<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB CALIFORNIA
TAX-EXEMPT
MONEY FUND-
SWEEP SHARES
SEMI-ANNUAL REPORT
JUNE 30, 1995
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Fellow Shareholder,
This year, the SchwabFunds Family(TM) celebrates its fifth
anniversary as a mutual fund complex. This celebration follows an
[Photo exciting 1994 when the organization experienced tremendous
of growth-- the third largest asset growth of all mutual fund
Charles companies. By placing your trust in SchwabFunds(R), you've helped
R. Schwab] total assets under management reach $27 billion, ranking
SchwabFunds in the top 6% of all mutual fund complexes in just a
few years.
We believe much of this success can be traced to the Schwab commitment to
serving the needs of Fund shareholders, a commitment demonstrated by the entire
SchwabFunds staff and, in particular, by our experienced team of portfolio
managers.
The 20 professionals who make up our growing portfolio management team are
devoted to monitoring the financial markets for you. Through careful and
disciplined selection of securities, they strive to construct optimal portfolios
that provide shareholders with competitive returns that meet their investment
goals. Shareholders continue to signal their trust in the 175 years of combined
experience behind our SchwabFunds portfolio management by keeping their money
invested in SchwabFunds. In fact, a large number of the 1.5 million shareholders
have been investing in the SchwabFunds Family since its first year of operation.
We believe an important part of serving your needs is keeping you informed about
your investments. For example, we've added the question and answer section of
this report, developed to address what our portfolio managers feel have been the
most pressing questions we've heard from shareholders over the period. It is one
way we hope to keep communication open between you and the people managing your
investments. In addition, now that Charles Schwab Investment Management, Inc.
will be managing the day-to-day portfolio management of the three Schwab equity
funds, we will be even better able to meet your service needs and respond to
your questions.
The SchwabFunds Family has grown to include a solid selection of funds that meet
the "core" needs of investors. The 16 funds available to retail investors offer
effective diversification of the U.S. and international equity markets, both
taxable and tax-free bonds, and a variety of money market investments. With this
level of diversification, you may use the SchwabFunds to create an efficient,
well-rounded portfolio. Or, they can serve as building blocks to an overall
investment program that includes more specialized investments.
To receive a brochure and prospectus for any of the SchwabFunds, you can call
Schwab's toll-free number, 1-800-2 NO-LOAD, or visit any one of the over 200
Schwab offices. The prospectus includes more complete information on the Funds,
including charges and expenses. Please read it carefully before investing.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family. You should feel confident that the outstanding efforts of all those who
are part of the SchwabFunds organization will continue going forward. And, we
expect these efforts to help us meet even higher standards of excellence in the
years ahead.
/s/ Charles R. Schwab
Charles R. Schwab
Chairman
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
YES! I'D LIKE TO TAKE
ADVANTAGE OF AN EASY WAY
TO EFFECTIVELY DIVERSIFY MY EQUITY PORTFOLIO.
PLEASE SEND ME MORE INFORMATION, INCLUDING PROSPECTUSES, FOR THE THREE
SCHWABFUNDS(R) EQUITY INDEX FUNDS LISTED BELOW.
SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000
Index(R), Schwab's own benchmark of America's 1,000 largest companies, based on
market capitalization.
SCHWAB SMALL-CAP INDEX FUND(TM) seeks to track the total return of the Schwab
Small-Cap Index(TM), comprised of the second 1,000 largest U.S. companies,
ranked by market capitalization.
SCHWAB INTERNATIONAL INDEX FUND(TM) seeks to track the total return of the
Schwab International Index(TM), comprised of 350 of the largest publicly traded
companies (based on market capitalization) in countries with developed
securities markets outside of the U.S.
The prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
--------------------------------------------------------------------------------
NAME
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ADDRESS
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See the back page for more information.
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<PAGE> 4
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<PAGE> 5
COMMENTS FROM THE INVESTMENT ADVISER
We're pleased to report to you on the performance of the Schwab California
Tax-Exempt Money Fund--Sweep Shares for the six-month period ended June 30,
1995. During the first half of this year, the Fund once again proved successful
at providing a competitive level of current income exempt from federal and
California personal income taxes*, combined with capital stability and ready
access to your money.
The Schwab California Tax-Exempt Money Fund--Sweep Shares experienced strong
asset growth during the period, as both new and existing shareholders
contributed additional assets to the Fund. On June 30, 1995, the Fund's total
net assets reached a new high of over $1.4 billion, an increase of 12% in the
six-month reporting period since the end of 1994.
NEW NAME HIGHLIGHTS SWEEP FEATURE
As you've probably noticed, we've added the term Sweep Shares to the name of the
Schwab California Tax-Exempt Money Fund. This addition highlights the Fund's
convenient automatic sweep feature, which can be a useful component of your
portfolio. Cash balances of $100 or more in your Schwab account are
automatically invested in the Fund on a regular basis to keep your cash working
in between investments. You may rest assured that the Fund's investment
objectives, strategy and policies all remain the same.
PERFORMANCE REVIEW
Both short-term taxable interest rates, as well as tax-exempt rates declined
slightly during the first half of 1995. The table below presents the Fund's
7-day average yields at the end of the period. As with all money market funds,
past performance is no guarantee of future results.
================================================================================
7-DAY AVERAGE YIELDS
(As of 6/30/95)
<TABLE>
<CAPTION>
Simple Compound Compound Taxable Equivalent**
--------------------------------------------------------------------------------
<S> <C> <C>
3.29% 3.34% 6.21%
</TABLE>
================================================================================
HIGHER RETURNS, AFTER TAXES
As a resident of a state with some of the nation's highest taxes, you're
probably well aware of how much income taxes can erode your investment returns.
The Schwab California Tax-Exempt Money Fund--Sweep Shares is designed to provide
high after-tax returns in the form of current income that is exempt from federal
and California personal income taxes.*
* Income may be subject to local taxes and the Alternative Minimum Tax (AMT).
** Taxable equivalent yield assumes a combined federal and California personal
income tax rate of 46.24%.
<PAGE> 6
Depending on your tax bracket, this double tax-exempt income may offer you a
significant yield advantage over taxable money funds on a taxable equivalent
basis. For example, although past performance is no guarantee of future results,
on June 27, 1995, the Fund's 7-day simple yield was 3.31% and the compound yield
was 3.36%; for shareholders in the highest tax bracket, this compound yield
translates to a compound taxable equivalent yield of 6.25%, which surpasses the
5.56% average 7-day compound yield for fully taxable money funds on June
27,1995.(1)
KEY GOAL: CAPITAL STABILITY
If you're like most money market fund investors, preserving the value of your
investment is an important concern. That's why the Schwab California Tax-Exempt
Money Fund--Sweep Shares is managed with stability of capital as a fundamental
objective. To protect your principal, the Fund seeks to maintain a stable $1
share price. As with all money market funds, of course, there can be no
assurance that the Fund will be able to maintain a $1 net asset value, and your
investment is neither insured nor guaranteed by the U.S. Government.
HIGH-QUALITY PORTFOLIO
The Schwab California Tax-Exempt Money Fund--Sweep Shares seeks to invest in a
diversified portfolio of short-term municipal securities issued by the State of
California, its agencies and municipalities. To limit credit risk, the Fund
primarily invests in high-quality securities rated in the top two rating
categories by national rating agencies. We maintain strict credit quality
standards for the Fund's portfolio, while actively managing portfolio maturity
to help protect and enhance your returns. The chart below illustrates the Fund's
portfolio composition on June 30, 1995. In addition, you'll find a complete
listing of the securities in the Fund's portfolio as of June 30, 1995 later in
this report.
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND PORTFOLIO COMPOSITION
[Pie chart indicating percentages as of June 30, 1995 for the Tax-Exempt Money
Fund]
<TABLE>
<S> <C>
Bonds Under 13 Months 4%
Notes 18%
Tax-Exempt Commercial Paper 14%
Variable Rate Obligations 58%
Variable Rate Tender Option Bonds/Partnerships 6%
</TABLE>
* Also contains 20 hundredths of one percent in Put Bonds.
(1) Source: IBC/Donoghue, average compound seven-day yield for the 254 funds in
the First Tier category of Taxable Money Funds as of June 27, 1995.
<PAGE> 7
To enhance your understanding of the performance of the Schwab California
Tax-Exempt Money Fund--Sweep Shares, the portfolio management team offers
insights into economic trends and the Fund's investment strategy in the
following section. If you want more information on the Fund, or any of the
mutual funds in the SchwabFunds Family(TM), visit your local Schwab office or
call 1-800-2 NO-LOAD.
LOOKING FORWARD IN 1995
While the outlook for interest rates in the second half of the year is
uncertain, we remain confident that the Schwab California Tax-Exempt Money
Fund--Sweep Shares will continue to strive to offer you an effective cash
management tool that can help you earn a competitive level of double tax-exempt
income without sacrificing safety and liquidity.
At SchwabFunds(R), we recognize that we earn your trust day by day. We
appreciate your continued confidence in our efforts, and we look forward to
helping you achieve your financial goals in the future.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
<PAGE> 8
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
Stephen B. Ward - Senior Vice President and Chief Investment Officer
Walter Beveridge - Portfolio Manager
Q. WHAT HAS BEEN THE ECONOMIC CLIMATE IN THE FIRST SIX MONTHS OF 1995?
A. Following an impressive 4.1% growth rate of the Gross Domestic Product
(GDP) during 1994, the highest annual growth rate in ten years, economic
activity is showing increasing signs of slowing. Recent evidence of this trend
includes slowdowns in auto sales, consumer spending and retail sales, home
building and home sales, and a somewhat dramatic slowdown in the labor markets.
The GDP growth rate for the first quarter of 1995 was 2.7%, and 0.5% for the
second quarter.
The primary reason for the slowdown in the GDP growth rate has been a series of
increases in the federal funds rate implemented by the Federal Reserve ("the
Fed") throughout 1994 and into 1995. With the high rate of growth in 1994 and a
falling civilian unemployment rate, potential inflation emerged as a major
concern at the Fed. As a result, the Fed initiated a series of increases in the
federal funds rate, resulting in a rise from 3.0% in January 1994 to 6.0% in
February 1995. As evidenced by the Fed's recent 0.25% reduction in the federal
funds rate in July 1995, these increases appear to have accomplished their
desired effect of slowing the rate of economic growth to more moderate levels
and reducing the likelihood of increases in the rate of inflation.
Q. HOW HAVE THE ECONOMIC EVENTS OF THE LAST SIX MONTHS IMPACTED SHORT-TERM
INTEREST RATES?
A. Short-term interest rates have been declining slowly since the beginning of
the year. For example, the 90-day commercial paper rate dropped from
approximately 6.3% at the beginning of the year to approximately 5.9% on June
30, 1995. This decline has been a result of the anticipation that the Fed will
lower interest rates, a practice known as "easing," as well as the economic
slowdown that was brought on by prior increases in interest rates, a practice
known as "tightening."
Q. HOW HAVE SHORT-TERM TAX-EXEMPT RATES RESPONDED TO THE DECLINES IN TAXABLE
RATES?
A. Unlike short-term taxable rates, short-term tax-exempt rates did not
experience an overall decline during the first four months of 1995. As shown in
the graph on the following page, these rates were characterized by a degree of
volatility with no clear trend during the initial four months of the year.
During May and June, strong demand for shorter term fixed rate securities caused
a significant reduction in the 90-day municipal commercial paper rate.
Differences in rate movements of tax-exempt versus taxable securities are
attributable to the difference in supply and demand conditions in these markets.
The supply of tax-exempt securities is more irregular because tax-exempt issuers
enter the market based on budget, tax, and legal considerations -- different
motivations from those of taxable issuers.
<PAGE> 9
INTEREST RATES DECLINED IN THE FIRST HALF OF 1995
YIELDS
90-Day Municipal Commercial Paper
January 6, 1995-June 30, 1995
[Graph of 90-Day Municipal Commercial Paper]
<TABLE>
<CAPTION>
YIELDS
90-DAY MUNICIPAL
DATE COMMERCIAL PAPER
---- ----------------
<S> <C>
1/6 4.00
1/13 4.06
1/20 4.02
1/27 4.04
2/3 4.00
2/10 4.15
2/17 4.18
2/24 4.04
3/1 4.08
3/10 3.91
3/17 3.96
3/24 3.90
3/31 3.96
4/7 3.95
4/13 4.06
4/21 4.10
4/28 4.10
5/5 4.10
5/12 4.09
5/19 3.97
5/26 3.81
6/2 3.69
6/9 3.18
6/16 3.40
6/23 3.60
6/30 3.65
</TABLE>
Source: Lehman Brothers, Inc.
Q. WHAT STANDARDS DOES THE INVESTMENT ADVISER USE IN SELECTING SECURITIES FOR
THE PORTFOLIO?
A. Money market funds are required to hold high-quality securities in their
portfolios. For the Schwab California Tax-Exempt Money Fund, we have taken the
additional step of only investing in what are referred to as First Tier
securities. In general, a First Tier security is one that is within certain
maturity limits and carries the top rating from the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs), or is deemed to
be of comparable quality by the Trust's Board of Trustees if unrated.
One other method we utilize to increase the overall quality of the Schwab
California Tax-Exempt Money Fund's portfolio is to selectively purchase
securities which are insured or backed by a letter of credit from a highly rated
financial institution. These arrangements are frequently referred to as "credit
enhancements" because they provide an incremental level of creditworthiness, in
addition to the strength of the underlying issuer. Schwab's thorough credit
review of the portfolio's securities includes ongoing review of the issuer as
well as the insurance company or financial institution providing any credit
enhancement to the security. Banks which provide enhancements on securities we
purchase represent some of the highest rated U.S., Japanese, and British banks.
<PAGE> 10
Recently there has been a fair amount of news coverage concerning the health of
the Japanese economy in general and Japanese banks in particular. As a result of
our continuous monitoring of the situation in Japan, we are confident that we
have selected the Japanese banks that are among the highest rated in the world.
Selected carefully, these banks appear to represent excellent opportunities to
provide credit enhancements which improve the overall quality of the portfolios.
Q. WE CONTINUE TO READ ABOUT PROBLEMS WITH DERIVATIVES. DOES THE SCHWAB
CALIFORNIA TAX-EXEMPT MONEY FUND INVEST IN THE DERIVATIVE SECURITIES WHICH HAVE
CAUSED PROBLEMS FOR OTHER MONEY FUNDS?
A. No. Unlike some well-publicized examples, it has always been our position
that such securities are inappropriate for use in money market funds. Therefore,
the Fund has never purchased these types of securities. The Fund only invests in
securities appropriate for money market funds, such as fixed rate notes and
simple variable rate notes or variable rate demand notes. These types of
securities are used in virtually all money market funds.
The Fund also uses more complex variable rate securities relying on puts
(purchase agreements) from high-quality banks and dealers. These high-quality
securities feature good liquidity, and attractive yields. In fact, they are
designed and well-suited for money market funds and many funds use them in their
investment strategies. These securities are called tender option bonds and are
created by attaching a put to another security after its initial issuance. The
SEC is aware that tax-exempt money market funds have been using these securities
for many years and has not objected.
Q. DOES THE FUND OWN ANY ORANGE COUNTY SECURITIES?
A. As of June 30, 1995, the Schwab California Tax-Exempt Money Fund had 3.1%
of its net assets invested in securities issued by two municipal entities which
had invested in the Orange County Investment Pool.
Subsequent to June 30, 1995, the Orange County Pooled Tax and Revenue
Anticipation note owned by the Fund, which represented 2.8% of the Fund's net
assets, was paid on time, in full. At the time of this writing, the Fund's only
remaining Orange County-related security was issued by Newport Beach, and
represents approximately 3 tenths of one percent of the Fund's net assets. This
note matures in October 1995 and we currently expect the Fund will receive
timely payment.
From time to time, the Fund has invested in certain obligations of Orange County
or former Orange County investment pool participants which are either insured or
backed by a letter of credit. Such "credit enhancements" improve the
creditworthiness of the security. These holdings are high-quality and highly
rated securities and their repayment is guaranteed by a bond insurer or major
financial institution. We believe that these positions represent a minimal
credit risk for the Fund.
<PAGE> 11
Q. WHAT IS THE CURRENT STATUS OF THE ORANGE COUNTY SITUATION AND WHAT IMPACT
IS IT LIKELY TO HAVE ON THE FUND?
A. Since we last reported to you in the December 31, 1994 annual report, a
settlement was approved by the Federal bankruptcy court for Orange County which
allowed for the distribution of most of the County's investment pool to its
former participants. Since that time, all of the cities, school districts and
other municipal entities that had invested in the pool, and also had outstanding
notes that have reached their maturity dates, have paid off those notes in full.
On June 27, 1995, the voters of Orange County rejected County Measure R which
would have provided additional sales tax revenue to assist the County in meeting
its obligations. On July 7, 1995, the owners of the Orange County direct
securities which remain outstanding agreed to extend the maturity of their
outstanding notes to June 30, 1996, in order to provide more time for the County
to develop a financial recovery plan. County officials have proposed a plan
which requires certain changes in state laws and diverts for the County's use
certain tax revenues which would otherwise go to local cities and public
agencies. This proposal has not been adopted by the County, the State of
California, or the bankruptcy court, and any solution must survive serious
opposition before it can result in a plan which can actually pay note holders.
In the event the county officials are not successful in adopting a viable plan,
the State of California may require that a bankruptcy trustee be appointed.
Since the Newport Beach note, which represents less than one third of one
percent of the Fund's net assets, is the only remaining unenhanced Orange
County-related security owned by the Fund, we do not currently foresee any
notable impact on the Fund resulting from the Fund's ownership of this security.
Q. HOW HAS THE ECONOMIC CLIMATE IN CALIFORNIA AFFECTED THE PERFORMANCE OF THE
FUND?
A. The economic recovery of the last two years is expected to slow down in
the near future, as California responds to the general softening of the nation's
economy.
Although California has regained over half of the total number of jobs it lost
during the last recession, the unemployment rate continues to exceed the
national average. Persistent softness of the real estate market, particularly
new home construction, is likely to keep unemployment levels above average in
the near future. Further, if the real estate market does not experience some
recovery in the next year, there may be significant negative implications for
the State's economy and budget.
Over the remainder of 1995 and into 1996, California will continue to work
towards reducing its accumulated budget deficit of approximately $2 billion. The
challenge facing lawmakers is to provide necessary services, such as education,
health, welfare and public safety, and replace or upgrade sewers, highways, and
other infrastructure with available tax
<PAGE> 12
revenue while providing for budget reductions. The Governor's budget proposal
includes assumptions regarding federal assistance and State economic growth that
may not be realized. Therefore, the State's financial position may not improve
significantly over the next twelve months.
California's economic and budget difficulties have not had much effect on the
Fund's performance during the six-month reporting period. We are satisfied with
the credit quality of the California securities the Fund owns and we will, of
course, continue to monitor the State's situation closely. The State's current
credit ratings are A1 from Moody's Investors Service and A from both Standard &
Poor's Corporation and Fitch Investors Services, Inc., three well-known rating
agencies.
<PAGE> 13
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
PORTFOLIO SUMMARY
(Unaudited)
--------------------------------------------------------------------------------
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/95 as of 12/31/94 Reporting
(000s) (000s) Period
<S> <C> <C>
------------------------------------------------
$ 1,445,594 $1,293,883 12%
------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED ON
JUNE 30, 1995
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
---------------------------------------------
<S> <C> <C>
3.29% 3.35% 2.91%
---------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/94 12/31/94 3/31/95 6/30/95
----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 63.9% 71.1% 75.3% 68.4%
16 - 30 Days 3.8% 6.4% 0.0% 5.7%
31 - 60 Days 2.7% 9.1% 3.2% 2.9%
61 - 90 Days 13.0% 1.2% 8.9% 7.7%
91 - 120 Days 1.1% 0.2% 5.2% 3.8%
Over 120 Days 15.5% 12.0% 7.4% 11.5%
Weighted Average 64 Days 39 Days 30 Days 52 Days
----------------------------------------------------------------
</TABLE>
<PAGE> 14
SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--57.8%(a)
Alameda County, California Industrial Development
Authority Industrial Revenue Bonds
(Aitchison Family Project)
Series 1993A/(Wells Fargo Bank LOC)
4.35%, 07/07/95 $ 5,960 $ 5,960
Anaheim, California Certificates of Participation
(Anaheim Memorial Hospital Assoc. Project)/
(AMBAC Insurance & Industrial Bank of Japan SBPA)
4.05%, 07/07/95 48,820 48,820
Anaheim, California Certificates of Participation
(Police Facility Financing Project)/
(AMBAC Insurance & Industrial Bank of Japan SBPA)
4.05%, 07/07/95 1,600 1,600
Anaheim, California Housing Authority Multi Family
Housing Revenue Bonds (Heritage Village
Apartments Project)
Series 1992A/(Multiple Credit Enhancements)
4.15%, 07/07/95 3,385 3,385
Big Bear Lake, California Industrial Development
Revenue Certificates of Participation
(Southwest Gas Corp. Project)
Series A/(Union Bank of Switzerland LOC)
4.10%, 07/07/95 12,500 12,500
California Educational Facilities Authority
Revenue Bonds (California Institute of Technology)
Series 1994
3.60%, 07/07/95 10,400 10,400
California Health Facilities Financing Authority
Revenue Bonds (Adventist Health System-Sutter Health)
Series 1991A/(Toronto-Dominion LOC)
3.80%, 07/07/95 1,000 1,000
California Health Facilities Financing Authority
Revenue Bonds (Childrens Hospital Project)
Series 1991/(MBIA Insurance & Swiss Bank SBPA)
3.85%, 07/07/95 9,900 9,900
<CAPTION>
Par Value
------- -------
<S> <C> <C>
California Health Facilities Financing Authority
Revenue Bonds (Kaiser Permanente Project)
Series 1993A
3.90%, 07/07/95 $ 8,200 $ 8,200
California Health Facilities Financing Authority
Revenue Bonds (Kaiser Permanente Project)
Series 1993B
3.90%, 07/07/95 1,600 1,600
California Health Facilities Financing Authority
Revenue Bonds (Scripps Memorial Hospital)
Series 1985B/(MBIA Insurance & Morgan Guaranty
Trust SBPA)
4.05%, 07/07/95 15,120 15,120
California Health Facilities Financing Authority
Revenue Bonds (Scripps Memorial Hospital)
Series 1991A/(MBIA Insurance & Morgan Guaranty
Trust SBPA)
4.05%, 07/07/95 1,200 1,200
California Health Facilities Financing Authority
Revenue Bonds (Scripps Memorial Hospital)
Series 1991B/(MBIA Insurance & Swiss Bank SBPA)
3.90%, 07/07/95 13,900 13,900
California Health Facilities Financing Authority
Revenue Bonds (St. Francis Hospital)
Series 1995F/(MBIA Insurance & Rabobank
Nederland SBPA)
4.25%, 07/07/95 30,000 30,000
California Health Facilities Hospital Revenue Bonds
(Huntington Memorial Hospital)
Series 1985/ (Morgan Guaranty Trust LOC)
3.75%, 07/07/95 10,000 10,000
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Burney Forest Project)
Series 1988A/(National Westminster LOC)
4.35%, 07/01/95 600 600
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Reynolds Metals Co. Project)
Series 1985/(National Westminster LOC)
4.15%, 07/07/95 1,300 1,300
</TABLE>
<PAGE> 15
SchwabFunds(R) 2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
California Pollution Control Financing
Authority Pollution Control Revenue Bonds
(Southern California Edison)
Series 1986A
4.50%, 07/01/95 $ 4,500 $ 4,500
California Pollution Control Financing
Authority Pollution Control Revenue Bonds
(Southern California Edison)
Series 1986B
4.50%, 07/01/95 3,000 3,000
California Pollution Control Financing
Authority Pollution Control Revenue Bonds
(Southern California Edison)
Series 1986C
4.50%, 07/01/95 100 100
California Pollution Control Financing
Authority Pollution Control Revenue Bonds
(Southern California Edison)
Series 1986D
4.50%, 07/01/95 400 400
California Pollution Control Financing
Authority Resource Recovery Revenue Bonds
(Sanger Project)
Series 1990A/(Credit Suisse LOC)
4.10%, 07/07/95 6,800 6,800
California Pollution Control Financing
Authority Solid Waste Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990A/(Swiss Bank LOC)
4.10%, 07/07/95 12,900 12,900
California Pollution Control Financing
Authority Solid Waste Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990B/(Swiss Bank LOC)
4.10%, 07/07/95 8,900 8,900
California Pollution Control Financing
Authority Solid Waste Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990C/(Swiss Bank LOC)
4.10%, 07/07/95 10,000 10,000
California Pollution Control Financing
Authority Solid Waste Disposal Revenue Bonds
(Shell Oil Co. Martinez Project)
Series 1994A
4.30%, 07/01/95 1,000 1,000
<CAPTION>
Par Value
------- -------
<S> <C> <C>
California Pollution Control Financing
Authority Solid Waste Disposal Revenue Bonds
(Taormina Industries Project)
Series 1994B/(Sanwa Bank LOC)
4.20%, 07/07/95 $ 7,000 $ 7,000
California Statewide Community Development
Authority Apartment Development Revenue Bonds
Series 1995-A3/(FNMA LOC)
3.75%, 07/07/95 10,000 10,000
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(ARM Inc. Project)
Series 1994A/(Bank of Tokyo LOC)
3.85%, 07/07/95 675 675
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(Aerostar Properties Project)/(Union Bank LOC)
4.70%, 07/07/95 5,095 5,095
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(Agricultural Products Inc., Project)/
(Union Bank LOC)
4.70%, 07/07/95 1,455 1,455
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(Development Industries)
Series 1994A/(Bank of Tokyo LOC)
3.85%, 07/07/95 1,800 1,800
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(Industrial Dynamics, Co. Project)/
(Union Bank LOC)
4.70%, 07/07/95 5,190 5,190
California Statewide Community Development
Corp. Industrial Development Revenue Bonds
(Lorber Industries of California Project)/
(Union Bank LOC)
4.70%, 07/07/95 1,650 1,650
</TABLE>
<PAGE> 16
SchwabFunds(R) 3
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
California Statewide Community Development Corp.
Industrial Development Revenue Bonds
(Pacific Handy Cutter Products Project)/
(Union Bank LOC)
4.70%, 07/07/95 $ 1,365 $ 1,365
California Statewide Community Development Corp.
Industrial Development Revenue Bonds
(Pacific Scientific Project)
Series 1989/(Bank of California LOC)
4.40%, 07/07/95 4,625 4,625
California Statewide Community Development Corp.
Industrial Development Revenue Bonds
(Packaging Innovation Project)
Series 1994A/(Bank of Tokyo LOC)
3.85%, 07/07/95 2,240 2,240
California Statewide Community Development Corp.
Industrial Development Revenue Bonds
(The Diamond Foods Project)
Series 1991/(Union Bank LOC)
4.70%, 07/07/95 1,590 1,590
California Statewide Community Development Corp.
Industrial Development Revenue Bonds
(Z-Nix Co. Inc. Project)/(Union Bank LOC)
4.70%, 07/07/95 1,000 1,000
California Statewide Community Development Corp.
Industrial Development Revenue Refunding Bonds
(13th I Associates Project)/(Union Bank LOC)
4.15%, 07/07/95 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)
4.00%, 07/07/95 4,920 4,920
Chino, California Unified School District
Certificates of Participation
(Capital Construction Project)
Series B/(National Westminster LOC)
4.05%, 07/07/95 5,000 5,000
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Concord, California Multi Family Housing
Mortgage Revenue Bonds (Bel Air Apartments
Project)
Series 1986A/(Bank of America LOC)
3.90%, 07/07/95 $ 2,600 $ 2,600
Contra Costa, California Multi Family Housing
Mortgage Revenue Bonds (El Cerrito Project)
Series A/(Bank of America LOC)
3.90%, 07/07/95 980 980
Contra Costa, California Transportation Authority
Sales Tax Revenue Bonds
Series 1993A/(FGIC Insurance)
3.90%, 07/07/95 44,000 44,000
Duarte, California Redevelopment Agency
Certificates of Participation
(Johnson Duarte Partners Project)
Series 1984B/(Bank of America LOC)
4.05%, 07/07/95 1,600 1,600
Duarte, California Redevelopment Agency
Certificates of Participation
(Piken Duarte Partners Project)
Series A/(Bank of America LOC)
4.05%, 07/07/95 4,250 4,250
Emeryville, California Redevelopment Agency
Multi Family Housing Revenue Bonds
(Emery Bay Apartments II Project)
Series 1991A/(Bank of America LOC)
4.00%, 07/07/95 4,000 4,000
Encinitas, California Multi Family Housing
Revenue Refunding Bonds (Torrey Pines Project)
Series A/(Bank of America LOC)
3.60%, 07/07/95 8,100 8,100
Foothill Eastern Transportation Corridor Agency,
California Toll Road Revenue Bonds
Series 1995D/(Industrial Bank of Japan LOC)
4.00%, 07/07/95 8,500 8,500
Fremont, California Multi Family Housing
Revenue Refunding Certificates of Participation
(Amber Court Apartments Project)
Series 1990A/(Bank of Tokyo LOC)
4.15%, 07/07/95 10,380 10,380
</TABLE>
<PAGE> 17
SchwabFunds(R) 4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Fresno, California Multi Family Mortgage Revenue
Bonds (Oak Cornelia Apartments Project)
Series 1985A/(First Interstate Bank of
California LOC)
4.00%, 07/07/95 $25,265 $25,265
Golden Empire Schools Financing Authority Revenue
Bonds (Kern High School District Project)
Series 1992A/(Barclays Bank LOC)
4.10%, 07/07/95 1,500 1,500
Golden Empire Schools Financing Authority Revenue
Bonds (Kern High School District Project)
Series 1992B/(Barclays Bank LOC)
4.10%, 07/07/95 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)
3.85%, 07/07/95 1,935 1,935
Hayward, California Multi Family Housing Revenue
Bonds (The Shorewood Apartments Project)
Series 1984A/(FGIC Insurance & FGIC SPA)
3.90%, 07/07/95 12,100 12,100
Irvine Ranch, California Water District Capital
Improvement Revenue Bonds
Series 1986/(Morgan Guaranty Trust LOC)
4.15%, 07/01/95 7,100 7,100
Irvine Ranch, California Water District Consolidated
Revenue Refunding Bonds
Series 1985A-1/(Sumitomo Bank LOC)
4.30%, 07/01/95 1,700 1,700
Irvine Ranch, California Water District Consolidated
Revenue Refunding Bonds
Series 1985A-3/(Sumitomo Bank LOC)
4.30%, 07/01/95 1,800 1,800
Irvine Ranch, California Water District Consolidated
Revenue Refunding Bonds
Series 1985B-2/(Sumitomo Bank LOC)
4.35%, 07/01/95 4,400 4,400
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Irvine Ranch, California Water District Consolidated
Revenue Refunding Bonds
Series 1993A/(Bank of America LOC)
4.35%, 07/01/95 $ 1,700 $ 1,700
Irvine, California Improvement Bonds 1915 Limited
Obligation Act Special Assessment
District No. 94-15/(Dai-Ichi Kangyo Bank LOC)
4.30%, 07/01/95 6,600 6,600
Kern County, California Certificates of Participation
(Kern Public Facilities Project)
Series A/(Sanwa Bank LOC)
3.90%, 07/07/95 200 200
Lancaster, California Redevelopment Agency Multi
Family Revenue Bonds (Woodcreek Garden
Apartments Project)
Series 1985J/(Bank of Tokyo LOC)
3.95%, 07/07/95 2,400 2,400
Livermore, California Multi Family Housing Revenue
Refunding Bonds (Arbors Apartment Project)
Series 1991A/(Bank of Tokyo LOC)
4.15%, 07/07/95 9,255 9,255
Livermore, California Multi Family Housing Revenue
Refunding Bonds (Diablo Vista Apartments Project)
Series 1990A/(Union Bank LOC)
4.15%, 07/07/95 6,950 6,950
Local Government Finance Joint Powers Authority,
California Certificates of Participation
Series 1/(Fuji Bank LOC)
4.20%, 07/07/95 1,700 1,700
Loma Linda, California Hospital Revenue Project
Authority (Loma Linda University Medical Center)
Series 1985A/(Industrial Bank of Japan LOC)
4.00%, 07/07/95 4,020 4,020
Loma Linda, California Hospital Revenue Project
Authority (Loma Linda University Medical Center)
Series 1985C/(Industrial Bank of Japan LOC)
4.00%, 07/07/95 2,300 2,300
</TABLE>
<PAGE> 18
SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Loma Linda, California Hospital Revenue Project
Authority (Loma Linda University Medical Center)
Series 1985D/(Industrial Bank of Japan LOC)
4.00%, 07/07/95 $ 5,505 $ 5,505
Los Angeles County, California Certificates of
Participation ACES (Los Angeles County Museum
of Art Project)
Series 1985A/(Bank of America LOC)
4.05%, 07/07/95 2,800 2,800
Los Angeles County, California Certificates of
Participation ACES (Los Angeles County Museum
of Art Project)
Series 1985B/(Bank of America LOC)
4.05%, 07/07/95 1,300 1,300
Los Angeles County, California Metropolitan
Transportation Authority General Revenue Bonds
(Union Station Project)
Series 1985A/(Financial Security Assurance
Insurance & Society Generale SBPA)
4.05%, 07/07/95 33,100 33,100
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)
3.90%, 07/07/95 6,400 6,400
Los Angeles County, California Multi Family
Mortgage Revenue Refunding Bonds (Casden
Community Complex)
Series 1991C/(FHLB LOC)
3.80%, 07/07/95 3,200 3,200
Los Angeles County, California Multi Family
Mortgage Revenue Refunding Bonds (Valencia
Village Project)
Series 1984C/(Industrial Bank of Japan LOC)
4.25%, 07/07/95 900 900
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Los Angeles County, California Transportation
Commission Sales Tax Revenue Refunding Bonds
Series 1992A/(FGIC Insurance & Industrial Bank
of Japan SBPA)
3.95%, 07/07/95 $14,400 $14,400
Los Angeles, California Community Redevelopment
Agency Certificates of Participation
(Baldwin Hills Public Parking Project)
Series B/(Wells Fargo Bank LOC)
3.80%, 07/07/95 10,700 10,700
Los Angeles, California Community Redevelopment
Agency Certificates of Participation
(Broadway Springs Center Project)
Series 1987/(Bank of America LOC)
3.85%, 07/07/95 11,400 11,400
Los Angeles, California Multi Family Housing
Revenue Bonds (Poinsettia Apartments Project)
Series 1989A/(Dai-Ichi Kangyo Bank LOC)
3.85%, 07/07/95 9,600 9,600
Marin County, California Housing Authority Multi
Family Housing Revenue Bonds (Crest Marin II
Apartments Project)
Series 1989A/(Dai-Ichi Kangyo Bank LOC)
4.05%, 07/01/95 7,200 7,200
Modesto, California High School District and
Modesto City School District Certificates of
Participation (Capital Facilities Project)
Series 1991/(Mitsubishi Bank LOC)
3.75%, 07/07/95 3,700 3,700
Moorpark, California Multi Family Housing Revenue
Refunding Bonds (Le Club Apartments Project)
Series A/(Citibank LOC)
4.00%, 07/07/95 6,000 6,000
Oakland, California Economic Development Revenue
Refunding Bonds (Leamington Hotel Project)
Series 1994A/(First Interstate Bank of
California LOC)
3.95%, 07/07/95 4,250 4,250
</TABLE>
<PAGE> 19
SchwabFunds(R) 6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Oakland, California Health Facilities Revenue Bonds
Certificates of Participation (Children's
Hospital Project)
Series 1988A/(Banque Nationale de Paris LOC)
4.05%, 07/07/95 $ 3,500 $ 3,500
Ontario, California Redevelopment Agency Multi
Family Housing Revenue Refunding Bonds
Series 1991A/(FHLB LOC)
3.80%, 07/07/95 4,500 4,500
Orange County, California Apartment Development
Revenue Refunding Bonds (Jess L. Frost Project)
Series 1985B/(Wells Fargo Bank LOC)
4.10%, 07/07/95 8,200 8,200
Orange County, California Certificates of
Participation (Florence Crittenton Services Project)
Series 1990/(Swiss Bank LOC)
4.20%, 07/07/95 6,900 6,900
Orange County, California Municipal Water District
Water Facilities Corp. Certificates of Participation/
(Barclays Bank LOC & National Westminster LOC)
4.45%, 07/07/95 31,225 31,225
Panama Buena Vista, California Unified School District
Certificates of Participation (1994 Capital
Improvement Financing Project)/(Bank of
California LOC)
4.25%, 07/07/95 4,000 4,000
Riverside County, California Certificates of
Participation (Riverside County Public
Facility Project)
Series 1985A/(Sanwa Bank LOC)
4.10%, 07/01/95 9,000 9,000
Riverside County, California Certificates of
Participation (Riverside County Public
Facility Project)
Series 1985B/(Sanwa Bank LOC)
4.10%, 07/07/95 100 100
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Riverside County, California Certificates of
Participation (Riverside County Public
Facility Project)
Series 1985C/(Sanwa Bank LOC)
4.10%, 07/07/95 $ 5,600 $ 5,600
Riverside County, California Housing Authority
Multi Family Housing Revenue Bonds
(Briarwood Apartment Project)
Series 1985C/(FHLB LOC)
3.85%, 07/07/95 4,500 4,500
Riverside County, California Industrial Development
Authority Revenue Bonds (Cryogenic Project)
Series 1989B-1/(Rabobank Nederland N.V. LOC)
4.10%, 07/07/95 5,700 5,700
Sacramento County, California Certificates of
Participation (Administration Center and
Court House Project)/(Union Bank of
Switzerland LOC)
3.65%, 07/07/95 28,200 28,200
Salinas, California Apartment Development
Multi Family Housing Revenue Bonds
(Mariner Villa Project)
Series 1985B/(Bank of America LOC)
3.60%, 07/07/95 2,725 2,725
San Bernardino County, California Certificates of
Participation (Glen Helen Blockbuster Project)
Series 1994C/(Mitsubishi Bank LOC)
4.10%, 07/07/95 7,255 7,255
San Bernardino County, California Multi Family
Housing Revenue Bonds (Western Properties
Project IV)
Series 1985/Bank of America LOC)
3.90%, 07/07/95 1,100 1,100
San Diego County, California Regional Transportation
Commission Second Senior Sales Tax Revenue Bonds
Series 1992A/(FGIC Insurance & FGIC SPA)
4.05%, 07/07/95 18,600 18,600
</TABLE>
<PAGE> 20
SchwabFunds(R) 7
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
San Francisco, California City and County
Redevelopment Agency Multi Family Revenue Bonds
(Fillmore Center Project)
Series A-1/(Citibank LOC)
3.90%, 07/07/95 $26,500 $26,500
San Francisco, California City and County
Redevelopment Agency Multi Family Revenue Bonds
(Fillmore Center Project)
Series A-2/(Citibank LOC)
4.05%, 07/07/95 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)
3.85%, 07/07/95 13,100 13,100
San Francisco, California City and County
Redevelopment Agency Multi Family Revenue Bonds
(Rincon Center Apartments)
Series 1985B/(Citibank LOC)
3.90%, 07/07/95 5,810 5,810
San Francisco, California Housing Authority Multi
Family Housing Revenue Bonds (737 Post Project)
Series 1985D/(Banque Nationale de Paris LOC)
3.90%, 07/07/95 16,800 16,800
San Francisco, California Redevelopment Agency Multi
Family Revenue Bonds (Bayside Village Project)
Series A/(Industrial Bank of Japan LOC)
4.15%, 07/07/95 2,400 2,400
San Mateo County, California Certificates of
Participation (Capital Projects)
Series 1985B/(Swiss Bank LOC)
3.95%, 07/07/95 4,020 4,020
Santa Ana, California Unified School District
Certificates of Participation (Land Acquisition
Project)/(Sanwa Bank LOC)
4.10%, 07/07/95 100 100
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Santa Clara County, California El Camino Hospital
District Hospital Facility Authority Revenue Bonds
(Valley Medical Center Project)
Series 1985A/(National Westminster LOC)
3.90%, 07/07/95 $ 8,000 $ 8,000
Santa Clara County, California El Camino Hospital
District Hospital Facility Authority Revenue Bonds
(Valley Medical Center Project)
Series 1985B/(National Westminster LOC)
3.90%, 07/07/95 8,200 8,200
Santa Clara, California Electric Revenue Bonds
Series 1985A/(National Westminster LOC)
4.05%, 07/07/95 13,500 13,500
Santa Clara, California Electric Revenue Bonds
Series 1985B/(National Westminster LOC)
4.05%, 07/07/95 10,300 10,300
Santa Clara, California Electric Revenue Bonds
Series 1985C/(National Westminster LOC)
4.05%, 07/07/95 9,000 9,000
Santa Cruz County, California Housing Authority
Multi Family Housing Revenue Bonds
(Paloma Del Mar Apartments Project)
Series 1992A/(Bank of Tokyo LOC)
4.20%, 07/07/95 7,700 7,700
Simi Valley, California Multi Family Housing
Certificates of Participation (Lincoln Wood Ranch
Project)/(Sumitomo Bank LOC)
4.00%, 07/07/95 3,200 3,200
South San Francisco, California Multi Family Revenue
Bonds (Magnolia Plaza Apartments Project)
Series A/(Wells Fargo Bank LOC)
4.05%, 07/07/95 4,500 4,500
Southern California Public Power Authority
Transmission Project Revenue Bonds
Series 1991/(AMBAC Insurance & Swiss Bank SBPA)
3.90%, 07/07/95 27,800 27,800
</TABLE>
<PAGE> 21
SchwabFunds(R) 8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
Vallejo, California Commercial Development Revenue
Bonds (Vallejo Center Association Project)
Series 1994A/(Bank of Tokyo LOC)
4.20%, 07/07/95 $ 1,000 $ 1,000
Victor, California Elementary School District
Certificates of Participation (School Construction
Financing Project)/(National Westminster LOC)
4.25%, 07/07/95 4,000 4,000
Visalia, California Certificates of Participation
Revenue Bonds (Convention Center Expansion Project)
Series 1991/(Bank of California LOC)
4.65%, 07/07/95 1,000 1,000
--------
TOTAL VARIABLE RATE OBLIGATIONS (Cost $889,445)
889,445
--------
VARIABLE RATE TENDER OPTION BONDS--0.3%(a)
Southern California Rapid Transit District Tender
Option Short Mode Bonds (BT-9)/(MBIA Insurance
& Bankers Trust Tender Option)
4.05%, 07/07/95 4,200 4,200
--------
TOTAL VARIABLE RATE TENDER OPTION BONDS
(Cost $4,200) 4,200
--------
VARIABLE RATE TENDER OPTION BOND
PARTNERSHIPS--5.8%(a)(e)
California State Department of Water Resources
Revenue Bond (Central Valley Project)
Series J3 Tender Option Bond Partnership (BTP-141)/
(Bankers Trust Tender Option)
4.15%, 07/07/95 5,155 5,155
California State Revenue Anticipation Warrants
Series 1994C Tender Option Bond Partnership
(BTP-150)/(Multiple Credit Enhancements & Bankers
Trust Tender Option)
4.30%, 07/07/95 10,000 10,000
<CAPTION>
Par Value
------- -------
<S> <C> <C>
California State Revenue Anticipation Warrants
Series 1994C Tender Option Bond Partnership
(BTP-96)/(Multiple Credit Enhancements & Bankers
Trust Tender Option)
4.30%, 07/07/95 $18,465 $ 18,465
Los Angeles, California County Transportation
Commission Sales Tax Revenue Tender Option Bond
Partnership (BTP 146)/(Bankers Trust Tender
Option & Escrowed to Maturity with Government
Securities)
4.15%, 07/07/95 23,078 23,078
Los Angeles, California Department of Water and
Power Electric Plant Revenue Refunding Bonds
Series 1994 Tender Option Bond Partnership
(BTP-68)/(Automatic Data Processing, Inc.
Tender Option)
4.25%, 07/07/95 5,195 5,195
Metropolitan Water District of Southern California,
California Waterworks General Obligation Revenue
Refunding Bonds Series 1993A1 and 1993A2 Tender
Option Bond Partnership (BTP-115)/(Bankers
Trust Tender Option)
4.15%, 07/07/95 10,145 10,145
Southern California Public Power Authority Power
Project Class A Tender Option Bond Partnership
(BTP-90)/(Multiple Credit Enhancements & Bankers
Trust Tender Option)
4.10%, 07/07/95 8,290 8,290
Southern California Rapid Transit District
Certificates of Participation (Workers
Compensation Funding Program) Tender Option Bond
Partnership (BTP-163)/(MBIA Insurance & Bankers
Trust Tender Option)
4.10%, 07/07/95 8,710 8,710
--------
TOTAL VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS
(Cost $89,038) 89,038
--------
</TABLE>
<PAGE> 22
SchwabFunds(R) 9
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- -------
<S> <C> <C>
CERTIFICATES OF PARTICIPATION--0.8%(b)
Los Angeles County, California Certificates of
Participation (Van Nuys Courthouse Project)
Series 1985/(Escrowed to Maturity with
Government Securities)
3.70%, 06/01/96 $ 2,000 $ 2,133
Los Angeles, California Unified School District
Certificates of Participation (Multiple Properties)
Series 1994A/(AMBAC Insurance)
4.30%, 12/01/95 5,250 5,265
Oakland, California Redevelopment Agency Certificates
of Participation/(MBIA Insurance)
4.50%, 08/01/95 5,000 5,119
-------
TOTAL CERTIFICATES OF PARTICIPATION (Cost $12,517) 12,517
-------
GENERAL OBLIGATIONS--0.9%(b)
California State General Obligation Bonds
Series 1994/(AMBAC Insurance)
4.10%, 08/01/95 5,000 5,004
Los Angeles, California General Obligation Bonds
Series 1993A
4.37%, 09/01/95 4,350 4,372
Los Angeles, California General Obligation Bonds
Series 1994A
4.40%, 09/01/95 2,000 2,001
Los Angeles, California General Obligation Notes
Series 1990A
4.05%, 09/01/95 2,125 2,144
-------
TOTAL GENERAL OBLIGATIONS (Cost $13,521) 13,521
-------
MANDATORY PUT BONDS--0.2%(b)
California Educational Facilities Authority Revenue
Bonds (University of Southern California)
4.00%, 10/01/95 3,550 3,550
-------
TOTAL MANDATORY PUT BONDS (Cost $3,550) 3,550
-------
<CAPTION>
Par Value
------- -------
<S> <C> <C>
REVENUE ANTICIPATION WARRANTS--2.7%(b)
California State Revenue Anticipation Warrants
Series C/(FGIC Insurance)
4.61%, 04/25/96 $40,900 $41,492
-------
TOTAL REVENUE ANTICIPATION WARRANTS (Cost $41,492) 41,492
-------
REVENUE BONDS--1.0%(b)
California Educational Facilities Authority Revenue
Bonds (Stanford University)
Series 1985G/(Escrowed to Maturity with
Government Securities)
3.68%, 12/01/95 5,000 5,197
California Health Facilities Financing Authority
Revenue Bonds (Saint Joseph Health System)
Series 1984-1/(Escrowed to Maturity with
Government Securities)
4.40%, 07/01/95 2,750 2,778
Northern California Power Agency Public Power
Revenue Refunding Bonds (Geothermal Power Project #3)
Series 1985A
4.20%, 07/01/95 1,000 1,020
Northern California Power Agency Public Power Revenue
Refunding Bonds (Hydroelectric Project Number One)
Series 1986A/(Escrowed to Maturity with
Government Securities)
3.75%, 07/01/96 1,000 1,061
Santa Clara Valley Water District, California Revenue
Refunding Bonds/(Escrowed to Maturity with
Government Securities)
3.55%, 06/01/96 1,000 1,020
South Poway, California Community Facility District
No. 1 Special Tax (Pomerado Business Park)
Series 1985A/(Escrowed to Maturity with
Government Securities)
3.80%, 03/02/96 1,000 1,068
</TABLE>
<PAGE> 23
SchwabFunds(R) 10
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
Southern California Public Power Authority
Transmission (Southern Transmission Project)
Revenue Bonds/(Escrowed to Maturity with
Government Securities)
3.50%, 07/01/96 $ 3,250 $ 3,483
--------
TOTAL REVENUE BONDS (Cost $15,627) 15,627
--------
TAX ALLOCATION BONDS--1.2%(b)
San Bernardino, California Redevelopment Agency Tax
Allocation Bonds (Center City Redevelopment Project)/
(Escrowed to Maturity with Government Securities)
3.75%, 11/01/95 18,230 19,015
--------
TOTAL TAX ALLOCATION BONDS (Cost $19,015) 19,015
--------
TAX AND REVENUE ANTICIPATION NOTES--15.3%(b)
California School Cash Reserve Program Authority
Tax and Revenue Anticipation Notes
Series 1994A
3.75%, 07/05/95 25,000 25,002
California School Cash Reserve Program Authority
Tax and Revenue Anticipation Notes
Series 1995A/(MBIA Insurance)(d)
3.75%, 07/03/96 40,000 40,383
Elk Grove, California Unified School District
Tax and Revenue Anticipation Notes
Series 1994-95
4.03%, 09/14/95 4,250 4,258
Livermore Valley, California Joint Unified
School District Tax and Revenue Anticipation Notes
Series 1994
4.13%, 09/29/95 4,500 4,509
Los Angeles County, California Tax and Revenue
Anticipation Notes
Series 1995-96/(Multiple Credit Enhancements)(d)
3.80%, 07/01/96 20,000 20,134
Marin County, California Tax and Revenue
Anticipation Notes
Series 1995-96(d)
3.85%, 07/03/96 37,000 37,319
<CAPTION>
Par Value
------- --------
<S> <C> <C>
Martinez, California Unified School District Tax and
Revenue Anticipation Notes Secondary Education
Series 1994-95
4.10%, 10/26/95 $ 3,650 $ 3,660
Newport Beach, California Tax and Revenue
Anticipation Notes
Series 1994-95
4.20%, 10/15/95 4,300 4,309
Oakland, California Unified School District Alameda
County Tax and Revenue Anticipation Notes
Series 1994-95
4.04%, 09/12/95 31,625 31,668
Orange County, California Pooled Tax and Revenue
Anticipation Notes
Series 1994-95(c)
3.70%, 07/28/95 39,890 39,913
San Juan, California Unified School District
Tax and Revenue Anticipation Notes
Series 1994-95
4.05%, 09/20/95 15,000 15,022
Sonoma County, California Tax and Revenue
Anticipation Notes
Series 1994-95
4.14%, 10/10/95 8,950 8,965
--------
TOTAL TAX AND REVENUE ANTICIPATION NOTES (Cost $235,142) 235,142
--------
TAX-EXEMPT COMMERCIAL PAPER--14.0%(b)
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988A/(Swiss Bank LOC)
3.05%, 09/12/95 5,000 5,000
3.15%, 10/10/95 1,475 1,475
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988B/(Sumitomo Bank LOC)
3.15%, 09/07/95 26,800 26,800
3.70%, 09/08/95 11,900 11,900
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988D/(Bank of Tokyo LOC)
4.15%, 07/28/95 2,350 2,350
3.35%, 09/07/95 1,000 1,000
</TABLE>
<PAGE> 24
SchwabFunds(R) 11
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988F/(Banque Nationale de Paris LOC)
3.45%, 08/04/95 $10,000 $ 10,000
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Southern California Edison)
Series 1985A
4.05%, 08/23/95 1,000 1,000
3.00%, 10/10/95 12,900 12,900
California Pollution Control Financing Authority
Pollution Control Revenue Bonds
(Southern California Edison)
Series 1985B
4.05%, 07/20/95 7,100 7,100
3.80%, 07/27/95 1,400 1,400
3.00%, 10/10/95 16,800 16,800
California Pollution Control Financing Authority
Solid Waste Disposal Revenue Bonds
(Thermal Energy Development LP)
Series 1988A/(National Westminster LOC)
3.10%, 07/12/95 33,600 33,600
East Bay Municipal Utility District, California
(Wastewater Systems) Tax Exempt Commercial
Paper/(National Westminster LOC)
3.85%, 07/20/95 10,400 10,400
3.10%, 09/11/95 3,700 3,700
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Los Angeles County, California Department of
Water and Power Waterworks System Revenue Bonds
3.15%, 08/10/95 $ 6,000 $ 6,000
Los Angeles, California Wastewater System Tax
Exempt Commercial Paper
3.20%, 08/10/95 10,000 10,000
Metropolitan Water District of Southern
California Tax Exempt Commercial Paper
3.20%, 09/08/95 10,000 10,000
Orange County, California Local Transportation
Authority Sales Tax Revenue Commercial
Paper/(Industrial Bank of Japan LOC)
4.15%, 07/14/95 7,000 7,000
4.05%, 07/17/95 22,000 22,000
3.25%, 08/07/95 8,000 8,000
Sacramento, California Municipal Utility District
Tax Exempt Commercial Paper
Series H/(Bank of America & Morgan Guaranty
Trust LOC)
4.10%, 07/21/95 5,000 5,000
3.10%, 10/10/95 2,133 2,132
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Cost $215,557) 215,557
----------
TOTAL INVESTMENTS--100.0% (Cost $1,539,104) $1,539,104
==========
</TABLE>
<PAGE> 25
SchwabFunds(R) 12
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--------------------------------------------------------------------------------
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.
(c) As of June 30, 1995, the Fund was the beneficiary under an $11,967,000
irrevocable letter of credit issued by Bank of America National Trust and
Savings Association which permitted the Fund to make a demand for partial
payment of this security's principal amount under certain conditions upon
maturity or disposition of this security by the Fund. Subsequent to June
30, 1995, this security matured and was paid in full and the letter of
credit expired.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering into
the transaction. The transaction is subject to market fluctuation and to
the risk that the value may be more or less than the purchase price when
the transaction was entered into. The Fund has set aside sufficient
investment securities as collateral for securities purchased on a
delayed-delivery basis.
(e) Certain securities purchased by the 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 California Tax-Exempt Money Fund. Any resale by the Fund
must be in an exempt transaction, normally to a qualified institutional
buyer. At June 30, 1995, the aggregate value of private placement
securities held by the Fund was $89,038,000, which represented 6.16% 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.
Abbreviations
--------------
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNMA Federal National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 26
SchwabFunds(R) 13
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $1,539,104) $1,539,104
Cash 25
Interest receivable 15,547
Prepaid expenses 48
----------
Total assets 1,554,724
----------
LIABILITIES
Payable for:
Dividends 1,949
Investments purchased 106,339
Investment advisory and administration fee 224
Transfer agency and shareholder service fees 482
Other 136
----------
Total liabilities 109,130
----------
Net assets applicable to outstanding shares $1,445,594
==========
NET ASSETS CONSIST OF:
Capital paid in $1,446,225
Accumulated net realized loss on investments sold (631)
----------
$1,445,594
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 1,446,225
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 27
SchwabFunds(R) 14
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $26,063
-------
Expenses:
Investment advisory and administration fee 3,003
Transfer agency and shareholder service fees 3,024
Custodian fees 121
Registration fees 45
Professional fees 29
Shareholder reports 33
Trustees' fees 3
Amortization of deferred organization costs and
other prepaid expenses 43
Insurance and other expenses 49
-------
6,350
Less expenses reduced (1,983)
-------
Total expenses incurred by Fund 4,367
-------
Net investment income 21,696
Net realized gain on investments sold 41
-------
Increase in net assets resulting from operations $21,737
=======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 28
SchwabFunds(R) 15
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six For the
months ended year ended
June 30, 1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
Operations:
Net investment income $ 21,696 $ 27,608
Net realized gain (loss) on
investments sold 41 (600)
---------- ----------
Increase in net assets resulting
from operations 21,737 27,008
---------- ----------
Dividends to shareholders from
net investment income (21,696) (27,608)
---------- ----------
Capital Share Transactions (dollar
amounts and number of shares are the
same):
Proceeds from shares sold 2,103,652 3,435,641
Net asset value of shares issued in
reinvestment of dividends 24,436 24,116
Less payments for shares redeemed (1,976,418) (3,227,316)
---------- ----------
Increase in net assets from capital
share transactions 151,670 232,441
---------- ----------
Total increase in net assets 151,711 231,841
Net Assets:
Beginning of period 1,293,883 1,062,042
---------- ----------
End of period $ 1,445,594 $1,293,883
========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 29
SchwabFunds(R) 16
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
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(R), 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.
<PAGE> 30
SchwabFunds(R) 17
--------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
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
$3,003,000 during the six months ended 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 six
months ended June 30, 1995, the Fund incurred transfer agency and shareholder
service fees of $3,024,000, 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 six
months ended 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 incurred fees of $3,000 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 six
months ended June 30, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $1,726,000 and $257,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the six months
ended June 30, 1995, aggregated (in thousands) $1,561,748 and $1,324,383,
respectively.
<PAGE> 31
SchwabFunds(R) 18
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
For the six November 6, 1990
months ended (commencement of
June 30, 1995 For the year ended December 31, operations) to
(Unaudited) 1994 1993 1992 1991 December 31, 1990
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net investment income .02 .02 .02 .02 .04 .01
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .02 .02 .02 .02 .04 .01
Less Distributions
Dividends from net investment income (.02) (.02) (.02) (.02) (.04) (.01)
Distributions from realized gain on
investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.02) (.02) (.02) (.04) (.01)
---------- ---------- ---------- -------- ---------- ----------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ======== ========== ==========
Total return (%) 1.61 2.26 1.91 2.35 3.77 .77
Ratios/Supplemental Data
Net assets, end of period (000s) $ 1,445,594 $1,293,883 $1,062,042 $691,176 $494,214 $339,292
Ratio of expenses to average net
assets (%) .65* .64 .63 .63 .61 .28*
Ratio of net investment income to
average net assets (%) 3.23* 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 June
30, 1995, December 31, 1994, 1993, 1992, 1991 and 1990 would have been .95%*,
.94%, .96%, .97%, .98% and 1.17%*, respectively, and the ratio of net investment
income to average net assets would have been 2.93%*, 1.95%, 1.56%, 1.97%, 3.33%
and 4.17%*, respectively.
* Annualized
<PAGE> 32
THIS SPACE IS RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 33
CAPTURING GROWTH OPPORTUNITIES DOESN'T HAVE TO BE GUESSWORK.
Large-cap stocks, small-cap stocks, or international stocks? It's difficult to
predict which stock market segment will come out ahead during given time
periods, especially since these markets do not always move in tandem. While one
market segment may be experiencing only moderate growth, others, at the same
time, may be expanding rapidly.
SchwabFunds(R) three equity index funds help you take some of the guesswork out
of equity investing. These Funds provide a way for you to put the growth
potential of all three markets into your portfolio -- rather than relying on
just one market. The Funds offer an easy and efficient way to achieve a broad
level of effective equity diversification. In fact, they provide market
coverage that could require investments in many more funds.
SCHWAB 1000 FUND(R) is designed to match the total return of the
[FIGURE 1] Schwab 1000 Index,(R) which is comprised of the largest 1,000
publicly traded U.S. companies -- the stocks of which represent
about 91% of the total market capitalization of the U.S. stock
market. 1
SCHWAB SMALL-CAP INDEX FUND(TM) is designed to track the total
[FIGURE 2] return of the Schwab Small-Cap Index,(TM) which tracks the
performance of smaller-capitalization companies. The Schwab
Small-Cap Index is comprised of the second 1,000 largest publicly
traded companies in the U.S. 1
SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total
[FIGURE 3] return of the Schwab International Index,(TM) which is comprised
of 350 of the largest companies, based on market capitalization,
in foreign countries with developed securities markets. 2
You can begin building your diversified equity investment portfolio with the
three SchwabFunds equity index funds by calling Schwab at the toll-free number
below, or by sending back the enclosed postcard. We'll be happy to provide you
with a free prospectus and brochure for the Funds.
EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
--------------------------------------------------------------------------------
SCHWAB'S FUNDMAP(TM) SOFTWARE MAKES FUND
SELECTION EASIER.
FundMap Mutual Fund Selection Software for Windows(R) allows you to calculate
your long-term investment needs and can help you to decide how much you may need
to invest in each of the three SchwabFunds equity index funds. 3 You can explore
ways to allocate your assets, even re-evaluate your current strategy and set up
several "what if" scenarios. SchwabFunds and FundMap make it easy for you to
build a diversified portfolio today.
--------------------------------------------------------------------------------
1-800-2 NO-LOAD
1-800-266-5623
1 Each Index consists of publicly traded companies ranked by market
capitalization. Each Index does not include privately held companies,
investment companies and companies incorporated outside of the United
States.
2 The Index is comprised of publicly traded companies ranked by market
capitalization in countries with developed securities markets around the
world. It does not include privately held companies, investment companies,
or companies from the United States.
3 FundMap is available for Schwab customers only. Please allow 2-4 weeks for
delivery.
Windows is a registered trademark of Microsoft Corporation.
<PAGE> 34
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWABFUNDS FAMILY(TM) LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
CRS 3853 TF3635R (8/95) Printed on recycled paper.
