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SCHWAB NEW YORK MUNICIPAL MONEY FUND - SWEEP SHARES
PROSPECTUS APRIL 29, 1996,
AS AMENDED JANUARY 2, 1997
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION:
Contact your local Charles Schwab & Co., Inc. ("Schwab") office, or call 800-2
NO-LOAD.
THE SCHWAB NEW YORK MUNICIPAL MONEY FUND (the "Fund") is designed for investors
who seek maximum current income that is exempt from federal regular income taxes
and personal income taxes imposed by New York State and New York municipalities
consistent with stability of capital. Federal regular income tax does not
include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations. The Fund is a non-diversified
investment portfolio of The Charles Schwab Family of Funds (the "Schwab Fund
Family"), a no-load, open-end, management investment company. Prior to January
2, 1997, the Fund was known as the Schwab New York Tax-Exempt Money Fund. This
Prospectus describes the Sweep Shares of the Fund, one of the two classes of
shares of the Fund offered by Schwab ("Sweep Shares"). For a prospectus
describing the other class of shares of the Fund (the "Value Advantage Shares"),
call your local Schwab office or 800-2 NO-LOAD.
ABOUT THIS PROSPECTUS: THIS PROSPECTUS CONCISELY PRESENTS IMPORTANT INFORMATION
YOU SHOULD KNOW BEFORE INVESTING IN THE FUND. PLEASE READ IT CAREFULLY AND
RETAIN IT FOR FUTURE REFERENCE. You can find more detailed information about
this Fund in the Statement of Additional Information, dated April 29, 1996, as
amended January 2, 1997 (as may be amended from time to time). The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. This
Prospectus may be available electronically by using our Internet address:
http://www.schwab.com. To receive a free paper copy of this Prospectus or the
Statement of Additional Information, call Schwab at 800-2 NO-LOAD, 24 hours a
day, or write to the Fund at 101 Montgomery Street, San Francisco, California
94104. TDD users may contact Schwab at 800-345-2550, 24 hours a day.
TABLE OF CONTENTS
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Key Features of the Fund................. 2
Summary of Expenses...................... 3
Financial Highlights..................... 4
Matching the Fund to Your Investment
Needs.................................. 5
Investment Objective and Policies........ 5
Municipal Securities and Investment
Techniques............................. 7
Organization and Management
of the Fund............................ 11
Distributions and Taxes.................. 13
Share Price Calculation.................. 15
How the Fund Reports Performance......... 16
Investing in Shares of the Fund.......... 16
How to Buy Shares...................... 17
How to Sell or Exchange Shares......... 20
Other Important Information.............. 21
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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KEY FEATURES OF THE FUND
TRIPLE TAX-EXEMPT INCOME AND SAFETY. The Schwab New York Municipal Money Fund
(formerly, the Schwab New York Tax-Exempt Money Fund) is designed for investors
who seek maximum after-tax current income consistent with stability of capital.
The Fund primarily invests in high-quality, short-term debt securities the
interest on which is exempt from federal regular income taxes and personal
income taxes imposed by New York State and New York municipalities. Federal
regular income tax does not include the federal individual alternative minimum
tax or the alternative minimum tax for corporations. The Fund attempts to
maintain a stable net asset value of $1.00 per share. (See "Investment Objective
and Policies.")
AUTOMATIC INVESTMENT/REDEMPTION FEATURE. For the Sweep Shares of the Fund, if
you elect, free credit balances in your Schwab brokerage account (including your
Schwab One(R) account) will be automatically invested or "swept" into the Fund,
subject to the terms and conditions of your brokerage account agreement. Shares
will also be sold as necessary to settle securities transactions, collateralize
margin obligations or cover debit balances. This feature keeps your money
working and saves you the time and trouble of withdrawing and redepositing
funds. (See "Investing in Shares of the Fund -- How to Buy Shares" and
"Investing in Shares of the Fund -- How to Sell or Exchange Shares.")
LIQUIDITY. You can conveniently sell your shares of the Fund at any time. (See
"Investing in Shares of the Fund -- How to Sell or Exchange Shares.")
LOW COST INVESTING. The Fund imposes no sales or transaction fees on purchases
or redemptions of shares of the Fund. (See "Summary of Expenses.") In addition,
the total fund operating expenses of the Sweep Shares of the Fund will not
exceed 0.69% at least through April 30, 1997, as guaranteed by Charles Schwab
Investment Management, Inc. (the "Investment Manager") and Schwab. (See
"Matching the Fund to Your Investment Needs" and "Organization and Management of
the Fund.")
PROFESSIONAL MANAGEMENT. The Investment Manager currently provides investment
management services to the SchwabFunds(R), a family of 26 mutual funds with over
$42 billion in assets as of December 16, 1996. (See "Organization and Management
of the Fund.")
SHAREHOLDER SERVICE. Schwab's professional representatives are available
toll-free 24 hours a day to receive your Fund orders. Call your local Schwab
office during business hours or 800-2 NO-LOAD. As a discount broker, Schwab
gives you investment choices and lets you make your own decisions. Schwab has
many services that help you make the most informed investment decisions. (See
"Investing in Shares of the Fund -- How to Buy Shares" and "Investing in Shares
of the Fund -- How to Sell or Exchange Shares.")
CONVENIENT REPORTING. Customers receive regular Schwab statements that combine
all their mutual fund investment activity in one report.
SPECIAL RISK CONSIDERATIONS. An investment in the Fund is subject to certain
risks arising out of the Fund's investments in New York Municipal Securities,
municipal leases, participation interests and certain other securities. (See
"Municipal Securities and Investment Techniques.")
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NATIONWIDE NETWORK OF SCHWAB OFFICES. Schwab has over 225 offices throughout the
U.S. where customers can place purchase and sale orders.
SUMMARY OF EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES:
ANNUAL FUND OPERATING EXPENSES None
(AS A PERCENTAGE OF AVERAGE DAILY
NET ASSETS):
Management Fee
(after fee reduction)(1)....... 0.20%
12b-1 Fees........................ None
Other Expenses (after fee
reduction and/or expense
reimbursement)(2,3)............ 0.49%
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TOTAL FUND OPERATING
EXPENSES (2,3,4).................. 0.69%
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(1) This amount has been restated to reflect a reduction by the Investment
Manager, which is guaranteed through at least April 30, 1997. If there were
no such reduction, the maximum management fee for the Fund would have been
0.46% of the Fund's average daily net assets for the fiscal period ended
December 31, 1995. (See "Organization and Management of the Fund - Operating
Fees and Expenses.")
(2) See "Organization and Management of the Fund - Operating Fees and Expenses"
for information regarding the differing expenses for the multiple classes of
shares of the Fund.
(3) This amount has been restated to reflect the guarantee by the Investment
Manager and Schwab that, through at least April 30, 1997, the total
operating expenses of the Sweep Shares of the Fund will not exceed 0.69% of
the Sweep Shares' average daily net assets. Without this or a similar
guarantee, which was in effect during the fiscal period ended December 31,
1995, other expenses and total operating expenses would have been 0.58% and
1.04%, respectively, of the Sweep Shares' average daily net assets.
(4) A fee may be charged if applicable minimum balances are not maintained in
your Schwab brokerage account or Schwab One(R) account. (See "Investing in
Shares of the Fund.") For information regarding the differing minimum
balance and minimum investment requirements of the multiple classes of
shares of the Fund, see "Investing in Shares of the Fund -- How to Buy
Shares."
EXAMPLE. You would pay the following expenses on a $1,000 investment in the
Sweep Shares of the Fund, assuming (1) a 5% annual return and (2) redemption at
the end of each period:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$7 $22 $38 $ 86
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THE PURPOSE OF THE PRECEDING TABLE IS TO ASSIST INVESTORS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE SWEEP SHARES OF THE FUND WILL
BEAR DIRECTLY OR INDIRECTLY. This example reflects the guarantee by Schwab and
the Investment Manager that, at least through April 30, 1997, the total
operating expenses of the Sweep Shares of the Fund will not exceed 0.69%. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The example assumes a 5%
annual rate of return pursuant to requirements of the SEC. THIS HYPOTHETICAL
RATE OF RETURN IS NOT INTENDED TO BE REPRESENTATIVE OF PAST OR FUTURE
PERFORMANCE.
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FINANCIAL HIGHLIGHTS
The following information for the Sweep Shares has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report is included in
the Statement of Additional Information, which contains additional financial
data and related notes. A free copy of this statement may be obtained by calling
the telephone number or writing to the address on the first page of this
Prospectus.
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FOR THE PERIOD
FEBRUARY 27, 1995
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1995
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Net asset value at beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net realized and unrealized gain (loss) on investments --
------------------
Total from investment operations 0.03
LESS DISTRIBUTIONS
Dividends from net investment income (0.03)
Distributions from realized gain on investments --
------------------
Total distributions (0.03)
------------------
Net asset value at end of period $ 1.00
================
Total return 2.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $204,863
Ratio of expenses to average net assets 0.63%*
Ratio of net investment income to average net assets 3.20%*
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Note: 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, 1995 would have been 1.04%,
and the ratio of net investment income to average net assets would have
been 2.79%*.
*Annualized
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MATCHING THE FUND TO YOUR INVESTMENT NEEDS
The Fund may be appropriate for a variety of investment programs which can be
long-term or short-term in nature. While the Fund is not a substitute for
building an investment portfolio tailored to an individual's investment needs
and risk tolerance, it can be used as a high-quality, conveniently liquid money
market investment for your brokerage account cash when it is not fully invested
in other securities. The Fund would not be an appropriate investment for
retirement plans such as IRAs and Keogh plans.
Because the Fund is designed to provide liquidity and stability of capital, as
well as automatic investment of free credit balances, it may be especially
suitable for investors with short-term investment objectives, including those
who are awaiting an opportune time to invest in the equity and/or bond markets.
The Fund may also be appropriate for long-term investors seeking a low-risk
investment alternative which is designed to provide income which is exempt from
federal regular income taxes and personal income taxes imposed by New York State
and New York municipalities.
In addition to the Sweep Shares of the Fund, Schwab also offers Value Advantage
Shares of the Fund, pursuant to a multiple class plan (the "Plan") adopted by
the Board of Trustees of the Schwab Fund Family. Under the Plan, Value Advantage
Shares of the Fund, which are not available through automatic ("sweep")
investment programs, are subject to lower transfer agency expenses than the
Sweep Shares of the Fund. In addition, the minimum investment and minimum
account balance requirements of the Value Advantage Shares of the Fund are
higher than those applicable to the Sweep Shares. (See "Organization and
Management of the Fund - Operating Fees and Expenses" and "Investing in Shares
of the Fund -- How to Buy Shares.")
For information regarding Value Advantage Shares, call your local Schwab office
or 800-2 NO-LOAD. You may also obtain information about Value Advantage Shares
from your Schwab broker.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is maximum current income that is exempt from
federal regular income taxes and personal income taxes imposed by New York State
and New York municipalities, consistent with stability of capital. This
investment objective is fundamental, and cannot be changed without approval by
holders of a majority of the Fund's outstanding voting shares, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). To achieve its
objective, the Fund primarily invests in short-term high-quality municipal
obligations, the income from which is exempt from federal regular income taxes
and personal income taxes imposed by New York State and New York municipalities.
Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.
Under normal market conditions, the Fund attempts to invest 100% of its total
assets in debt obligations issued by or on behalf of New York and other states,
territories and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies and instrumentalities that
generate interest which, in the opinion of
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bond counsel, is exempt from federal regular income taxes ("Municipal
Securities"). Absent unusual market conditions, the Fund will invest at least
65% of its total assets in such obligations which also generate interest which,
in the opinion of bond counsel, is exempt from New York State and New York
municipal personal income tax ("New York Municipal Securities"). Under normal
market conditions, the Fund is authorized to invest in "private activity bonds."
(See "Distributions and Taxes - Federal Income Taxes.") The Fund's investment in
private activity bonds will not be included in the amount deemed to be invested
in New York Municipal Securities.
Provided that certain minimum conditions are met, dividends paid to New York
residents consisting of interest income received on New York Municipal
Securities will be exempt from State of New York personal income taxes and
personal income taxes imposed by New York City and other municipalities. See the
Statement of Additional Information for more information.
The Fund invests only in Municipal Securities which at the time of purchase: (a)
are rated in one of the two highest rating categories for municipal commercial
paper or short-term municipal securities assigned by any nationally recognized
statistical rating organization ("NRSRO"); (b) are guaranteed or insured by the
U.S. Government as to the payment of principal and interest; (c) are fully
collateralized by an escrow of U.S. Government securities acceptable to the
Investment Manager; or (d) are unrated by any NRSRO, if they are determined by
the Investment Manager, using guidelines approved by the Board of Trustees, to
be at least equal in quality to one or more of the above referenced securities.
The Fund may continue to hold a Municipal Security that, after its purchase by
the Fund, ceases to have a rating or is downgraded, causing its rating to fall
below that required for purchase by the Fund. Neither event would necessarily
require the Fund to sell the security. However, the Fund will keep such a
security in its portfolio only if the Board of Trustees or its properly
authorized delegate determines that keeping the security is in the best
interests of the Fund.
With the exception of securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, the Fund may not:
1. Purchase the securities of any issuer if as a result more than 5% of the
value of the Fund's total assets would be invested in the securities of that
issuer. However, provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer, up to 50% of
the value of the Fund's total assets may be invested without regard to this
5% limitation. For purposes of this limitation, a security is considered to
be issued by the governmental entity (or entities) whose assets and revenues
back the security, or, with respect to an industrial revenue bond that is
backed only by the assets and revenues of a non-governmental user, by such
non-governmental user. In certain circumstances, the guarantor of a security
may also be considered to be an issuer in connection with such guarantee.
2. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities
of issuers conducting their principal business activities in the same
industry. However, this limitation
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shall not apply to Municipal Securities issued by governmental entities.
MUNICIPAL SECURITIES
AND INVESTMENT TECHNIQUES
Municipal Securities in which the Fund may invest are generally classified in
one of two categories: "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are secured only by the revenues derived from: (1) a
particular facility or class of facilities; (2) a specific revenue source such
as a special excise tax; or (3) another specific revenue source such as the user
of the facility being financed.
Revenue securities may include private activity bonds and industrial development
bonds. Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities, and are not payable from the unrestricted
revenues of the issuer. As a result, the credit quality of private activity
bonds is frequently related directly to the credit standing of private
corporations or other entities. From time to time, the Fund may invest more than
25% of its total assets in industrial development and private activity bonds.
Among other types of instruments, the Fund may purchase tax-exempt commercial
paper and short-term municipal notes such as tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax payments, the proceeds of bond
placements, or other revenues. The Fund has the ability to invest all of its
assets in Municipal Securities which generate interest which is a tax preference
item for purposes of the federal alternative minimum tax. Thus, if you are
subject to the federal alternative minimum tax, all or a portion of your income
from the Fund may be subject to the federal alternative minimum tax.
MORAL OBLIGATION SECURITIES. The Fund may also invest in "moral obligation"
securities, which are normally issued by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund. The state or
municipality which created the issuer has a moral commitment but not a legal
obligation to restore the reserve fund.
MUNICIPAL LEASES. The Fund may invest up to 25% of its assets in municipal
leases, no more than 10% of which may be in illiquid leases. Municipal leases
are obligations issued by state and local governments or authorities to finance
the acquisition of equipment and facilities. These obligations may take the form
of a lease, an installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Investments in municipal leases may
be considered to be illiquid. Municipal leases are subject to "non-appropriation
risk," which is the risk that the municipality may terminate the lease in the
event that the municipality's appropriating body does not allocate the funds
necessary to make lease payments. In such circumstances, the lessor is typically
entitled to repossess the property. The private sector value of the property is,
however, generally less than the value of the property to the municipality. The
Investment Manager, pursuant to guidelines established by the Board of Trustees,
is responsible for determining the credit quality of unrated municipal leases,
on an ongoing
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basis, including an assessment of the likelihood that the lease will not be
terminated.
SYNTHETIC VARIABLE OR FLOATING-RATE MUNICIPAL SECURITIES. The Fund may also
invest up to 25% of its assets in synthetic variable or floating-rate municipal
securities. These securities generally comprise the following elements in a
trust: (i) a fixed-rate municipal bond (of any duration); (ii) a right to put
the bond at par value on 7-days notice or after a specific interval of time
depending on the terms of the synthetic security; and (iii) a contractual
agreement pursuant to which the investing Fund and a remarketing agent determine
the lowest rate that would permit the bond to be remarketed at par, taking into
account the put right. The trustee of the trust is generally a bank trust
department.
These synthetic floating-rate municipal securities may include tender option
bond trust receipts, in which a fixed-rate municipal bond (or group of bonds) is
placed into a trust from which two classes of trust receipts are issued, which
represent proportionate interests in the underlying bond(s). Interest payments
are made on the bond(s) based upon a pre-determined rate. Under certain
circumstances, the holder of a trust receipt may also participate in any gain or
loss on the sale of such bond(s). Tender option bond trust receipts generally
are structured as private placements and, accordingly, may be deemed to be
restricted securities for purposes of the Fund's investment limitations.
VARIABLE RATE SECURITIES. The Fund may invest in instruments which have interest
rates that are adjusted periodically, or which "float" continuously according to
formulas intended to minimize any fluctuation in the values of the instruments
("Variable Rate Securities"). The interest rate of Variable Rate Securities
ordinarily is determined by reference to, or is a percentage of, an objective
standard such as a bank's prime rate, the 90-day U.S. Treasury bill rate or the
rate of return on commercial paper or bank certificates of deposit. As interest
rates decrease or increase, Variable Rate Securities experience less
appreciation or depreciation than fixed-rate obligations.
VARIABLE RATE DEMAND INSTRUMENTS. The Fund may invest in variable rate demand
instruments issued by industrial development authorities and other government
entities. In the event that a variable rate demand instrument to be purchased by
the Fund is not rated by credit rating agencies, the Investment Manager, using
guidelines approved by the Board of Trustees, must determine that such
instrument is of comparable quality at the time of purchase to a rated
instrument that would be eligible for purchase by the Fund. In some cases, the
Fund may require that the issuer's obligation to pay the principal of the note
be backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend.
Although there may be no active secondary market for a particular variable rate
demand instrument purchased by the Fund, the Fund may, at any time or during
specified periods not exceeding one year (depending upon the instrument
involved), demand payment in full of the principal of the instrument and may
resell the instrument to a third party.
The Fund could suffer a loss from a variable rate demand instrument because of
the absence of an active secondary market, because it may be difficult for the
Fund to dispose of the instrument in the event an issuer defaults on its payment
obligation, because the Fund is only entitled to exercise
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its demand rights at certain times, or for other reasons.
Variable rate demand instruments will be subject to the Fund's restrictions on
acquiring and holding illiquid securities to the extent that the absence of an
active secondary market for such securities causes them to be illiquid.
PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
participation interests in Municipal Securities with fixed, floating or variable
rates of interest. The buyer of a participation interest receives an undivided
interest in the securities underlying the instrument.
The Fund will purchase a participation interest only if: (a) the instrument
subject to the participation interest matures in one year or less, or the
instrument includes a right to demand payment, usually within 7-days, from the
seller; (b) the instrument meets the Fund's previously described quality
standards for Municipal Securities; and (c) the instrument is issued with an
opinion of counsel or is the subject of a ruling of the Internal Revenue
Service, stating that the interest earned on the participation interest is
exempt from federal income tax.
STAND-BY COMMITMENTS. The Fund also may acquire "stand-by commitments" for
Municipal Securities held in its portfolio. Under a stand-by commitment, a
dealer agrees to purchase at the Fund's option specified Municipal Securities at
a price equal to their amortized cost value plus accrued interest. The Fund will
acquire stand-by commitments solely to improve portfolio liquidity. The Fund
does not intend to exercise its stand-by rights solely for trading purposes.
ILLIQUID SECURITIES. The Fund may purchase illiquid securities, including
repurchase agreements maturing in more than 7-days, provided that no more than
10% of the Fund's net assets valued at the time of the transaction are invested
in such securities.
GOVERNMENT SECURITIES. The Fund may invest in government securities, including
U.S. Treasury notes, bills and bonds, which are backed by the full faith and
credit of the U.S. Government. Some securities issued by U.S. Government
agencies or instrumentalities are supported by the credit of the agency or
instrumentality, while others have an additional line of credit with the U.S.
Treasury. However, there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities. Accordingly, such securities may
involve risk of loss of principal and interest.
MATURITY. The Fund will purchase only securities that are deemed to mature in
397 days or less in accordance with federal securities regulations or securities
which have a variable rate of interest that is readjusted no less frequently
than every 397 days.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities on
a "when-issued" or "delayed delivery" basis. When-issued or delayed delivery
securities are securities purchased for future delivery at a stated price and
yield. Generally, the Fund will not pay for such securities or start earning
interest on them until the Fund receives them. Securities purchased on a
when-issued or delayed delivery basis are recorded as an asset. The value of
such securities may change as the general level of interest rates changes.
The Fund will not invest more than 25% of its assets in when-issued or delayed
delivery securities. The Fund will not purchase such securities for speculative
purposes and the
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Fund will expect to actually acquire the securities when it purchases them.
However, the Fund reserves the right to sell any such securities before their
settlement dates, if the Investment Manager deems such a sale advisable.
REPURCHASE AGREEMENTS. The Fund may engage in "repurchase agreements." In
entering into a repurchase agreement, the Fund acquires ownership of a security
from a broker-dealer or bank that agrees to repurchase the security at a
mutually agreed upon time and price (which price is higher than the purchase
price), thereby determining the yield during the Fund's holding period. Maturity
of the securities subject to repurchase may exceed one year.
If the seller of a repurchase agreement becomes bankrupt or otherwise defaults,
the Fund might incur expenses in enforcing its rights and could experience
losses, including a decline in the value of the underlying securities and a loss
of income. The Fund will enter into repurchase agreements only with banks and
other recognized financial institutions that the Investment Manager deems
creditworthy.
TEMPORARY INVESTMENTS. The Fund may from time to time, as a defensive measure
under abnormal market conditions, invest any or all of its assets in taxable
"temporary investments" which include: obligations of the U.S. Government, its
agencies or instrumentalities; debt securities (other than Municipal Securities)
rated in one of the two highest rating categories by any NRSRO; commercial paper
(other than Municipal Securities) rated in one of the two highest rating
categories by any NRSRO; certificates of deposit of domestic banks having
capital, surplus and undivided profits in excess of $100 million; and any of the
foregoing temporary investments subject to repurchase agreements. While
temporary investments could cause the Fund to generate dividends taxable to
shareholders as ordinary income, it is the Fund's primary intention to produce
dividends which are not subject to federal income or New York personal income
taxes.
SECURITIES SUBJECT TO A PUT FEATURE. A "put" feature permits the Fund to sell a
security at a fixed price prior to maturity to the put issuer. Because of this
feature, Municipal Securities subject to a put generally may be sold to third
parties at market rates. Generally, a premium is paid for a security subject to
a put feature. Investments in Municipal Securities subject to puts are limited
by federal securities laws and expose the Fund to a credit risk associated with
the put provider.
BORROWING POLICY. The Fund may not borrow money except for temporary purposes to
meet redemption requests that could not otherwise be met without immediately
selling portfolio securities. The Fund may borrow an amount up to one-third of
the value of its total assets and may pledge up to 10% of its total assets to
secure borrowings. The Fund may not borrow for leverage purposes. The Fund's
borrowing and pledging policies as set forth in the Statement of Additional
Information are fundamental.
LEGAL OPINIONS. Bond counsel will render opinions on the validity of Municipal
Securities. Bond counsel will also render opinions on whether the interest paid
on Municipal Securities is exempt from federal income tax, and whether the
interest paid on New York Municipal Securities is exempt from New York State and
New York municipal personal income taxes. Bond counsel will render such opinions
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to the issuers of Municipal Securities at the time the securities are issued.
The Fund and the Investment Manager will not review the proceedings on the
issuance of Municipal Securities or the bases for such opinions.
SPECIAL RISK CONSIDERATIONS. The Fund is a non-diversified portfolio of the
Schwab Fund Family. The investment return on a non-diversified portfolio
typically is dependent upon the performance of a smaller number of issuers
relative to the number of issuers held in a diversified portfolio. In the event
of changes in the financial condition or in the market's assessment of certain
issuers, the Fund's policy of acquiring large positions in the obligations of a
relatively small number of issuers may affect the value of the Fund's portfolio
to a greater extent than it would that of a diversified portfolio.
The Fund may invest more than 25% of its assets in Municipal Securities that
produce interest that is paid solely from revenues on similar projects. However,
the Fund does not presently intend to invest in such securities on a regular
basis, but will do so if such investment is deemed necessary or appropriate by
the Investment Manager. To the extent that the Fund's assets are invested in
Municipal Securities that produce interest that is payable solely from revenues
on similar projects, the Fund will be subject to the particular risks presented
by such projects to a greater extent than it would be if the Fund's assets were
not so invested.
Certain New York constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could result in adverse
consequences affecting New York Municipal Securities. (See "Municipal
Securities" in the Statement of Additional Information for more information
about these significant financial considerations.)
Participation interests in Municipal Securities and other derivative securities
eligible for purchase by the Fund involve special risks, including a risk that
the Internal Revenue Service may characterize some or all of the interest paid
on such securities to the Fund as taxable. There is also an increased risk, most
typically associated with "municipal lease" obligations, that a municipality
will not appropriate the funds necessary to make the scheduled payments on, or
may seek to cancel or otherwise avoid its obligations under, the lease that
supports the security owned by the Fund.
ORGANIZATION AND
MANAGEMENT OF THE FUND
GENERAL OVERSIGHT. The Board of Trustees and officers of the Schwab Fund Family
meet regularly to review investments, performance, expenses and other business
affairs.
THE INVESTMENT MANAGER. Professional investment management for the Fund is
provided by the Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, California 94104. The Investment Manager
provides a continuous investment program, including general investment and
economic advice regarding the Fund's investment strategies; manages the Fund's
investment portfolio and performs expense management, accounting and record
keeping; and provides other services necessary to the operation of the Fund and
the Schwab Fund Family. The Investment Manager, formed in 1989, is a
wholly-owned subsidiary of The Charles Schwab Corporation and is the investment
adviser and administrator of the mutual funds in the SchwabFunds Family(R), a
family of
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26 mutual funds. As of December 16, 1996, the SchwabFunds(R) had aggregate net
assets in excess of $42 billion.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Charles Schwab & Co., Inc. ("Schwab" or
the "Transfer Agent"), 101 Montgomery Street, San Francisco, California 94104,
serves as shareholder services agent and transfer agent for the Fund. Schwab
provides information and services to shareholders, which include reporting share
ownership, sales and dividend activity (and associated tax consequences),
responding to daily inquiries, effecting the transfer of Fund shares and
facilitating effective cash management of shareholders' Schwab account balances.
It furnishes office space and equipment, telephone facilities, personnel and
informational literature distribution as is necessary or appropriate in
providing shareholder and transfer agency information and services. Schwab is
also the Fund's distributor, but receives no compensation for its services as
such.
Schwab was established in 1971 and is one of America's largest discount brokers.
The firm provides low-cost securities brokerage and related financial services
to over 3.3 million active customer accounts and has over 225 branch offices.
Schwab also offers convenient access to financial information services and
provides products and services that help investors make investment decisions.
Schwab is a wholly-owned subsidiary of The Charles Schwab Corporation. Charles
R. Schwab is the founder, Chairman, Chief Executive Officer and a Director of
The Charles Schwab Corporation. As a result of his beneficial ownership
interests in and other relationships with The Charles Schwab Corporation and its
affiliates, Mr. Schwab may be deemed to be a controlling person of Schwab and
the Investment Manager.
OPERATING FEES AND EXPENSES
Pursuant to its Investment Advisory and Administration Agreement with the Schwab
Fund Family, the Investment Manager receives from the Fund a graduated annual
fee, payable monthly, of 0.46% of the 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. At least through
April 30, 1997, the Investment Manager has guaranteed that the Fund's management
fee will not exceed 0.20% of the Fund's average daily net assets.
In addition, the Investment Manager and Schwab have guaranteed that, at least
through April 30, 1997, total fund operating expenses will not exceed 0.69% of
the average daily net assets of the Sweep Shares. The effect of these guarantees
is to maintain or lower the expenses of the Sweep Shares and thus maintain or
increase the total return to shareholders. For the fiscal period ended December
31, 1995 the Fund paid a management fee of 0.29%, and the Sweep Shares paid
total fund operating expenses of 0.63% of the Sweep Shares' average daily net
assets (after waivers and reimbursements). The following expenses are not
included as "operating expenses" for purposes of this guarantee: interest
expenses, taxes, capital items such as the cost of the purchase or sale of
portfolio securities, including brokerage fees or commissions, and extraordinary
expenses.
For the transfer agency services provided, the Transfer Agent receives an annual
fee, payable monthly, of 0.25% of the average daily net assets of the Sweep
Shares. In addition, for shareholder services provided, Schwab receives an
annual fee, payable monthly, of
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0.20% of the average daily net assets of the Sweep Shares. For the Value
Advantage Shares, the Transfer Agent receives an annual fee of 0.05% of the
average daily net assets of that class' shares of beneficial interest. The
Fund's Custodian is PNC Bank, N.A.
OTHER EXPENSES. The Schwab Fund Family pays the expenses of its operations,
including: the fees and expenses for independent accountants, legal counsel and
the custodian of its assets; the cost of maintaining books and records of
account; registration fees; the fees and expenses of qualifying the Schwab Fund
Family and its shares for distribution under federal and state securities laws;
and industry association membership dues. These expenses generally are allocated
among the Schwab Fund Family's investment portfolios ("Series"), or classes of
shares within these Series, in proportion to their relative net assets at the
time the expense is incurred. However, expenses directly attributable to a
particular Series or class of a Series will be charged to that Series or class,
respectively. The differing expenses applicable to the Sweep Shares and the
Value Advantage Shares will cause the performance of these two classes of shares
to differ.
OTHER INFORMATION
The Schwab Fund Family was organized as a business trust under the laws of
Massachusetts on October 20, 1989 and may issue an unlimited number of shares of
beneficial interest or classes of shares in one or more Series. Currently, the
Schwab Fund Family offers shares of 9 Series which may be organized into one or
more classes of shares of beneficial interest. The Board of Trustees may
authorize the issuance of shares of additional Series or classes if it deems it
desirable. Shares within each class or Series have equal noncumulative voting
rights and equal rights as to distributions, assets and liquidation of such
Series, except to the extent such voting rights or rights as to distributions,
assets and liquidation vary among classes of a Series.
SHAREHOLDER MEETINGS AND VOTING RIGHTS. The Schwab Fund Family is not required
to hold annual shareholders' meetings and does not intend to do so. It will,
however, hold special meetings as required or deemed desirable by the Board of
Trustees for such purposes as changing fundamental policies, electing or
removing Trustees, or approving or amending an investment advisory agreement. In
addition, a Trustee may be removed by shareholders at a special meeting called
upon written request of shareholders owning in the aggregate at least 10% of the
outstanding shares of the Schwab Fund Family.
Shareholders will vote by Series and not in the aggregate (for example, when
voting to approve the investment advisory agreement), except when voting in the
aggregate is permitted under the 1940 Act, such as for the election of Trustees.
In addition, holders of the Sweep Shares will vote exclusively as a class on any
matter relating solely to the Sweep Shares and on any matter in which the
interests of the holders of the Sweep Share differ from the interests of the
holders of Value Advantage Shares.
DISTRIBUTIONS AND TAXES
DIVIDENDS AND OTHER DISTRIBUTIONS. On each day that the net asset value per
share of the Fund is determined ("Business Day"), the Fund's net investment
income is declared as of the close of trading on the New York Stock Exchange
(the "Exchange") (generally 4:00 p.m. Eastern time) as a dividend to
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<PAGE> 14
shareholders of record at that time. Dividends are normally paid (and, where
applicable, reinvested) on the 15th of each month, if a Business Day, otherwise
on the next Business Day, with the exception of the dividend paid in December,
which is scheduled to be paid on the last Business Day in December.
TAX INFORMATION. The Fund has elected to be treated as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"),
qualified as such, and intends to continue to so qualify. In order to so
qualify, the Fund will distribute on a current basis substantially all of its
investment company taxable income, its net exempt-interest income and its net
capital gains (if any), and will meet certain other requirements. Such
qualification relieves the Fund of liability for federal and New York income
taxes to the extent the Fund's earnings are distributed.
FEDERAL INCOME TAXES. Dividends derived from exempt-interest income (known as
"exempt-interest dividends") may be treated by the Fund's shareholders as items
of interest excludable from their federal gross income. To the extent dividends
paid to shareholders are derived from taxable interest or capital gains, such
dividends will be subject to federal income tax, whether received in cash or
reinvested.
The Fund may at times purchase Municipal Securities at a discount from the price
at which they were initially issued. For federal income tax purposes, some or
all of this market discount will be included in the Fund's ordinary income and
will be taxable to shareholders as such when it is distributed to them.
If the Fund holds certain "private activity bonds" ("industrial development
bonds" under prior law), dividends derived from interest on such obligations and
other securities which may be owned by the Fund will be classified as an item of
tax preference which could subject certain shareholders to federal alternative
minimum tax liability. Corporate shareholders must also take all exempt-interest
dividends into account in determining "adjusted current earnings" for purposes
of calculating their alternative minimum tax.
Private activity bonds and industrial development bonds generally are bonds
issued by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. Private activity bonds and industrial
development bonds also generally are limited obligation (or revenue) securities,
which means that they are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from some other
specific revenue source. (See "Municipal Securities" in the Statement of
Additional Information.)
Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that exempt interest dividends will be taken into account
in determining the taxability of such benefits.
NEW YORK INCOME TAXES: Dividends paid by the Fund to non-corporate shareholders
and derived from interest on New York Municipal Securities or federal
obligations are also exempt from State of New York, New York City and other
municipalities' personal income taxes. For this purpose, federal obligations are
obligations the interest on which would be excludable from gross income for New
York personal income tax purposes if the obligations were owned by an
individual. However,
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<PAGE> 15
income tax will be taxed as ordinary income to such shareholders,
notwithstanding that all or a portion of such dividends are exempt from State of
New York personal income tax. Moreover, to the extent that the Fund's dividends
are derived from sources other than New York Municipal Securities or federal
obligations, such dividends will be subject to State of New York, New York City
and other municipalities' personal income taxes, even though such dividends may
be exempt for federal regular income tax purposes.
To the extent, if any, that dividends paid to shareholders are derived from
taxable interest or from capital gains, such dividends will not be exempt from
State of New York, New York City and other municipalities' personal income taxes
whether received in cash or reinvested.
Records of dividends and other distributions, purchases and redemptions will be
reflected on shareholders' Schwab statements. The Fund will notify shareholders
at least annually as to the federal income and State of New York personal income
tax consequences of distributions made each year.
The foregoing is only a brief summary of some of the federal and New York income
tax considerations affecting the Fund and its shareholders. Potential investors
should consult their tax advisers with specific reference to their own tax
situations.
SHARE PRICE CALCULATION
The price of a Sweep Share of the Fund is its "net asset value" per share or
"NAV." This figure is computed by taking total Fund assets allocable to that
class, subtracting any liabilities allocable to the class, and dividing the
resulting amount by the number of shares of the class outstanding. The net asset
value per share of the Sweep Shares of the Fund is determined on each day both
the Federal Reserve Bank of New York and the Exchange are open for business,
first at 10:00 a.m. (Eastern time), then again as of the close of normal trading
on the Exchange (generally 4:00 p.m. Eastern time). Purchase or redemption
orders and exchange requests will be executed at the net asset value next
determined after receipt by the Transfer Agent or its authorized agent. While
the Fund attempts to maintain its net asset value at a constant $1.00 per share,
Fund shares are not insured against reduction in net asset value.
The Fund values its portfolio securities 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 the Fund's investments using the amortized cost method
with market values. Market valuations are obtained by using (1) actual
quotations provided by third-party pricing services or market makers; (2)
estimates of market value; or (3) values obtained from yield data relating to
comparable classes of money market instruments published by reputable sources at
the mean between the bid and asked prices for the instruments. If a deviation of
1/2 of 1% or more were to occur between the net asset value per share of the
Sweep Shares of the Fund calculated by reference to market values and the $1.00
per share amortized cost value of the Sweep Shares of the Fund, or if there were
any other deviation which the Board of Trustees 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.
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HOW THE FUND REPORTS PERFORMANCE
From time to time the Fund may advertise the yield, effective yield, taxable
equivalent yield, taxable equivalent effective yield and total return of the
Sweep Shares of the Fund. Performance figures are based upon historical results
and are not intended to indicate future performance. Since money market funds
seek to maintain a stable $1.00 share price, current 7-day yields are the most
common illustration of money market fund performance.
The yield of the Sweep Shares of the Fund refers to the income generated by a
hypothetical investment in Sweep Shares of the Fund over a specific 7-day
period. This income is then annualized, which means that the income generated
during the 7-day period is assumed to be generated each week over an annual
period and is shown as a percentage of the hypothetical investment.
Effective yield is calculated similarly, but the income earned by the investment
is assumed to be compounded weekly when annualized. Effective yield will be
slightly higher than yield due to this compounding effect.
Taxable equivalent yield is the yield that a taxable investment must generate in
order to equal (after applicable taxes are deducted) the Sweep Shares' yield for
an investor in stated federal, State of New York, and New York municipal income
tax brackets (normally assumed to be the applicable maximum tax rate). Taxable
equivalent yield will be higher than tax-exempt yield. (See "Yield" in the
Statement of Additional Information.)
Taxable equivalent effective yield is computed in the same manner as is taxable
equivalent yield, except that effective yield is substituted for yield in the
calculation.
Total return is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The performance of the Sweep Shares of the Fund may be compared to that of other
mutual funds tracked by mutual fund rating services, various indices of
investment performance, U.S. Government obligations, bank certificates of
deposit, other investments for which reliable performance data is available and
the consumer price index.
Because the Sweep Shares of the Fund are subject to different expenses than the
Value Advantage Shares, the performance of the two classes of shares will
differ.
Additional performance information about the Sweep Shares of the Fund is
available in the Fund's Annual Report, which is sent to all shareholders. To
request a free copy, call your local Schwab office or 800-2 NO-LOAD.
INVESTING IN SHARES OF THE FUND
SHAREHOLDER SERVICE. You may place Fund purchase orders and orders to sell
shares as well as exchange requests at any one of over 225 Schwab offices
nationwide or by calling
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800-2 NO-LOAD, where trained representatives are available to answer questions
about the Fund and your account. The right to initiate transactions by telephone
is automatically available through your Schwab account. TDD users may contact
Schwab at 800-345-2550, 24 hours a day.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the Fund follows telephone orders that
it reasonably believes to be genuine, it will not be liable for any losses a
shareholder may experience. If the Fund does not follow reasonable procedures to
confirm that a telephone order is genuine, the Fund may be liable for any losses
the shareholder may suffer from unauthorized or fraudulent orders. These
procedures may include:
- - requiring a form of personal identification prior to acting upon instructions
received by telephone;
- - providing written confirmation of such instructions; and
- - tape recording telephone transactions.
Investors should remember that it may be difficult to complete transactions by
telephone during periods of drastic economic or market changes, when our phone
lines may become very busy with calls from other investors. If you want to buy,
sell or exchange shares but have trouble reaching the Fund by telephone, you may
want to use one of the other ways offered for completing the transactions
discussed below, even though these procedures may mean that completing your
transaction may take longer.
To assist in minimizing administrative costs, share certificates will not be
issued. Records regarding share ownership are maintained by the Transfer Agent.
Telephone purchase or redemption orders and exchange requests received prior to
8:00 p.m. (Eastern time) on any Business Day, once they have been verified as to
the caller's identity and account ownership, will be deemed to be received by
the Transfer Agent, or its authorized agent, prior to the next net asset value
determination. Subsequent telephone orders received prior to the first net asset
value determination on the following day will be deemed received prior to that
day's second net asset value determination.
HOW TO BUY SHARES
OPENING A SCHWAB ACCOUNT. You may buy shares of the Fund through an account
maintained with Schwab, and payment for shares must be made directly to Schwab.
If you do not presently maintain a Schwab account and wish to establish one,
simply complete a Schwab Account Application (available by calling 800-2
NO-LOAD, 24 hours a day, or by contacting your local Schwab office) and deliver
it, by mail or in person, to your local Schwab office. You may also mail the
application to Schwab at 101 Montgomery Street, San Francisco, California 94104.
Corporations and other organizations should contact their local Schwab office to
determine which additional forms may be necessary to open a Schwab account. With
your Schwab account, you have access to other investments available at Schwab,
such as stocks, bonds and other mutual funds.
The Securities Investor Protection Corporation ("SIPC") will provide account
protection, in an amount up to $500,000, for securities, including Fund shares,
which you hold in a Schwab account. Of course, SIPC account protection does not
protect shareholders from share price fluctuations. If you already have a
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Schwab account, you may buy shares in the Fund as described below and need not
open a new account.
SCHWAB ACCOUNT MINIMUMS AND ASSOCIATED FEES. Schwab requires a $1,000 deposit
and account balance minimum to maintain a Schwab brokerage account ($500 for
custodial accounts). A fee of $7.50 will be charged to Schwab brokerage accounts
that fall below this minimum for three consecutive months in any quarter. This
fee, if applicable, will be charged at the end of each quarter and will be
waived if there has been at least one commissionable trade within the last 6
months, or if the shareholder's combined account balances at Schwab total
$10,000 or more.
Schwab currently imposes no fee for opening a Schwab One(R) account with a
minimum of $5,000 account equity. Schwab One accounts containing less than
$5,000 account equity are subject to a fee of $5 per month imposed by Schwab if
there have been fewer than two commissionable trades within the last 12 months.
DEPOSITING FUNDS. You may deposit funds into your Schwab account by check, wire
or many other forms of electronic funds transfer. Securities may also be
deposited. You may also buy SchwabFunds(R) shares using electronic products such
as StreetSmart(R), The Equalizer(R) and TeleBroker(R). All deposit checks should
be made payable to Charles Schwab & Co., Inc. If you would like to wire funds
into your existing Schwab account, please contact your local Schwab office for
instructions.
WHEN YOU CAN BUY SHARES. You must have funds in your Schwab account in order to
buy Fund shares. If funds (including those transmitted by wire) are received by
Schwab before the time of the Fund's last daily net asset value calculation
(normally 4:00 p.m. Eastern time), they will be available for investment on that
day. If funds arrive after that time, they will be available for investment the
next Business Day.
METHODS OF BUYING SHARES
AUTOMATIC INVESTMENT: When opening a Schwab brokerage account, an investor will
be asked to select a SchwabFunds class or series with sweep privileges as a
"primary fund." If the Fund is selected as a primary fund, free credit balances
in the investor's brokerage account will be invested automatically in shares of
the Fund according to the procedures described in the account agreement with the
investor. Depending on the type of account, the automatic investment of free
credit balances will be effected daily, weekly or at other times and may be
subject to minimum investment and other requirements.
An investor with an existing Schwab brokerage account may add the automatic
investment feature to his or her account by completing the appropriate section
of the Schwab Account Application available at any Schwab office. A shareholder
may change primary funds by calling or writing his or her local Schwab office or
writing Schwab at the address referenced on the cover of this Prospectus. Note
that the automatic reinvestment feature is not available for Value Advantage
Shares.
DIRECT PURCHASE: A Schwab account holder may buy shares of the Fund (if it is
not his or her primary fund) in several ways. The minimum initial investment for
such a purchase is $1,000, and subsequent investments must be at least $100. For
the Value Advantage Shares, the minimum initial investment is $25,000, the
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minimum subsequent investment is $5,000 and the minimum account balance is
$20,000.
BY TELEPHONE
You may use existing funds in your Schwab account to make initial and subsequent
share purchases. To place your order, call your local Schwab office during
regular business hours or 800-2 NO-LOAD, 24 hours a day. TDD users may contact
Schwab at 800-345-2550, 24 hours a day.
BY MAIL
You may direct that funds already in your Schwab account be used to make initial
and subsequent share purchases. Alternatively, your purchase instructions may be
accompanied by a check made payable to Charles Schwab & Co., Inc., which will be
deposited into your Schwab account and used, as necessary, to cover all or part
of your purchase order.
Written purchase orders (along with any checks) should be mailed to Schwab at
101 Montgomery Street, San Francisco, California 94104 or to your local Schwab
office and should:
- - reference your Schwab account number (inapplicable if a Schwab Account
Application is also enclosed);
- - specify the name of the Fund and class, and the dollar amount of shares you
would like to buy; and
- - for initial share purchases only, select one of the distribution options
listed below.
Once mailed, a purchase request is irrevocable and may not be modified or
cancelled.
ELECTRONICALLY
For more information regarding how to buy shares electronically using
StreetSmart(R), The Equalizer(R) and TeleBroker(R), call 800-2 NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
Visit your local Schwab office, where a representative will be happy to assist
you.
DISTRIBUTION OPTIONS. The Schwab account standing instructions that you selected
in your Schwab Account Application will determine which of the two distribution
options listed below will apply to you. Fund distributions will be automatically
reinvested, unless the Transfer Agent, or its authorized agent, has received
instructions that distributions be mailed to you as they are paid. Please
contact your local Schwab office if you already have a Schwab account and wish
to change your account standing instructions.
AUTOMATIC REINVESTMENT: All distributions will be reinvested in additional
full Sweep Shares of the Fund at the net asset value next determined after
their payable date.
RECEIVE DIVIDENDS BY MAIL: All distributions will be credited to your
Schwab account as of the payable date. If your account is coded to have
dividends mailed immediately, checks will normally be mailed the Business
Day after distributions are credited.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
You can request that your Schwab office wire funds from your Schwab account to
your bank account. There is a $15 fee for each wire transfer of funds.
OTHER PURCHASE INFORMATION. The minimum amounts required for automatic
investment or direct purchase may be reduced or waived on
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certain occasions. For example, free credit balances in accounts of certain
categories of investors, such as holders of Schwab One(R) and Schwab custodial
accounts, may be invested automatically irrespective of amount. The Fund may
also waive the minimums for purchases by trustees, directors, officers or
employees of the Fund, Schwab or the Investment Manager. The Fund reserves the
right, in its sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this Prospectus, to
reject purchase orders or to change the minimum investment requirements. All
orders to buy shares of the Fund are subject to acceptance by the Fund and are
not binding until confirmed or accepted in writing. Schwab will charge a $15
service fee against an investor's Schwab account should his or her check be
returned because of insufficient or uncollected funds or a stop payment order.
HOW TO SELL OR
EXCHANGE SHARES
The exchange privilege allows you to exchange your SchwabFunds(R) shares for
shares of another SchwabFunds Series or class available to investors in your
state, provided you meet the initial and subsequent investment requirements and
any other requirements relating to the Series or class of shares you wish to
buy. Thus, you can conveniently modify your investments if your goals or market
conditions change. For federal income tax and certain other purposes, an
exchange of shares between funds will be treated as a sale of shares in one fund
and a purchase of shares in another fund. An exchange of shares between classes
of the same fund should not be treated as a sale of shares. The Fund reserves
the right to modify, limit or terminate the exchange privilege upon 60 days'
written notice.
AUTOMATIC REDEMPTION. A sale of Fund shares will be automatically effected to
satisfy debit balances in an investor's Schwab account, to provide necessary
cash collateral for an investor's margin obligation to Schwab and to settle
securities transactions in the account. All such sales will be effected in
accordance with the procedures described in the investor's Schwab Account
Agreement.
DIRECT REDEMPTION. You can sell or exchange your shares at any time by
telephone, by mail, electronically or in person, subject to the following terms
and conditions:
- - if you bought your shares by check, we will send you your money as soon as
your check clears your bank, which may take up to 15 days;
- - depending on the type of Schwab account you have, your money may earn interest
during any holding period;
- - you will receive the dividends declared for the day on which you sell your
shares;
- - we will have a check for your shares at your local Schwab office on the
Business Day after the Transfer Agent, or its authorized agent, receives
proper instructions to sell your shares;
- - a check normally will be mailed to you on the Business Day following the sale
of your shares if you specifically request that it be mailed; and
- - we may suspend the right to sell shares or postpone payment for a sale of
shares when trading on the Exchange is restricted; the Exchange is closed for
any reason other than its normal weekend or holiday closings, emergency
circumstances as determined by the SEC; or for any other circumstances as the
SEC may permit.
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METHODS OF SELLING OR EXCHANGING SHARES
BY TELEPHONE
You can sell or exchange your shares by telephone by calling your local Schwab
office during regular business hours, or by calling 800-2 NO-LOAD, 24 hours a
day. TDD users may contact Schwab at 800-345-2550, 24 hours a day.
We need the following information in order to process your telephone sale or
exchange request:
- - your Schwab account number and your name for verification;
- - the number of shares you want to sell or exchange;
- - the name of the Fund and class, if applicable, from which you are selling or
exchanging shares;
- - the name of the Fund and class into which shares are to be exchanged, if
applicable; and
- - the distribution option you select, if you are exchanging shares.
BY MAIL
You can also sell or exchange shares by writing to your local Schwab office or
by writing to the address on the cover of this Prospectus.
We need the following information in order to process your mail sale or exchange
request:
- - your Schwab account number;
- - the number of shares you want to sell or exchange;
- - the name of the fund and class, if applicable, from which you are selling or
exchanging shares;
- - the name of the Fund and class into which shares are to be exchanged, if
applicable;
- - the distribution option you select, if you are exchanging shares; and
- - the signature of at least one of the registered Schwab account holders in the
exact form specified in the account.
Once mailed, a sale or exchange request is irrevocable and may not be modified
or cancelled.
ELECTRONICALLY
For more information regarding how to sell or exchange shares electronically
using StreetSmart(R), The Equalizer(R) and TeleBroker(R), call 800-2 NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
You can also request a sale or exchange of shares in person at your local Schwab
office.
OTHER IMPORTANT INFORMATION
MINIMUM BALANCE AND BROKERAGE ACCOUNT REQUIREMENTS. Due to the relatively high
cost of maintaining smaller holdings, the Fund reserves the right to redeem a
shareholder's shares if, as a result of redemptions, their aggregate value drops
below the $100 minimum balance requirement for the Sweep Shares of the Fund. The
Fund will notify shareholders in writing 30 days before taking such action to
allow them to increase their holdings to at least the minimum level. Also note
that, because they can only be held in Schwab accounts, Fund shares will be
automatically redeemed should the Schwab account in which they are carried be
closed.
CONSOLIDATED MAILINGS. In an effort to reduce the Fund's mailing costs, the Fund
consolidates shareholder mailings by household.
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<PAGE> 22
This consolidation means that a household having multiple accounts with the
identical address of record will receive a single package during each
shareholder mailing. If you do not wish this consolidation to apply to your
account(s), please write to SchwabFunds(R) at 101 Montgomery Street, San
Francisco, California 94104 to that effect.
WIRE TRANSFERS TO YOUR BANK. If you so instruct your local Schwab office, funds
can be wired from your Schwab account to your bank account. Call your local
Schwab office for additional information. A $15 service fee will be charged
against your Schwab account for each wire sent.
SCHWAB ONE(R) ACCOUNT FEATURES. Shareholders who hold shares of the Fund in
Schwab One accounts are entitled to sell Fund shares through debit cards and
checks. Investors should contact Schwab if they are interested in the benefits
and requirements of a Schwab One account.
READING THIS PROSPECTUS. References to "you" and "your" in this Prospectus refer
to prospective investors and/or current shareholders, while references to "we",
"us", "our" or "our Fund" refer to the Fund generally.
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR.
- ------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
- ------------------------------------------------------
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THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 24
SCHWAB NEW YORK
MUNICIPAL MONEY FUND - SWEEP SHARES
PROSPECTUS April 29, 1996, as amended
January 2, 1997
[SchwabFunds(R) Logo]
2239-4 (1/97) Printed on recycled paper.
[SchwabFunds(R) Logo]
101 Montgomery Street
San Francisco, California 94104
