notes
Series 1994-1995 (d)
6.00%, 01/01/95 $ 41,500 $ 41,490
----------
88,945
----------
EDUCATION--1.4%
Irvine Unified School District
(Orange County, California)
1994 Taxable Notes (d)
6.47%, 01/11/95 46,375 46,425
Newport Mesa Unified
School District (Orange
County, California)
1994 Taxable Notes (d)
6.48%, 01/11/95 24,960 24,985
North Orange County
Community College District
(Orange County, California)
1994 Taxable Notes (d)
6.48%, 01/11/95 47,785 47,834
Orange County Board of
Education (Orange
County, California)
1994 Taxable Notes (d)
6.48%, 01/11/95 35,880 35,920
----------
155,164
----------
FINANCE (COMMERCIAL)--0.1%
CIT Group Holdings, Inc.
5.80%, 01/03/95 15,000 14,999
----------
HEALTHCARE--0.2%
Catholic Healthcare West
Taxable Variable Rate
Demand Bonds
Series 1993A
7.00%, 01/07/95 20,400 20,400
----------
INSURANCE--0.9%
Commonwealth Life
Insurance Co.
5.83%, 03/31/95 100,000 100,000
----------
MONOLINE INSURANCE--0.1%
New Orleans Aviation
Board Taxable
Refunding Bonds Series
1993A /
(MBIA Insurance)
6.26%, 01/07/95 7,500 7,500
----------
SECURITIES
BROKERAGE-DEALER--2.6%
Bear Stearns Companies Inc.
6.04%, 01/23/95 50,000 50,000
CS First Boston, Inc.
6.08%, 04/01/95 50,000 50,000
Goldman Sachs Group, L.P.
6.03%, 01/01/95 35,000 35,000
5.92%, 01/03/95 40,000 40,000
5.91%, 01/03/95 20,000 20,000
Lehman Brothers Holdings Inc.
6.09%, 01/18/95 100,000 100,000
----------
295,000
----------
PUBLIC FACILITIES--0.3%
Orange County Flood
Control District 1994-95
Taxable Notes (d)
6.03%, 01/03/95 41,000 40,995
----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $1,156,293) 1,156,293
----------
BANKER'S
ACCEPTANCES--0.2%
BANKING--DOMESTIC--0.2%
Bankers Trust New York Corp.
6.12%, 02/13/95 17,667 17,539
----------
BANKING--JAPAN--0.0%
Fuji Bank, Ltd.
6.26%, 03/13/95 5,000 4,939
----------
TOTAL BANKER'S ACCEPTANCES
(Cost $22,478) 22,478
----------
BANK NOTES--1.5%
BANKING--DOMESTIC--1.5%
PNC Bank, N.A.
6.05%, 04/20/95 30,000 29,967
6.00%, 04/20/95 50,000 49,953
5.96%, 04/20/95 25,000 24,995
5.93%, 04/20/95 10,000 9,999
5.95%, 04/26/95 50,000 49,991
----------
TOTAL BANK NOTES
(Cost $164,905) 164,905
----------
CERTIFICATES OF
DEPOSIT--4.2%
BANKING--DOMESTIC--0.2%
Bank of the West, Inc.
6.25%, 01/12/95 20,000 20,000
----------
BANKING--FRANCE--1.8%
Banque Nationale de Paris
5.22%, 03/06/95 11,000 11,000
Societe Generale
5.17%, 01/17/95 20,000 20,000
5.10%, 02/02/95 95,000 95,000
5.18%, 02/03/95 25,000 24,998
5.18%, 02/06/95 25,000 24,998
5.64%, 04/03/95 30,000 30,001
----------
205,997
----------
BANKING--GERMANY--0.2%
Commerzbank AG
5.54%, 02/21/95 20,000 19,999
----------
BANKING--JAPAN--1.6%
Fuji Bank, Ltd.
6.32%, 02/28/95 11,000 10,992
5.98%, 02/28/95 25,000 25,000
Mitsubishi Bank, Ltd.
5.57%, 01/19/95 49,000 48,998
Sanwa Bank, Ltd.
6.07%, 01/03/95 40,000 40,000
6.11%, 01/13/95 20,000 20,000
6.25%, 03/08/95 15,000 15,003
6.25%, 03/09/95 15,000 15,000
----------
174,993
----------
</TABLE>
38
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SchwabFunds(R) 6
-------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
BANKING--SWITZERLAND--0.4%
Credit Suisse
4.85%, 04/12/95 $ 25,000 $ 25,001
4.91%, 04/13/95 25,000 25,001
--------
50,002
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $470,991) 470,991
--------
MUNICIPAL TAXABLE
NOTES--0.6%
CITY OR COUNTY
GENERAL OBLIGATIONS--0.6%
Anaheim (Orange County,
California) Taxable Notes
Series 1994(d)
5.68%, 04/04/95 10,000 9,981
4.69%, 04/04/95 45,000 45,034
Fresno County, California
Teeter Plan Taxable Notes
Series 1994-1995
5.83%, 06/30/95 12,000 12,000
--------
TOTAL MUNICIPAL TAXABLE NOTES
(Cost $67,015) 67,015
--------
REMARKETED
CERTIFICATES--0.5%
ASSET BACKED SECURITIES--0.5%
Circuit City RECOP Trust
6.15%, 01/23/95 35,000 35,000
6.33%, 03/07/95 17,000 17,000
--------
TOTAL REMARKETED CERTIFICATES
(Cost $52,000) 52,000
--------
</TABLE>
<TABLE>
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE
AGREEMENTS--6.8%(c)
CS First Boston Corp. 6.00%
Issue Date 12/27/94
Last Put Date 12/28/94
Due 01/04/95
Collateralized By:
FHLMC: $36,600 Par;
6.00% Due 11/15/08
FNMA: $24,455 Par;
6.00% Due 12/25/08
FHLMC: $21,685 Par;
6.50% Due 01/15/24
FNMA: $23,865 Par;
6.75% Due 11/25/06
FNMA: $24,365 Par;
6.75% Due 11/25/06 90,120 90,000
CS First Boston Corp. 6.00%
Issue Date 12/27/94
Last Put Date 12/29/94
Due 01/05/95
Collateralized By:
FNMA: $35,000 Par;
6.75% Due 11/25/06
FNMA: $42,451 Par;
6.75% Due 11/25/06
FHLMC: $25,950 Par;
5.50% Due 01/15/08
FHLMC: $27,640 Par;
6.50% Due 03/15/24 $ 90,135 $ 90,000
J.P. Morgan Securities Inc.
5.90% Issue Date 12/30/94
Due 01/03/95
Collateralized By:
FNMA: $30,774 Par;
7.00% Due 12/25/22
FNMA: $36,067 Par;
7.50% Due 01/25/21
FHLMC: $24,351 Par;
5.00% Due 11/15/23
FHLMC-GNMA: $32,693
Par; 6.50% Due 01/25/23 100,066 100,000
Lehman Government
Securities, Inc. 5.52%
Issue Date 10/04/94
Last Put Date 12/30/94
Due 01/06/95
Collateralized By:
FHLMC: $14,636 Par;
6.69% Due 10/15/08
FHLMC: $43,420 Par;
6.25% Due 07/15/19
FHLMC: $9,112 Par;
6.00% Due 02/15/06
FNMA: $43,421 Par;
8.00% Due 05/25/22
FNMA: $12,516 Par;
9.13% Due 09/25/23
FNMA: $2,057 Par;
6.00% Due 07/25/07 113,614 112,000
Lehman Government
Securities, Inc. 5.55%
Issue Date 10/05/94
Last Put Date 12/29/94
Due 01/05/95
Collateralized By:
FHLMC: $13,028 Par;
9.00% Due 09/15/21
FHLMC: $110 Par;
9.00% Due 09/15/21 13,184 13,000
Paine Webber Inc. 6.25%
Issue Date 12/27/94
Due 01/03/95
Collateralized By:
FHLMC: $50,000 Par;
4.10% Due 01/15/24
FHLMC: $25,000 Par;
7.85% Due 10/15/23
FHLMC: $20,000 Par;
6.84% Due 07/15/08
FNMA: $17,690 Par;
5.80% Due 09/25/06 100,122 100,000
</TABLE>
39
<PAGE> 40
SchwabFunds(R) 7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----
<S> <C> <C>
Salomon Brothers Inc. 5.90%
Issue Date 12/21/94
Due 01/03/95
Collateralized By:
FHLMC: $45,362 Par;
7.00% Due 05/01/24
FHLMC: $46,496 Par;
7.00% Due 05/01/24 $ 81,173 $ 81,000
Salomon Brothers Inc. 5.90%
Issue Date 12/21/94
Due 01/04/95
Collateralized By:
FHLMC: $35,155 Par;
7.00% Due 05/01/24
FNMA: $30,074 Par;
6.50% Due 12/01/23
FNMA: $30,074 Par;
6.50% Due 12/01/23 81,186 81,000
Salomon Brothers Inc. 5.95%
Issue Date 12/16/94
Last Put Date 12/31/94
Due 01/01/95
Collateralized By:
FHLMC: $50,000 Par;
7.00% Due 06/01/24
FHLMC: $50,000 Par;
7.00% Due 06/01/24
FHLMC: $13,660 Par;
7.00% Due 06/01/24 $100,017 $100,000
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $767,000) 767,000
--------
TOTAL INVESTMENTS--100.0%
(Cost $11,278,752) $11,278,752
===========
</TABLE>
See accompanying Notes to Schedules of Investments.
40
<PAGE> 41
SchwabFunds(R) 8
-------------------------------------------------------------------------------
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--17.1%(b)
Federal Home Loan Bank
5.59%, 02/14/95 $ 20,000 $ 20,000
6.02%, 03/08/95 20,000 19,959
Federal National Mortgage
Association
5.35%, 01/16/95 20,000 20,000
Student Loan Marketing
Association
6.17%, 01/03/95 9,615 9,615
6.12%, 01/03/95 9,165 9,204
6.10%, 01/03/95 21,675 21,732
6.07%, 01/03/95 115,000 114,934
5.94%, 01/03/95 25,000 25,007
5.93%, 01/03/95 35,000 35,000
5.90%, 01/03/95 30,000 30,000
5.48%, 06/30/95 20,000 20,010
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $325,461) 325,461
---------
AGENCY OBLIGATIONS--60.8%
COUPON NOTES--0.8%
Federal Home Loan Bank
3.46%, 02/03/95 14,850 14,831
---------
DISCOUNT NOTES--60.0%
Federal Farm Credit
6.02%, 02/28/95 3,670 3,635
Federal Home Loan Bank
5.04%, 01/03/95 25,000 24,993
4.92%, 01/03/95 45,000 44,988
4.83%, 01/04/95 39,885 39,869
5.91%, 01/09/95 17,845 17,822
5.93%, 01/11/95 43,000 42,930
4.95%, 01/12/95 25,000 24,963
5.01%, 01/18/95 20,000 19,954
5.47%, 02/01/95 31,175 31,030
6.16%, 05/30/95 23,000 22,432
6.34%, 06/01/95 23,845 23,231
Federal Home Loan
Mortgage Corp.
5.93%, 01/04/95 33,730 33,713
5.47%, 01/09/95 25,000 24,970
5.60%, 02/02/95 47,000 46,769
5.61%, 02/03/95 21,815 21,704
5.48%, 03/15/95 16,000 15,827
5.49%, 03/22/95 4,000 3,953
Federal National Mortgage
Association
4.92%, 01/05/95 20,000 19,989
5.82%, 01/10/95 22,495 22,462
5.91%, 01/12/95 15,000 14,973
5.02%, 01/17/95 10,225 10,203
5.05%, 01/19/95 25,000 24,938
5.56%, 01/24/95 25,000 24,912
5.77%, 01/26/95 22,160 22,072
5.77%, 01/27/95 15,000 14,938
5.88%, 01/30/95 23,105 22,996
6.04%, 02/07/95 25,000 24,846
5.05%, 02/08/95 50,000 49,739
6.02%, 02/28/95 21,560 21,353
5.12%, 03/01/95 30,000 29,755
6.19%, 03/03/95 25,000 24,742
6.19%, 03/06/95 23,280 23,028
5.19%, 03/09/95 50,000 49,529
5.27%, 03/20/95 42,000 41,533
5.37%, 03/22/95 31,405 31,040
5.36%, 03/22/95 15,000 14,826
6.25%, 03/30/95 32,680 32,189
6.30%, 04/27/95 58,845 57,675
6.42%, 05/04/95 34,000 33,274
6.49%, 05/12/95 15,650 15,289
6.11%, 05/17/95 25,000 24,439
6.66%, 06/08/95 24,880 24,177
6.67%, 06/29/95 25,000 24,198
---------
1,141,898
---------
TOTAL AGENCY OBLIGATIONS
(Cost $1,156,729) 1,156,729
---------
U.S. TREASURY
OBLIGATIONS--2.3%
U.S. Treasury Bills
5.98%, 05/18/95 23,400 22,883
U.S. Treasury Notes
8.38%, 04/15/95 20,000 20,193
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $43,076) 43,076
---------
</TABLE>
<TABLE>
<CAPTION>
Maturity Value
-------- -----
<S> <C> <C>
REPURCHASE
AGREEMENTS--19.8%(c)
CS First Boston, Corp. 5.80%
Issue Date 11/17/94
Last Put Date 12/31/94
Due 01/07/95
Collateralized By:
FNMA: $20,130 Par;
5.40% Due 03/25/09
FNMA: $23,320 Par;
5.40% Due 03/25/09
FHLMC: $22,290 Par;
5.88% Due 05/15/21
FNMA: $904 Par;
6.00% Due 01/01/24 55,692 55,238
Lehman Government
Securities, Inc. 5.52%
Issue Date 10/04/94
Last Put Date 12/29/94
Due 01/05/95
Collateralized By:
FHLMC: $47,268 Par;
9.00% Due 09/15/21
FNMA: $16,497 Par;
5.50% Due 06/25/23
FNMA: $766 Par;
7.00% Due 04/01/08
U.S. Treasury Note: $400 Par;
8.75% Due 08/15/00
FHLMC: $1,484 Par;
8.25% Due 12/01/08
FHLMC: $600 Par;
6.00% Due 06/15/19 60,856 60,000
</TABLE>
41
<PAGE> 42
SchwabFunds(R) 9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----
<S> <C> <C>
Lehman Government
Securities, Inc. 5.52%
Issue Date 10/05/94
Last Put Date 12/30/94
Due 01/06/95
Collateralized By:
FHLMC: $14,037 Par;
7.00% Due 02/15/22
FNMA: $31,500 Par;
7.00% Due 02/25/23
FHLMC: $383 Par;
6.00% Due 06/15/19
FNMA: $339 Par;
5.75% Due 06/25/08
FHLMC: $511 Par;
6.00% Due 06/15/19 $ 40,570 $ 40,000
Lehman Government
Securities, Inc. 5.52%
Issue Date 10/05/94
Last Put Date 12/31/94
Due 01/07/95
Collateralized By:
FNMA: $42,730 Par;
6.50% Due 01/25/23
FHLMC: $10,772 Par;
5.75% Due 05/15/05
FNMA: $680 Par;
6.50% Due 06/01/08
FHLMC: $400 Par;
6.00% Due 05/15/19 45,649 45,000
Lehman Government
Securities, Inc. 5.80%
Issue Date 11/28/94
Last Put Date 12/31/94
Due 01/07/95
Collateralized By:
FNMA: $22,357 Par;
9.50% Due 07/25/20 22,301 22,158
Paine Webber Inc. 5.45%
Issue Date 10/03/94
Last Put Date 12/28/94
Due 01/04/95
Collateralized By:
FHLMC: $41,250 Par;
5.575% Due 02/15/24
FNMA: $21,475 Par;
5.86% Due 01/25/22
FHLMC: $475 Par;
5.575% Due 02/15/24
FHLMC: $330 Par;
5.575% Due 02/15/24
FHLMC: $490 Par;
7.00% Due 04/15/24
FHLMC: $450 Par;
7.00% Due 04/15/24 $ 60,845 $ 60,000
Salomon, Inc. 5.88%
Issue Date 12/23/94
Due 01/06/95
Collateralized By:
FHLMC: $44,215 Par;
7.50% Due 06/01/24 40,091 40,000
Salomon, Inc. 5.90%
Issue Date 12/22/94
Due 01/03/95
Collateralized By:
FHLMC: $30,951 Par;
7.50% Due 06/01/24 28,055 28,000
Salomon, Inc. 5.90%
Issue Date 12/23/94
Due 01/03/95
Collateralized By:
FHLMC: $31,308 Par;
7.00% Due 06/01/24 27,661 27,611
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $378,007) 378,007
----------
TOTAL INVESTMENTS--100.0%
(Cost $1,903,273) $1,903,273
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
42
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SchwabFunds(R) 10
-------------------------------------------------------------------------------
SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
U.S. TREASURY
OBLIGATIONS--100.0%
U.S. Treasury Bills
5.06%-5.08%, 01/12/95 $ 22,000 $ 21,966
5.09%-5.55%, 01/19/95 77,285 77,099
5.11%-5.29%, 01/26/95 18,930 18,863
4.82%-5.40%, 02/02/95 101,545 101,072
5.02%-5.50%, 02/09/95 99,435 98,883
5.62%-5.63%, 02/16/95 8,390 8,330
5.51%-5.76%, 03/02/95 92,880 92,015
5.39%-5.89%, 03/09/95 99,220 98,176
5.32%-5.53%, 03/16/95 21,180 20,948
5.54%-5.74%, 04/06/95 25,000 24,639
5.78%-5.80%, 04/13/95 24,565 24,169
6.21%, 04/27/95 15,000 14,707
5.78%-6.18%, 05/04/95 53,285 52,208
5.98%, 05/25/95 20,000 19,535
6.34%, 06/01/95 1,720 1,675
U.S. Treasury Notes
8.63%, 01/15/95 8,540 8,550
4.25%, 01/31/95 50,000 49,957
11.25%, 02/15/95 10,000 10,067
3.88%, 02/28/95 35,035 34,938
8.50%, 05/15/95 25,000 25,183
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $802,980) 802,980
--------
TOTAL INVESTMENTS--100.0%
(Cost $802,980) $802,980
========
</TABLE>
NOTES TO SCHEDULES OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below and Treasury and Agency
Notes which reflect the coupon rate of the security. Yields for each type of
security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Money Market Fund are private
placement securities exempt from registration by Section 4(2) of the
Securities Act of 1933. These securities generally are issued to
institutional investors, such as the Schwab Money Market Fund. Any resale by
the Schwab Money Market Fund must be in an exempt transaction, normally to a
qualified institutional buyer. At December 31, 1994, the aggregate value of
private placement securities held by the Schwab Money Market Fund was
$2,665,221,000, which represented 23.74% of net assets. Of this total,
$2,322,312,000 or 20.68% of net assets, were invested in securities
determined by the Investment Manager to be liquid in accordance with a
resolution adopted by the Board of Trustees relating to Rule 144A,
promulgated under the Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December 31,
1994. Dates shown represent the latter of the demand date or next interest
rate change date, which is considered the maturity date for financial
reporting purposes. For variable rate securities without demand features and
which mature in less than one year the next interest reset date is shown.
(c) Due dates shown for repurchase agreements represent the earlier of the
final maturity date or put date, which is considered the maturity date for
financial reporting purposes. Dates of repurchase agreements reflect the
original issue date and the last put date.
43
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SchwabFunds(R) 11
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(d) With respect to these securities, the Schwab Money Market Fund has
obtained a $27,993,000 irrevocable letter of credit from Bank of America
National Trust and Savings Association which allows the Fund to make demands
for partial payment of the securities' principal amount under certain
conditions upon maturity or disposition of the securities by the Fund. This
letter of credit provides a degree of additional support for the valuation of
these securities but has not been needed to maintain the Fund's net asset
value of $1.00 per share since the Fund has not experienced any losses to
date in excess of one half of one percent of its net assets. The letter of
credit expires on August 1, 1995. See Note 7 to the Financial Statements for
further discussion.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
44
<PAGE> 45
SchwabFunds(R) 12
-------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
----------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $11,278,752, $1,903,273
and $802,980, respectively) $11,278,752 $1,903,273 $802,980
Cash 1 3 2
Interest receivable 25,024 6,729 4,162
Receivable for securities matured -- -- 76,165
Prepaid expenses 243 69 49
Deferred organization costs 7 3 25
----------- ---------- --------
Total assets 11,304,027 1,910,077 883,383
----------- ---------- --------
LIABILITIES
Payable for:
Dividends 68,543 11,438 4,191
Investments purchased -- -- 74,820
Investment advisory and
administration fee 2,759 467 118
Transfer agency and
shareholder service fees 3,882 695 194
Other 1,538 149 189
----------- ---------- --------
Total liabilities 76,722 12,749 79,512
----------- ---------- --------
Net assets applicable to
outstanding shares $11,227,305 $1,897,328 $803,871
=========== ========== ========
NET ASSETS CONSIST OF:
Capital paid in $11,227,659 $1,897,435 $803,943
Accumulated net realized loss
on investments sold (354) (107) (72)
----------- ---------- --------
$11,227,305 $1,897,328 $803,871
=========== ========== ========
THE PRICING OF SHARES
Outstanding shares,
$0.00001 par value
(unlimited shares authorized) 11,227,659 1,897,435 803,943
Net asset value, offering and
redemption price per share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
45
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SchwabFunds(R) 13
-------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- --------------
<S> <C> <C> <C>
Interest income $446,812 $82,497 $22,705
-------- ------- -------
Expenses:
Investment advisory and
administration fee 42,102 8,356 2,458
Transfer agency and
shareholder service fees 45,453 8,624 2,404
Custodian fees 747 267 174
Registration fees 1,390 134 212
Professional fees 312 55 29
Shareholder reports 733 147 38
Trustees' fees 61 13 3
Amortization of deferred
organization costs and
other prepaid expenses 87 25 14
Insurance and other expenses 302 73 16
-------- ------- -------
91,187 17,694 5,348
Less expenses reduced (16,027) (3,445) (1,876)
-------- ------- -------
Total expenses incurred by Fund 75,160 14,249 3,472
-------- ------- -------
Net investment income 371,652 68,248 19,233
Net realized loss on investments sold (124) (23) (45)
-------- ------- -------
Net increase in net assets resulting
from operations $371,528 $68,225 $19,188
======== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
46
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SchwabFunds(R) 14
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Money Schwab Government Schwab U.S. Treasury
Market Fund Money Fund Money Fund
-------------------------- ------------------------ ----------------------
For the year ended For the year ended For the year ended
December 31, December 31, December 31,
1994 1993 1994 1993 1994 1993
----------- ----------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment
income $ 371,652 $ 189,205 $ 68,248 $ 44,423 $ 19,233 $ 6,373
Net realized loss on
investments sold (124) -- (23) (53) (45) (20)
----------- ----------- ---------- ---------- ---------- --------
Net increase in net
assets resulting
from operations 371,528 189,205 68,225 44,370 19,188 6,353
----------- ----------- ---------- ---------- ---------- --------
Dividends to shareholders
from net investment
income (371,652) (189,205) (68,248) (44,423) (19,233) (6,373)
----------- ----------- ---------- ---------- ---------- --------
Capital Share
Transactions (dollar
amounts and
number of shares
are the same):
Proceeds from
shares sold 27,194,342 18,899,319 4,092,811 3,648,235 1,791,760 915,597
Net asset value of
shares issued in
reinvestment of
dividends 323,920 180,144 61,588 43,211 15,433 5,552
Less payments for
shares redeemed (24,455,432) (17,049,031) (4,001,651) (3,539,583) (1,381,420) (721,881)
----------- ----------- ---------- ---------- ---------- --------
Increase in net
assets from
capital share
transactions 3,062,830 2,030,432 152,748 151,863 425,773 199,268
----------- ----------- ---------- ---------- ---------- --------
Total increase in
net assets 3,062,706 2,030,432 152,725 151,810 425,728 199,248
Net Assets:
Beginning of period 8,164,599 6,134,167 1,744,603 1,592,793 378,143 178,895
----------- ----------- ---------- ---------- ---------- --------
End of period $11,227,305 $ 8,164,599 $1,897,328 $1,744,603 $ 803,871 $378,143
=========== =========== ========== ========== ========== ========
</TABLE>
See accompanying Notes to Financial Statements.
47
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SchwabFunds(R) 15
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab
U.S. Treasury Money Fund (the "Funds") are series of The Charles Schwab Family
of Funds (the "Trust"), an open-end, management investment company organized
as a Massachusetts business trust on October 20, 1989 and registered under the
Investment Company Act of 1940, as amended.
In addition to the three funds described above, the Trust also offers -- the
Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund, the
Schwab Value Advantage Money Fund(TM), the Schwab Institutional Advantage Money
Fund(TM), the Schwab Retirement Money Fund(TM) and the Schwab New York
Tax-Exempt Money Fund. The assets of each series are segregated and accounted
for separately.
The Schwab Money Market Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations. The Schwab Government
Money Fund invests exclusively in a diversified portfolio of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements thereon. The Schwab U.S. Treasury Money Fund invests
solely in United States Treasury notes, bills and other direct obligations of
the United States Treasury, backed by the full faith and credit of the United
States Government.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from security transactions are determined
on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds, their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from each Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
48
<PAGE> 49
SchwabFunds(R) 16
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Schwab Money Market Fund pays an annual fee, payable
monthly, of .46% of the first $2 billion of average daily net assets, .45% of
such assets over $2 billion, and .40% of such assets in excess of $3 billion.
For advisory services and facilities furnished, the Schwab Government Money Fund
and the Schwab U.S. Treasury Money Fund each pay an annual fee, payable monthly,
of .46% of the first $1 billion of each Fund's average daily net assets, .41% of
such assets over $1 billion, and .40% of such assets in excess of $2 billion.
Under these agreements, the Schwab Money Market Fund, the Schwab Government
Money Fund and the Schwab U.S. Treasury Money Fund incurred investment advisory
and administration fees of $42,102,000, $8,356,000 and $2,458,000, respectively,
during the year ended December 31, 1994, before the Investment Manager reduced
its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of each Fund's average daily net assets.
For the year ended December 31, 1994, the Schwab Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred transfer
agency and shareholder service fees of $45,453,000, $8,624,000 and $2,404,000,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1994, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Schwab Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred fees of
$61,000, $13,000 and $3,000, respectively, related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit each Fund's ratio of operating expenses to average net assets. For the
year ended December 31, 1994, the total of such fees reduced by the Investment
Manager was $13,405,000, $2,922,000 and $1,442,000 for the Schwab Money Market
Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund,
respectively, and the total of such fees reduced by Schwab was $2,622,000,
$523,000 and $434,000 for the Schwab Money Market Fund, the Schwab Government
Money Fund and the Schwab U.S. Treasury Money Fund, respectively.
49
<PAGE> 50
SchwabFunds(R) 17
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1994, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab
Schwab Money Schwab Government U.S. Treasury
Market Fund Money Fund Money Fund
------------ ----------------- -------------
<S> <C> <C> <C>
Purchases $49,530,467 $15,924,140 $3,022,721
Proceeds of sales and
maturities $46,455,889 $15,773,548 $2,600,803
</TABLE>
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Money Market Fund
----------------------------------------------------------------------
For the period
January 26, 1990
(commencement
For the year ended December 31, of operations) to
-------------------------------------------------- December 31,
1994 1993 1992 1991 1990
-------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment
Operations
Net investment income .04 .03 .03 .06 .07
Net realized and unrealized
gain (loss) on investments -- -- -- -- --
----------- ---------- ---------- ---------- ----------
Total from investment
operations .04 .03 .03 .06 .07
Less Distributions
Dividends from net
investment income (.04) (.03) (.03) (.06) (.07)
Distributions from realized
gain on investments -- -- -- -- --
----------- ---------- ---------- ---------- ----------
Total distributions (.04) (.03) (.03) (.06) (.07)
----------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00
=========== ========== ========== ========== ==========
Total return (%) 3.68 2.67 3.48 5.70 7.23
Ratios/Supplemental Data
Net assets, end of
period (000s) $11,227,305 $8,164,599 $6,134,167 $4,866,584 $4,058,408
Ratio of expenses to
average net assets (%) .74 .73 .70 .78 .82*
Ratio of net investment income
to average net assets (%) 3.68 2.64 3.40 5.52 7.51*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Money
Market Fund for the periods ended December 31, 1994, 1993, 1992, 1991 and 1990
would have been .90%, .91%, .92%, .94% and .95%*, respectively, and the ratio of
net investment income to average net assets would have been 3.52%, 2.46%, 3.18%,
5.36% and 7.38%*, respectively.
* Annualized
50
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SchwabFunds(R) 18
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Government Money Fund
-----------------------------------------------------------------------
For the period
January 26, 1990
(commencement
For the year ended December 31, of operations) to
------------------------------------------------- December 31,
1994 1993 1992 1991 1990
------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment
Operations
Net investment income .04 .03 .03 .05 .07
Net realized and unrealized
gain (loss) on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from investment
operations .04 .03 .03 .05 .07
Less Distributions
Dividends from net
investment income (.04) (.03) (.03) (.05) (.07)
Distributions from realized
gain on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (.04) (.03) (.03) (.05) (.07)
---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total return (%) 3.62 2.66 3.42 5.53 7.23
Ratios/Supplemental Data
Net assets, end of
period (000s) $1,897,328 $1,744,603 $1,592,793 $1,458,705 $1,424,377
Ratio of expenses to
average net assets (%) .74 .73 .72 .70 .70*
Ratio of net investment income
to average net assets (%) 3.56 2.63 3.36 5.38 7.51*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Government
Money Fund for the periods ended December 31, 1994, 1993, 1992, 1991 and 1990
would have been .92%, .93%, .94%, .95% and .96%*, respectively, and the ratio of
net investment income to average net assets would have been 3.38%, 2.43%, 3.14%,
5.13% and 7.25%*, respectively.
* Annualized
51
<PAGE> 52
SchwabFunds(R) 19
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
---------------------------------------------------------
For the period
November 6, 1991
(commencement
For the year ended December 31, of operations) to
------------------------------------ December 31,
1994 1993 1992 1991
------------------------------------ ----------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net investment income .04 .03 .03 .01
Net realized and unrealized
gain (loss) on investments -- -- -- --
-------- -------- -------- -------
Total from investment operations .04 .03 .03 .01
Less Distributions
Dividends from net
investment income (.04) (.03) (.03) (.01)
Distributions from realized
gain on investments -- -- -- --
-------- -------- -------- -------
Total distributions (.04) (.03) (.03) (.01)
-------- -------- -------- -------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00
======== ======== ======== =======
Total return (%) 3.52 2.54 3.26 .68
Ratios/Supplemental Data
Net assets, end of period (000s) $803,871 $378,143 $178,895 $16,906
Ratio of expenses to
average net assets (%) .65 .65 .59 .24*
Ratio of net investment income
to average net assets (%) 3.60 2.50 2.91 4.11*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab U.S.
Treasury Money Fund for the periods ended December 31, 1994, 1993, 1992 and 1991
would have been 1.00%, 1.05%, 1.15% and 4.11%*, respectively, and the ratio of
net investment income to average net assets would have been 3.25%, 2.10%, 2.35%
and .24%*, respectively.
* Annualized
52
<PAGE> 53
SchwabFunds(R) 20
--------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY
FUND & SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Schwab Money Market Fund had 2.66% of its net assets,
or $298,629,000, invested in securities issued by municipalities that
participated in the investment pool maintained by Orange County, California and
0.37%, or $41,490,000, of its net assets in a security issued directly by Orange
County. On December 6, 1994, Orange County, California and the investment pool
maintained by Orange County filed for protection under Chapter 9 of the federal
Bankruptcy Code. As with any bankruptcy filing, many uncertainties arise
relative to repayment terms and amounts and these uncertainties may adversely
impact securities market values. The Schwab Money Market Fund has obtained a
$27,993,000 irrevocable letter of credit from a major commercial bank which
allows the Fund to make demands for partial payment under certain conditions
upon maturity or disposition of the securities by the Fund. Although this letter
of credit enhances the market value of these securities, it does not provide for
complete credit support, and therefore, the Fund continues to be exposed to some
risk of loss of principal due to the issuer's investment in Orange County,
California's investment pool. As of December 31, 1994, no securities held by the
Fund were in default and all regularly scheduled interest and principal payments
have been made. The letter of credit, which expires on August 1, 1995, has not
been needed to maintain the Fund's net asset value of $1.00 per share since the
Fund has not experienced any losses to date in excess of one half of one percent
of its net assets. The Charles Schwab Corporation has agreed to reimburse the
bank for any payments made by the bank to the Fund under this letter of credit.
53
<PAGE> 54
SchwabFunds(R)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To the Trustees and Shareholders
of the Schwab Money Market Fund,
the Schwab Government Money Fund and
the Schwab U.S. Treasury Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Schwab Money Market Fund, the Schwab Government Money Fund and
the Schwab U.S. Treasury Money Fund (three series constituting part of The
Charles Schwab Family of Funds, hereafter referred to as the "Trust") at
December 31, 1994, and the results of each of their operations and the changes
in each of their net assets for the periods presented, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian and broker, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
54
<PAGE> 55
<TABLE>
<CAPTION>
SchwabFunds(R) 1
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--63.00%(a)
ALABAMA--1.29%
Citronelle, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(AKZO Chemicals, Inc.
Project) / (Wachovia Bank
of North Carolina LOC)
5.70%, 01/07/95 $ 1,100 $ 1,100
Mobile, Alabama Industrial
Development Board
Pollution Control
Revenue Refunding Bonds
(Alabama Power Co.
Project) Series 1993C
5.65%, 01/07/95 12,000 12,000
Montgomery, Alabama
Special Care Facility
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985C /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 2,000 2,000
Montgomery, Alabama
Special Care Facility
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985F /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 9,000 9,000
Montgomery, Alabama
Special Care Facility
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985G /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 6,390 6,390
Montgomery, Alabama
Special Care Facility
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985H /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 5,295 5,295
Opelika, Alabama Industrial
Development Board
Adjustable Rate
Industrial Development
Revenue Bonds
(Powerguard Project)
Series 1994 /
(Southtrust Bank of
Alabama LOC)
5.85%, 01/07/95 3,350 3,350
-------
39,135
-------
ALASKA--0.99%
Alaska Housing Finance Corp.
General Mortgage Revenue
Authority Series 1991A /
(Credit Suisse SBPA)
5.75%, 01/07/95 20,000 20,000
Alaska Housing Finance Corp.
General Mortgage Revenue
Authority Series 1991C /
(Swiss Bank SBPA)
5.75%, 01/07/95 10,000 10,000
-------
30,000
-------
ARIZONA--0.41%
Arizona Educational Loan
Marketing Corp.
Education Loan
Revenue Bonds Series A /
(MBIA Insurance &
Fuji Bank SBPA)
5.50%, 01/07/95 6,000 6,000
Pinal County, Arizona
Industrial Development
Authority Pollution
Control Revenue Bonds
(Newmont) Series 1984A /
(National Westminster LOC)
6.05%, 01/01/95 1,600 1,600
Yavapai County, Arizona
Industrial Development
Authority Industrial
Development Revenue
Bonds (First Health Care
Corp.) / (Wachovia Bank
of Georgia LOC)
5.70%, 01/07/95 4,230 4,230
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series B /
(Citibank Arizona LOC)
5.95%, 01/07/95 550 550
-------
12,380
-------
CALIFORNIA--1.02%
Auburn, California
Unified School District
Certificates of Participation
(Capital Improvement
Financing Project) /
(Bank of California LOC)
5.40%, 01/07/95 1,200 1,200
California Health Facilities
Financing Authority
Revenue Bonds
Pooled Loan Program
Series 1985B /
(FGIC Insurance &
FGIC SPA)
5.75%, 01/01/95 2,100 2,100
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
SchwabFunds(R) 2
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Shell Oil Co. Project)
Series 1991B
6.15%, 01/01/95 $ 200 $ 200
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Shell Oil Co. Project)
Series 1991C
6.15%, 01/01/95 400 400
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986A
5.00%, 01/01/95 400 400
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986B
5.00%, 01/01/95 1,600 1,600
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986C
5.00%, 01/01/95 3,700 3,700
California Pollution Control
Financing Authority
Resource Recovery
Revenue Bonds
(Burney Forest Products) /
(National Westminster LOC)
5.90%, 01/01/95 200 200
California Pollution Control
Financing Authority
Resource Recovery
Revenue Bonds (Sanger
Project) Series 1990A /
(Credit Suisse LOC)
5.00%, 01/07/95 1,300 1,300
California Pollution Control
Solid Waste Disposal
Revenue Bonds
(Colmac Energy Project)
Series C / (Swiss Bank LOC)
5.00%, 01/07/95 4,000 4,000
California Statewide
Communities
Development Authority
Revenue Bonds
(Packaging Innovation
DZ Industries Inc.)
Series 1994A-2 /
(Bank of Tokyo LOC)
5.63%, 01/04/95 600 600
Contra Costa, California
Transportation Authority
Sales Tax Revenue
Bonds Series 1993A /
(FGIC Insurance)
5.65%, 01/07/95 9,400 9,400
Los Angeles County,
California Metropolitan
Transportation Authority
Sales Tax Revenue
Bonds Series A /
(MBIA Insurance & Industrial
Bank of Japan SBPA)
5.40%, 01/07/95 3,400 3,400
San Diego County, California
Regional Transportation
Commission Sales Tax
Revenue Bonds Second
Series 1994A / (Multiple
Credit Enhancements)
5.75%, 01/07/95 2,100 2,100
San Diego County, California
Regional Transportation
Commission Second
Senior Sales Tax
Revenue Bonds
Series 1992A /
(FGIC Insurance &
FGIC SPA)
5.75%, 01/07/95 400 400
-------
31,000
-------
COLORADO--4.27%
Colorado Health Facilities
Financing Authority
Revenue Bonds
(Sisters of Charity Health)
Series B / (Multiple Credit
Enhancements)
5.50%, 01/07/95 23,600 23,600
Colorado Student
Obligation Bonds
Authority Student Loan
Revenue Bonds
(Colorado University)
Series 1989A /
(Sumitomo Bank LOC)
5.05%, 01/07/95 12,400 12,400
Colorado Student
Obligation Bonds
Authority Student Loan
Revenue Bonds
(Colorado University)
Series 1990A /
(Sumitomo Bank LOC)
5.05%, 01/07/95 8,700 8,700
Colorado Student
Obligation Bonds
Authority Student Loan
Revenue Bonds
(Colorado University)
Series 1993A /
(SLMA LOC)
4.90%, 01/07/95 2,000 2,000
</TABLE>
56
<PAGE> 57
<TABLE>
<CAPTION>
SchwabFunds(R) 3
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
Colorado Student
Obligation Bonds
Authority Student Loan
Revenue Bonds
(Colorado University)
Series 1993B /
(SLMA LOC)
5.05%, 01/07/95 $ 2,000 $ 2,000
Colorado Student
Obligation Bonds
Authority Student Loan
Revenue Bonds
(Colorado University)
Series 1993C-2 /
(SLMA LOC)
4.90%, 01/07/95 6,800 6,800
Denver, Colorado City and
County Airport System
Revenue Bonds
Series 1992D / (Morgan
Guaranty Trust Co.
New York LOC)
5.75%, 01/01/95 26,100 26,100
Denver, Colorado City and
County Airport System
Revenue Bonds
Series 1992E /
(Bank of Tokyo LOC)
5.95%, 01/07/95 22,000 22,000
Denver, Colorado City and
County Airport System
Revenue Bonds
Series 1992F /
(Bank of Montreal LOC)
5.75%, 01/07/95 16,000 16,000
Douglas County, Colorado
Multi Family Housing
Revenue Bonds
(Autumn Chase Project) /
(Citibank LOC)
5.50%, 01/07/95 9,600 9,600
Pitkin County, Colorado
Industrial Development
Revenue Bonds (Aspen
Skiing Colorado Project)
Series 1994B /
(FNB Chicago LOC)
6.10%, 01/01/95 600 600
--------
129,800
--------
CONNECTICUT--3.92%
Connecticut State General
Obligation Economic
Recovery Bonds
Series 1991B / (Multiple
Credit Enhancements)
5.40%, 01/07/95 30,300 30,300
Connecticut State Second
Lien Special Tax
Obligation Bonds
Series 1990-1 / (Industrial
Bank of Japan LOC)
5.85%, 01/07/95 22,800 22,800
Connecticut State
Special Assessment
Unemployment
Compensation Advance
Fund Revenue Bonds
Series 1993B / (Multiple
Credit Enhancements)
5.45%, 01/07/95 65,900 65,900
--------
119,000
--------
DISTRICT OF COLUMBIA--0.14%
District of Columbia
Revenue Bonds
(Georgetown University)
Series 1988D /
(Sanwa Bank SBPA)
5.55%, 01/07/95 4,200 4,200
FLORIDA--3.12% --------
Brevard County, Florida
Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Palm Place Project) /
(Chemical Bank LOC)
5.35%, 01/07/95 5,000 5,000
Dade County, Florida
Solid Waste Industrial
Development Revenue
Bonds (Montenay-Dade
Ltd. Project) /
(Banque Paribas LOC)
5.05%, 01/07/95 1,600 1,600
Dade County, Florida
Solid Waste Industrial
Development Revenue
Bonds (Montenay-Dade
Ltd. Project) Series 1988 /
(Banque Paribas LOC)
5.05%, 01/07/95 9,770 9,770
Dade County, Florida
Solid Waste Industrial
Development Revenue
Bonds (Montenay-Dade
Ltd. Project) Series 1990A /
(Banque Paribas LOC)
5.05%, 01/07/95 2,485 2,485
Dade County, Florida
Water & Sewer Systems
Variable Revenue Bonds
Series 1994 / (FGIC
Insurance & Industrial
Bank of Japan SBPA)
4.95%, 01/07/95 41,300 41,300
Florida Housing Finance
Agency Multi Family
Housing Revenue Bonds
(Blairstone Project)
Series VV / (Citibank LOC)
5.00%, 01/07/95 1,900 1,900
Hillsborough County, Florida
Industrial Development
Authority Revenue Bonds
(Seaboard Tampa
Terminals) Series 1986A/
(Barclays Bank LOC)
5.50%, 01/07/95 5,500 5,500
</TABLE>
57
<PAGE> 58
<TABLE>
<CAPTION>
SchwabFunds(R) 4
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
Orange County, Florida
Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Rio Vista Project) /
(First Union Bank of
North Carolina LOC)
5.65%, 01/07/95 $3,875 $3,875
Orange County, Florida
Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Smokewood Project) /
(Citibank LOC)
5.50%, 01/07/95 10,000 10,000
Palm Beach County, Florida
Health Facilities
Authority Revenue
Refunding Bonds
(Joseph L. Morse
Geriatric Center) /
(Sun Bank LOC)
5.35%, 01/07/95 9,955 9,955
Palm Beach County, Florida
Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Crystal II Project) /
(Citibank LOC)
5.20%, 01/07/95 2,850 2,850
Pinellas County, Florida
Health Facilities
Authority Revenue
Bonds (Pooled Hospital
Loan Program) /
(Chemical Bank LOC)
6.05%, 01/01/95 500 500
-------
94,735
-------
GEORGIA--3.13%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power Project)
Series 1993A / (FGIC
Insurance & Industrial
Bank of Japan SBPA)
4.95%, 01/07/95 12,440 12,440
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) Series 1994A /
(Credit Local de France &
FGIC Insurance)
4.95%, 01/07/95 8,740 8,740
Cobb County, Georgia
Housing Authority Multi
Family Housing
Revenue Bonds
(Williamstown Apartment
Project) / (Wachovia
Bank of Georgia LOC)
5.85%, 01/07/95 2,000 2,000
Dekalb County, Georgia
Development Authority
Industrial Development
Revenue Bonds
(Siemens Energy, Inc.
Project)
5.75%, 01/07/95 $3,750 $3,750
Dekalb County, Georgia
Housing Authority Multi
Family Housing
Revenue Bonds
(Columbia on Clairmont)
Series H / (Citibank LOC)
5.50%, 01/07/95 2,120 2,120
Dekalb County, Georgia
Housing Authority Multi
Family Housing
Revenue Bonds (Wood
Hills Apartment Project) /
(Bank of Montreal LOC)
5.45%, 01/07/95 5,250 5,250
Dekalb, Georgia Private
Hospital Authority
Revenue Anticipation
Certificates
(Egleston Childs Hospital/
Emory University)
Series 1994A & B4 /
(Trust Bank of Atlanta LOC)
4.90%, 01/07/95 12,000 12,000
Douglas County, Georgia
Development Authority
Industrial Development
Revenue Bonds
(Mima Inc.) / (Wachovia
Bank of Georgia LOC)
5.38%, 01/07/95 4,300 4,300
Hapeville, Georgia
Industrial Development
Authority (Hapeville
Hotel, Ltd. Project) /
(Swiss Bank LOC)
6.05%, 01/01/95 7,900 7,900
Laurens County, Georgia
Development Authority
Solid Waste Disposal
(Southeast Paper Co.
Project) /
(Wachovia
Bank of Georgia LOC)
5.75%, 01/07/95 25,000 25,000
Rockmart, Georgia
Development Authority
Industrial Development
Revenue Bonds (CW.
Matthews Contracting) /
(Wachovia Bank of
Georgia LOC)
5.75%, 01/07/95 3,000 3,000
Smyrna, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Walton Park LP) /
(Wachovia Bank of
Georgia LOC)
5.75%, 01/07/95 7,000 7,000
</TABLE>
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
Villa Rica, Georgia
Industrial Development
Revenue Bonds (Lowes
Home Centers, Inc.
Project) / (Wachovia Bank
of North Carolina LOC)
5.70%, 01/07/95 $1,500 $ 1,500
-------
95,000
-------
HAWAII--1.69%
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990A /
(Industrial Bank of
Japan LOC)
5.70%, 01/07/95 17,100 17,100
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990B /
(Industrial Bank of
Japan LOC)
5.70%, 01/07/95 19,600 19,600
Honolulu, Hawaii City and
County Multi Family
Housing Refunding
Bonds (Lolani Regents
Project) Series 1990A /
(Bank of Hawaii LOC)
5.35%, 01/07/95 9,350 9,350
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(Hale Kua Gardens
Project) Series A /
(Bank of Tokyo LOC)
5.75%, 01/07/95 5,379 5,379
-------
51,429
-------
ILLINOIS--10.86%
Centralia, Illinois
Industrial Development
Authority Revenue Bonds
(Hollywood Brands, Inc.
Project) / (Wachovia Bank
of North Carolina LOC)
5.70%, 01/07/95 2,500 2,500
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series 1994C /
(Societe Generale LOC)
5.45%, 01/07/95 35,000 35,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series A /
(Westpac Banking Corp. LOC)
5.70%, 01/07/95 13,300 13,300
Illinois Development
Financing Authority
Industrial Development
Revenue Bonds (Knead
Dough Baking, Inc.) /
(Bank of America LOC)
6.25%, 01/07/95 $4,750 $4,750
Illinois Development
Financing Authority
Industrial Development
Revenue Bonds
(Marriott Corp.
Deerfield Project) /
(National Westminster LOC)
5.00%, 01/07/95 1,300 1,300
Illinois Development
Financing Authority
Industrial Development
Revenue Bonds (Palos
Community Hospital) Series 1994 /
(Credit Suisse LOC)
5.35%, 01/01/95 25,000 25,000
Illinois Development
Financing Authority
Industrial Development
Revenue Bonds (Rerkin
Paperboard Co. LP)
Series 1994 /
(Northern Trust LOC)
5.75%, 01/07/95 5,500 5,500
Illinois Development
Financing Authority
Residential Rental
Revenue Bonds
(River Oak) /
(Swiss Bank LOC)
5.10%, 01/07/95 11,790 11,790
Illinois Educational Facility
Authority Revenue
Bonds (Chicago
Historical Society) /
(Mitsubishi Bank LOC)
5.70%, 01/07/95 8,400 8,400
Illinois Educational Facility
Authority Revenue
Bonds (Illinois College
of Optometry) /
(Sumitomo Bank LOC)
5.55%, 01/07/95 18,800 18,800
Illinois Educational Facility
Authority Revenue
Bonds (Illinois Institute
of Technology)
Series 1990A /
(Northern Trust LOC)
5.60%, 01/07/95 21,500 21,500
Illinois Educational Facility
Authority Revenue Bonds
(Northwestern University) /
(FNB Chicago LOC)
5.65%, 01/07/95 22,200 22,200
</TABLE>
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Par Value
--- -----
<S> <C> <C>
Illinois Educational Facility
Authority Revenue
Bonds (University
Pooled Financing
Program) Series 1985 /
(FGIC Insurance &
Sakura Bank SBPA)
5.60%, 01/07/95 $17,185 $17,185
Illinois Health Facility
Authority Revenue
Bonds (Evangelical
Hospital Corp.) Series A/
(FNB Chicago LOC)
5.55%, 01/07/95 4,100 4,100
Illinois Health Facility
Authority Revenue Bonds
(Franciscan Village
Project) Series 1989A /
(Commonwealth Bank of
Australia LOC)
5.05%, 01/07/95 2,000 2,000
Illinois Health Facility
Authority Revenue
Bonds (Ingalls Memorial
Hospital) Series 1985C /
(Fuji Bank LOC)
5.40%, 01/07/95 1,100 1,100
Illinois Health Facility
Authority Revenue
Bonds (Sisters Services)
Series E /
(MBIA Insurance &
Morgan Guaranty Trust Co.
New York SBPA)
5.50%, 01/07/95 4,300 4,300
Illinois Health Facility
Authority Revenue
Bonds (Streeterville
Corp.) Series A /
(FNB Chicago LOC)
5.65%, 01/07/95 14,400 14,400
Illinois Health Facility
Authority Revenue
Bonds (Washington &
Jane Smith Home)
Series 1991 /
(Comerica Bank LOC)
5.70%, 01/07/95 2,800 2,800
Illinois Health Facility
Authority Revolving
Fund Pooled Loan
Series 1985C /
(FNB Chicago LOC)
5.70%, 01/07/95 6,000 6,000
Illinois Health Facility
Authority Revolving
Fund Pooled Loan
Series 1985D /
(FNB Chicago LOC)
5.70%, 01/07/95 20,000 20,000
Illinois State Toll Highway
Authority Series B /
(MBIA Insurance)
5.75%, 01/07/95 33,200 33,200
Kane County, Illinois
Revenue Bonds
(Glenwood School for
Boys) / (Harris Trust &
Savings Bank LOC)
5.65%, 01/07/95 9,000 9,000
McHenry County, Illinois
Industrial Development
Authority Revenue
Bonds (Dean Foods
Co.) / (Wachovia Bank
of Georgia LOC)
5.70%, 01/01/95 2,675 2,675
Oak Forest, Illinois
Revenue Bonds
(Homewood Pool) /
(FNB Chicago LOC)
5.70%, 01/07/95 37,000 37,000
Savannah, Illinois Industrial
Development Revenue
Bonds (Metform Corp.)
Series 1994A /
(FNB Chicago LOC)
5.90%, 01/07/95 6,000 6,000
-------
329,800
-------
INDIANA--0.39%
Crawfordsville, Indiana
Industrial Development
Revenue Bonds
(National Service
Industries, Inc. Project) /
(Wachovia Bank of
Georgia LOC)
5.70%, 01/07/95 1,000 1,000
Hammond, Indiana
Adjustable Rate
Economic Development
Revenue Bonds (Lear
Seating Corp. Project)
Series 1994 /
(Chemical Bank LOC)
4.00%, 01/01/95 2,750 2,750
Indiana Health Facility
Financing Authority
Hospital Revenue Bonds
(Methodist Hospital)
Series 1992C /
(Credit Suisse SBPA)
5.50%, 01/07/95 4,100 4,100
Indianapolis, Indiana
Economic Development
Authority Revenue
Bonds (Herff-Jones, Inc.
Project) / (Wachovia
Bank of Georgia LOC)
5.75%, 01/07/95 4,100 4,100
-------
11,950
-------
IOWA--0.34%
Des Moines, Iowa
Methodist Health
System, Inc. Hospital
Facility Revenue Bonds
(Methodist Health Care) /
(Fuji Bank LOC)
5.40%, 01/07/95 3,895 3,895
</TABLE>
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
Iowa Higher Education
Loan Authority Revenue
Bonds (Private College
Facility) / (MBIA
Insurance & Dai-Ichi
Kangyo Bank SBPA)
5.55%, 01/07/95 $4,500 $ 4,500
Iowa Housing Finance
Authority Multi Family
Revenue Bonds (Small
Business Loan Project)
Series 1985A /
(FHLB of Des Moines LOC)
5.50%, 01/07/95 2,000 2,000
-------
10,395
-------
KANSAS--1.13%
Kansas City, Kansas
Industrial Revenue
Bonds (Owen Industries,
Inc. Project) Series 1987 /
(Sanwa Bank LOC)
5.65%, 01/07/95 2,950 2,950
Kansas Department of
Transportation Highway
Adjustable Revenue
Bonds Series 1994B
5.00%, 01/07/95 26,500 26,500
Wichita, Kansas Airport
Facilities Revenue
Bonds (Flightsafety
International, Inc.) /
(Wachovia Bank of
North Carolina LOC)
5.75%, 01/07/95 3,000 3,000
Wichita, Kansas Health
Facilities Authority
Revenue Bonds (CSJ
Health System Wichita)
Series XXV /
(Sumitomo Bank LOC)
5.70%, 01/07/95 1,900 1,900
-------
34,350
-------
KENTUCKY--1.36%
Kentucky Higher Education
Student Loan Corp.
Insured Student Loan
Revenue Bonds /
(Sumitomo Bank LOC)
5.25%, 01/07/95 23,500 23,500
Lebanon, Kentucky
Industrial Development
Revenue Bonds
(Wallace Computer
Services, Inc.) /
(Wachovia Bank of
Georgia LOC)
5.75%, 01/07/95 5,000 5,000
Mason County, Kentucky
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds (East
Kentucky Power Corp.)
Series 1984B-1 /
(N.R.U. - C.F.C. Guaranty)
5.55%, 01/07/95 10,800 10,800
Owensboro, Kentucky
Limited Obligation
Revenue Bonds (Dart
Polymers, Inc. Project)
Series 1985A /
(National Westminster LOC)
4.00%, 01/07/95 1,900 1,900
-------
41,200
-------
LOUISIANA--3.39%
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control
Revenue Refunding
Bonds (Central
Louisiana Electric Co.)
Series 1991A /
(Swiss Bank LOC)
5.40%, 01/07/95 400 400
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control
Revenue Refunding
Bonds (Central
Louisiana Electric Co.)
Series 1991B /
(Swiss Bank LOC)
5.40%, 01/07/95 5,500 5,500
Louisiana Public Facilities
Authority Hospital
Revenue Bonds
(Willis Knighton
Medical Project) /
(AMBAC Insurance &
Mellon Bank SBPA)
5.40%, 01/07/95 15,300 15,300
Louisiana Public Facilities
Authority Revenue Bonds
(Kenner Hotel, Ltd.) /
(Swiss Bank LOC)
6.05%, 01/01/95 500 500
New Orleans, Louisiana
Aviation Board Revenue
Bonds (Passenger
Facility Charge Projects) /
(Banque Paribas &
Canadian Imperial Bank
of Commerce LOC)
5.40%, 01/07/95 12,000 12,000
New Orleans, Louisiana
Aviation Board Revenue
Bonds Series 1993B /
(MBIA Insurance & Industrial
Bank of Japan SBPA)
5.40%, 01/07/95 55,600 55,600
</TABLE>
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Par Value
--- -----
<S> <C> <C>
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue
Bonds (Hotel Occupancy
Project) Series 1989B /
(Sanwa Bank LOC)
5.65%, 01/07/95 $1,600 $ 1,600
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue
Bonds Series 1989B /
(Sanwa Bank LOC)
5.65%, 01/07/95 3,800 3,800
Rapides Parish, Louisiana
Industrial Development
Board Pollution Control
Refunding Bonds
(Central Louisiana
Electric Co.) Series 1991 /
(Swiss Bank LOC)
5.40%, 01/07/95 8,150 8,150
---------
102,850
---------
MARYLAND--2.64%
Baltimore, Maryland
Industrial Development
Authority Revenue
Bonds (City of Baltimore
Capital Acquisition)
Series 1986 / (Dai-Ichi
Kangyo Bank LOC)
5.55%, 01/07/955 51,900 51,900
Maryland Health and
Higher Education Facility
Authority Pooled
Revenue Bonds
(Kennedy Kreiger)
Series 1993D /
(FNB Maryland LOC)
5.50%, 01/07/95 2,000 2,000
Maryland Health and
Higher Education Facility
Authority Revenue
Bonds (Pooled Loan
Program) Series A /
(Dai-Ichi Kangyo Bank LOC &
FNB Chicago SBPA)
5.40%, 01/07/95 9,700 9,700
Montgomery County,
Maryland Housing
Opportunity Commission
Housing Revenue Bonds
(Draper Lane) Series 1991I /
(FGIC Insurance &
Sumitomo Bank SBPA)
5.80%, 01/07/95 16,500 16,500
-------
80,100
-------
MASSACHUSETTS--0.26%
Massachusetts Health &
Education Facilities
Authority Revenue
Bonds (Brigham &
Womens Hospital)
Series A /
(Sanwa Bank LOC)
5.10%, 01/07/95 2,900 2,900
Massachusetts State
Industrial Finance
Agency Resource
Recovery Authority
Revenue Bonds (Ogden
Haverhill Project)
Series 1992A / (Union Bank
of Switzerland LOC)
5.10%, 01/07/95 5,000 5,000
-------
7,900
-------
MICHIGAN--0.22%
Michigan Strategic Fund
Pollution Control
Revenue Bonds
(Dow Chemical Project)
Series 1987
6.15%, 01/01/95 2,900 2,900
Midland County, Michigan
Economic Development
Authority Limited
Obligation Bonds
(Dow Chemical Project)
Series A
6.90%, 01/01/95 2,000 2,000
Midland County, Michigan
Economic Development
Authority Limited
Obligation Bonds
(Dow Chemical Project)
Series B
6.75%, 01/01/95 1,900 1,900
-------
6,800
-------
MINNESOTA--0.67%
St. Paul, Minnesota
Housing Redevelopment
Authority Rental
Multi Family Housing
Development Bonds
(Multi City)
Series 1985A /
(FHLB Des Moines LOC)
5.50%, 01/07/95 20,400 20,400
-------
MISSOURI--0.25%
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue
Bonds (Sisters of Mercy)
Series 1988A / (Multiple
Credit Enhancements)
5.20%, 01/07/95 3,200 3,200
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue
Bonds (Sisters of Mercy)
Series 1992B /
(Toronto-Dominion SBPA)
5.20%, 01/07/95 3,500 3,500
</TABLE>
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
Par Value
--- -----
<S> <C> <C>
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue
Bonds (St. Anthony
Medical Center) /
(Mitsubishi Bank SBPA)
5.55%, 01/07/95 $ 900 $ 900
-------
7,600
-------
MONTANA--0.21%
Forsyth, Montana Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Portland General
Electric Coal Stripping
Project) Series 1983B /
(Swiss Bank LOC)
5.50%, 01/07/95 1,500 1,500
Montana State Health
Facility Authority
Revenue Bonds (Health
Care Pooled Loan
Program) Series 1985A /
(FGIC Insurance &
Norwest Bank of
Minnesota SBPA)
5.60%, 01/07/95 4,776 4,776
-------
6,276
-------
NEBRASKA--0.05%
Douglas County, Nebraska
Industrial Development
Revenue Bonds (Lozier
Corp. Project) Series 1991 /
(Wachovia Bank LOC)
5.70%, 01/07/95 1,500 1,500
-------
NEVADA--1.72%
Clark County, Nevada
Airport Improvement
Revenue Refunding
Bonds Series 1993A /
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
4.95%, 01/07/95 47,400 47,400
State of Nevada
Department of
Commerce Industrial
Development Revenue
Bonds (Cimco, Inc.
Project) Series 1993A /
(Wells Fargo Bank LOC)
5.55%, 01/07/95 4,830 4,830
-------
52,230
-------
NEW HAMPSHIRE--0.26%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (VHA
New England, Inc.)
Series 1985B /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 1,000 1,000
New Hampshire Housing
Finance Authority Multi
Family Housing
Revenue Bonds
(Fairways Project)
Series 1994-1 /
(General Electric Capital
Corp. LOC)
5.80%, 01/07/95 7,000 7,000
-------
8,000
-------
NEW JERSEY--0.70%
New Jersey Turnpike
Authority Revenue
Bonds Series 1991D /
(FGIC Insurance &
Societe Generale LOC)
4.65%, 01/07/95 21,400 21,400
-------
NEW MEXICO--0.79%
Albuquerque, New Mexico
Gross Receipts Lodgers
Tax Adjustable Rate
Tender Revenue Bonds
Series 1994 /
(Canadian Imperial Bank of
Commerce LOC)
4.95%, 01/07/95 1,300 1,300
Belen, New Mexico
Industrial Development
Revenue Bonds
(Solo Cup, Inc. Project) /
(Wachovia Bank LOC)
5.75%, 01/07/95 3,250 3,250
New Mexico Educational
Assistance Foundation
Student Loan Program
Series 1992B /
(AMBAC Insurance &
International Nederladen
Bank SBPA)
5.10%, 01/07/95 19,400 19,400
-------
23,950
-------
NEW YORK--1.01%
New York City, New York
Municipal Water &
Sewer System Revenue
Bonds Series 1992C /
(FGIC Insurance &
FGIC SPA)
6.00%, 01/01/95 100 100
New York City, New York
Municipal Water &
Sewer System Revenue
Bonds Series 1994C /
(FGIC Insurance &
FGIC SBPA)
6.00%, 01/01/95 13,800 13,800
New York State Dormitory
Authority Various
Revenue Bonds
(Masonic Hall) /
(AMBAC Insurance &
Credit Local de France SBPA)
4.70%, 01/07/95 9,100 9,100
</TABLE>
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<CAPTION>
Par Value
--- -----
<S> <C> <C>
New York, New York
General Obligation
Bonds Series 1991E2 /
(Industrial Bank of
Japan & Morgan
Guaranty Trust Co.
New York LOC)
4.75%, 01/01/95 $ 1,000 $ 1,000
New York, New York
General Obligation
Bonds Series 1994B
Subseries B4 /
(MBIA Insurance &
National Westminster LOC)
6.00%, 01/01/95 2,600 2,600
New York, New York
Various Rate General
Obligation Bonds Series
1995B Subseries B10 /
(Union Bank of
Switzerland LOC)
5.30%, 01/07/95 2,000 2,000
New York, New York
Various Rate General
Obligation Bonds Series
1995B1 Subseries B8 /
(Mitsubishi Bank LOC)
5.35%, 01/07/95 2,000 2,000
------
30,600
------
NORTH CAROLINA--2.31%
Bladen County, North Carolina
Industrial Facility and
Pollution Control Financing
Authority Resource
Recovery Bonds (BCH
Energy LP Project) /
(Bank of Tokyo LOC)
5.60%, 01/07/95 18,000 18,000
Charlotte, North Carolina
Airport Revenue
Refunding Bonds
Series 1993A / (MBIA
Insurance & Industrial
Bank of Japan SBPA)
4.95%, 01/07/95 6,500 6,500
North Carolina Medical
Care Community
Hospital Revenue Bonds
(ACES Pooled
Financial Project) /
(MBIA Insurance &
Mitsubishi Bank SBPA)
5.55%, 01/07/95 1,910 1,910
North Carolina Medical
Care Community
Hospital Revenue Bonds
(Pooled Equipment
Finance Project) /
(MBIA Insurance &
Banque Paribas SBPA)
5.45%, 01/07/95 11,300 11,300
Wake County, North Carolina
Industrial Facility and
Pollution Control Financing
Authority (Carolina
Power & Light)
Series 1985 /
(Sumitomo Bank LOC)
5.90%, 01/07/95 29,400 29,400
Wake County, North Carolina
Industrial Facility and
Pollution Control Financing
Authority (Carolina
Power & Light)
Series 1985B /
(Sumitomo Bank LOC)
5.90%, 01/07/95 2,900 2,900
------
70,010
------
NORTH DAKOTA--0.24%
Mercer County, North Dakota
National Rural
Utility Pollution Control
Revenue Bonds
(Basin Electric Power
Cooperative Antelope
Project) Series 1984C /
(N.R.U. - C.F.C. Guaranty)
5.55%, 01/07/95 7,200 7,200
-----
OHIO--1.37%
Cincinnati, Ohio Student
Loan Funding Corp.
Student Loan Revenue
Bonds Series 1983A /
(Fuji Bank LOC)
5.00%, 01/07/95 4,800 4,800
Columbus, Ohio Electric
System Revenue Bonds
Series 1984 / (Dai-Ichi
Kangyo Bank LOC)
3.90%, 01/01/95 6,880 6,880
Dayton, Ohio Special
Facilities Refunding
Revenue Bonds
(Emery Air Freight)
Series 1993F /
(ABN-Amro LOC)
5.35%, 01/07/95 8,000 8,000
Ohio Air Quality
Development Revenue
Bonds (JMG Funding LP)
Series 1994A /
(Societe Generale LOC)
5.60%, 01/07/95 20,000 20,000
Ohio Housing Finance
Agency Multi Family
Housing Revenue Bonds
(Kenwood Congregate
Retirement Community)
Series 1985 / (Morgan
Guaranty Trust Co.
New York LOC)
3.85%, 01/01/95 2,000 2,000
------
41,680
------
</TABLE>
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SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
OKLAHOMA--0.08%
Oklahoma City, Oklahoma
Industrial & Cultural
Facilities Trust Revenue
Bonds Series 1990A /
(Industrial Bank of
Japan LOC)
5.55%, 01/07/95 $ 1,400 $ 1,400
Tulsa, Oklahoma Industrial
Development Authority
Hospital Revenue Bonds
(Hillcrest Medical
Center) Series 1988 /
(Mitsubishi Bank LOC)
5.50%, 01/07/95 700 700
Tulsa, Oklahoma Industrial
Development Authority
Revenue Bonds (Teams
Thomas & Betts Project)
Series 1991 / (Wachovia
Bank of North Carolina LOC)
5.75%, 01/07/95 300 300
-------
2,400
-------
OREGON--1.81%
Medford, Oregon Hospital
Facility Authority
Revenue Bonds (Rogue
Valley Manor Project)
Series 1985 /
(Banque Paribas LOC)
5.55%, 01/07/95 7,700 7,700
Oregon State Economic
Development Commission
Economic and Industrial
Development Revenue
Bonds / (Wachovia Bank
of Georgia LOC)
5.70%, 01/07/95 4,100 4,100
Oregon State General
Obligation Notes
Series 1973F /
(Mitsubishi Bank LOC)
4.95%, 01/07/95 21,185 21,185
Oregon State General
Obligation Notes
Series 1973H /
(Bank of Tokyo LOC)
5.60%, 01/07/95 18,100 18,100
Port of Portland, Oregon
Industrial Development
Revenue Bonds
(Schnitzer Steel Project) /
(Comerica LOC)
5.50%, 01/07/95 4,000 4,000
------
55,085
------
PENNSYLVANIA--1.68%
Delaware County,
Pennsylvania Industrial
Development Authority
Solid Waste Revenue
Bonds (Scott Paper Co.)
Series C /
(Fuji Bank LOC)
5.65%, 01/07/95 2,000 2,000
Montgomery County,
Pennsylvania Industrial
Development Authority
(Seton Medical Supply Co.) /
(Banque Paribas LOC)
5.50%, 01/07/95 5,500 5,500
Pennsylvania Energy
Development Authority
Energy Development
Revenue Bonds (B & W
Ebensberg Project)
Series 1986 /
(Swiss Bank LOC)
5.10%, 01/07/95 6,900 6,900
Sayre, Pennsylvania
Health Care Facilities
Authority (VHA Capital
Finance Revenue)
Series 1985B /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 4,365 4,365
Sayre, Pennsylvania
Health Care Facilities
Authority (VHA Capital
Finance Revenue)
Series 1985F /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 3,100 3,100
Sayre, Pennsylvania
Health Care Facilities
Authority (VHA Capital
Finance Revenue)
Series 1985J /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 9,800 9,800
Washington County,
Pennsylvania Authority
Lease Revenue Bonds
(Higher Education
Pooled Equipment Lease) /
(Sanwa Bank LOC)
5.50%, 01/07/95 19,400 19,400
------
51,065
------
SOUTH CAROLINA--0.38%
Cherokee County, South
Carolina Industrial
Revenue Bonds
(Oshkosh Truck Co.) /
(Bank of Nova Scotia LOC)
5.75%, 01/07/95 4,400 4,400
Greenville County, South
Carolina Industrial
Development Revenue
Bonds (Quality
Thermoforming Project) /
(South Carolina
National Bank LOC)
5.75%, 01/07/95 1,300 1,300
</TABLE>
65
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<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
South Carolina Jobs
Economic Development
Authority Industrial
Development Revenue
Bonds (Ado Corp.
Project) / (South Carolina
National Bank LOC)
5.75%, 01/07/95 $ 1,200 $ 1,200
Spartanburg County, South
Carolina Industrial
Development Authority
Bonds (Bemis, Inc.) /
(Wachovia Bank of
Georgia LOC)
5.70%, 01/07/95 4,750 4,750
------
11,650
------
SOUTH DAKOTA--0.19%
Rapid City, South Dakota
Industrial Development
Revenue Bonds
(Corporate Property
Associates) /
(Lloyds Bank LOC)
5.45%, 01/07/95 5,825 5,825
------
TENNESSEE--0.33%
Clarksville, Tennessee
Public Building Authority
Revenue Bonds Series 1990 /
(MBIA Insurance &
Credit Suisse SBPA)
4.90%, 01/07/95 3,400 3,400
Metropolitan Nashville and
Davidson County,
Tennessee Health and
Education Facility Board
Revenue Bonds Series A /
(FGIC Insurance &
Barclays Bank Line Of Credit)
5.50%, 01/07/95 1,500 1,500
Sullivan County, Tennessee
Industrial Development
Floating Rate Demand
Multi Family Rental Housing
Bonds (Brandymill I
Project) Series 1984 /
(Firemans Fund
Insurance Co. Insurance)
4.20%, 01/01/95 5,195 5,195
------
10,095
------
TEXAS--5.52%
Amarillo, Texas Health
Facility Corp. Hospital
Revenue Bonds (High
Plains Baptist Hospital)
Series 1985 /
(Banque Paribas LOC)
5.50%, 01/07/95 9,300 9,300
Capital Industrial
Development Corp.,
Texas Industrial
Development Revenue
Bonds (National Service
Industry Project) /
(Wachovia Bank of
Georgia LOC)
5.70%, 01/07/95 1,450 1,450
Greater East Texas Higher
Education Authority
Student Loan Revenue
Bonds Series 1988A /
(AMBAC Insurance &
Citibank SBPA)
5.65%, 01/07/95 18,300 18,300
Greater East Texas Higher
Education Authority
Student Loan Revenue
Bonds Series 1993A /
(SLMA LOC)
5.60%, 01/07/95 48,150 48,150
Harris County, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Exxon
Corp. Project) Series 1984A
6.00%, 01/07/95 1,900 1,900
Harris County, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Exxon
Corp. Project) Series 1994B
6.00%, 01/01/95 7,600 7,600
Hunt County, Texas
Industrial Development
Corp. Revenue Bonds
(Trico Industries Inc.
Project) Series 1987 /
(ABN-Amro LOC)
5.50%, 01/07/95 5,330 5,330
Lavaca-Navidad River
Authority, Texas Water
Supply System Contract
Revenue Bonds
(Formosa Plastics Corp.
Project) / (Canadian
Imperial Bank of
Commerce LOC)
5.25%, 01/07/95 13,900 13,900
Lower Neches Valley
Authority, Texas
Revenue Bonds (Mobil
Corp. Neches River
Treatment Project)
Series 1994
5.50%, 01/07/95 12,000 12,000
Midlothian, Texas Industrial
Development Corp.
Pollution Control
Revenue Bonds
(Box-Crow Co. Project) /
(Union Bank of
Switzerland LOC)
5.75%, 01/07/95 1,400 1,400
</TABLE>
66
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Port Authority Corpus
Christi, Texas Nueces
County Marine Terminal
Revenue Bonds
(Reynolds Metals Co.) /
(Barclays Bank LOC)
5.40%, 01/07/95 $ 3,100 $ 3,100
Texas Health Facilities
Development Corp.
Adjustable Convertible
Extendable Secondary
Revenue Bonds Pooled
Health Series 1985B /
(Banque Paribas LOC)
5.50%, 01/07/95 11,000 11,000
Texas Small Business
Industrial Development
Corp. Industrial
Development Revenue
Bonds (Texas Public
Facility Capital Access) /
(Multiple Credit
Enhancements)
5.55%, 01/07/95 24,595 24,595
Texas State Department of
Housing and Community
Affairs Multi Family
Residential Housing
Revenue Bonds
(Remington Hill)
Series 1993B /
(General Electric Capital
Corp. Guaranty)
5.40%, 01/07/95 9,580 9,580
-------
167,605
-------
VERMONT--0.14%
Vermont Education and
Health Buildings
Financing Agency
Revenue Bonds
(VHA New England)
Series 1985G /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 4,240 4,240
-------
VIRGINIA--0.50%
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA /
Mid Atlantic States, Inc.)
Series 1985A /
(AMBAC Insurance &
Mellon Bank SBPA)
5.25%, 01/07/95 500 500
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA /
Mid Atlantic States, Inc.)
Series 1985B /
(AMBAC Insurance &
Mellon Bank SBPA)
5,25%, 01/97/95 400 400
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA /
Mid Atlantic States, Inc.)
Series 1985C /
(AMBAC Insurance &
Mellon Bank SBPA)
5.25%, 01/07/95 600 600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA /
Mid Atlantic States, Inc.)
Series 1985F /
(AMBAC Insurance &
Mellon Bank SBPA)
5.25%, 01/07/95 5,600 5,600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA /
Mid Atlantic States, Inc.)
Series 1985G /
(AMBAC Insurance &
Mellon Bank SBPA)
5.25%, 01/07/95 8,100 8,100
------
15,200
------
WASHINGTON--0.93%
Washington State Health
Care Facilities Authority
Revenue Refunding
Bonds (Sisters of St.
Joseph of Peace)
Series 1993 /
(MBIA Insurance &
U.S. Bank of
Washington SBPA)
5.60%, 01/07/95 12,700 12,700
Washington State Housing
Finance Commission
Multi Family Mortgage
Revenue Bonds
(Canyon Lakes II
Project) / (U.S. Bank of
Washington LOC)
5.95%, 01/01/95 2,565 2,565
Washington State Housing
Finance Commission
Multi Family Mortgage
Revenue Bonds
(Canyon Lakes)
Series 1993A / (U.S. Bank
of Washington LOC)
5.75%, 01/07/95 4,565 4,565
Washington State Housing
Finance Commission
Non-Profit Housing
Revenue Bonds
(Emerald Heights
Project) Series 1990 /
(Banque Paribas LOC)
6.20%, 01/01/95 4,545 4,545
</TABLE>
67
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Washington State Housing
Finance Commission
Non-Profit Housing
Revenue Bonds (YMCA
Snohomish Co.
Program) / (U.S. Bank
of Washington LOC)
5.75%, 01/01/95 $ 4,000 $ 4,000
-------
28,375
-------
WEST VIRGINIA--0.36%
West Virginia State
Hospital Finance
Authority Hospital
Revenue Bonds
(St. Joseph's Hospital
Project) Series 1987 /
(Mitsubishi Bank LOC)
5.55%, 01/07/95 2,300 2,300
West Virginia State
Hospital Finance
Authority Hospital
Revenue Bonds (VHA
Mid Atlantic States, Inc.)
Series 1985H /
(AMBAC Insurance &
FNB Chicago SBPA)
5.25%, 01/07/95 8,600 8,600
------
10,900
------
WISCONSIN--0.77%
Fairwater, Wisconsin
Industrial Development
Revenue Bonds (Dean
Foods Co. Project)
Series 1990 /
(Wachovia Bank LOC)
5.70%, 01/07/95 1,450 1,450
Milwaukee, Wisconsin
Redevelopment
Authority Industrial
Development Revenue
Bonds (Field Container
Corp.) Series 1994 /
(Northern Trust LOC)
5.75%, 01/07/95 5,000 5,000
Pewaukee, Wisconsin
Industrial Development
Authority Revenue
Bonds (Husco
International, Inc.
Project) Series 1992 /
(Bank One of Milwaukee LOC)
5.80%, 01/07/95 4,290 4,290
Sheboygan, Wisconsin
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Wisconsin Power &
Light Co.)
5.40%, 01/07/95 1,000 1,000
Wisconsin State Health
and Educational
Facilities Authority
Revenue Bonds (SSM
Health Care Project)
Series 1990A /
(Industrial Bank of
Japan LOC)
5.55%, 01/07/95 4,000 4,000
Wisconsin State Health
and Educational
Facilities Authority
Revenue Bonds (Sinai
Samaritan) Series 1994A /
(Marshall & Ilsley
Bank LOC)
5.45%, 01/07/95 7,670 7,670
---------
23,410
---------
WYOMING--0.16%
Lincoln County, Wyoming
Pollution Control
Revenue Bonds (Exxon
Corp.) Series 1984A
6.00%, 01/01/95 1,300 1,300
Lincoln County, Wyoming
Pollution Control
Revenue Bonds (Exxon
Corp.) Series 1984C
6.00%, 01/01/95 1,600 1,600
Lincoln County, Wyoming
Pollution Control
Revenue Bonds (Exxon
Corp.) Series 1984D
6.00%, 01/01/95 1,300 1,300
Uinta County, Wyoming
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Chevron USA, Inc.
Project) Series 1992
6.15%, 01/01/95 600 600
---------
4,800
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $1,913,520) 1,913,520
---------
VARIABLE RATE TENDER
OPTION BONDS--2.23%(a)
GEORGIA--0.17%
Metropolitan Atlanta Rapid
Transit Authority,
Georgia Sales Tax
Revenue Bonds
Series M (BT-69) /
(Bankers Trust Tender Option)
5.65%, 01/05/95 5,280 5,280
---------
</TABLE>
68
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
NEVADA--0.82%
Nevada State General
Obligation Bonds
(Colorado River Community)
Series 1994 (Citi-143) /
(Citibank Tender Option)
5.44%, 01/07/95 $25,000 $25,000
-------
TEXAS--0.40%
Harris County, Texas Toll
Road Tender Option
Bonds (Citi-138) /
(Citibank Tender Option)
5.44%, 01/07/95 7,000 7,000
Harris County, Texas Toll
Road Tender Option
Bonds (Citi-139) /
(Citibank Tender Option)
5.44%, 01/07/95 5,000 5,000
-------
12,000
-------
WASHINGTON--0.84%
King County, Washington
Department of
Metropolitan Services
Unlimited Taxable
General Obligation
Bonds Series 1994A
(Citi-136) /
(Citibank Tender Option)
5.44%, 01/07/95 15,570 15,570
King County, Washington
Department of
Metropolitan Services
Unlimited Taxable
General Obligation
Bonds Series 1994A
(Citi-137) /
(Citibank Tender Option)
5.44%, 01/07/95 10,000 10,000
------
25,570
------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $67,850) 67,850
------
VARIABLE RATE TENDER OPTION BOND
PARTNERSHIP--5.57%(a)
CALIFORNIA--0.16%
Metropolitan Water District
Southern California
Waterworks General
Obligation Refunding
Bonds Series 1993A2
(BTP-139) / (Bankers
Trust Tender Option)
5.33%, 01/07/95 4,745 4,745
------
CONNECTICUT--0.24%
Connecticut State General
Obligation General
Purpose Public
Improvement Bonds
Partnership Series 1991A
(BTP-151) / (Bankers
Trust Tender Option)
5.70%, 01/07/95 7,365 7,365
------
GEORGIA--0.51%
Georgia State Public
Improvement General
Obligation Bonds
Series 1993B & 1993C
(BTP-135) / (Bankers
Trust Tender Option)
5.70%, 01/07/95 3,865 3,865
Georgia State Public
Improvement General
Obligation Bonds
Series 1993B & 1993C
(BTP-140) / (Bankers
Trust Tender Option)
5.70%, 01/07/95 4,575 4,575
Georgia State Public
Improvement General
Obligation Bonds
Series 1994B (BTP-148) /
(Bankers Trust Tender Option)
5.70%, 01/07/95 7,100 7,100
------
15,540
------
ILLINOIS--0.50%
Chicago, Illinois
Metropolitan Water
Reclamation District
Greater Chicago
General Obligation
Refunding Bonds
(Cook County) (BTP-71) /
(Automated Data
Processing Co., Inc.
Tender Option)
5.02%, 01/07/95 9,870 9,870
Chicago, Illinois School
Finance Authority
General Obligation
School Finance Bonds
(BTP-70) / (MBIA
Insurance & Automated
Data Processing Co.,
Inc. Tender Option)
4.69%, 01/07/95 5,365 5,365
------
15,235
------
MARYLAND--0.12%
Baltimore County,
Maryland General
Obligation Consolidated
Public Improvement
Bonds Series 1991
(BTP-132) / (Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.70%, 01/07/95 3,621 3,621
------
MINNESOTA--0.15%
Minnesota State General
Obligation Bonds
(BTP-65) / (Automated
Data Processing Co.,
Inc. Tender Option &
Escrowed to Maturity with
Government Securities)
4.37%, 01/07/95 4,455 4,455
------
</TABLE>
69
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
NEVADA--0.60%
Clark County, Nevada
General Obligation
Transportation
Improvement Bonds
Series 6-1-1992A
(BTP-144) /
(AMBAC Insurance &
Bankers Trust Tender Option)
5.70%, 01/07/95 $ 13,590 $ 13,590
Clark County, Nevada
General Obligation
Transportation
Improvement Bonds
Series 6-1-1992B
(BTP-145) /
(AMBAC Insurance &
Bankers Trust Tender Option)
5.70%, 01/07/95 4,525 4,525
------
18,115
------
PENNSYLVANIA--0.19%
Allegheny County,
Pennsylvania General
Obligation Bonds
Series C38 (BTP-133) /
(AMBAC Insurance,
Bankers Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.65%, 01/07/95 2,855 2,855
Allegheny County,
Pennsylvania General
Obligation Bonds
Series C38 (BTP-134) /
(AMBAC Insurance,
Bankers Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.65%, 01/07/95 2,870 2,870
------
5,725
------
SOUTH CAROLINA--0.44%
Piedmont, South Carolina
Municipal Power Agency
Electric Revenue Bonds
Series 1986 (BTP-37) /
(Bankers Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.70%, 01/07/95 7,856 7,856
South Carolina State
Capital Improvement
Revenue Refunding
Bonds (BTP-147) /
(Bankers Trust Tender Option)
5.70%, 01/07/95 5,370 5,370
------
13,226
------
TEXAS--1.18%
Texas State Public Finance
Authority General
Obligation Bonds
Public Improvement
Series 1993B (BTP-116) /
(Bankers Trust Tender Option)
5.24%, 01/07/95 10,170 10,170
Texas State Public Finance
Authority General
Obligation Bonds
Series 1994 (BTP-127) /
(Bankers Trust Tender Option)
5.70%, 01/07/95 14,980 14,980
University of Texas
Permanent University
Fund Tender Option
Bonds Series 1992A
(BTP-143) / (Permanent
University Fund
Guaranty, Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.70%, 01/07/95 10,685 10,685
------
35,835
------
VIRGINIA--0.43%
Chesterfield County,
Virginia General
Obligation Public
Improvement and
Refunding Bonds
Series 1991 (BTP-136) /
(Bankers Trust Tender Option)
5.70%, 01/07/95 6,025 6,025
Fairfax County, Virginia
Public Improvement
Bonds Series 1991A
(BTP-131) / (Bankers
Trust Tender Option)
5.70%, 01/07/95 7,146 7,146
------
13,171
------
WASHINGTON--0.59%
Washington Public Power
Supply System Nuclear
Project Number 2
Revenue Refunding
Bonds Series 1990C
(BTP-130) / (Bankers
Trust Tender Option)
5.75%, 01/07/95 5,740 5,740
Washington Public Power
Supply System Nuclear
Project Number 2
Revenue Refunding
Bonds Series 1993B
(BTP-137) / (Bankers
Trust Tender Option)
5.75%, 01/07/95 6,685 6,685
Washington State General
Obligation Bonds Public
Improvement Series 1990
(BTP-152) / (Bankers
Trust Tender Option)
5.70%, 01/07/95 5,655 5,655
------
18,080
------
</TABLE>
70
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
WISCONSIN--0.46%
Wisconsin State Public
Improvement General
Obligation Revenue
Bonds Series 1992A
(BTP-142) / (Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.70%, 01/07/95 $ 9,480 $ 9,480
Wisconsin State Public
Improvement General
Obligation Tender
Option Bonds (BTP-62) /
(Automated Data
Processing Co., Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.37%, 01/07/95 4,500 4,500
--------
13,980
--------
TOTAL VARIABLE RATE TENDER
OPTION BOND PARTNERSHIP
(Cost $169,093) 169,093
--------
BOND ANTICIPATION
NOTES--0.16%(b)
NEW YORK--0.16%
Nassau County, New York
Bond Anticipation Notes
Series 1994E
4.10%, 08/15/95 4,800 4,819
--------
TOTAL BOND ANTICIPATION NOTES
(Cost $4,819) 4,819
--------
GENERAL OBLIGATIONS--0.70%(b)
GEORGIA--0.07%
Clayton County, Georgia
School District General
Obligation Bonds /
(Escrowed to Maturity with
Government Securities)
2.63%, 02/01/95 2,015 2,064
--------
IOWA--0.04%
Cedar Rapids, Iowa
Unlimited General
Obligation Bonds
Series 1989
4.50%, 06/01/95 1,225 1,234
--------
KANSAS--0.04%
Kansas City, Kansas
Special Obligation
Bonds Series 1992 /
(Escrowed to Maturity with
Government Securities)
2.65%, 02/15/95 1,100 1,103
--------
OREGON--0.03%
Washington County, Oregon
Unified High School
District #3JT
General Obligation
Bonds (Hillsboro Union
High School District)
Series 1994 /
(MBIA Insurance)
4.10%, 11/01/95 1,000 1,007
--------
SOUTH CAROLINA--0.03%
Beaufort County, South
Carolina School District
General Obligation Bonds /
(AMBAC Insurance)
2.65%, 02/01/95 1,000 1,004
--------
TEXAS--0.49%
Cypress Fairbanks, Texas
Independent School
District Revenue Bonds
Series 1984B /
(Escrowed to Maturity with
Government Securities)
2.60%, 02/01/95 1,475 1,483
Northside, Texas
Independent School
District General
Obligation Bonds
(Permanent School
Fund Guaranty)
2.00%, 02/01/95 10,000 10,015
San Antonio, Texas
Refunding Improvement
Bonds Series 1985A /
(Escrowed to Maturity with
Government Securities)
4.30%, 08/01/95 1,000 1,026
Spring, Texas Independent
School District
Refunding General
Obligation Bonds /
(Permanent School
Fund Guaranty)
2.65%, 02/15/95 1,940 1,942
Travis County, Texas
General Obligation
Bonds Series 1987A
2.75%, 03/01/95 500 505
--------
14,971
--------
TOTAL GENERAL OBLIGATIONS
(Cost $21,383) 21,383
--------
MANDATORY PUT BONDS--4.41%(b)
CALIFORNIA--1.79%
California Higher Educational
Loan Authority
Student Loan Revenue
Bonds Series 1987B /
(SLMA LOC)
3.90%, 07/01/95 5,000 5,000
</TABLE>
71
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SchwabFunds(R) 18
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
California Higher Educational
Loan Authority
Student Loan Revenue
Bonds Series 1987C /
(SLMA LOC)
4.00%, 07/01/95 $42,000 $ 42,000
California Public Capital
Improvements Financing
Authority Revenue
Bonds (Various Pooled
Projects) Series 1988C /
(National Westminster LOC)
4.24%, 03/15/95 7,300 7,300
-------
54,300
-------
FLORIDA--0.12%
Orange County, Florida
Industrial Development
Authority Industrial
Development Revenue
Bonds (General
Accident Insurance Co.
of America Project)
4.45%, 06/01/95 3,500 3,500
-------
OREGON--0.16%
Klamath Falls, Oregon
Electric Revenue Bonds
(Salt Caves Hydro)
Series 1986E /
(Escrowed to Maturity with
Government Securities)
3.75%, 05/02/95 5,000 5,000
-------
TEXAS--1.65%
Greater East Texas Higher
Education Authority
Student Loan Revenue
Bonds Series 1992B /
(SLMA LOC)
4.00%, 07/01/95 13,000 13,000
Greater East Texas Higher
Education Authority
Student Loan Revenue
Bonds Series 1993B-1 /
(SLMA LOC)
2.75%, 02/01/95 11,000 11,000
Greater East Texas Higher
Education Authority
Student Loan Revenue
Bonds Series 1993B-2 /
(SLMA LOC)
2.85%, 06/01/95 6,500 6,500
Panhandle Plains, Texas
Higher Education
Authority Student Loan
Revenue Bonds
Series 1992A / (SLMA LOC)
2.90%, 03/01/95 4,500 4,504
Panhandle Plains, Texas
Higher Education
Authority Student Loan
Revenue Bonds
Series 1993A / (SLMA LOC)
3.35%, 03/31/951 15,000 15,000
-------
50,004
-------
VIRGINIA--0.69%
Harrisonburg, Virginia
Redevelopment and
Housing Authority Multi
Family Housing
Revenue Bonds /
(Guardian Savings &
Loan Association LOC)
2.75%, 02/01/95 10,000 10,000
Virginia State Housing
Development Authority
Commonwealth
Mortgage Variable Rate
Bonds Series B,
Sub Series B Stem
4.40%, 07/12/95 11,100 11,100
--------
21,100
--------
TOTAL MANDATORY PUT BONDS
(Cost $133,904) 133,904
--------
OPTIONAL PUT BONDS--3.77%(b)
FLORIDA--0.78%
Putnam County, Florida
Industrial Development
Authority Pollution
Control Revenue Bonds
(Seminole Electric
Corp.) Series 1984H-3 /
(N.R.U. - C.F.C. Guaranty)
4.00%, 03/15/95 23,700 23,700
--------
ILLINOIS--0.37%
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series B / (Westpac
Banking Corp. LOC)
3.35%, 01/01/95 11,350 11,350
--------
MISSOURI--1.97%
Missouri State
Environmental
Improvement and
Energy Resources
Authority Pollution
Control Revenue Bonds
(Union Electric Co.)
Series 1985A /
(Swiss Bank LOC)
3.75%, 06/01/95 31,200 31,200
Missouri State
Environmental
Improvement and
Energy Resources
Authority Pollution
Control Revenue Bonds
(Union Electric Co.)
Series 1985B / (Union
Bank of Switzerland LOC)
3.75%, 06/01/95 28,500 28,500
--------
59,700
--------
</TABLE>
72
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SchwabFunds(R) 19
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
SOUTH CAROLINA--0.65%
York County, South
Carolina Pollution
Control Authority
Revenue Bonds (North
Carolina Electric Project)
Series 1984N-6 /
(N.R.U. - C.F.C. Guaranty)
4.00%, 03/15/95 $19,660 $ 19,660
--------
TOTAL OPTIONAL PUT BONDS
(Cost $114,410) 114,410
--------
REVENUE ANTICIPATION NOTES--0.66%(b)
CALIFORNIA--0.66%
California State Revenue
Anticipation Notes
Series 1994-95A
4.45%, 06/28/95 20,090 20,133
--------
TOTAL REVENUE ANTICIPATION
NOTES (Cost $20,133) 20,133
--------
REVENUE BONDS--0.29%(b)
ARKANSAS--0.10%
North Little Rock, Arkansas
Electric System
Revenue Bonds (Murray
Lock and Dam
Hydro-Electric Project)
Series 1985 /
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
4.00%, 07/01/95 3,000 3,159
--------
CALIFORNIA--0.03%
Southern California Public
Power Authority
(Southern Transmission
Project) Series 1984B /
(Escrowed to Maturity with
Government Securities)
2.60%, 01/01/95 1,000 1,030
--------
LOUISIANA--0.00%
Louisiana State Energy
and Power Authority
Revenue Bonds
(Rodemacher Unit #2) /
(FGIC Insurance &
Escrowed to Maturity with
Government Securities)
2.85%, 01/01/95 105 107
--------
MASSACHUSETTS--0.01%
Massachusetts State
Health and Educational
Facilities Authority
Revenue Bonds
(Massachusetts General
Hospital) Series 1985D /
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
2.85%, 01/01/95 285 291
--------
NEW YORK--0.03%
Triborough Bridge and
Tunnel Authority, New
York General Purpose
Revenue Bonds
Series 1985E /
(Escrowed to Maturity with
Government Securities)
2.65%, 01/01/95 750 765
--------
PENNSYLVANIA--0.02%
Delaware River Port
Authority, Pennsylvania
and New Jersey River
Bridges Revenue Bonds /
(AMBAC Insurance &
Escrowed to Maturity with
Government Securities)
2.55%, 01/01/95 585 603
--------
UTAH--0.02%
Intermountain Power
Agency, Utah Power
Supply Revenue Bonds
Series 1985D
4.20%, 07/01/95 500 510
--------
WASHINGTON--0.08%
Seattle, Washington
Municipal Light & Power
Revenue Refunding
Bonds Series 1993
3.40%, 05/01/95 1,850 1,850
Seattle, Washington
Municipal Metropolitan
Sewer Revenue Bonds
Series 1987Q /
(Escrowed to Maturity with
Government Securities)
2.50%, 01/01/95 500 510
--------
2,360
--------
TOTAL REVENUE BONDS
(Cost $8,825) 8,825
--------
TAX ANTICIPATION NOTES--2.16%(b)
MINNESOTA--1.38%
Minneapolis, Minnesota
Special School District
No. 001 General
Obligation Tax
Anticipation Notes
2.58%, 01/26/95 42,000 42,009
--------
TEXAS--0.78%
Texas Association of
School Boards
Certificates of
Participation Tax
Anticipation Notes
Series 1994A / (Capital
Guaranty Insurance Co. &
Sanwa Bank LOC)
4.15%, 08/31/95 22,620 22,707
4.10%, 08/31/95 1,000 1,004
--------
23,711
--------
TOTAL TAX ANTICIPATION NOTES
(Cost $65,720) 65,720
--------
</TABLE>
73
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SchwabFunds(R) 20
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
TAX AND REVENUE ANTICIPATION
NOTES--7.09%(b)
CALIFORNIA--6.46%
California School Cash
Reserve Program
Authority Pooled Bonds
Series 1994A
3.75%, 07/05/95 $50,000 $ 50,183
Kern, California
High School District
Tax and Revenue
Anticipation Notes
4.20%, 08/10/95 20,000 20,093
Los Rios, California
College District Tax and
Revenue Anticipation
Notes Series 1994
4.14%, 09/29/95 12,000 12,052
Mt. Diablo, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1994-95
4.15%, 10/27/95 16,800 16,912
Orange County, California
Pooled Tax and
Revenue Anticipation
Notes Series 1994-95 (c)
3.70%, 07/28/95 74,160 74,485
Sacramento, California
Unified School District
Tax and Revenue
Anitcipation Notes
Series 1994-95
4.30%, 11/10/95 9,500 9,555
Santa Clara County,
California East Side
Unified School District
Tax and Revenue
Anticipation Notes
Series 1994
4.10%, 10/26/95 8,000 8,056
Santa Rosa, California
High School District
Tax and Revenue
Anticipation Notes
Series 1994-95
4.25%, 11/10/95 5,000 5,031
--------
196,367
--------
TEXAS--0.05%
Irving, Texas Independent
School District Tax and
Revenue Anticipation
Notes Series 1994-95
4.02%, 08/31/95 1,535 1,542
--------
UTAH--0.17%
Salt Lake City, Utah
Tax and Revenue
Anticipation Notes
Series 1994
3.55%, 06/30/95 5,000 5,023
--------
WISCONSIN--0.41%
Appleton, Wisconsin Area
School District Tax and
Revenue Anticipation
Notes Series 1994-95
4.35%, 09/29/95 7,750 7,772
Oconomowoc, Wisconsin
Area School District
Tax and Revenue
Anticipation Notes
Series 1994
4.25%, 09/08/95 4,600 4,608
--------
12,380
--------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES (Cost $215,312) 215,312
--------
TAX-EXEMPT COMMERCIAL PAPER--9.96%(b)
ARIZONA--0.53%
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison Co. Palo Verde
Project) Series 1985B
3.65%, 01/30/95 1,000 1,000
3.55%, 02/09/95 2,000 2,000
3.50%, 02/09/95 1,200 1,200
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison Co. Palo Verde
Project) Series 1985C
3.65%, 01/26/95 700 700
3.55%, 01/26/95 5,550 5,550
3.90%, 02/13/95 4,700 4,700
3.60%, 02/13/95 1,000 1,000
--------
16,150
--------
CALIFORNIA--0.92%
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A /
(Sumitomo Bank LOC)
3.50%, 02/15/95 12,000 12,000
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A /
(Swiss Bank LOC)
3.45%, 02/09/95 4,000 4,000
</TABLE>
74
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SchwabFunds(R) 21
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
California Pollution Control
Financing Authority Solid
Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP)
Series 1988A /
(National Westminster LOC)
4.80%, 01/10/95 $ 5,500 $ 5,500
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds
Series A / (Multiple
Credit Enhancements)
4.40%, 01/10/95 6,400 6,400
-------
27,900
-------
COLORADO--0.66%
Platte River, Colorado
Power Authority
Adjustable Tender
Electric Revenue
Secondary Lien Bonds
Series S-1 / (Morgan
Guaranty Trust Co.
New York SBPA)
3.50%, 01/11/95 5,400 5,400
3.50%, 01/26/95 12,800 12,800
3.40%, 03/07/95 2,300 2,300
-------
20,500
-------
FLORIDA--0.36%
Florida Municipal Loan
Council Pooled Revenue
Bonds Series 1985 /
(Sumitomo Bank LOC)
3.70%, 02/10/95 6,000 6,000
Sunshine State of Florida
Government Financing
Community Revenue
Bonds Series 1986 /
(Multiple Credit
Enhancements)
3.55%, 02/10/95 4,800 4,800
-------
10,800
-------
GEORGIA--1.74%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) 1st Series 1989 /
(Credit Suisse LOC)
3.35%, 01/23/95 2,300 2,300
3.35%, 02/06/95 10,200 10,200
3.60%, 02/08/95 19,600 19,600
3.55%, 02/08/95 3,100 3,100
3.55%, 02/09/95 5,000 5,000
3.50%, 02/09/95 8,950 8,950
3.45%, 02/09/95 1,100 1,100
3.50%, 02/22/95 2,500 2,500
-------
52,750
-------
ILLINOIS--0.16%
Chicago, Illinois Tender
Notes General Purpose
Public Improvement
General Obligation
Series 1994A2 /
(Union Bank of
Switzerland LOC)
4.15%, 07/19/95 5,000 5,000
-------
KANSAS--0.96%
Burlington, Kansas
Pollution Control
Revenue Refunding
Bonds (Kansas City
Power & Light)
Series 1987A /
(Toronto-Dominion Bank LOC)
3.35%, 01/23/95 4,500 4,500
3.50%, 02/09/95 7,850 7,850
Burlington, Kansas
Pollution Control
Revenue Refunding
Bonds (Kansas City
Power & Light)
Series 1987B /
(Deutsche Bank LOC)
3.65%, 02/07/95 9,700 9,700
3.60%, 02/08/95 4,900 4,900
3.90%, 02/13/95 2,200 2,200
-------
29,150
-------
KENTUCKY--0.20%
Pendleton County, Kentucky
Multiple County
Lease Revenue
Bonds (Kentucky
Association Counties
Lease Program) /
(Commonwealth Bank
of Australia LOC)
3.60%, 02/10/95 6,000 6,000
-------
LOUISIANA--0.85%
Louisiana State Adjustable
Tender Refunding
Bonds Series 1991A /
(Credit Local de France &
Fuji Bank LOC)
4.20%, 02/27/95 7,600 7,600
3.45%, 03/07/95 7,110 7,110
West Baton Rouge Parish,
Louisiana Industrial
District Number Three
Adjustable Tender
Pollution Control
Revenue Refunding
Bonds (Dow Chemical
Corp.) Series 1987
3.55%, 01/26/95 11,150 11,150
-------
25,860
-------
</TABLE>
75
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SchwabFunds(R) 22
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
MICHIGAN--0.15%
Michigan State Strategic
Fund Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Dow Chemical Project)
Series 1987
3.60%, 02/13/95 $ 4,450 $ 4,450
----------
MINNESOTA--0.70%
Rochester, Minnesota
Adjustable Tender
Health Care Facility
Revenue Bonds (Mayo
Foundation / Mayo
Medical Center)
Series 1982B
3.65%, 01/30/95 1,500 1,500
Rochester, Minnesota
Adjustable Tender
Health Care Facility
Revenue Bonds (Mayo
Foundation / Mayo
Medical Center)
Series 1988E /
(Credit Suisse SBPA)
3.55%, 02/09/95 1,100 1,100
3.45%, 02/09/95 1,000 1,000
4.05%, 02/27/95 2,600 2,600
Rochester, Minnesota
Adjustable Tender
Health Care Facility
Revenue Bonds (Mayo
Foundation / Mayo
Medical Center)
Series 1988F /
(Credit Suisse SBPA)
3.60%, 02/08/95 800 800
3.55%, 02/08/95 1,900 1,900
4.05%, 02/27/95 5,100 5,100
3.40%, 03/07/95 3,250 3,250
Rochester, Minnesota
Adjustable Tender
Health Care Facility
Revenue Bonds (Mayo
Foundation / Mayo
Medical Center)
Series 1992C
3.55%, 02/08/95 4,100 4,100
----------
21,350
----------
NORTH CAROLINA--1.63%
North Carolina Eastern
Municipal Power Agency
Power System Revenue
Bonds Series 1988B /
(Union Bank of
Switzerland & Morgan
Guaranty Trust Co.
New York LOC)
3.65%, 01/24/95 2,200 2,200
3.65%, 01/30/95 9,500 9,500
3.55%, 02/09/95 2,000 2,000
4.05%, 02/27/95 3,800 3,800
North Carolina Eastern
Municipal Power Agency
Power System Revenue
Bonds Series 1991 /
(Industrial Bank of
Japan LOC)
3.60%, 02/03/95 6,875 6,875
3.65%, 02/07/95 12,000 12,000
3.85%, 02/13/95 7,500 7,500
4.05%, 02/27/95 5,500 5,500
----------
49,375
----------
PENNSYLVANIA--0.30%
Philadelphia, Pennsylvania
General Obligation
Bonds Tax Exempt
Commercial Paper
Series 1990 /
(Fuji Bank LOC)
3.75%, 02/07/95 9,100 9,100
----------
VIRGINIA--0.41%
Chesapeake County, Virginia
Industrial Development
Authority Revenue
Bonds (Virginia
Electric Power Co.)
Series 1985A
5.15%, 01/05/95 8,930 8,930
Chesterfield County, Virginia
Pollution Control
Revenue Bonds (Virginia
Electric Power Co.)
Series 1987A
5.15%, 01/05/95 3,600 3,600
----------
12,530
----------
WYOMING--0.39%
Lincoln County, Wyoming
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Exxon Corp. Project)
Series 1987C
3.80%, 01/30/95 5,000 5,000
Lincoln County, Wyoming
Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(PacificCorp.)
Series 1991 / (Union
Bank of Switzerland LOC)
4.05%, 02/27/95 2,500 2,500
3.40%, 03/07/95 4,200 4,200
----------
11,700
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $302,615) 302,615
----------
TOTAL INVESTMENTS--100.00%
(Cost $3,037,584) $3,037,584
==========
</TABLE>
See accompanying Notes to Schedule of Investments.
76
<PAGE> 77
SchwabFunds(R) 23
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December 31,
1994. Dates shown represent the latter of the demand date or next interest
rate change date, which is considered the maturity date for financial
reporting purposes.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
(c) With respect to this security, the Schwab Tax-Exempt Money Fund has
obtained an $18,540,000 irrevocable letter of credit from Bank of America
National Trust and Savings Association which allows the Fund to make demands
for partial payment of this security's principal amount under certain
conditions upon maturity or disposition of this security by the Fund. This
letter of credit provides a degree of additional support for the valuation
of this security but has not been needed to maintain the Fund's net asset
value of $1.00 per share since the Fund has not experienced any losses to
date in excess of one half of one percent of its net assets. The letter of
credit expires on August 1, 1995. See Note 7 to the Financial Statements for
further discussion.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
N.R.U.-C.F.C. National Rural Utilities Cooperative Financing Corporation
SBPA Standby Purchase Agreement
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
77
<PAGE> 78
SchwabFunds(R) 24
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost: $3,037,584) $3,037,584
Cash 103
Interest receivable 21,298
Receivable for securities sold 12,013
Prepaid expenses 158
Deferred organization costs 1
----------
Total assets 3,071,157
----------
LIABILITIES
Payable for:
Dividends 12,591
Investments purchased 40,702
Investment advisory and administration fee 516
Transfer agency and shareholder service fees 1,063
Other 334
----------
Total liabilities 55,206
----------
Net assets applicable to outstanding shares $3,015,951
==========
NET ASSETS CONSIST OF:
Capital paid in $3,017,778
Accumulated net realized loss on investments sold (1,827)
----------
$3,015,951
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 3,017,778
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
78
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SchwabFunds(R) 25
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31,1994
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $84,171
-------
Expenses:
Investment advisory and administration fee 12,067
Transfer agency and shareholder service fees 12,788
Custodian fees 322
Registration fees 406
Professional fees 110
Shareholder reports 126
Trustees' fees 17
Amortization of deferred organization costs and
other prepaid expenses 30
Insurance and other expenses 91
-------
25,957
Less expenses reduced (7,464)
-------
Total expenses incurred by Fund 18,493
-------
Net investment income 65,678
Net realized loss on investments sold (1,586)
-------
Net increase in net assets resulting from operations $64,092
=======
</TABLE>
See accompanying Notes to Financial Statements.
79
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SchwabFunds(R) 26
--------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 65,678 $ 39,404
Net realized loss on investments sold (1,586) (215)
Change in accretion of market discount -- (4)
----------- ----------
Net increase in net assets resulting
from operations 64,092 39,185
----------- -----------
Dividends to shareholders from
net investment income (65,678) (39,404)
----------- -----------
Capital Share Transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 8,184,151 6,116,534
Net asset value of shares issued in
reinvestment of dividends 57,664 37,717
Less payments for shares redeemed (7,647,595) (5,475,618)
----------- -----------
Increase in net assets from capital
share transactions 594,220 678,633
----------- -----------
Total increase in net assets 592,634 678,414
Net Assets:
Beginning of period 2,423,317 1,744,903
----------- -----------
End of period $ 3,015,951 $ 2,423,317
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
80
<PAGE> 81
SchwabFunds(R) 27
-------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
-------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Tax-Exempt Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab California Tax-Exempt Money Fund, the Schwab Value Advantage Money
Fund(TM), the Schwab Institutional Advantage Money Fund(TM), the Schwab
Retirement Money Fund(TM) and the Schwab New York Tax-Exempt Money Fund. The
assets of each series are segregated and accounted for separately.
The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of
short-term high quality municipal securities.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis
(date the order to buy or sell is executed). Interest income is recorded on
the accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified
cost basis.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$12,067,000 during the year ended December 31, 1994, before the Investment
Manager reduced its fee (see Note 4).
81
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SchwabFunds(R) 28
--------------------------------------------------------------------------------
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of average daily net assets. For the year
ended December 31, 1994, the Fund incurred transfer agency and shareholder
service fees of $12,788,000, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1994, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $17,000 related to
the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1994, the total of such fees reduced by the Investment
Manager and Schwab was $6,646,000 and $818,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1994, aggregated (in thousands) $5,295,206 and $4,784,748,
respectively.
82
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SchwabFunds(R) 29
--------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS.
For the year ended December 31, 1994
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
January 26, 1990
(commencement
of operations)
For the year ended December 31, to December 31,
1994 1993 1992 1991 1990
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment
Operations
Net investment income .02 .02 .03 .04 .05
Net realized and unrealized
gain (loss) on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from investment
operations .02 .02 .03 .04 .05
Less Distributions
Dividends from net
investment income (.02) (.02) (.03) (.04) (.05)
Distributions from realized
gain on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.02) (.03) (.04) (.05)
---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total return (%) 2.32 1.93 2.49 4.01 5.08
Ratios/Supplemental Data
Net assets, end of
period (000s) $3,015,951 $2,423,317 $1,744,903 $1,359,121 $1,185,974
Ratio of expenses to
average net assets (%) .65 .63 .63 .63 .63*
Ratio of net investment income
to average net assets (%) 2.31 1.92 2.45 3.91 5.33*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended
December 31, 1994, 1993, 1992, 1991 and 1990 would have been .91%, .93%, .94%,
.95% and .95%*, respectively, and the ratio of net investment income to average
net assets would have been 2.05%, 1.62%, 2.14%, 3.59% and 5.01%*, respectively.
* Annualized
83
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SchwabFunds(R) 30
--------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Fund had 2.47% of its net assets, or $74,485,000,
invested in a security issued by a municipality that participated in the
investment pool maintained by Orange County, California. On December 6, 1994,
Orange County, California and the investment pool maintained by Orange County
filed for protection under Chapter 9 of the federal Bankruptcy Code. Although
the issuer of this security has not filed for bankruptcy, the issuer's ability
to repay its obligations in a timely manner may be affected by the issuer's
investment in the Orange County investment pool and consequently these
uncertainties may adversely impact the security's market value. The Fund has
obtained an $18,540,000 irrevocable letter of credit from a major commercial
bank which allows the Fund to make demands for partial payment under certain
conditions upon maturity or disposition of this security by the Fund. Although
this letter of credit enhances the market value of this security, it does not
provide for complete credit support, and therefore, the Fund continues to be
exposed to some risk of loss of principal due to the issuer's investment in
Orange County, California's investment pool. As of December 31, 1994, no
securities held by the Fund were in default and all regularly scheduled interest
and principal payments have been made. The letter of credit, which expires on
August 1, 1995, has not been needed to maintain the Fund's net asset value of
$1.00 per share since the Fund has not experienced any losses to date in excess
of one half of one percent of its net assets. The Charles Schwab Corporation has
agreed to reimburse the bank for any payments made by the bank to the Fund under
this letter of credit.
84
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SchwabFunds(R)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
To the Trustees and Shareholders
of the Schwab Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets present fairly, in all material respects, the
financial position of the Schwab Tax-Exempt Money Fund (one of the series
constituting The Charles Schwab Family of Funds, hereafter referred to as the
"Trust") at December 31, 1994, and the results of its operations and the
changes in its net assets for the periods presented, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
85
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--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--62.1%(a)
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds
(Aitchison Family
Project) Series 1993A /
(Wells Fargo Bank LOC)
5.50%, 01/07/95 $ 2,960 $ 2,960
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds
(Scientific Technology
Project) Series 1994A /
(Banque Nationale de
Paris LOC)
5.45%, 01/07/95 3,000 3,000
Anaheim, California
Certificates of
Participation (Anaheim
Memorial Hospital
Association Project) /
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.50%, 01/07/95 4,400 4,400
Anaheim, California
Housing Authority Multi
Family Housing
Revenue Bonds
(Heritage Village
Apartments Project)
Series 1992A / (Multiple
Credit Enhancements)
5.40%, 01/07/95 1,000 1,000
Auburn County, California
Unified School District
Capital Improvement
Financing Project
Certificates of
Participation (Placer
County School Project)
Series 1993 /
(Bank of California LOC)
5.40%, 01/07/95 1,800 1,800
Big Bear Lake, California
Industrial Development
Revenue Certificates of
Participation (Southwest
Gas Corp. Project)
Series A / (Union Bank
of Switzerland LOC)
5.05%, 01/07/95 12,500 12,500
California Educational
Facilities Authority
Revenue Bonds
California Institute of
Technology) Series 1994
4.80%, 01/07/95 10,600 10,600
California Health Facilities
Financing Authority
Revenue Bonds
(Adventist Health
System - Sutter Health)
Series 1991A /
(Toronto-Dominion LOC)
5.40%, 01/07/95 1,000 1,000
California Health Facilities
Financing Authority
Revenue Bonds
(Childrens Hospital
Project) Series 1991 /
(MBIA Insurance &
Swiss Bank SBPA)
5.40%, 01/07/95 9,900 9,900
California Health Facilities
Financing Authority
Revenue Bonds
(Huntington Memorial
Hospital) Series 1985 /
(Morgan Guaranty Trust
Co. New York LOC)
5.50%, 01/07/95 10,000 10,000
California Health Facilities
Financing Authority
Revenue Bonds (Kaiser
Permanente Medical
Center) Series 1993A
5.30%, 01/07/95 8,200 8,200
California Health Facilities
Financing Authority
Revenue Bonds (Kaiser
Permanente Medical
Center) Series 1993B
5.30%, 01/07/95 1,600 1,600
California Health Facilities
Financing Authority
Revenue Bonds (Scripps
Memorial Hospital)
Series 1985B /
(MBIA Insurance &
Morgan Guaranty Trust Co.
New York SBPA)
5.75%, 01/07/95 15,120 15,120
California Health Facilities
Financing Authority
Revenue Bonds (Scripps
Memorial Hospital)
Series 1991A /
(MBIA Insurance &
Morgan Guaranty Trust Co.
New York SBPA)
5.75%, 01/07/95 1,200 1,200
California Health Facilities
Financing Authority
Revenue Bonds (Scripps
Memorial Hospital)
Series 1991B /
(MBIA Insurance &
Swiss Bank SBPA)
5.50%, 01/07/95 13,900 13,900
</TABLE>
86
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SchwabFunds(R) 2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
California Health Facilities
Financing Authority
Revenue Bonds
(Seton Medical Center
Daughters of Charity Tri
Provisional Health Care)
5.50%, 01/07/95 $21,590 $21,590
California Health Facilities
Financing Authority
Revenue Bonds
(Sutter Health Project)
Series 1990A /
(Morgan Guaranty Trust Co.
New York LOC)
6.15%, 01/01/95 400 400
California Health Facilities
Financing Authority
Revenue Bonds
Pooled Loan Program
Series 1985A /
(MBIA Insurance &
Morgan Guaranty Trust Co.
New York SBPA)
5.75%, 01/07/95 2,155 2,155
California Health Facilities
Financing Authority
Revenue Bonds
Pooled Loan Program
Series 1985B /
(FGIC Insurance &
FGIC SBPA)
5.75%, 01/07/95 19,100 19,100
California Health Facilities
Financing Authority
Revenue Bonds
Pooled Loan Program
Series 1987A /
(FNB Chicago LOC)
5.80%, 01/07/95 2,800 2,800
California Health Facilities
Financing Authority
Revenue Bonds
Pooled Loan Program
Series 1990A /
(Swiss Bank LOC)
5.80%, 01/01/95 11,500 11,500
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds (Arco
Project) Series 1994A
5.15%, 01/01/95 2,000 2,000
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Burney Forest Project)
Series 1988A /
(National Westminster LOC)
5.90%, 01/01/95 4,400 4,400
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Reynolds Metals Co.
Project) Series 1985 /
(National Westminster LOC)
5.00%, 01/07/95 1,300 1,300
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Shell Oil Co. Project)
Series 1991A
6.15%, 01/01/95 300 300
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Shell Oil Co. Project)
Series 1991B
6.15%, 01/01/95 300 300
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Shell Oil Co. Project)
Series 1994B
5.05%, 01/01/95 4,100 4,100
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986A
5.00%, 01/01/95 1,500 1,500
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986B
5.00%, 01/01/95 2,400 2,400
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986C
5.00%, 01/01/95 6,400 6,400
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1986D
5.00%, 01/01/95 2,200 2,200
California Pollution Control
Financing Authority
Resource Recovery
Revenue Bonds
(Burney Forest Products
Project) Series A /
(National Westminster LOC)
5.90%, 01/01/95 3,700 3,700
</TABLE>
87
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--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- -------
<S> <C> <C>
California Pollution Control
Financing Authority
Resource Recovery
Revenue Bonds (Sanger
Project) Series 1990A /
(Credit Suisse LOC)
5.00%, 01/07/95 $5,500 $5,500
California Pollution Control
Financing Authority
Solid Waste Disposal
Revenue Bonds
(Colmac Energy Project)
Series 1990A /
(Swiss Bank LOC)
5.00%, 01/07/95 3,900 3,900
California Pollution Control
Financing Authority
Solid Waste Disposal
Revenue Bonds
(Colmac Energy Project)
Series 1990B /
(Swiss Bank LOC)
5.00%, 01/07/95 3,900 3,900
California Pollution Control
Financing Authority
Solid Waste Disposal
Revenue Bonds
(Colmac Energy Project)
Series 1990C /
(Swiss Bank LOC)
5.00%, 01/07/95 1,000 1,000
California Pollution Control
Financing Authority
Solid Waste Disposal
Revenue Bonds
(Taormina Industries
Project) Series 1994B /
(Sanwa Bank LOC)
5.15%, 01/07/95 7,000 7,000
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(ARM Inc. Project)
Series 1994A /
(Bank of Tokyo LOC)
5.63%, 01/07/95 750 750
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Aerostar Properties
Project) / (Union Bank LOC)
5.55%, 01/07/95 5,290 5,290
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Agricultural Products,
Inc. Project) /
(Union Bank LOC)
5.55%, 01/07/95 1,455 1,455
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Diamond Foods
Project) Series 1991 /
(Union Bank LOC)
5.55%, 01/07/95 1,590 1,590
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Industrial Dynamics,
Co., Ltd. Project) /
(Union Bank LOC)
5.55%, 01/07/95 5,460 5,460
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds (Pacific
Handy Cutter Products,
Inc. Project) /
(Union Bank LOC)
5.55%, 01/07/95 1,365 1,365
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Pacific Scientific
Project) Series 1989 /
(Bank of California LOC)
5.55%, 01/07/95 4,625 4,625
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Packaging Innovation
Project) Series 1994A /
(Bank of Tokyo LOC)
5.63%, 01/07/95 1,250 1,250
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
(Z-Nix Co., Inc. Project)/
(Union Bank LOC)
5.55%, 01/07/95 1,000 1,000
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Bonds
Certificates of
Participation (Lorber
Industries of California
Project) / (Union Bank LOC)
5.55%, 01/07/95 1,650 1,650
</TABLE>
88
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SchwabFunds(R) 4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- -------
<S> <C> <C>
California Statewide
Communities
Development Corp.
Industrial Development
Revenue Refunding
Bonds (13th I
Associates Project) /
(Union Bank LOC)
5.05%, 01/07/95 $3,180 $3,180
Carlsbad, California Multi
Family Housing
Revenue Refunding
Bonds Certificates of
Participation (La Costa
Apartment Project)
Series 1993A /
(Bank of America LOC)
5.75%, 01/07/95 4,920 4,920
Chino, California Unified
School District
Certificates of
Participation (Capital
Construction Project)
Series B /
(National Westminster LOC)
4.90%, 01/07/95 5,000 5,000
Concord, California Multi
Family Mortgage
Revenue Bonds (Bel Air
Apartments Project)
Series 1986A /
(Bank of America LOC)
5.65%, 01/07/95 2,600 2,600
Contra Costa County,
California Multi Family
Housing Mortgage
Revenue Bonds (El
Cerrito Project) Series A /
(Bank of America LOC)
5.65%, 01/07/95 980 980
Contra Costa County,
California Transportation
Authority Sales Tax
Revenue Certificates of
Participation Series A /
(FGIC Insurance)
5.65%, 01/07/95 42,800 42,800
Duarte, California
Redevelopment Agency
Certificates of
Participation (Johnson
Duarte Partners Project)
Series 1984B /
(Bank of America LOC)
4.90%, 01/07/95 1,600 1,600
Duarte, California
Redevelopment Agency
Certificates of
Participation (Piken
Duarte Partners Project)
Series A /
(Bank of America LOC)
4.90%, 01/07/95 4,250 4,250
Emeryville, California
Redevelopment Agency
Multi Family Housing
Revenue Bonds (Emery
Bay Apartments II
Project) Series 1991A /
(Bank of America LOC)
6.75%, 01/07/95 4,000 4,000
Encinitas, California Multi
Family Housing
Revenue Refunding
Bonds (Torrey Pines
Project) Series A /
(Bank of America LOC)
5.50%, 01/07/95 8,100 8,100
Fremont, California Multi
Family Housing
Revenue Refunding
Certificates of
Participation (Amber
Court Project)
Series 1990A /
(Bank of Tokyo LOC)
5.05%, 01/07/95 10,380 10,380
Fresno, California Multi
Family Mortgage
Revenue Bonds (Oak
Cornelia Apartments
Project) Series 1985A /
(First Interstate Bank of
California LOC)
5.45%, 01/07/95 25,665 25,665
Golden Empire Schools
Financing Authority
Revenue Bonds (Kern
High School District
Project) Series 1992A /
(Barclays Bank LOC)
5.85%, 01/07/95 1,500 1,500
Golden Empire Schools
Financing Authority
Revenue Bonds (Kern
High School District
Project) Series 1992B /
(Barclays Bank LOC)
5.80%, 01/07/95 2,000 2,000
Grand Terrace, California
Community
Redevelopment Agency
Multi Family Housing
Revenue Bonds (Mount
Vernon Villas Project)
Series 1985A /
(Industrial Bank of
Japan LOC)
6.75%, 01/07/95 1,935 1,935
Hayward, California Multi
Family Housing
Revenue Bonds
(Shorewood Apartments
Project) Series 1984A /
(FGIC Insurance &
FGIC SPA)
5.80%, 01/07/95 25,100 25,100
</TABLE>
89
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SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- -------
<S> <C> <C>
Irvine Ranch, Califorina
Water Distict 1986
Capital Improvement
Revenue Bonds /
(Morgan Guaranty Trust Co.
New York LOC)
6.63%, 01/01/95 $1,300 $1,300
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds
Series 1985A /
(Sumitomo Bank LOC)
6.75%, 01/01/95 1,000 1,000
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds
Series 1985B-1 /
(Sumitomo Bank LOC)
6.75%, 01/01/95 100 100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds
Series 1985B-2 /
(Sumitomo Bank LOC)
6.75%, 01/01/95 8,100 8,100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds
Series 1991 /
(National Westminster LOC)
6.75%, 01/01/95 100 100
Kern County, California
Certificates of
Participation (Kern
Public Facilities Project)
Series A / (Sanwa Bank LOC)
5.35%, 01/07/95 200 200
Lancaster, California
Redevelopment Agency
Multi Family Revenue
Bonds (Woodcreek
Garden Apartments
Project) Series 1985J /
(Bank of Tokyo LOC)
5.25%, 01/07/95 2,400 2,400
Livermore, California
Multi Family Housing
Revenue Refunding
Bonds (Arbors
Apartment Project)
Series 1991A /
(Bank of Tokyo LOC)
5.05%, 01/07/95 7,900 7,900
Livermore, California
Multi Family Housing
Revenue Refunding
Bonds (Diablo Vista
Apartments Project)
Series 1990A /
(Union Bank LOC)
5.05%, 01/07/95 6,950 6,950
Local Government Finance
Joint Powers Authority,
California Certificates of
Participation Series 1 /
(Fuji Bank LOC)
5.00%, 01/07/95 1,700 1,700
Loma Linda, California
Hospital Revenue
Project Authority (Loma
Linda University Medical
Center) Series 1985A /
(Industrial Bank of
Japan LOC)
5.40%, 01/07/95 4,020 4,020
Loma Linda, California
Hospital Revenue
Project Authority (Loma
Linda University Medical
Center) Series 1985C /
(Industrial Bank of
Japan LOC)
5.40%, 01/07/95 2,300 2,300
Loma Linda, California
Hospital Revenue
Project Authority (Loma
Linda University Medical
Center) Series 1985D /
(Industrial Bank of
Japan LOC)
5.40%, 01/07/95 5,505 5,505
Los Angeles County,
California Certificates of
Participation (Los
Angeles County
Museum Art Project)
Series 1985A /
(Bank of America LOC)
5.55%, 01/07/95 2,800 2,800
Los Angeles County,
California Certificates of
Participation (Los
Angeles County
Museum Art Project)
Series 1985B /
(Bank of America LOC)
5.55%, 01/07/95 1,300 1,300
Los Angeles County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Sand Canyon Villas
Project) Series 1989A /
(Industrial Bank of
Japan LOC)
5.55%, 01/07/95 5,000 5,000
Los Angeles County,
California Metropolitan
Transportation Authority
Sales Tax Revenue
Refunding Bonds
Proposition C Second
Senior Series A /
(MBIA Insurance & Industrial
Bank of Japan SBPA)
5.40%, 01/07/95 3,300 3,300
</TABLE>
90
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SchwabFunds(R) 6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Los Angeles County,
California Multi Family
Mortgage Revenue
Bonds (Valencia Village
Project) Series 1984C /
(Industrial Bank of
Japan LOC)
5.40%, 01/07/95 $ 900 $ 900
Los Angeles County,
California Multi Family
Mortgage Revenue
Refunding Bonds
(Casden Community
Complex) Series 1991C /
(FHLB LOC)
5.50%, 01/07/95 3,200 3,200
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding
Bonds Series 1992A /
(FGIC Insurance &
Industrial Bank of
Japan LOC)
4.85%, 01/ 07/95 5,200 5,200
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Baldwin
Hills Public Parking
Project) Series B /
(Wells Fargo Bank LOC)
5.63%, 01/07/95 7,700 7,700
Los Angeles, California
Certificates of
Participation (Simon
Wiesenthal Center)
Series 1988 / (National
Australia Bank LOC)
5.40%, 01/07/95 2,200 2,200
Los Angeles, California
Community Redevelopment
Certificates of
Participation (Broadway
Springs Center Project)
Series 1987 /
(Bank of America LOC)
5.40%, 01/07/95 11,400 11,400
Los Angeles, California
Multi Family Housing
Revenue Bonds
(Poinsettia Apartments
Project) Series 1989A /
(Dai-Ichi Kangyo Bank LOC)
5.75%, 01/07/95 10,000 10,000
Marin County, California
Housing Authority Multi
Family Housing
Revenue Bonds (Crest
Marin II Apartments
Project) Series 1989A /
(Dai-Ichi Kangyo Bank LOC)
5.55%, 01/01/95 7,300 7,300
Modesto, California
High School District and
Modesto City School
District Certificates of
Participation (Capital
Facilities Project)
Series 1991 /
(Mitsubishi Bank LOC)
5.40%, 01/07/95 3,700 3,700
Moorpark, California
Multi Family Housing
Revenue Refunding
Bonds (Le Club
Apartments Project)
Series A /
(Citibank LOC) 5.50%, 01/07/95 6,000 6,000
Oakland, California
Economic Development
Revenue Refunding
Bonds (Leamington
Hotel Project)
Series 1994A /
(First Interstate Bank of
California LOC)
5.50%, 01/07/95 4,250 4,250
Oakland, California
Health Facilities
Revenue Bonds
Certificates of
Participation (Children' s
Hospital Project)
Series 1988 /(Banque
Nationale de Paris LOC)
4.90%, 01/07/95 3,500 3,500
Ontario, California
Redevelopment Agency
Multi Family Housing
Revenue Refunding
Bonds Series 1991A /
(FHLB LOC) 5.50%, 01/07/95 4,500 4,500
Orange County, California
Apartment Development
Revenue Refunding
Bonds (Jess L. Frost
Project) Series 1985B /
(Wells Fargo Bank LOC)
5.40%, 01/07/95 8,200 8,200
Orange County, California
Certificates of
Participation (Florence
Crittenton Services
Project) Series 1990 /
(Swiss Bank LOC)
7.00%, 01/07/95 7,000 7,000
Orange County, California
Municipal Water District
Water Facilities Corp.
Certificates of
Participation /
(Barclays Bank &
National Westminster LOC)
7.00%, 01/07/95 31,225 31,225
</TABLE>
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--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Panama Buena Vista,
California Unified School
District Certificates of
Participation (1994
Capital Improvement
Financing Project) /
(Bank of California LOC)
5.40%, 01/07/95 $ 4,000 $ 4,000
Paramount, California
Housing Authority Multi
Family Housing
Revenue Bonds
(Century Place
Apartments Project)
Series 1989A / (Dai-Ichi
Kangyo Bank LOC)
5.63%, 01/07/95 17,000 17,000
Placer County, California
Industrial Development
Authority Industrial
Revenue Certificates
of Participation
(Chesapeake Industries,
Inc. Project) Series 1985 /
(Barclays Bank LOC)
5.70%, 01/07/95 2,400 2,400
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility
Project) Series 1985A /
(Sanwa Bank LOC)
5.55%, 01/01/95 9,000 9,000
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility
Project) Series 1985B /
(Sanwa Bank LOC) 5.55%, 01/07/95 100 100
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility
Project) Series 1985C /
(Sanwa Bank LOC)
5.55%, 01/07/95 5,600 5,600
Riverside County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Briarwood Apartment
Project) Series 1985C /
(FHLB LOC)
5.35%, 01/07/95 5,000 5,000
Riverside County,
California Industrial
Development Authority
Revenue Bonds
(Cryogenic Project)
Series 1989B-1 /
(Rabo Bank LOC)
5.00%, 01/07/95 5,700 5,700
Sacramento County,
California Certificates
of Participation
(Administration Center
and Court House
Project) / (Union Bank
of Switzerland LOC)
5.25%, 01/07/95 18,600 18,600
Salinas, California
Apartment Development
Revenue Bonds
(Mariner Villa Project)
Series 1985B /
(Bank of America LOC)
5 .50%, 01/07/95 2,725 2,725
San Bernardino County,
California Certificates of
Participation (Glen
Helen Blockbuster
Project) Series 1994C /
(Mitsubishi Bank LOC)
5.50%, 01/07/95 3,880 3,880
San Bernardino County,
California Multi Family
Certificates of
Participation Revenue
Bonds (Western
Properties Project IV)
Series 1985 /
(Bank of America LOC)
6.50%, 01/07/95 1,100 1,100
San Diego County,
California Regional
Transportation
Commission Retail
Sales Tax Revenue
Bonds (Second Series
#9) Series A / (Multiple
Credit Enhancements)
5.75%, 01/07/95 15,100 15,100
San Diego County,
California Regional
Transportation
Commission Second
Senior Sales Tax
Revenue Bonds
Series 1992A / (FGIC
Insurance & FGIC SPA)
5.75%, 01/07/95 19,600 19,600
San Francisco, California
City and County Agency
Multi Family Housing
Revenue Bonds
(Sutter/Post Apartment
Project) Series A /
(Dai-Ichi Kangyo Bank LOC)
5.60%, 01/ 07/95 4,435 4,435
San Francisco, California
City and County
Housing Authority Multi
Family Housing
Revenue Bonds
(737 Post Project)
Series 1985D / (Banque
Nationale de Paris LOC)
5.25%, 01/07/95 14,000 14,000
</TABLE>
92
<PAGE> 93
SchwabFunds(R) 8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
San Francisco, California
City and County
Redevelopment Agency
Multi Family Revenue
Bonds (Bayside Village
Project) Series A /
(Industrial Bank of
Japan LOC)
5.15%, 01/07/95 $ 2,400 $ 2,400
San Francisco, California
City and County
Redevelopment Agency
Multi Family Revenue
Bonds (Fillmore Center
Project) Series A-1 /
(Citibank LOC)
5.40%, 01/07/95 26,500 26,500
San Francisco, California
City and County
Redevelopment Agency
Multi Family Revenue
Bonds (Fillmore Center
Project) Series A-2 /
(Citibank LOC)
5.55%, 01/07/95 3,750 3,750
San Francisco, California
City and County
Redevelopment Agency
Multi Family Revenue
Bonds (Fillmore Center
Project) Series B-2 /
(Bank of Nova Scotia LOC)
5.35%, 01/07/95 13,100 13,100
San Francisco, California
City and County
Redevelopment Agency
Multi Family Revenue
Bonds (Rincon Center
Apartments) Series 1985B /
(Citibank LOC)
5.40%, 01/07/95 5,810 5,810
San Mateo County,
California Certificates of
Participation (Capital
Projects) Series 1985B /
(Swiss Bank LOC)
5.00%, 01/07/95 2,920 2,920
Santa Ana, California
Unified School District
Certificates of
Participation (Land
Acquisition Project) /
(Sanwa Bank LOC)
9.00%, 01/07/95 100 100
Santa Clara County,
California El Camino
Hospital Facility
Authority Revenue
Bonds (Valley Medical
Center Project)
Series 1985A /
(National Westminster LOC)
5.50%, 01/07/95 8,000 8,000
Santa Clara County,
California El Camino
Hospital Facility
Authority Revenue
Bonds (Valley Medical
Center Project)
Series 1985B /
(National Westminster LOC)
5.50%, 01/07/95 8,200 8,200
Santa Clara, California
Electric Revenue Bonds
Series 1985A /
(National Westminster LOC)
4.90%, 01/07/95 13,700 13,700
Santa Clara, California
Electric Revenue Bonds
Series 1985B /
(National Westminster LOC)
4.90%, 01/07/95 8,200 8,200
Santa Clara, California
Electric Revenue Bonds
Series 1985C /
(National Westminster LOC)
4.90%, 01/07/95 9,200 9,200
Santa Cruz County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Paloma Del Mar
Apartments Project)
Series 1992A /
(Bank of Tokyo LOC)
5.35%, 01/07/95 7,700 7,700
Simi Valley, California
Multi Family Housing
Certificates of
Participation (Lincoln
Wood Ranch Project) /
(Sumitomo Bank LOC)
5.50%, 01/07/95 3,200 3,200
South San Francisco,
California Multi Family
Revenue Bonds
(Magnolia Plaza
Apartments Project)
Series A /
(Wells Fargo Bank LOC)
5.55%, 01/07/95 4,500 4,500
Southern California
Public Power Authority
Transmission Project
Revenue Bonds
Series 1991 /
(AMBAC Insurance &
Swiss Bank LOC)
4.85%, 01/07/95 13,900 13,900
Vallejo, California
Commercial
Development Revenue
Bonds (Vallejo Center
Association Project)
Series 1994A /
(Bank of Tokyo LOC)
5.50%, 01/07/95 1,000 1,000
</TABLE>
93
<PAGE> 94
SchwabFunds(R) 9
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Victor, California
Elementary School
District Certificates
of Participation
(School Construction
Financing Project) /
(National Westminster LOC)
5.40%, 01/07/95 $ 4,000 $ 4,000
Visalia, California
Certificates of
Participation Revenue
Bonds (The Convention
Center Expansion
Project) Series 1991 /
(Bank of California LOC)
5.85%, 01/07/95 1,000 1,000
--------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $808,740) 808,740
--------
VARIABLE RATE TENDER
OPTION BONDS--0.3%(a)
Southern California Rapid
Transit Tender Option
Short Mode Bonds
(BT-9) / (MBIA Insurance &
Bankers Trust Tender Option)
5.50%, 01/07/95 4,200 4,200
--------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $4,200) 4,200
--------
VARIABLE RATE TENDER OPTION
BOND PARTNERSHIP--3.9%(a)
California State
Department of Water
Resources Revenue
Bonds (Central Valley
Project) Series J3
(BTP-141) / (Bankers
Trust Tender Option)
5.65%, 01/07/95 5,155 5,155
California State Revenue
Anticipation Warrants
Series C (BTP-150) /
(Multiple Credit
Enhancements & Bankers
Trust Tender Option)
5.44%, 01/07/95 10,000 10,000
Los Angeles, California
Department of Water
and Power Electric Plant
Revenue Refunding
Bonds Series 1994
Tender Option Bonds
(BTP-68) / (Automatic
Data Processing, Inc.
Tender Option)
5.75%, 01/07/95 5,195 5,195
Metropolitan Water District
of Southern California
General Obligation
Revenue Refunding
Bonds Series 1993A1
and 1993A2 Tender
Option Bonds (BTP-115) /
(Bankers Trust Tender Option)
5.65%, 01/07/95 9,145 9,145
Southern California Public
Power Authority Power
Project Revenue Bonds
Series 1993A (San Juan
Number Three) Tender
Option Bonds (BTP-88) /
(MBIA Insurance &
Bankers Trust Tender Option)
5.60%, 01/07/95 2,200 2,200
Southern California Public
Power Authority Power
Project Revenue Bonds
Series 1993A (San Juan
Number Three) Tender
Option Bonds (BTP-89) /
(MBIA Insurance &
Bankers Trust Tender Option)
5.60%, 01/07/95 1,710 1,710
Southern California Public
Power Authority Power
Project Tender Option
Bonds (BTP-90) /
(Multiple Credit
Enhancements &
Bankers Trust Tender Option)
5.60%, 01/07/95 8,290 8,290
Southern California Rapid
Transit District
Certificates of
Participation (Workers
Compensation Funding
Program) Tender Option
Bonds (BTP-163) /
(AMBAC Insurance &
Bankers Trust Tender Option)
5.60%, 01/07/95 8,710 8,710
--------
TOTAL VARIABLE RATE TENDER
OPTION BOND PARTNERSHIP
(Cost $50,405) 50,405
--------
GENERAL OBLIGATIONS--0.7%(b)
Los Angeles County,
California General
Obligation Notes
Series 1990A
4.05%, 09/01/95 2,125 2,198
Los Angeles, California
General Obligation
Bonds Series 1993A
4.37%, 09/01/95 4,350 4,438
Los Angeles, California
General Obligation
Bonds Series 1994A
4.40%, 09/01/95 2,000 2,004
--------
TOTAL GENERAL OBLIGATIONS
(Cost $8,640) 8,640
--------
MANDATORY PUT BONDS--1.4%(b)
California Educational
Facilities Authority
Revenue Bonds
(University of
Southern California)
3.80%, 04/01/95 3,250 3,250
</TABLE>
94
<PAGE> 95
SchwabFunds(R) 10
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- -------
<S> <C> <C>
California Public Capital
Improvements Financing
Authority Revenue
Bonds (Various Pooled
Projects) Series 1988C /
(National Westminster LOC)
3.45%, 03/15/95 $15,000 $15,000
-------
TOTAL MANDATORY PUT BONDS
(Cost $18,250) 18,250
-------
REVENUE ANTICIPATION
NOTES--0.4%(b)
California State Revenue
Anticipation Notes
Series 1994-95A
4.45%, 06/28/95 5,000 5,011
-------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $5,011) 5,011
-------
REVENUE BONDS--0.0%(b)
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds (Small
Business Administration)
Series B-1 / (U.S. Small
Business Administration
Guaranty)
3.69%, 02/01/95 100 100
-------
TOTAL REVENUE BONDS
(Cost $100) 100
-------
TAX ALLOCATION BONDS--0.0%(b)
Milpitas, California
Redevelopment Agency
Tax Allocation Bonds
(Redevelopment Project
J Area No. 1) Series 1985 /
(MBIA Insurance)
2.75%, 01/15/95 500 501
-------
TOTAL TAX ALLOCATION BONDS
(Cost $501) 501
-------
TAX AND REVENUE ANTICIPATION
NOTES--10.9%(b)
Benicia, California Unified
School District Tax and
Revenue Anticipation
Notes Series 1994-95
4.50%, 06/28/95 1,900 1,905
California School Cash
Reserve Program
Authority Pooled
Tax and Revenue
Anticipation Notes
Series 1994A
3.75%, 07/05/95 25,000 25,091
Elk Grove, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1994-95
4.03%, 09/14/95 4,250 4,278
Livermore Valley, California
Joint Unified School
District Tax and
Revenue Anticipation
Notes Series 1994
4.13%, 09/29/95 4,500 4,528
Los Angeles County,
California Tax and
Revenue Anticipation
Notes Series 1994-95
3.85%, 06/30/95 3,000 3,009
Martinez, California Unified
School District Tax and
Revenue Anticipation
Notes Series 1994-95
4.10%, 10/26/95 3,650 3,676
Newport Beach, California
Tax and Revenue
Anticipation Notes
Series 1994-95
4.20%, 10/15/95 4,300 4,326
Oakland, California
Unified School District
Alameda County
Tax and Revenue
Anticipation Notes
Series 1994-95
4.04%, 09/12/95 31,625 31,774
Orange County, California
Pooled Tax and
Revenue Anticipation
Notes Series 1994-95 (c)
3.70%, 07/28/95 39,890 40,065
San Juan, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1994-95
4.05%, 09/20/95 15,000 15,072
Sonoma County, California
Tax and Revenue
Anticipation Notes
Series 1994-95
4.14%, 10/10/95 8,950 8,990
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES (Cost $142,714) 142,714
-------
TAX-EXEMPT COMMERCIAL PAPER--20.3%(b)
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A /
(Swiss Bank LOC)
3.45%, 02/09/95 33,000 33,000
</TABLE>
95
<PAGE> 96
SchwabFunds(R) 11
-------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- -------
<S> <C> <C>
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988B /
(Sumitomo Bank LOC)
3.45%, 01/24/95 $3,300 $3,300
3.40%, 01/26/95 9,900 9,900
3.50%, 02/09/95 21,500 21,500
3.60%, 02/15/95 4,000 4,000
3.50%, 02/21/95 2,000 2,000
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988F / (Banque
Nationale de Paris LOC)
3.30%, 01/24/95 10,000 10,000
3.40%, 02/09/95 3,000 3,000
3.45%, 02/21/95 14,000 14,000
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1985A
3.25%, 01/25/95 2,100 2,100
3.25%, 02/06/95 9,000 9,000
3.80%, 02/13/95 3,900 3,900
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
(Southern California
Edison) Series 1985B
3.25%, 01/25/95 7,100 7,100
3.45%, 01/26/95 9,100 9,100
3.50%, 01/30/95 1,500 1,500
3.80%, 02/13/95 2,500 2,500
3.40%, 02/15/95 2,100 2,100
California Pollution Control
Financing Authority Solid
Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP)
Series 1988A /
(National Westminster LOC)
4.25%, 01/11/95 13,540 13,540
4.05%, 01/11/95 6,000 6,000
East Bay, California
Municipal Utility District
(Wastewater Systems) /
(National Westminster LOC)
4.30%, 01/11/95 10,000 10,000
3.45%, 01/23/95 10,400 10,400
Los Angeles County,
California Department of
Water and Power
Waterworks System
Revenue Bonds
3.90%, 01/11/95 5,350 5,350
4.30%, 01/12/95 11,400 11,400
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds Series A /
(Multiple Credit
Enhancements)
4.25%, 02/10/95 3,000 3,000
Los Angeles, California
Wastewater System
3.90%, 01/11/95 6,000 6,000
Metropolitan Water District
of Southern California Tax
Exempt Commercial Paper
4.30%, 01/11/95 10,000 10,000
Sacramento, California
Municipal Utility District
Revenue Bonds Series H /
(Bank of America &
Morgan Guaranty Trust Co.
New York LOC)
3.50%, 01/30/95 30,350 30,350
3.70%, 02/15/95 5,000 5,000
West and Central Basin
Financing Authority
West Basin Municipal
Water District /
(Toronto-Dominion LOC)
3.85%, 02/15/95 15,000 15,000
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $264,040) 264,040
----------
TOTAL INVESTMENTS--100.0%
(Cost $1,302,601) $1,302,601
==========
</TABLE>
96<PAGE> 97
SchwabFunds(R) 12
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on current
market rates. Rates shown are the effective rates on December 31, 1994. Dates
shown represent the latter of the demand date or next interest rate change date,
which is considered the maturity date for financial reporting purposes.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
(c) With respect to this security, the Schwab California Tax-Exempt Money Fund
has obtained an $11,967,000 irrevocable letter of credit from Bank of America
National Trust and Savings Association which allows the Fund to make demands for
partial payment of this security's principal amount under certain conditions
upon maturity or disposition of this security by the Fund. This letter of credit
provides a degree of additional support for the valuation of this security but
has not been needed to maintain the Fund's net asset value of $1.00 per share
since the Fund has not experienced any losses to date in excess of one half of
one percent of its net assets. The letter of credit expires on August 1, 1995.
See Note 7 to the Financial Statements for further discussion.
Abbreviations
-------------
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
See accompanying Notes to Financial Statements.
97
<PAGE> 98
SchwabFunds(R) 13
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost: $1,302,601) $1,302,601
Cash 52
Interest receivable 7,667
Prepaid expenses 73
Deferred organization costs 2
----------
Total assets 1,310,395
----------
LIABILITIES
Payable for:
Dividends 5,376
Investments purchased 10,311
Investment advisory and administration fee 210
Transfer agency and shareholder service fees 464
Other 151
----------
Total liabilities 16,512
----------
Net assets applicable to outstanding shares $1,293,883
==========
NET ASSETS CONSIST OF:
Capital paid in $1,294,555
Accumulated net realized loss on investments sold (672)
----------
$1,293,883
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 1,294,555
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
98
<PAGE> 99
SchwabFunds(R) 14
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Interest income $35,503
-------
Expenses:
Investment advisory and administration fee 5,528
Transfer agency and shareholder service fees 5,518
Custodian fees 220
Registration fees 72
Professional fees 63
Shareholder reports 51
Trustees' fees 8
Amortization of deferred organization costs and other
prepaid expenses 9
Insurance and other expenses 40
-------
11,509
Less expenses reduced (3,614)
-------
Total expenses incurred by Fund 7,895
-------
Net investment income 27,608
Net realized loss on investments sold (600)
-------
Net increase in net assets resulting from operations $27,008
=======
</TABLE>
See accompanying Notes to Financial Statements.
99<PAGE> 100
SchwabFunds(R) 15
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 27,608 $ 16,030
Net realized loss on investments sold (600) (56)
----------- -----------
Net increase in net assets resulting from
operations 27,008 15,974
----------- -----------
Dividends to shareholders from
net investment income (27,608) (16,030)
----------- -----------
Capital Share Transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 3,435,641 2,616,148
Net asset value of shares issued in
reinvestment of dividends 24,116 15,138
Less payments for shares redeemed (3,227,316) (2,260,364)
----------- -----------
Increase in net assets from capital share
transactions 232,441 370,922
----------- -----------
Total increase in net assets 231,841 370,866
Net Assets:
Beginning of period 1,062,042 691,176
----------- -----------
End of period $ 1,293,883 $ 1,062,042
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
100<PAGE> 101
SchwabFunds(R) 16
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab California Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund, the Schwab Value Advantage Money Fund(TM), the
Schwab Institutional Advantage Money Fund(TM), the Schwab Retirement Money
Fund(TM) and the Schwab New York Tax-Exempt Money Fund. The assets of each
series are segregated and accounted for separately.
The Schwab California Tax-Exempt Money Fund, which is not "diversified" within
the meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of California and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of California income
tax.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of
101
<PAGE> 102
SchwabFunds(R) 17
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
such assets in excess of $2 billion. Under these agreements, the Fund incurred
investment advisory and administration fees of $5,528,000 during the year ended
December 31, 1994, before the Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of average daily net assets. For the year
ended December 31, 1994, the Fund incurred transfer agency and shareholder
service fees of $5,518,000, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1994, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $8,000 related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1994, the total of such fees reduced by the Investment
Manager and Schwab were $3,274,000 and $340,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1994, aggregated (in thousands) $2,664,298 and $2,431,876,
respectively.
102
<PAGE> 103
SchwabFunds(R) 18
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
November 6, 1990
(commencement
For the year ended of operations) to
December 31, December 31,
1994 1993 1992 1991 1990
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment
Operations
Net investment income .02 .02 .02 .04 .01
Net realized and unrealized
gain (loss) on investments -- -- -- -- --
---------- ---------- -------- -------- --------
Total from investment
operations .02 .02 .02 .04 .01
Less Distributions
Dividends from net
investment income (.02) (.02) (.02) (.04) (.01)
Distributions from realized
gain on investments -- -- -- -- --
---------- ---------- -------- -------- --------
Total distributions (.02) (.02) (.02) (.04) (.01)
---------- ---------- -------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ======== ======== ========
Total return (%) 2.26 1.91 2.35 3.77 .77
Ratios/Supplemental Data
Net assets, end of
period (000s) $1,293,883 $1,062,042 $691,176 $494,214 $339,292
Ratio of expenses to
average net assets (%) .64 .63 .63 .61 .28*
Ratio of net investment income
to average net assets (%) 2.25 1.89 2.31 3.70 5.06*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended
December 31, 1994, 1993, 1992, 1991 and 1990 would have been .94%, .96%, .97%,
.98% and 1.17%*, respectively, and the ratio of net investment income to average
net assets would have been 1.95%, 1.56%, 1.97%, 3.33% and 4.17%*, respectively.
* Annualized
103<PAGE> 104
SchwabFunds(R) 19
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1994
--------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Fund had 3.10% of its net assets, or $40,065,000,
invested in a security issued by a municipality that participated in the
investment pool maintained by Orange County, California. On December 6, 1994,
Orange County, California and the investment pool maintained by Orange County
filed for protection under Chapter 9 of the federal Bankruptcy Code. Although
the issuer of this security has not filed for bankruptcy, the issuer's ability
to repay its obligations in a timely manner may be affected by the issuer's
investment in the Orange County investment pool and consequently these
uncertainties may adversely impact the security's market value. The Fund has
obtained an $11,967,000 irrevocable letter of credit from a major commercial
bank which allows the Fund to make demands for partial payment under certain
conditions upon maturity or disposition of this security by the Fund. Although
this letter of credit enhances the market value of this security, it does not
provide for complete credit support, and therefore, the Fund continues to be
exposed to some risk of loss of principal due to the issuer's investment in
Orange County, California's investment pool. As of December 31, 1994, no
securities held by the Fund were in default and all regularly scheduled interest
and principal payments have been made. The letter of credit, which expires on
August 1, 1995, has not been needed to maintain the Fund's net asset value of
$1.00 per share since the Fund has not experienced any losses to date in excess
of one half of one percent of its net assets. The Charles Schwab Corporation has
agreed to reimburse the bank for any payments made by the bank to the Fund under
this letter of credit.
In addition to the security described above, at December 31, 1994, the Fund was
invested in a $4,326,000 Tax and Revenue Anticipation Note issued by Newport
Beach, California. The issuer, Newport Beach, California, is a participant in
the investment pool maintained by Orange County. The security, which represents
0.33% of the net assets of the Fund, is scheduled to mature on October 15, 1995.
Until maturity or disposition of this security, the Fund continues to be exposed
to some risk of loss of principal due to the issuer's investment in Orange
County, California's invesment pool.
104
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To the Trustees and Shareholders
of the Schwab California Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Schwab California Tax-Exempt Money Fund (one of the series
constituting The Charles Schwab Family of Funds, hereafter referred to as the
"Trust") at December 31, 1994, and the results of its operations and the changes
in its net assets for the periods presented, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
105
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SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--80.8%(a)
ASSET BACKED SECURITIES--6.6%
Enterprise Funding Corp.
6.10%, 01/18/95 $1,000 $ 997
Preferred Receivables Corp.
5.92%, 01/11/95 1,000 998
Receivables Capital Corp.
6.13%, 01/13/95 2,000 1,996
-------
3,991
-------
AUTOMOTIVE--11.1%
BMW U.S. Capital Corp.
6.16%, 01/04/95 1,000 999
5.94%, 02/22/95 1,300 1,289
Ford Credit Europe PLC
6.31%, 03/23/95 1,000 986
Ford Motor Credit Co.
6.39%, 04/06/95 1,000 983
General Motors Acceptance Corp.
5.99%, 02/16/95 1,000 992
6.40%, 03/20/95 1,500 1,480
-------
6,729
-------
BANKING--BELGIUM--1.6%
Generale Bank, Inc.
5.85%, 03/03/95 1,000 990
-------
BANKING--DOMESTIC--4.9%
Government Development Bank for Puerto Rico
5.71%, 01/12/95 1,000 998
Vehicle Services of America / (NationsBank LOC)
6.15%, 01/20/95 2,000 1,994
-------
2,992
-------
BANKING--JAPAN--8.2%
Bancal Tri-State Corp. / (Mitsubishi Bank
Keepwell Agreement)
5.89%, 02/14/95 2,000 1,986
Bridgestone/Firestone, Inc. / (Sumitomo Bank
LOC)
6.28%, 03/06/95 1,000 989
</TABLE>
106
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SchwabFunds(R) 2
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
SRD Finance Inc. / (Sakura Bank LOC)
6.17%, 01/05/95 $2,000 $ 1,999
-------
4,974
-------
BANKING--NETHERLANDS--1.6%
ABN-Amro North America Finance, Inc.
5.51%, 01/03/95 1,000 1,000
-------
BANKING--UNITED KINGDOM--2.6%
Yorkshire Building Society
5.90%, 02/07/95 1,585 1,576
-------
DATA PROCESSING--3.3%
Electronic Data Systems
6.16%, 01/19/95 2,000 1,994
-------
FINANCE (COMMERCIAL)--11.5%
CIT Group Holdings, Inc.
5.55%, 01/09/95 1,000 999
General Electric Capital Corp.
5.16%, 02/06/95 2,000 1,990
General Electric Capital Services
5.09%, 02/01/95 2,000 1,991
Hanson Finance (UK) PLC
5.78%, 02/06/95 2,000 1,989
-------
6,969
-------
FINANCE (CONSUMER)--1.6%
Sears Roebuck Acceptance Corp.
5.80%, 02/09/95 1,000 994
-------
MINING AND MINERAL RESOURCES--3.3%
BHP Finance (U.S.A.), Inc.
5.81%, 01/17/95 1,000 997
5.85%, 01/23/95 1,000 996
-------
1,993
-------
</TABLE>
107
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SchwabFunds(R) 3
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
PHARMACEUTICALS--1.6%
American Home Products Corp.
6.49%, 04/21/95 $1,000 $ 981
-------
SECURITIES BROKERAGE-DEALER--22.9%
Bear Stearns Companies Inc.
5.58%, 01/25/95 1,000 996
CS First Boston, Inc.
5.56%, 01/12/95 1,000 998
Goldman Sachs Group, LP
6.02%, 01/09/95 552 551
5.90%, 02/01/95 1,000 995
6.51%, 04/17/95 1,000 981
Lehman Brothers Holdings Inc.
5.94%, 01/27/95 1,000 996
Morgan Stanley Group Inc.
6.35%, 03/10/95 1,000 988
6.35%, 03/13/95 1,500 1,482
Nomura Holdings America, Inc.
5.88%, 02/14/95 2,000 1,986
Paine Webber Group Inc.
5.78%, 02/07/95 2,000 1,988
5.99%, 02/17/95 1,000 992
Salomon, Inc.
6.52%, 02/08/95 1,000 993
-------
13,946
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $49,129) 49,129
-------
BANK NOTES--3.3%
BANKING--DOMESTIC--3.3%
PNC Bank, N.A.
5.95%, 04/26/95 2,000 2,000
-------
TOTAL BANK NOTES
(Cost $2,000) 2,000
-------
</TABLE>
108
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SchwabFunds(R) 4
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT--8.2%
Banking--France--3.3%
Societe Generale
5.10%, 02/02/95 $2,000 $ 2,000
Banking--Germany--3.3%
5.18, 02/03/95 2,000 2,000
Banking--Japan--1.6%
Fuji Bank, Ltd.
6.32%, 02/28/95 1,000 999
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $4,999) 4,999
-------
REMARKED CERTIFICATES--1.6%
Asset Backed Securities--1.6%
Circuit City RECOP Trust
6.33%, 03/07/95 1,000 1,000
-------
TOTAL REMARKETED CERTIFICATES
(Cost $1,000) 1,000
-------
Maturity
--------
REPURCHASE AGREEMENT--6.1%
Citicorp Securities, Inc. 5.80%
Issue Date 12/30/94
Due 01/03/95
Collateralized By:
FNMA: $4,200 Par; 7.00%
Due 12/25/16 3,681 3,679
-------
TOTAL REPURCHASE AGREEMENT
(Cost $3,679) 3,679
-------
TOTAL INVESTMENTS--100.0%
(Cost $60,807) $60,807
=======
</TABLE>
109
<PAGE> 110
SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
Notes to Schedule of Investments.
--------------------------------------------------------------------------------
Yields shown are effective yields at the time of purchase. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Institutional Advantage Money
Fund are private placement securities exempt from registration by Section 4(2)
of the Securities Act of 1933. These securities generally are issued to
institutional investors, such as the Schwab Institutional Advantage Money Fund.
Any resale by the Schwab Institutional Advantage Money Fund must be in an
exempt transaction, normally to a qualified institutional buyer. At December
31, 1994, the aggregate value of private placement securities held by the
Schwab Institutional Advantage Money Fund was $2,977,000, which represented
4.96% of net assets. Of this total, $1,977,000 or 3.29% of net assets were
invested in securities determined by the Investment Manager to be liquid in
accordance with a resolution adopted by the Board of Trustees relating to Rule
144A, promulgated under the Securities Act of 1933.
Abbreviations
-------------
FNMA Federal National Mortgage Association
LOC Letter of Credit
RECOP Remarketed Certificates of Participation
See accompanying Notes to Financial Statements.
110
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--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Assets and Liabilities (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost: $60,807) $60,807
Interest receivable 118
Receivable for fund shares sold 32
Deferred organization costs 45
Prepaid expenses 15
-------
Total assets 61,017
-------
LIABILITIES
Payable for:
Dividends 298
Fund shares redeemed 512
Investment advisory and administration fee 13
Transfer agency and shareholder service fees 10
Deferred organization costs 57
Other 39
-------
Total liabilities 929
-------
Net assets applicable to outstanding shares $60,088
=======
NET ASSETS CONSIST OF:
Capital paid in $60,088
Accumulated net realized loss on investments sold ---
-------
$60,088
=======
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value (unlimited shares authorized) 60,088
Net asset value, offering and redemption price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
111
<PAGE> 112
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--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Operations (in thousands)
For the period January 4, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Interest income $2,191
------
Expenses:
Investment advisory and administration fee 220
Transfer agency and shareholder service fees 119
Custodian fees 35
Registration fees 26
Professional fees 24
Shareholder reports 1
Amortization of deferred organization costs 12
Insurance and other expenses 4
------
441
Less expenses reduced (178)
------
Total expenses incurred by Fund 263
------
Net investment income 1,928
Net realized loss on investments sold --
------
Net increase in net assets resulting from operations $1,928
======
</TABLE>
See accompanying Notes to Financial Statements.
112
<PAGE> 113
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Changes in Net Assets (in thousands)
For the period January 4, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Operations:
Net investment income $ 1,928
Net realized loss on investments sold --
---------
Net increase in net assets resulting from operations 1,928
---------
Dividends to shareholders from net investment income (1,928)
---------
Capital Share Transactions (dollar amounts and number of
shares are the same):
Proceeds from shares sold 240,455
Net asset value of shares issued in reinvestment of dividends 397
Less payments for shares redeemed (180,764)
---------
Increase in net assets from capital share transactions 60,088
---------
Total increase in net assets 60,088
Net Assets:
Beginning of period --
---------
End of period $ 60,088
=========
</TABLE>
See accompanying Notes to Financial Statements.
113
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SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period January 4, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Institutional Advantage Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended. The Fund
commenced operations on January 4, 1994.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund, the
Schwab Value Advantage Money Fund(TM), the Schwab Retirement Money Fund(TM)
and the Schwab New York Tax-Exempt Money Fund. The assets of each series are
segregated and accounted for separately.
The Schwab Institutional Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation - Investments are stated at amortized cost which approximates
market value.
Security transactions and interest income - Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from security transactions are
determined on an identified cost basis.
Repurchase agreements - Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders - The Fund declares a daily dividend, equal to its net
investment income for that day, payable monthly.
Deferred organization costs - Costs incurred in connection with the organization
of the Fund, its initial registration with the Securities and Exchange
Commission and with various states are amortized on a straight-line basis over a
five year period from the Fund's commencement of operations.
Expenses - Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
114
<PAGE> 115
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--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period January 4, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
Federal income taxes - It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements - The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$220,000 during the period from January 4, 1994 (commencement of operations) to
December 31, 1994, before the Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements - The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. For the
period from January 4, 1994 (commencement of operations) to December 31, 1994,
the Fund incurred transfer agency and shareholder service fees of $119,000,
before Schwab reduced its fees (see Note 4).
Officers and trustees - Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the
period from January 4, 1994 (commencement of operations) to December 31, 1994,
the Trust made no direct payments to its officers or trustees who are
"interested persons" within the meaning of the Investment Company Act of 1940,
as amended. The Fund did not incur fees related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the
period from January 4, 1994 (commencement of operations) to December 31, 1994,
the total of such fees reduced by the Investment Manager and Schwab were $96,000
and $82,000, respectively.
115
<PAGE> 116
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--------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period January 4, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the period from
January 4, 1994 (commencement of operations) to December 31, 1994, aggregated
(in thousands) $1,193,776 and $1,133,283, respectively.
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
<S> <C>
Net asset value at beginning of period $1.00
Income from Investment Operations
Net investment income .04
Net realized and unrealized gain (loss) on investments --
-------
Total from investment operations .04
Less Distributions
Dividends from net investment income (.04)
Distributions from realized gain on investments --
-------
Total distributions (.04)
-------
Net asset value at end of period $1.00
=======
Total return 3.86%
Ratios/Supplemental Data
Net assets, end of period (000s) $60,088
Ratio of expenses to average net assets .55%*
Ratio of net investment income to average net assets 4.04%*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had
these fees not been reduced, the ratio of expenses to average net assets for the
period ended December 31, 1994 would have been .92%* and the ratio of net
investment income to average net assets would have been 3.67%*.
* Annualized
116
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To the Trustees
and Shareholders of the Schwab Institutional Advantage Money Fund(TM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Schwab Institutional Advantage Money Fund (one of the series
constituting The Charles Schwab Family of Funds, hereafter referred to as the
"Trust") at December 31, 1994, and the results of its operations and the changes
in its net assets for the period presented, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
m isstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
117
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--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--86.0%
ASSET BACKED SECURITIES--7.3%
Broadway Capital Corp.
6.16%, 02/24/95 $1,329 $ 1,317
Budget Funding Corp.
5.92%, 02/16/95 1,000 993
-------
2,310
-------
AUTOMOTIVE--12.5%
BMW U.S. Capital Corp.
5.72%, 02/22/95 1,000 992
6.05%, 05/15/95 1,000 978
General Motors Acceptance Corp.
5.91%, 02/13/95 1,000 993
Renault Acceptance B.V.
5.62%, 01/24/95 1,000 996
-------
3,959
-------
BANKING--BELGIUM--3.1%
Generale Bank, Inc.
5.85%, 03/03/95 1,000 990
-------
BANKING--DOMESTIC BANK HOLDING COMPANY--6.3%
Chemical Banking Corp.
6.01%, 03/02/95 1,000 990
NationsBank Corp.
5.90%, 02/21/95 1,000 992
-------
1,982
-------
BANKING--DOMESTIC--6.3%
Fleet Financial Group, Inc.
6.12%, 01/11/95 1,000 998
Government Development Bank for Puerto Rico
5.85%, 01/17/95 1,000 997
-------
1,995
-------
</TABLE>
118
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--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
BANKING--FRANCE--3.1%
Indosuez N.A. Inc.
5.90%, 02/23/95 $1,000 $ 991
-------
BANKING--JAPAN--3.2%
Bancal Tri-State Corp. / (Mitsubishi Bank
Keepwell Agreement)
5.89%, 02/14/95 1,000 993
-------
DATA PROCESSING--6.3%
Electronic Data Systems
5.58%, 01/17/95 1,000 998
5.89%, 02/15/95 1,000 993
-------
1,991
-------
FINANCE (COMMERCIAL)--12.6%
CIT Group Holdings, Inc.
5.55%, 01/09/95 1,000 999
General Electric Capital Corp.
6.53%, 04/26/95 1,000 980
General Electric Capital Services
5.19%, 02/27/95 1,000 992
Transamerica Finance Corp.
5.28%, 02/08/95 1,000 995
-------
3,966
-------
MINING AND MINERAL RESOURCES--3.2%
BHP Finance (U.S.A.), Inc.
5.81%, 01/17/95 1,000 997
-------
SECURITIES BROKERAGE-DEALER--22.1%
Bear Stearns Companies Inc.
5.78%, 02/13/95 2,000 1,986
Lehman Brothers Holdings Inc.
5.81%, 01/18/95 1,000 997
Nomura Holdings America, Inc.
5.74%, 01/25/95 2,000 1,992
Paine Webber Group Inc.
5.52%, 01/10/95 1,000 999
</TABLE>
119
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--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
Paine Webber Group Inc.
5.83%, 02/13/95 $1,000 $ 994
-------
6,968
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $27,142) 27,142
-------
BANKER'S ACCEPTANCES--3.3%
BANKING--JAPAN--3.3%
Sanwa Bank, Ltd.
6.49%, 04/19/95 1,050 1,030
-------
TOTAL BANKER'S ACCEPTANCES
(Cost $1,030) 1,030
-------
CERTIFICATES OF DEPOSIT--6.3%
BANKING--FRANCE--3.2%
Societe Generale
5.10%, 02/02/95 1,000 1,000
BANKING--GERMANY--3.1%
Commerzbank AG
5.18%, 02/03/95 1,000 1,000
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $2,000) 2,000
-------
</TABLE>
120
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SchwabFunds(R) 4
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----
<S> <C> <C>
REPURCHASE AGREEMENT--4.4%
Citicorp Securities, Inc. 5.80%
Issue Date 12/30/94
Due 01/03/95
Collateralized By:
FNMA: $1,600 Par; 7.00%
Due 12/25/16 $ 1,401 $ 1,400
-------
TOTAL REPURCHASE AGREEMENT
(Cost $1,400) 1,400
-------
TOTAL INVESTMENTS--100.0%
(Cost $31,572) $31,572
=======
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
--------------------------------------------------------------------------------
Yields shown are effective yields at the time of purchase. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Retirement Money Fund are
private placement securities exempt from registration by Section 4(2) of the
Securities Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab Retirement Money Fund. Any resale by the Schwab
Retirement Money Fund must be in an exempt transaction, normally to a qualified
institutional buyer. At December 31, 1994, the aggregate value of private
placement securities held by the Schwab Retirement Money Fund was $1,317,000,
which represented 4.19% of net assets. All of these private placement
investments were determined by the Investment Manager to be liquid in accordance
with a resolution adopted by the Board of Trustees relating to Rule 144A,
promulgated under the Securities Act of 1933.
See accompanying Notes to Financial Statements.
121
<PAGE> 122
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY fUND(TM)
Statement of Assets and Liabilities (in thousands)
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $31,572) $31,572
Interest receivable 43
Receivable for fund shares sold 56
Deferred organization costs 47
Prepaid expenses 15
-------
Total assets 31,733
-------
LIABILITIES
Payable for:
Dividends 177
Fund shares redeemed 43
Investment advisory and administration fee 13
Transfer agency and shareholder service fees 2
Deferred organization costs 57
Other 26
-------
Total liabilities 318
-------
Net assets applicable to outstanding shares $31,415
=======
NET ASSETS CONSIST OF:
Capital paid in $31,415
Accumulated net realized loss on investments sold --
-------
$31,415
=======
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value (unlimited
shares authorized) 31,415
Net asset value, offering and redemption price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
122
<PAGE> 123
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Statement of Operations (in thousands)
For the period March 2, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $994
----
Expenses:
Investment advisory and administration fee 96
Transfer agency and shareholder service fees 52
Custodian fees 17
Registration fees 15
Professional fees 23
Shareholder reports 1
Amortization of deferred organization costs 10
Insurance and other expenses 5
----
219
Less expenses reduced (67)
----
Total expenses incurred by Fund 152
----
Net investment income 842
Net realized loss on investments sold --
----
Net increase in net assets resulting from operations $842
====
</TABLE>
See accompanying Notes to Financial Statements.
123
<PAGE> 124
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
Statement of Changes in Net Assets (in thousands)
For the period March 2, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Operations:
Net investment income $ 842
Net realized loss on investments sold --
--------
Net increase in net assets resulting from operations 842
--------
Dividends to shareholders from net investment income (842)
--------
Capital Share Transactions (dollar amounts and number
of shares are the same):
Proceeds from shares sold 84,340
Net asset value of shares issued in reinvestment of dividends 661
Less payments for shares redeemed (53,586)
--------
Increase in net assets from capital share transactions 31,415
--------
Total increase in net assets 31,415
Net Assets:
Beginning of period --
--------
End of period $ 31,415
========
</TABLE>
See accompanying Notes to Financial Statements.
124
<PAGE> 125
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period March 2, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Retirement Money Fund (the "Fund") is a series of The Charles Schwab
Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended. The Fund commenced
operations on March 2, 1994.
In addition to the Fund, the Trust also offers -- the Schwab Money
Market Fund, the Schwab Government Money Fund, the Schwab U.S. Treasury Money
Fund, the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money
Fund, the Schwab Value Advantage Money Fund, the Schwab Institutional
Advantage Money Fund and the Schwab New York Tax-Exempt Money Fund. The assets
of each series are segregated and accounted for separately. The Schwab
Retirement Money Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation - Investments are stated at amortized cost which approximates
market value.
Security transactions and interest income - Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from security transactions are
determined on an identified cost basis.
Repurchase agreements - Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders - The Fund declares a daily dividend, equal to its net
investment income for that day, payable monthly.
Deferred organization costs - Costs incurred in connection with the organization
of the Fund, its initial registration with the Securities and Exchange
Commission and with various states are amortized on a straight-line basis over a
five year period from the Fund's commencement of operations.
Expenses - Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
125
<PAGE> 126
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period March 2, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
Federal income taxes - It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements - The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$96,000, during the period from March 2, 1994 (commencement of operations) to
December 31, 1994, before the Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements - The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. For the
period from March 2, 1994 (commencement of operations) to December 31, 1994, the
Fund incurred transfer agency and shareholder service fees of $52,000, before
Schwab reduced its fees (see Note 4).
Officers and trustees - Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the
period from March 2, 1994 (commencement of operations) to December 31, 1994, the
Trust made no direct payments to its officers or trustees who are "interested
persons" within the meaning of the Investment Company Act of 1940, as amended.
The Fund did not incur fees related to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the
period from March 2, 1994 (commencement of operations) to December 31, 1994, the
total of such fees reduced by the Investment Manager and Schwab were $21,000 and
$46,000, respectively.
126
<PAGE> 127
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the period March 2, 1994 (commencement of operations) to December 31, 1994
--------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the period from
March 2, 1994 (commencement of operations) to December 31, 1994, aggregated (in
thousands) $891,143 and $859,802, respectively.
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
<S> <C>
Net asset value at beginning of period $1.00
Income from Investment Operations
---------------------------------
Net investment income .03
Net realized and unrealized gain (loss) on investments sold --
---------------
Total from investment operations .03
Less Distributions
------------------
Dividends from net investment income (.03)
Distributions from realized gain on investments --
---------------
Total distributions (.03)
---------------
Net asset value at end of period $1.00
===============
Total return (%) 3.29
----------------
Ratios/Supplemental Data
------------------------
Net assets, end of period (000s) $31,415
Ratio of expenses to average net assets (%) .73*
Ratio of net investment income to average net assets (%) 4.04*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had
these fees not been reduced the ratio of expenses to average net assets for the
period ended December 31, 1994, would have been 1.05%*, and the ratio of net
investment income to average net assets would have been 3.72%*.
* Annualized
127
<PAGE> 128
SchwabFunds(R)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To the Trustees
and Shareholders of the Schwab Retirement Money Fund(TM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Schwab Retirement Money Fund (one of the series constituting The
Charles Schwab Family of Funds, hereafter referred to as the "Trust") at
December 31, 1994, and the results of its operations and the changes in its net
assets for the period presented, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
128
<PAGE> 129
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder
of the Schwab New York Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Schwab New York
Tax-Exempt Money Fund (the "Fund"), a series of The Charles Schwab Family of
Funds, at December 31, 1994, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1995
129
<PAGE> 130
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
(A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash $1,000
Deferred organization costs 10,260
Payable to Charles Schwab Investment Management, Inc. (10,260)
--------
Net Assets $1,000
======
Number of shares of beneficial interest issued and
outstanding, $0.00001 par value (unlimited shares authorized) 1,000
======
Net Asset Value and Offering Price Per Share at December 31, 1994 $1.00
=====
</TABLE>
The Notes to the Statement of Assets and Liabilities are an integral part of
this financial statement.
130
<PAGE> 131
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
(A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
The Schwab New York Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end, no-load,
management investment company. The Trust was established on October 20, 1989
under the laws of the Commonwealth of Massachusetts as a Massachusetts business
trust. As of December 31, 1994, the Fund has had no operations other than
activities relating to its organization and the registration of its shares of
beneficial interest under the Securities Act of 1933 and the sale and issuance
of 1,000 shares to Charles Schwab & Co., Inc. at $1.00 per share.
2. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
The Trust has investment advisory and administration agreements with Charles
Schwab Investment Management, Inc. (the "Investment Manager") under which the
Fund will pay a fee for investment advisory and administrative services. The
Trust has transfer agency and shareholder service agreements with Charles Schwab
& Co., Inc. ("Schwab"), under which the Fund will pay a fee for transfer agency
and shareholder services. The investment advisory and administration agreements
and the transfer agency and shareholder service agreements are described more
fully in the Trust's Statement of Additional Information under the caption:
"MANAGEMENT OF THE TRUST". The Investment Manager and Schwab are, respectively,
direct and indirect wholly-owned subsidiaries of The Charles Schwab Corporation.
3. DEFERRED ORGANIZATION COSTS
Costs incurred in connection with the Fund's organization, initial securities
registration, and public offering of shares have been incurred by the Investment
Manager and are an obligation to be paid by the Fund. These costs will be
amortized over the period of benefit, but not to exceed 60 months from the
commencement of operations of the Fund. As an initial investor, Schwab has
agreed that in the event the initial shares are redeemed by it or any transferee
during the amortization period, the redemption proceeds will be reduced by any
unamortized organization expenses on a pro rata basis.
131
<PAGE> 132
SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--67.9%(a)
Babylon, New York General
Obligation Bonds/(Bank
of Nova Scotia SBPA &
AMBAC Insurance)
3.95%, 07/07/95 $5,500 $ 5,500
Cortland County, New York
Industrial Development
Authority Industrial
Development Revenue
Bonds Series 1994B
(General Signal Corp.
Project) Series 1983/
(Wachovia Bank LOC)
3.90%, 07/07/95 1,750 1,750
Erie County, New York
Water Authority Water
Revenue Bonds
Series 1993B/(Industrial
Bank of Japan SBPA & AMBAC
Insurance)
4.00%, 07/07/95 1,400 1,400
Franklin County, New York
Industrial Development
Authority Revenue Bonds (Kes
Chateaugay LP Project) Series
A/(Bank of Tokyo LOC)
4.05%, 07/07/95 3,000 3,000
Geneva, New York
Industrial Development
Agency Civic Facility
Revenue Bonds
(Colleges of The Seneca)
Series 1993A/
(Sumitomo Bank LOC)
4.05%, 07/07/95 2,500 2,500
Monroe County, New York
Industrial Development
Authority Industrial
Development Revenue Bonds
(ENIB Corp. Lease Rent
Project) Series 1988/
(ABN-AMRO Bank LOC)
3.85%, 07/07/95 2,000 2,000
Nassau County, New York
Industrial Development Agency
Civic Facilities Revenue
Bonds (Cold Spring Harbor
Laboratory Project)/
(Morgan Guaranty Trust LOC)
4.40%, 07/07/95 400 400
New Rochelle, New York
Industrial Development
Authority Industrial
Development Revenue Bonds
(Chas Sadek Import Corp.)/
(Bank of New York LOC)
3.60%, 07/07/95 5,500 5,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries B-2/
(Dai-Ichi Kangyo Bank LOC)
4.55%, 07/07/95 900 900
New York City, New York
General Obligation Bonds
Series 1993 Subseries B-2B/
(Dai-Ichi Kangyo Bank LOC)
4.55%, 07/01/95 700 700
New York City, New York
General Obligation Bonds
Series 1994 Subseries B-4/
(Union Bank of Switzerland LOC)
4.50%, 07/07/95 1,200 1,200
New York City, New York
Housing Development Corp.
Mortgage Revenue Multi Family
Housing Revenue Bonds
(Columbus Gardens Project)
Series 1993A/(Citibank LOC)
4.00%, 07/07/95 3,600 3,600
New York City, New York
Housing Development Corp.
Special Obligation
Revenue Bonds (East 96th
Street Project) Series 1990A/
(Mitsubishi Bank LOC)
3.75%, 07/07/95 7,700 7,700
New York City, New York
Industrial Development
Agency Industrial
Development Revenue
Bonds (Field Hotel Associates
JFK Project) Series 1985/
(Banque Indosuez LOC)
4.10%, 07/07/95 6,200 6,200
New York City, New York
Industrial Development
Agency Industrial Development
Revenue
Bonds (Japan Airlines)
Series 1991/(Morgan
Guaranty Trust LOC)
4.15%, 07/07/95 200 200
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/ (AMBAC
Insurance & Credit Local de
France SBPA)
3.95%, 07/07/95 7,200 7,200
New York State Dormitory
Authority Revenue Bonds (St.
Francis Center at the
Knolls)/ (Banque Paribas LOC)
4.10%, 07/07/95 800 800
New York State Energy Research
& Development Authority
Electric Facility Revenue
Bonds (Lilco Project) Series
1993A/
(Toronto-Dominion Bank LOC)
4.10%, 07/07/95 2,000 2,000
</TABLE>
132
<PAGE> 133
SchwabFunds(R) 2
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
New York State Energy Research
& Development Authority
Electric Facility Revenue
Bonds (Lilco Project) Series
1993B/
(Toronto-Dominion Bank LOC)
3.90%, 07/07/95 $5,000 $ 5,000
New York State Energy Research
& Development Authority
Pollution Control Revenue
Refunding Bonds (New York
State Electric & Gas) Series
1994C/
(Morgan Guaranty Trust LOC)
4.20%, 07/01/95 3,000 3,000
New York State Energy Research
& Development Authority
Pollution Control Revenue
Refunding Bonds (Orange and
Rockland Utilities, Inc.
Project) Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
3.95%, 07/07/95 8,800 8,800
New York State Energy Research
& Development Authority
Pollution Control
Revenue Refunding Bonds/
(Union Bank of
Switzerland LOC)
4.50%, 07/07/95 2,000 2,000
4.20%, 07/01/95 1,100 1,100
New York State Housing Finance
Agency Revenue Bonds (Mount
Sinai School of Medicine)
Series 1984A/
(Sanwa Bank LOC)
4.00%, 07/07/95 6,000 6,000
New York State Housing Finance
Agency
Revenue Bonds
(Hospital Special Surgery
Staff) Series 1985A/
(Sakura Bank LOC)
4.00%, 07/07/95 1,600 1,600
New York State Housing Finance
Agency
Multi Family Housing Revenue
Bonds (Normandie Court II)
Series 1987A/
(Bankers Trust Co. LOC)
3.85%, 07/07/95 8,150 8,150
New York State Local
Government Assistance
Corp. Bonds Series 1994B/
(Credit Suisse LOC &
Swiss Bank LOC)
3.70%, 07/07/95 6,900 6,900
Niagara County, New York
Industrial Development
Revenue Bonds (Allegheny
Ludlum Steel Company) Series
1984/(PNC Bank LOC)
3.85%, 07/07/95 3,500 3,500
Niagara Falls, New York
Bridge Commission Revenue
Bonds Series 1993A/
(FGIC Insurance & Industrial
Bank of Japan SBPA)
4.00%, 07/07/95 1,400 1,400
Port Authority, New York and
New Jersey Special Obligation
Revenue Bonds Series 1993/
(Deutsche Bank LOC)
4.10%, 07/07/95 4,000 4,000
Puerto Rico--Puerto Rico
Government Development Bank
Revenue Refunding Bonds
Series 1995/
(Credit Suisse LOC)
3.80%, 07/07/95 5,000 5,000
Rotterdam, New York
Industrial Development
Agency Refunding Bonds
(Rotterdam Industrial Park
Project) Series 1993A/
(Chemical Bank LOC)
3.80%, 07/07/95 3,200 3,200
St. Lawrence County, New York
Industrial Development
Authority Environmental
Improvement Revenue Bonds
(Reynolds Metals Project)
Series 1995/(Royal Bank of
Canada LOC)
4.00%, 07/07/95 4,000 4,000
Triborough Bridge and Tunnel
Authority, New York Special
Obligation Bridge Revenue
Bonds Series 1994/
(FGIC Securities Purchase
Agreement & FGIC Insurance)
3.75%, 07/07/95 6,200 6,200
Yonkers, New York Industrial
Development Authority Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project)/(Industrial Bank of
Japan LOC)
3.95%, 07/07/95 2,200 2,200
--------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $124,600) 124,600
--------
</TABLE>
133
<PAGE> 134
SchwabFunds(R) 3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE TENDER
OPTION BONDS--3.8%(a)
New York City Tender Option
Custody Receipt Short Mode
(BT-79)/(Bankers Trust
Tender Option)
4.00%, 07/07/95 $7,000 $ 7,000
--------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $7,000) 7,000
--------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS
--2.9%(a)
New York State
Dormitory Authority
New York University
Industrial Revenue Bonds
(BTP-26)/(Automatic Data
Processing, Inc. Tender
Option & MBIA Insurance)
4.19%, 07/07/95 5,375 5,375
--------
TOTAL VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS
(Cost $5,375) 5,375
--------
BOND ANTICIPATION
NOTES--5.4%(b)
Broome County, New York
Bond Anticipation Notes
Series 1995-96
4.33%, 04/19/96 3,812 3,832
Nassau County, New York
General Obligation Bond
Anticipation Notes Series
1985B
4.10%, 11/15/95 3,000 3,012
Schenectady, New York
General Obligation Bond
Anticipation Notes Series
1995
4.63%, 02/16/96 3,068 3,079
--------
TOTAL BOND ANTICIPATION NOTES
(Cost $9,923) 9,923
--------
REVENUE ANTICIPATION
NOTES--2.2%(b)
Erie County, New York
Revenue Anticipation Notes
Series 1994-95/(Union Bank
of Switzerland LOC)
4.30%, 08/15/95 4,000 4,002
--------
TOTAL REVENUE ANTICIPATION
NOTES (Cost $4,002) 4,002
--------
REVENUE BONDS--8.5%(b)
New York City, New York
Municipal Assistance Corp.
Revenue Bonds Series 1984-52/
(Escrowed to Maturity with
Government Securities)
4.15%, 07/01/95 1,235 1,260
New York State Dormitory
Authority Special Obligation
Revenue Bonds (State
University) Series 1989B/
(Escrowed to Maturity with
Government Securities)
4.00%, 11/01/95 1,350 1,361
New York State Medical Care
Facility Finance Agency
Revenue Bonds (St. Mary's
Hospital) Series 1985/ (AMBAC
Insurance & Escrowed to
Maturity with Government
Securities)
4.60%, 11/01/95 3,450 3,561
New York State Urban
Development Corp.
Revenue Refunding Bonds
(Correctional Facility)
Series 1986/
(Escrowed to Maturity with
Government Securities)
4.80%, 01/01/96 7,000 7,246
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds Series
1986-1/
(Escrowed to Maturity with
Government Securities)
4.05%, 01/01/96 1,000 1,037
Triborough Bridge and Tunnel
Authority, New York
General Purpose Revenue
Bonds Series I/
(Escrowed to Maturity with
Government Securities)
4.45%, 01/01/96 1,000 1,035
--------
TOTAL REVENUE BONDS
(Cost $15,500) 15,500
--------
TAX ANTICIPATION
NOTES--2.2%(b)
Suffolk County, New York
Tax Anticipation Notes/
(Westdeutsche
Landesbank LOC)
4.55%, 08/15/95 1,000 1,001
Westchester County, New York
Tax Anticipation Notes Series
1995
4.45%, 12/14/95 3,000 3,006
--------
TOTAL TAX ANTICIPATION NOTES
(Cost $4,007) 4,007
--------
</TABLE>
134
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--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
TAX-EXEMPT COMMERCIAL
PAPER--7.1%(b)
New York City, New York
Municipal Water Finance
Authority Tax Exempt
Commercial Paper/
(Credit Suisse LOC)
3.60%, 09/07/95 $7,000 $ 7,000
New York State Dormitory
Authority Revenue Bonds
(Memorial Sloan Kettering
Project) Series 1989C/
(Fuji Bank LOC)
3.05%, 09/15/95 6,000 6,000
--------
TOTAL TAX-EXEMPT COMMERCIAL
PAPER
(Cost $13,000) 13,000
--------
TOTAL INVESTMENTS--100.0%
(Cost $183,407) $183,407
========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on June 30, 1995.
Dates shown represent the latter of the demand date or next interest rate
change date, which is considered the maturity date for financial reporting
purposes. For variable rate securities without demand features the next
interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
Abbreviations
-------------
<TABLE>
<S> <C>
ABN-AMRO Algemene Bank of the Netherlands/Amsterdam-Rotterdam
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
135
<PAGE> 136
SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $183,407) $183,407
Cash 29
Interest receivable 1,507
Prepaid expenses 3
Deferred organization costs 10
--------
Total assets 184,956
--------
LIABILITIES
Payable for:
Dividends 261
Deferred organization costs 10
Investment advisory and administration fee 66
Other 60
--------
Total liabilities 397
--------
Net assets applicable to outstanding shares $184,559
========
NET ASSETS CONSIST OF:
Capital paid in $184,549
Accumulated net realized gain on investments sold 10
--------
$184,559
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 184,549
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
136
<PAGE> 137
SchwabFunds(R) 6
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $2,293
------
Expenses:
Investment advisory and administration fee 266
Transfer agency and shareholder service fees 260
Custodian fees 9
Registration fees 29
Professional fees 11
Shareholder reports 12
Amortization of deferred organization costs 1
Insurance and other expenses 2
------
590
Less expenses reduced (249)
------
Total expenses incurred by Fund 341
------
Net investment income 1,952
Net realized gain on investments sold 10
------
Increase in net assets resulting from operations $1,962
======
</TABLE>
See accompanying Notes to Financial Statements.
137
<PAGE> 138
SchwabFunds(R) 7
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Operations:
Net investment income $ 1,952
Net realized gain on investments sold 10
--------
Increase in net assets resulting from operations 1,962
--------
Dividends to shareholders from net investment income (1,952)
--------
Capital Share Transactions (dollar amounts and number of
shares are the same):
Proceeds from shares sold 351,731
Net asset value of shares issued in reinvestment of
dividends 1,661
Less payments for shares redeemed (168,843)
--------
Increase in net assets from capital share transactions 184,549
--------
Total increase in net assets 184,559
Net Assets:
Beginning of period --
--------
End of period $ 184,559
========
</TABLE>
See accompanying Notes to Financial Statements.
138
<PAGE> 139
SchwabFunds(R) 8
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SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab New York Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended. The Fund
commenced operations on February 27, 1995.
On May 9, 1995, the Board of Trustees of the Trust adopted a multiple class plan
for the Fund. On July 7, 1995, the Fund began offering more than one class of
shares. Pursuant to the plan, the existing shares were redesignated as Sweep
Shares, and a new class of shares was added -- the Value Advantage Shares. Both
classes represent interests in the same portfolio of investments of the Fund and
are substantially the same in all respects except that the shares are subject to
different transfer agency and shareholder service fees, investment minimums and
certain other expenses.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund, the
Schwab Value Advantage Money Fund(R), the Schwab Institutional Advantage Money
FundTM and the Schwab Retirement Money FundTM. The assets of each series are
segregated and accounted for separately.
The Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
139
<PAGE> 140
SchwabFunds(R) 9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$266,000 during the period from February 27, 1995 to June 30, 1995, before the
Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of average daily net assets. For the period
from February 27, 1995 to June 30, 1995, the Fund incurred transfer agency and
shareholder service fees of $260,000, before Schwab reduced its fees (see Note
4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the period
from February 27, 1995 to June 30, 1995, the Trust made no direct payments to
its officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund did not incur fees related
to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the
period from February 27, 1995 to June 30, 1995, the total of such fees reduced
by the Investment Manager and Schwab was $11,000 and $238,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period from
February 27, 1995 to June 30, 1995, aggregated (in thousands) $324,924 and
$141,340, respectively.
140
<PAGE> 141
SchwabFunds(R) 10
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
February 27, 1995
(commencement
of operations) to
June 30, 1995
(Unaudited)
-----------------
<S> <C>
Net asset value at beginning of period $1.00
Income from Investment Operations
Net investment income .01
Net realized and unrealized gain (loss) on
investments --
--------
Total from investment operations .01
Less Distributions
Dividends from net investment income (.01)
Distributions from realized gain on investments --
--------
Total distributions (.01)
--------
Net asset value at end of period $1.00
========
Total return (%) 1.15
Ratios/Supplemental Data
Net assets, end of period (000s) $ 184,559
Ratio of expenses to average net assets (%) .59*
Ratio of net investment income to average
net assets (%) 3.38*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced, the ratio of expenses to average net assets for the
period ended June 30, 1995 would have been 1.02%*, and the ratio of net
investment income to average net assets would have been 2.95%*.
* Annualized
141
<PAGE> 142
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's
Investors Service ("Moody's"). Issuers (or related supporting institutions) of
commercial paper with this rating are considered to have a superior ability to
repay short-term promissory obligations. Issuers (or related supporting
institutions) of securities rated Prime-2 are viewed as having a strong capacity
to repay short-term promissory obligations. This capacity will normally be
evidenced by many of the characteristics of issuers whose commercial paper is
rated Prime-1 but to a lesser degree.
STANDARD & POOR'S CORPORATION
A Standard & Poor's Corporation ("S&P") A-1 commercial paper rating
indicates either an overwhelming or very strong degree of safety regarding
timely payment of principal and interest. Issues determined to possess
overwhelming safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is strong, but the relative degree of
safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term United States Treasury obligations), a Duff-1
rating signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1-
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
F-1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F-1 reflect an assurance of timely
payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.
142
<PAGE> 143
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
strong capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protections, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree.
143
<PAGE> 144
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free United States Treasury debt. AA
rated bonds are of high credit quality and have strong protection factors. The
risks associated with them are modest but may vary slightly from time to time
because of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS
ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very strong. TBW-2 is
the second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
144
