<PAGE> 1
As filed with the Securities and Exchange Commission on March 29, 1996
File Nos. 33-31894 and 811-05954
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 23 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 [X]
THE CHARLES SCHWAB FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(415) 627-7000
Timothy F. McCarthy, President
The Charles Schwab Family of Funds
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)
Copies of communications to:
<TABLE>
<S> <C>
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management , Inc.
1301 K Street, NW, Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104
</TABLE>
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On April 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485
if appropriate, check appropriate box:
/ / This post-effective amendment designates a new
effective date for a previously filed post-effective amendment
DECLARATION PURSUANT TO RULE 24f-2: Pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, Registrant has registered an
indefinite number or amount of its shares of beneficial interest under the
Securities Act of 1933, as amended. The Rule 24f-2 Notice for Registrant's
fiscal year ended December 31, 1995 was filed on February 21, 1996.
Total No. of Pages_____ Exhibit Index Appears at _____
<PAGE> 2
PART A
THE CHARLES SCHWAB FAMILY OF FUNDS
The information required by Items 1 through 9 for Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab
Tax-Exempt Money Fund-Sweep Shares, Schwab California Tax-Exempt Money
Fund-Sweep Shares, Schwab Retirement Money Fund(R), Schwab Institutional
Advantage Money Fund(TM), and Schwab New York Tax-Exempt Money Fund-Sweep
Shares, separate portfolios of Registrant, are hereby incorporated by reference
to the Prospectuses for these Portfolios filed with the Securities and Exchange
Commission pursuant to Rule 497(e) on September 1, 1995.
<PAGE> 3
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Value Advantage Money Fund
<TABLE>
<CAPTION>
Part A Item Prospectus Caption
----------- ------------------
<S> <C>
Cover Page Cover Page
Synopsis Key Features of the Fund; Summary of Expenses
Condensed Financial Information Financial Highlights
General Description of Registrant Matching the Fund to Your Investment Needs;
Investment Objective and Policies
Management of the Fund Other Information; Organization and Management of
the Fund
Management's Discussion of Fund Performance How the Fund Reports Performance
Capital Stock and Other Securities Cover Page; Matching the Fund to Your Investment
Needs; Organization and Management of the Fund;
Dividends and Other Distributions; Income Tax
Information; Other Information; Investing in the
Fund
Purchase of Securities Being Offered How We Determine the Price of Your Shares; How to
Buy Shares
Redemption or Repurchase How to Sell Your Shares
Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 4
SCHWAB VALUE ADVANTAGE
MONEY FUND(R)
PROSPECTUS APRIL 1, 1996
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION: Contact your local Charles Schwab &
Co., Inc. ("Schwab") office, or call 800-2 NO-LOAD.
THE SCHWAB VALUE ADVANTAGE MONEY FUND, (the "Fund") is designed to provide you
with the highest possible current income consistent with the Fund's investment
objective while seeking to preserve your investment and provide you with
liquidity. The Fund is a diversified investment portfolio of The Charles Schwab
Family of Funds (the "Trust"), a no-load, open-end management investment
company.
ABOUT THIS PROSPECTUS: THIS PROSPECTUS PROVIDES YOU WITH CONCISE INFORMATION
THAT YOU SHOULD KNOW BEFORE YOU DECIDE IF THE FUND PROVIDES THE INVESTMENT
OPPORTUNITY YOU WANT. READ IT CAREFULLY, AND RETAIN IT FOR FUTURE REFERENCE. You
can find more detailed information in the Statement of Additional Information,
dated April 1, 1996 (and as may be amended from time to time). The Statement has
been filed with the SEC and is incorporated in this Prospectus by reference
(which means that it is legally considered part of this Prospectus even though
it is not printed here). 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 Statement of Additional Information, call Schwab at 800-2
NO-LOAD, 24 hours a day, or write 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Key Features of the Fund................... 2
Summary of Expenses........................ 2
Financial Highlights....................... 4
Matching the Fund to Your Investment
Needs.................................... 5
Investment Objective and Policies.......... 5
Investment Techniques Used by the Fund..... 8
Organization and Management of the Fund.... 9
Management Functions
and Responsibilities................... 9
Operating Fees and Expenses.............. 10
Other Information........................ 10
Investing in Shares of the Fund............ 11
How to Buy Shares........................ 11
How to Exchange Shares................... 14
How to Sell Your Shares.................. 14
Important Information about
Your Investment.......................... 16
Dividends and Other Distributions........ 16
Income Tax Information................... 16
How We Determine the Price of Your
Shares................................. 16
How the Fund Reports Performance......... 17
Glossary of Important Terms................ 19
</TABLE>
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.
<PAGE> 5
KEY FEATURES OF THE FUND
MAXIMUM CURRENT INCOME AND SAFETY. Our goal is to provide you with the highest
possible current income while preserving your investment and providing you with
quick access to your money. To achieve this goal, the Fund invests in
high-quality, short-term debt securities. (See "Investment Objective and
Policies.")
PRESERVATION OF INVESTMENT. The Fund seeks to maintain a stable net asset value
(known as the Fund's "NAV") of $1.00 per share.
READY ACCESS TO YOUR CASH. You can conveniently sell your shares of the Fund at
any time. Generally, your redemption check will be available the next Business
Day at your local Schwab office, or it can be mailed directly to you. (See
"Investing in Shares of the Fund - How to Sell Your Shares.")
LOW COST INVESTING. The Fund was designed with operating expenses well below the
industry average. (See "Matching the Fund to Your Investment Needs.")
Additionally, you pay no sales fee when you buy Fund shares. Fees may be charged
for balances and transactions under the required minimums.
PROFESSIONAL MANAGEMENT OF THE FUND. Charles Schwab Investment Management, Inc.
(referred to in this Prospectus as the "Investment Manager") currently manages
the mutual funds in the SchwabFunds Family(R), a family of 21 mutual funds with
over $35 billion in assets as of March 18, 1996. (See "Organization and
Management of the Fund - The Investment Manager.")
SHAREHOLDER SERVICES. Schwab's professional representatives are available
toll-free 24 hours a day at 800-2 NO-LOAD to service your account, or you can
call your local Schwab office during regular business hours. (See "Investing in
the Fund.")
CONVENIENT REPORTING. You receive one consolidated account statement for all of
your account activity that combines all of your mutual fund activity into one
report.
READING THIS PROSPECTUS. For your ease of reading, we have italicized certain
terms which have been included in the glossary at the end of this Prospectus. If
you are unsure of the meaning of any italicized term, check the glossary.
References to "you" and "your" in this Prospectus refer to prospective investors
and/or current shareholders, while references to "us," "our" and "our Fund"
refer to the Fund generally.
SUMMARY OF EXPENSES
ANNUAL OPERATING EXPENSES. Our Fund pays its own annual operating expenses from
its income and assets. These expenses include management fees paid to the
Investment Manager, transfer agency fees, and other expenses. These expenses
cover, for example, services such as investment research and management of the
portfolio, and maintaining shareholder records. Because these fees are paid from
the Fund's income and assets, they are factored into the price of the Fund's
shares and into the dividends paid to shareholders. As a shareholder, you are
not charged any of these fees directly.
YOUR FEES FOR BUYING AND SELLING SHARES. You pay no sales fee when you buy the
Fund's shares. Because the Fund is designed for high balance accounts, the
Transfer Agent charges a $5 administrative fee if you sell or exchange shares
worth less than $5,000. The Transfer Agent charges a $5 fee each month that your
Fund account balance falls below the required
2
<PAGE> 6
$20,000 minimum, or below $15,000 for Individual Retirement Accounts and other
retirement accounts. The Transfer Agent will notify you in writing 15 days
before this fee is assessed in order to give you time to bring your account
balance up to the minimum amount.
The following fees (except the administrative fee) are stated as a percentage of
average net assets of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Administrative Fee (1)....... $5.00
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS):
Management Fee (after fee
reduction)(2).............. 0.35%
12b-1 Fees................... None
Other Expenses (after fee
reductions and/or expense
reimbursements)(3)......... 0.05%
------
TOTAL FUND OPERATING EXPENSES
(3,4)........................... 0.40%
</TABLE>
(1) If you sell or exchange shares in an amount less than $5,000, you will be
subject to a $5 administrative fee.
(2) This amount reflects a reduction by the Investment Manager, which is
guaranteed through at least August 31, 1996. If there were no such
reduction, the maximum management fee would be 0.46% of the Fund's average
daily net assets.
(3) This amount reflects the guarantee by Schwab and the Investment Manager
that, through at least August 31, 1996, the total fund operating expenses of
the Fund will not exceed 0.40% of the Fund's average daily net assets.
Without this guarantee, which was in effect during the fiscal year ended
December 31, 1995, the Fund's other expenses and total operating expenses
would have been 0.29% and 0.72%, respectively, of the Fund's average daily
net assets.
(4) You may be charged a fee if applicable minimum balances are not maintained
in your Schwab brokerage account or Schwab One(R) account. (See "Investing
in the Fund - How to Buy Shares - Schwab Account Minimums and Associated
Fees.") Schwab Individual Retirement Accounts with balances of $10,000 or
more by September 15, 1996 will not be charged Schwab's $29 annual IRA
account fee for the life of the account. Schwab Keogh plans are currently
charged an annual fee of $45.
EXAMPLE. You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return; and (2) redemption at the end of each period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$4 $13 $22 $ 51
</TABLE>
THE PRECEDING TABLE IS AN EXAMPLE ONLY, AND DOES NOT REPRESENT PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE EXPENSES SHOWN IN THE
EXAMPLE. This example reflects the guarantee by Schwab and the Investment
Manager that, through at least August 31, 1996, total operating expenses of the
Fund will not exceed 0.40% of the Fund's average daily net assets. Also, this
example does not include the $5 administrative fee on sales or exchanges of Fund
shares equal to or less than $5,000. Nor does this example include the $5
monthly fee charged on balances that fall below $20,000, or $15,000 for
Individual Retirement Accounts and other retirement accounts. Please remember,
that while this example assumes a 5% annual return on investment, the Fund's
actual return
3
<PAGE> 7
may be more or less than the 5% annual return used in this example.
The purpose of the preceding table is to help you understand the various costs
and expenses you will bear directly or indirectly when you invest in the Fund.
(See "Organization and Management of the Fund - Operating Fees and Expenses.")
FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report is included in our Statement of Additional
Information, which includes additional financial data and related notes. You can
get a free copy of this Statement by calling the telephone number or writing to
the address on the first page of this Prospectus. Using information in the
Fund's financial statements, we have prepared this table to show you information
such as investment income, dividends from investment income and the total
investment return.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992(1)
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net asset value
at beginning
of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income........... 0.06 0.04 0.03 0.02
Net realized &
unrealized gains
(losses) on
investment....... -- -- -- --
---------- --------- ------- -------
Total from
investment
operation........ 0.06 0.04 0.03 0.02
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992(1)
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Less distributions:
Dividends from net
investment
income........... (0.06) (0.04) (0.03) (0.02)
Dividends from
realized
gain on
investments...... -- -- -- --
---------- --------- ------- -------
Total
distributions...... (0.06) (0.04) (0.03) (0.02)
---------- --------- ------- -------
Net asset value at
end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ======= =======
Total return (%).... 5.80 4.09 3.02 2.33
Ratios/Supplemental
data:
Net assets at end
of period
(000's).......... $6,923,890 $3,731,629 $729,356 $319,024
Ratio of expenses
to average net
assets (%)....... 0.40 0.40 0.39 0.29*
Ratio of net
investment income
to average net
assets (%)....... 5.63 4.40 2.97 3.27*
</TABLE>
(1) For the period from April 30, 1992 (commence- ment of operations) to
December 31, 1992.
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the Fund's ratio of operating expenses to
average net assets. Had these fees and expenses not been reduced and absorbed,
the ratio of expenses to average net assets for the periods ended December 31,
1995, 1994, 1993 and 1992 would have been 0.72%, 0.79%, 0.82% and 0.94%*,
respectively, and the ratio of net investment income to average net assets would
have been 5.31%, 4.01%, 2.54% and 2.62%*, respectively.
*Annualized
4
<PAGE> 8
MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
Because the Fund is designed for larger balance accounts and less frequent
shareholder transactions, we can keep the operating expenses lower than the
industry average, which helps provide more competitive yields. The table below
shows the Fund's total operating expenses compared to the industry average for
similar type funds.
<TABLE>
<S> <C>
The Fund Industry Average*
---------- ------------------
0.40% 0.70%
</TABLE>
Note: These amounts represent total operating expenses after fee waivers for
first tier money funds, not including institutional money funds.
Our Fund invests in high-quality money market securities and is designed for
high current yields. Because shares of our Fund are held in your Schwab account,
the proceeds from redemptions you make are available for other investment
purchases you make in your account. Keep in mind, however, that because the Fund
is intended for larger balance accounts, you may be charged a fee for
redemptions or exchanges under the required minimum or if your balance falls
below the required minimum.
Schwab also offers a selection of "sweep" money funds with lower minimums which
automatically invest the uninvested cash balances in your Schwab account in a
Schwab money fund which you select. A "sweep" money fund may be more suitable
for providing income on fluctuating cash balances in your account in between
other investments.
* Fourth quarter industry averages as reported by IBC/Donoghue Quarterly Report
on Money Fund Performance, 4th Quarter, 1995.
The Fund may be appropriate for a variety of investment programs which can be
long-term or short-term in nature. The Fund should not be a substitute for
building an investment portfolio tailored to your individual investment needs
and risk tolerance.
INVESTMENT OBJECTIVE
AND POLICIES
Our Fund's investment objective is to provide maximum current income consistent
with liquidity and stability of capital. Because any investment involves risk,
we cannot guarantee achieving this objective. This investment objective is
fundamental.
To achieve this objective, we normally will invest in the following types of
U.S. dollar-denominated debt instruments, which our Investment Manager has
determined present minimal credit risk:
1. Bank certificates of deposit, time deposits or bankers' acceptances of
domestic banks (including their foreign branches), U.S. branches of foreign
banks, and foreign branches of foreign banks having capital, surplus and
undivided profits in excess of $100 million.
2. Commercial paper rated in one of the two highest rating categories by
Moody's, S&P, Duff, Fitch, or any other nationally recognized statistical
rating organization (referred to in this Prospectus as an "NRSRO") and
commercial paper or notes of issuers who have an outstanding unsecured debt
issue that is currently rated in one of the two highest rating categories by
any NRSRO. The obligation must also be on the same or
5
<PAGE> 9
a higher level of priority as the rated issue, and it must be collateralized
to the same extent as the rated issue. We may also invest in other corporate
obligations such as publicly traded bonds, debentures and notes rated in one
of the two highest rating categories by any NRSRO, as well as other similar
securities which, if unrated by any NRSRO, the Investment Manager, using
guidelines approved by the Board of Trustees, determines to be at least equal
in quality to one or more of the securities mentioned above. (For a
description of the ratings, see "Appendix - Ratings of Investment Securities"
in the Statement of Additional Information.)
3. Obligations of, or obligations guaranteed by, the United States government,
the Canadian government or their agencies or instrumentalities.
4. Repurchase agreements involving obligations that are suitable for investment
under the categories listed above.
PRIVATE PLACEMENT SECURITIES. We may invest in commercial paper that is exempt
from registration according to Section 4(2) of the Securities Act of 1933, and
that is resold to qualified institutional buyers under Securities Act Rule 144A
(known as "Section 4(2) paper").
Federal securities laws restrict the disposition of Section 4(2) paper. Such
commercial paper is generally sold to institutional investors who agree that
they are purchasing the paper for investment and not for public distribution.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity.
Because it is not possible to predict with assurance exactly how the market for
Section 4(2) paper will develop, our Investment Manager, pursuant to guidelines
approved by the Board of Trustees, will carefully monitor the Fund's investments
in these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. Our Fund's liquidity could
be reduced if qualified institutional buyers become temporarily uninterested in
purchasing these restricted securities.
We will not invest more than 10% of our assets in Section 4(2) paper (and other
illiquid securities) unless our Investment Manager determines, by continuously
referring to the appropriate trading markets and following the guidelines
approved by the Board of Trustees, that any Section 4(2) paper we hold in excess
of this level is at all times liquid.
ASSET-BACKED COMMERCIAL PAPER. We may invest in asset-backed commercial paper.
Repayment of this type of commercial paper is intended to be obtained from an
identified pool of assets, including automobile receivables, credit card
receivables, and other types of receivables. Asset-backed commercial paper is
issued by a special purpose vehicle (usually a corporation) that has been
established for the purpose of issuing the commercial paper and purchasing the
underlying pool of assets. The issuer of the commercial paper bears the direct
risk of prepayment on the receivables constituting the underlying pool of
assets. Credit support for such asset-backed commercial paper may be based on
the underlying assets or it may be provided by a third party. Credit enhancement
techniques include letters of credit, insurance bonds, limited guarantees (which
are generally provided by the seller),
6
<PAGE> 10
and over-collateralization. We apply the same quality requirements to
asset-backed commercial paper as we apply to other securities we purchase.
EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. We may purchase
Eurodollar certificates of deposit. However, when purchasing such certificates
we will consider their marketability, any possible restrictions on international
currency transactions and any regulations imposed on such securities by the
domicile country of the issuer. The regulatory requirements that apply to
certificates of deposit issued by U.S. banks may not apply to Eurodollar
certificates. Income from such certificates may be subject to foreign taxes.
We may invest in securities of foreign issuers, or securities principally traded
overseas. Such securities may involve special risks because of foreign economic,
political and legal devel-opments, including changes in currency exchange rates,
regulations controlling the exchange of currency (including blocking any
exchange of currency), expropriation of assets or nationalization, imposition of
withholding taxes on dividend interest payments, and possible difficulty in
obtaining and enforcing judgments against foreign entities. Furthermore, issuers
of foreign securities are subject to different, often less comprehensive,
accounting, reporting and disclosure requirements than domestic issuers. The
securities of some foreign companies and foreign securities markets are less
liquid and at times more volatile than securities of comparable U.S. companies
and U.S. securities markets. Foreign brokerage commissions and other fees are
also generally higher than those imposed in the United States. There are also
special tax considerations that apply to securities of foreign issuers and
securities principally traded overseas.
VARIABLE RATE SECURITIES. We 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 is
ordinarily 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.
Generally, changes in the interest rate on Variable Rate Securities reduce the
fluctuation of their market value. Accordingly, as interest rates decrease (or
increase), Variable Rate Securities experience less capital appreciation (or
depreciation) than fixed-rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") allow the
purchaser to resell the securities at an amount approximately equal to amortized
cost, or to the principal amount plus accrued interest. Like other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard that is intended to minimize fluctuations
in the values of the securities. We determine the maturity of Variable Rate
Securities in accordance with SEC rules.
ILLIQUID SECURITIES. We may purchase illiquid securities, including repurchase
agreements maturing in more than seven days, provided that no more than 10% of
our net assets valued at the time of the transaction are invested in such
securities.
GOVERNMENT SECURITIES. We 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. Govern-
7
<PAGE> 11
ment. Some securities issued by U.S. Government agencies or instrumentalities
are supported by the credit of the agency or instrumentality, for example, those
issued by the Federal Home Loan Bank, while others, such as those issued by the
Federal National Mortgage Association, Farm Credit System, and Student Loan
Marketing Association 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. We 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, we will not pay for such securities or start earning interest
on them until we receive 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.
We will not invest more than 25% of our assets in when-issued or delayed
delivery securities. We will not purchase such securities for speculative
purposes, and will expect to actually acquire the securities when we purchase
them. However, we reserve the right to sell any such securities before their
settlement dates, if our Investment Manager deems such a sale advisable.
REPURCHASE AGREEMENTS. We may invest in repurchase agreements, which are
instruments under which we acquire ownership of a security from a broker-dealer
or bank who then agrees to repurchase the security at a mutually agreed upon
time and price. The repurchase price, which is higher than the purchase price,
determines the security's yield during the time we hold it. Securities
underlying repurchase agreements may have maturities longer than one year.
If the seller of a repurchase agreement becomes bankrupt or otherwise defaults,
we might incur expenses in enforcing our rights and could experience losses,
including a decline in the value of the underlying securities and a loss of
income. We will enter into repurchase agreements only with banks and other
recognized financial institutions that our Investment Manager deems
creditworthy.
INVESTMENT TECHNIQUES USED
BY THE FUND
MATURITY. We will purchase only securities that mature in 397 days or less, or
securities which have a variable rate of interest that is readjusted no less
frequently than every 397 days.
BORROWING POLICY. We may not borrow money except for temporary purposes to meet
redemption requests that could not otherwise be met without immediately selling
portfolio securities. We may borrow an amount up to one-third of the value of
our total assets and may pledge up to 10% of our net assets to secure such
borrowings. We will not borrow for leverage purposes. This borrowing policy is
fundamental.
LIMITATIONS ON INVESTMENTS. We are subject to the following limitations, which
apply to all our investments other than securities issued or guaranteed by the
U.S. Government, its agencies, and instrumentalities:
1. DIVERSIFICATION. Except as provided in this paragraph, we may not invest more
than 5% of the value of our total assets in the securities of
8
<PAGE> 12
one issuer. However, we may invest more than 5% of our total assets in the First
Tier securities of a single issuer for a period of up to three Business Days
after the purchase thereof, provided further that we may not make more than one
investment in accordance with the foregoing proviso at any time. 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. In certain
circumstances, the guarantor of a security may also be considered to be an
issuer in connection with such a guarantee.
2. CONCENTRATION. As matter of fundamental policy, we will not invest 25% or
more of the value of our total assets in the securities of issuers conducting
their principal business activities in the same industry.
ORGANIZATION AND
MANAGEMENT OF THE FUND
MANAGEMENT FUNCTIONS AND RESPONSIBILITIES
GENERAL OVERSIGHT. Our Board of Trustees and officers meet regularly to review
our investments, performance, expenses and other business affairs.
THE INVESTMENT MANAGER. Our Investment Manager, Charles Schwab Investment
Management, Inc., manages our Fund, subject to the authority of the trustees and
officers of the Trust. Our Investment Manager, founded 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
21 mutual funds. As of March 18, 1996, the SchwabFunds(R) had aggregate net
assets in excess of $35 billion.
Through a professional staff of portfolio managers and securities analysts, our
Investment Manager provides us with a continuous investment program, including
general investment and economic advice regarding our investment strategies,
manages our investment portfolio, performs expense management, accounting, and
record keeping, and provides other services necessary to our operation.
TRANSFER AGENT AND SHAREHOLDER SERVICES.
Schwab serves as our Shareholder Services Agent and Transfer Agent. Schwab
provides information to our shareholders, reports share ownership and all
account activities, and responds to all inquiries from shareholders. Schwab also
distributes informational literature, and furnishes the office space and
equipment, telephone facilities, and personnel that is necessary in providing
shareholders services.
Schwab was established in 1971 and is one of America's largest discount brokers.
Schwab 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 and, as of March 8, 1996, was the beneficial
owner of approximately 21.1% of the outstanding shares of that corporation. Mr.
Schwab may be deemed to be a controlling person of Schwab and our Investment
Manager.
ACCOUNTANTS. Price Waterhouse LLP is our independent accountant. Their address
is
9
<PAGE> 13
555 California Street, San Francisco, California 94104.
OPERATING FEES AND EXPENSES
For investment management services, under the terms of its Investment Advisory
and Administration Agreement with the Trust, our Fund pays a graduated annual
fee to the Investment Manager. This fee is based on the value of our Fund's
average daily net assets and is payable monthly by the Fund in the amount of
0.46% of the first $2 billion of the Fund's average daily net assets; 0.45% of
such assets over $2 billion but less than $3 billion; and 0.40% of such assets
over $3 billion.
Our Investment Manager guarantees that, through at least August 31, 1996, the
Fund's management fee will not exceed 0.35% of its average daily net assets, and
our Investment Manager and Schwab guarantee that the Fund's total fund operating
expenses will not exceed 0.40% of the Fund's average daily net assets. The
effect of this voluntary expense limitation is to maintain or increase the
Fund's total return to shareholders. For the fiscal year ended December 31,
1995, the Fund paid an investment management fee of 0.29% and total expenses of
0.40% (after waivers and reimbursements) of the Fund's average daily net assets.
The following expenses are not included as "operating expenses" for purposes of
this guarantee: interest expenses, taxes, and capital items such as costs of
purchase or sale of portfolio securities, including brokerage fees or
commissions.
For its services as Transfer Agent, Schwab receives an annual fee of 0.05% of
the Fund's average daily net assets. In addition, for shareholder services
provided, Schwab receives an annual fee of 0.20% of the Fund's average daily net
assets.
Schwab serves as our Fund's principal underwriter/distributor but receives no
compensation for this service. PNC Bank, N.A. is our Fund's custodian.
OTHER EXPENSES. The Trust pays the expenses of our Fund's operations, including
the fees and expenses for independent auditors, legal counsel, custodians, the
cost of maintaining books and records of account, taxes, registration fees, and
the fees and expenses of qualifying the Trust and its shares for distribution
under federal and state securities laws, and industry association membership
dues.
The Trust generally allocates these expenses among its individual 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 Series or class of a Series will be charged
to that Series or class, respectively.
OTHER INFORMATION
The Trust 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 Trust offers
shares of nine 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 to be desirable to do so.
Shares within each 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.
10
<PAGE> 14
ANNUAL SHAREHOLDER MEETINGS. The Trust is not required to hold annual 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 Trust.
YOUR VOTING RIGHTS. If we were to make changes to our management or fundamental
policies, you would be asked to vote as a shareholder because shareholders have
voting rights on these matters. If a meeting is held and you cannot attend, you
may vote by proxy. Before the meeting, we will send you proxy materials that
explain the issues to be decided and include a voting card for you to mail back.
You are entitled to one vote for each share owned. Unless permitted by the 1940
Act, shareholders vote by Series and not in the aggregate. For example, when
voting to approve an investment advisory agreement for a Series, only
shareholders of that Series may vote; when voting to elect Trustees,
shareholders of all the Series vote in the aggregate.
INVESTING IN SHARES OF THE FUND
You may place purchase and redemption orders as well as exchange requests by
telephone by calling your local Schwab office during regular business hours, or
by calling 800-2 NO-LOAD. 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.
We will follow reasonable procedures to confirm that your telephone instructions
are genuine. If we follow telephone orders that we reasonably believe to be
genuine, we will not be liable for any losses you may experience. If we do not
follow reasonable procedures to confirm that your telephone order is genuine, we
may be liable for any losses you may suffer from unauthorized or fraudulent
orders. These procedures may include:
- - requiring a form of personal identification before we act upon any
instructions received by telephone;
- - providing written confirmation of your telephone instructions; and
- - tape recording all telephone transactions.
You should remember that it may be difficult to reach us by telephone during
periods of drastic economic or market changes, when our phone lines become very
busy with calls from other investors. If you want to purchase, redeem or
exchange shares but have trouble reaching us by telephone, you may want to use
one of the other ways we offer 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.
HOW TO BUY SHARES
OPENING A SCHWAB ACCOUNT. You may buy our shares only through a Schwab account.
You can open a Schwab account by completing the appropriate account application.
(Corporations and other organizations should contact a
11
<PAGE> 15
Schwab office to find out the additional forms that must be completed to open an
account.)
Within your Schwab account, you have access to other investments available at
Schwab such as stocks, bonds and other mutual funds. Additionally, the
Securities Investor Protection Corporation (known as "SIPC") will provide
account protection up to $500,000 for your securities, including shares in the
Fund, which you hold in a Schwab account. However, SIPC account protection does
not protect you from any loss of principal due to market or economic conditions.
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 twelve
months. Note that, in addition to these Schwab One account minimums, there are
higher minimum investment and other requirements applicable to the Fund, which
are described below.
DEPOSITING FUNDS AND MEETING THE FUND'S INVESTMENT MINIMUMS. 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 Fund shares
using electronic products such as StreetSmart(TM), 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.
The minimum initial investment in the Fund is $25,000, or $15,000 for an
Individual Retirement Account or other retirement plan. After you have bought
the minimum amount of shares for your initial investment, you can buy additional
shares in amounts of at least $5,000, or $2,000 for an IRA or other retirement
plan. The Transfer Agent imposes a $5 fee for each month your Fund account
balance falls below the required $20,000 minimum or $15,000 for an IRA or other
retirement plan. The Transfer Agent reserves the right to waive these minimums
from time to time for clients of Schwab Institutional, a division of Schwab, and
for certain other investors. See the Statement of Additional Information for
more details.
We, in our sole discretion and without prior notice to you, reserve the right to
reject orders to buy shares, to change the minimum investment requirements, and
to withdraw or suspend any part of the offering made by this Prospectus. In
particular, if you engage in excessive exchange or redemption activity, we
reserve the right to refuse your future orders to buy shares in order to
minimize the costs to the Fund associated with these practices. All orders to
buy shares must be accepted by us, and orders are not binding until we confirm
or accept them in writing. Schwab will charge your Schwab brokerage account a
$15 service fee for any check returned because of insuffi-
12
<PAGE> 16
cient or uncollected funds, or because of a stop payment order.
WHEN YOU CAN BUY SHARES. You must have funds in your Schwab account in order to
buy our shares. Funds (including those which are transmitted by wire) received
by Schwab before 4:00 p.m. (Eastern time) can be used to buy our shares on that
day. Funds that arrive after that time can be used to buy shares the next
Business Day.
METHODS OF BUYING SHARES. Schwab offers you several convenient ways to purchase
Fund shares. You may choose the one that works best for you, and Schwab will
confirm execution of your purchase order.
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 out 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, CA 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 the dollar amount of shares you would like to
purchase; and
- - (initial share purchase only) select one of the distribution options listed
below.
ELECTRONICALLY
For more information regarding how to buy Fund shares electronically using
StreetSmart(TM), 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. When you first buy our shares, you may choose one of the
two following distribution options:
AUTOMATIC REINVESTMENT: All distributions will be reinvested in additional
full and fractional shares of the Fund at the net asset value next
determined on their payable date; or
RECEIVE YOUR DIVIDENDS IN CASH: All distributions will be credited to your
Schwab account on the date distributions are payable. If you choose to have
your dividends mailed, a check normally will be mailed to you the Business
Day after distributions are credited to your account.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
13
<PAGE> 17
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.
HOW TO EXCHANGE SHARES
You can exchange your SchwabFunds(R) shares for shares of other SchwabFunds
Series or classes available to investors in your state provided you meet the
minimum initial or subsequent investment requirements and any other requirements
relating to the Series or class of shares you wish to purchase. Thus, you can
conveniently modify your investments if your goals or market conditions change.
The Transfer Agent will charge you a $5 administrative fee if you are exchanging
less than $5,000 of our shares.
We reserve the right to modify, limit, or terminate the exchange privilege upon
60 days' written notice. For federal income tax and other purposes, an exchange
is treated as a sale of your shares and a purchase of other shares.
BY TELEPHONE
We need the following information in order to process your telephone exchange
request:
- - your Schwab account number and your name for verification;
- - the number of our shares you want to exchange and the name of the fund from
which you are exchanging shares;
- - the name of the fund and class, if applicable, into which you want to exchange
shares; and
- - the distribution option you select.
BY MAIL
You can also exchange shares by writing to your local Schwab office or to the
address on the cover of this Prospectus.
We need the following information in a letter from you in order to process your
mail exchange request:
- - your Schwab account number;
- - the number of our shares you want to exchange and the name of the fund from
which you are exchanging shares;
- - the name of the fund and class, if applicable, into which you want to exchange
shares;
- - the signature of at least one of the registered Schwab account holders of your
account in the exact form specified in the account; and
- - the distribution option you select.
Once mailed, an exchange request is irrevocable and may not be modified or
cancelled.
ELECTRONICALLY
For more information regarding how to exchange Fund shares electronically using
StreetSmart(TM), The Equalizer(R), and TeleBroker(R), please call 800-2 NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
You can also request an exchange in person at your local Schwab office.
HOW TO SELL YOUR SHARES
You can sell 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;
14
<PAGE> 18
- - 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 receives proper instructions to sell
your shares;
- - a check will normally 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 New York Stock Exchange (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.
The Transfer Agent will charge you a $5 administrative fee if you sell shares
equal to or less than $5,000 and may sell additional shares from your account to
pay the administrative fee. The Transfer Agent will waive this minimum for
certain clients of Schwab Institutional, a division of Schwab, and for certain
other investors. See the Statement of Additional Information for more details.
NON-SWEEP LIQUIDATION POLICY. If no cash assets or margin credit balance is
available in your Schwab Account, Schwab will redeem shares of the Fund without
prior notification to you to cover (a) debits in your account resulting from
transactions in securities; (b) payment of your Schwab One(R) checks; (c)
payment of charges made on your Visa(R) debit card; (d) purchases made under an
Automatic Investment Plan; and (e) electronic fund transactions. Schwab may
charge you a $10 fee each time Schwab must redeem your shares in one of these
circumstances.
If your account contains more than one Value Advantage Investment, shares will
be redeemed from the Value Advantage Investment in your account with the highest
balance at the time of the settlement of the transaction. If those shares are
insufficient to satisfy the total amount due, then the Value Advantage
Investment with the next highest balance in your account will be used until no
Value Advantage Investment remains in your account. If the sum of the Value
Advantage Investments you own is insufficient to satisfy the total amount due,
none of your shares will be redeemed.
For redemptions made under the circumstances outlined above, you will not be
charged an administrative fee for redemptions which are less than the amount
required to satisfy the Fund's minimum redemption requirement.
BY TELEPHONE
You can sell your shares by telephone by calling your local Schwab office during
regular business hours, or by calling 800-2 NO-LOAD. 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
request:
- - your Schwab account number and your name for verification;
- - the number of shares you want to sell; and
- - the name of the fund from which you are selling shares.
15
<PAGE> 19
BY MAIL
You can also sell your shares by writing to your local Schwab office or to the
address on the cover of this Prospectus.
We need the following information in a letter from you in order to process your
mail redemption request:
- - your Schwab account number;
- - the name of the fund from which you are selling shares;
- - the number of shares you want to redeem; and
- - the signature of at least one of the registered Schwab account holders of your
account in the exact form specified in the account.
Once mailed, a redemption request is irrevocable and may not be modified or
cancelled.
ELECTRONICALLY
For more information regarding how to sell Fund shares electronically using
StreetSmart(TM), The Equalizer(R), and TeleBroker(R), please call 800-2 NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
You can also request a sale of shares in person at your local Schwab office.
IMPORTANT INFORMATION
ABOUT YOUR INVESTMENT
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Business Day we determine the Fund's net investment income, which we
compute by subtracting the Fund's expenses for that day from the amount the Fund
earned on its investments on that day. We declare dividends from this net
investment income each Business Day for those who were shareholders of record at
the previous net asset value calculation. We pay, or reinvest, dividends on the
15th day of each month, if it is a Business Day. If the 15th day of the month is
not a Business Day, we pay dividends on the next Business Day with the exception
of the dividend scheduled to be paid in December, which is paid on the last
Business Day in December.
INCOME TAX INFORMATION
The following is only a very brief summary of some of the federal income tax
consequences that affect the Fund and its shareholders. Therefore, it is
important that you consult with advisers about your own tax situation.
The Fund has qualified as a regulated investment company under the Code. In
order for the Fund to continue to so qualify, we will distribute to the Fund's
shareholders on a current basis substantially all of the Fund's net investment
income and net capital gains, if any, and we will cause the Fund to meet certain
other requirements. As a regulated investment company, the Fund will pay no
federal income taxes to the extent that it distributes earnings to its
shareholders.
All distributions we make that are attributable to taxable interest or
short-term capital gains are taxable to shareholders as ordinary income.
Reinvested distributions will be taxable as if they had been received by
shareholders in cash.
We will provide you with a record of all dividends, distributions, purchases,
and sales on your regular Schwab brokerage account statement. At least once a
year we will notify you of the federal income tax consequences of all
distributions made that year to your account.
HOW WE DETERMINE THE PRICE OF YOUR SHARES
The price of a share is its net asset value, which we determine each Business
Day at the close of
16
<PAGE> 20
trading on the Exchange, generally at 4:00 p.m., Eastern time. We determine the
price of a share by adding our total assets, subtracting any liabilities, and
then dividing the resulting number by the amount of shares outstanding. Purchase
or redemption orders and exchange requests will be executed at the Net Asset
Value next determined after receipt and verification by the Transfer Agent or
its authorized agent. While we try to maintain our net asset value at a constant
$1 per share, we cannot guarantee this value.
We do not price the securities in our portfolio at market value. Instead, we
value our portfolio securities at the price we paid when we bought them,
adjusting this price to reflect amortization of premium or any discount. After
using this amortized cost method to determine the value of our investments, we
then compare this value with the market value of our investments.
We calculate the market value of our investments using one of the following
three methods: (1) we may use actual quotations provided by third-party pricing
services or market makers; (2) we may estimate the market value of the
instruments; or (3) we may use a value obtained from the yield data (published
by reputable sources) of money market instruments that are comparable to the
securities we are valuing, using the mean between the bid and asked prices for
the instruments as the value of the instruments.
If a deviation of 1/2 of 1% or more between our net asset value per share as
calculated by market values and our $1 per share amortized cost value, or if
there is any other deviation which the Board of Trustees believes would result
in a material dilution to shareholders or purchasers, the Board of Trustees will
promptly consider what action, if any, should be taken.
HOW THE FUND REPORTS PERFORMANCE
From time to time, we may advertise our yield and effective yield. Our actual
performance will, of course, vary from year to year, and past performance in no
way represents or guarantees future performance. How we perform in any given
year will depend on the type and quality of securities in which we invest, the
market, and our operating expenses.
YIELD. When we calculate our yield, we make some hypothetical assumptions about
how we will do for one year. Using the income generated over one 7-day period by
a hypothetical investment, we assume that this amount of income is generated
each week for one year. This income for the year is then shown as a percentage
of our hypothetical investment. (See the section entitled "Yield" in the
Statement of Additional Information for more information.)
EFFECTIVE YIELD. We calculate effective yield the same way, but we assume that
the income generated by our hypothetical investment is compounded weekly over
our hypothetical year. Because of the effect of compounding, the effective yield
will be slightly higher than the yield.
COMPARING THE FUND'S PERFORMANCE WITH OTHER FUNDS. We may compare the
performance of our Fund with the performance of other mutual funds by comparing
the ratings of mutual fund rating services, various indices of investment
performance, United States Government obligations, bank certificates of deposit,
the consumer price index, and other investments for which reliable data is
available.
ANNUAL AND SEMI-ANNUAL REPORT MAILINGS
Twice a year, we will provide a report to all shareholders describing our
performance and
17
<PAGE> 21
outlining the investments held in the portfolio. In order to reduce mailing
costs, we consolidate these shareholder mailings by household. If a household
has multiple accounts and the same address of record for all the accounts, we
will send mailings for all accounts at that address in a single package. If you
do not want this consolidation of mailings to apply to your account, please
write to SchwabFunds(R) at the address on the front of this Prospectus. To
request a free copy of our Annual Report (or Semi-Annual Report) to
Shareholders, call your local Schwab office or call 800-2 NO-LOAD.
18
<PAGE> 22
GLOSSARY OF IMPORTANT TERMS
AMORTIZED COST METHOD: the method of calculating a money market mutual fund's
net asset value whereby portfolio securities are valued at the fund's
acquisition cost, as adjusted for amortization or premium or accretion of
discount, rather than at their value based on current market factors.
ANNUALIZED: calculated to represent a year; a statement produced by calculating
financial results covering less than a year to show what would happen if the
results were hypothetically extended to cover an entire year.
BUSINESS DAY: any day both the Federal Reserve Bank of New York and the New York
Stock Exchange are open for business. A Business Day normally begins at 9:30
a.m. (Eastern time) when the Exchange opens and usually ends at 4 p.m. (Eastern
time) when the Exchange closes.
CAPITAL GAIN OR LOSS: the increase or decrease in the value of a security
relative to the original purchase price. A gain is realized when the security
that has increased in value is sold. If a security is held for more than 12
months and then sold at a profit, that profit is a realized long-term capital
gain. If it is sold at a profit after being held for less than 12 months, that
profit is a realized short-term capital gain.
CODE: The Internal Revenue Code of 1986, as amended.
COMMERCIAL PAPER: unsecured debt obligations issued by businesses and sold at a
discount but redeemed at par within 2 to 270 days.
DISTRIBUTION: payment the fund makes to shareholders. There are two kinds of
distributions: dividends, or the profits (after expenses) from the fund's
investments, and capital gains distributions.
DUFF: Duff & Phelps Credit Rating Co., an NRSRO.
FITCH: Fitch Investor Services, Inc., an NRSRO.
FUND: The Schwab Value Advantage Money Fund.
FUNDAMENTAL: a policy that cannot be changed without the approval of a majority
(as defined in the 1940 Act) of the shareholders of a fund.
HIGH-QUALITY: rated in one of the two highest ratings categories assigned by any
NRSRO.
INVESTMENT MANAGER: Charles Schwab Investment Management, Inc.
LIQUIDITY: ability to convert assets into cash or cash equivalents within seven
days at a fair value.
MATURITY: the date on which the principal of a debt obligation such as a bond
comes due and must be repaid.
MONEY MARKET INSTRUMENT: short-term, liquid debt such as Treasury bills and
commercial paper, which is sold at a discount but redeemed at par. See
Commercial Paper.
MOODY'S: Moody's Investors Service, an NRSRO.
NET ASSET VALUE (NAV): on a per share basis, the value of one share in the Fund.
This value is determined by adding the total Fund assets, subtracting all
liabilities, and then dividing the resulting number by the number of shares
outstanding.
1940 ACT: the Investment Company Act of 1940, as amended.
19
<PAGE> 23
NONCUMULATIVE VOTING RIGHTS: the right of a shareholder to vote only the number
of shares owned at the time of voting.
NRSRO: a Nationally Recognized Statistical Rating Organization, such as Moody's,
S&P, Duff or Fitch.
PORTFOLIO: the total stocks, bonds, and other securities held by an individual
investor, a mutual fund, or a financial institution.
PRINCIPAL: capital; the original value of an investment or a debt; the face
value of a bond.
RISK: the possibility of losing all or part of an investment, that the value of
the investment will decrease, or that the investor will receive little or no
return on the investment.
S&P: Standard & Poor's Corporation, an NRSRO.
SCHWAB: Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA
94104.
SECURITIES AND EXCHANGE COMMISSION (SEC): established by Congress to administer
the Securities Act of 1933 and other securities-related laws.
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC): a government sponsored
private corporation that insures securities accounts held in brokerages for up
to $500,000 in the event of the bankruptcy or financial failure of the
brokerage. The insurance does not cover loss due to financial risk.
SHORT-TERM: with respect to the Fund's portfolio investments, maturing in 397
days or less.
TRANSFER AGENT: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104.
TRUST: The Charles Schwab Family of Funds.
YIELD: the dividend or interest paid by a security. The yield is calculated as a
percentage of the security's current market price. A stock selling for $80 per
share and paying dividends of $6.40 is yielding 8 percent ($6.40 / $80 = .08).
Likewise, a bond with a par or face value of $1,000 and a 9 percent interest
rate selling for $600 is yielding 15 percent ($90 / $600 = .15). Interest on a
bond is always based on the par or face value of the bond, while the yield or
return is based on the market price.
- ------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY
OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS.
- ------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
LAWFULLY BE MADE.
- ------------------------------------------------------
20
<PAGE> 24
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 25
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 26
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 27
SCHWAB VALUE
ADVANTAGE
MONEY FUND(R)
PROSPECTUS April 1, 1996
[SchwabFunds Logo]
840-6 (4/96) CRS 3918 Printed on recycled paper
[SchwabFunds Logo]
101 Montgomery Street
San Francisco, California 94104
<PAGE> 28
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Tax-Exempt Money Fund-Value Advantage Shares
Schwab California Tax-Exempt Money Fund-Value Advantage Shares
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares
<TABLE>
<CAPTION>
Part A Item Prospectus Caption
- ----------- ------------------
<S> <C>
Cover Page Cover Page
Synopsis Key Features of the Funds; Summary of Expenses
Condensed Financial Information Financial Highlights
General Description of Registrant Matching the Funds to Your Investment Needs;
Investment Objectives and Policies
Management of the Fund Organization and Management of the Funds
Management's Discussion of Fund Performance How the Fund Reports Performance
Capital Stock and Other Securities Cover Page; Matching the Funds to Your Investment
Needs; Special Risk Considerations; Organization and
Management of the Funds; Investing in the Funds;
Important Information about Your Investment
Purchase of Securities Being Offered Investing in Shares of the Funds; Important
Information about Your Investment
Redemption or Repurchase Investing in Shares of the Funds; Important
Information about Your Investment
Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 29
SCHWAB MONEY FUNDS
VALUE ADVANTAGE INVESTMENTS(TM)
SCHWAB TAX-EXEMPT MONEY FUND -
VALUE ADVANTAGE SHARES(TM)
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND -
VALUE ADVANTAGE SHARES(TM)
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND -
VALUE ADVANTAGE SHARES(TM)
PROSPECTUS APRIL 1, 1996
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION: Contact your local Charles Schwab &
Co., Inc. ("Schwab") office, or call 800-2 NO-LOAD.
THE SCHWAB TAX-EXEMPT MONEY FUND (THE "TAX-EXEMPT FUND"), SCHWAB CALIFORNIA
TAX-EXEMPT MONEY FUND (THE "CALIFORNIA FUND"), AND SCHWAB NEW YORK TAX-EXEMPT
MONEY FUND (THE "NEW YORK FUND") (the "Funds") are designed to provide you with
the highest possible current income consistent with each Fund's investment
objective while seeking to preserve your investment and provide you with
liquidity. As a matter of fundamental policy, the Tax-Exempt Fund is a
diversified investment portfolio, and the New York Fund and California Fund are
non-diversified investment portfolios, of The Charles Schwab Family of Funds
(the "Trust"), a no-load, open-end management investment company. Shares of the
California Fund are offered to California residents and the residents of
selected other states. Shares of the New York Fund are offered to New York
residents and the residents of selected other states. This Prospectus relates to
the Value Advantage Shares of each Fund. For a prospectus describing the other
class of shares of the Fund (the "Sweep Shares"), call your local Schwab office
or 800-2 NO-LOAD.
ABOUT THIS PROSPECTUS: THIS PROSPECTUS PROVIDES YOU WITH CONCISE INFORMATION
THAT YOU SHOULD KNOW BEFORE YOU DECIDE IF THE FUNDS PROVIDE THE INVESTMENT
OPPORTUNITY YOU WANT. READ IT CAREFULLY, AND RETAIN IT FOR FUTURE REFERENCE. You
can find more detailed information in the Statement of Additional Information,
dated April 1, 1996 (and as may be amended from time to time). The Statement has
been filed with the SEC and is incorporated in this Prospectus by reference
(which means that it is legally considered part of this Prospectus even though
it is not printed here). 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 Statement of Additional Information, call Schwab at 800-2
NO-LOAD, 24 hours a day, or write the Funds at 101 Montgomery Street, San
Francisco, California 94104. TDD users may contact Schwab at 800-345-2550, 24
hours a day.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Key Features of the Funds................ 2
Summary of Expenses...................... 3
Financial Highlights..................... 4
Matching the Funds to Your
Investment Needs....................... 5
Investment Objectives and Policies....... 6
Investment Techniques Used by the
Funds.................................. 11
Special Risk Considerations.............. 12
Organization and Management
of the Funds........................... 13
Investing in Shares of the Funds......... 16
Important Information About
Your Investment........................ 21
Glossary of Important Terms.............. 25
</TABLE>
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 EACH FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY OF THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE> 30
KEY FEATURES OF THE FUNDS
MAXIMUM CURRENT INCOME AND SAFETY. Our goal is to provide you with the highest
possible current income consistent with the investment objectives of each Fund
while preserving your investment and providing you with quick access to your
money. To achieve this goal, the Funds invest in high-quality, short-term debt
securities. The Tax-Exempt Fund seeks to provide you with current income that is
exempt from Federal income taxes. The California Fund seeks to provide you with
current income that is exempt from Federal income taxes and California personal
income taxes. The New York Fund seeks to provide you with current income that is
exempt from Federal income taxes and personal income taxes imposed by New York
State and New York municipalities. (See "Investment Objectives and Policies.")
PRESERVATION OF INVESTMENT. Each Fund seeks to maintain a stable net asset value
(known as the Fund's "NAV") of $1.00 per share.
READY ACCESS TO YOUR CASH. You can conveniently sell your shares of any Fund at
any time. Generally, your redemption check will be available the next Business
Day at your local Schwab office, or it can be mailed directly to you. (See
"Investing in Shares of the Funds - How to Sell Your Shares.")
LOW COST INVESTING. The Value Advantage Shares of the Funds were designed with
operating expenses well below the industry average. (See "Matching the Funds to
Your Investment Needs.") Additionally, you pay no sales fee when you buy shares
of the Funds. Fees may be charged for balances and transactions under the
required minimums.
PROFESSIONAL MANAGEMENT OF THE FUNDS.
Charles Schwab Investment Management, Inc. (referred to in this Prospectus as
the "Investment Manager") currently manages the mutual funds in the SchwabFunds
Family(R), a family of 21 mutual funds with over $35 billion in assets as of
March 18, 1996. (See "Organization and Management of the Funds - The Investment
Manager.")
SHAREHOLDER SERVICES. Schwab's professional representatives are available
toll-free 24 hours a day at 800-2 NO-LOAD to service your account, or you can
call your local Schwab office during regular business hours. (See "Investing in
Shares of the Funds.")
CONVENIENT REPORTING. You receive one consolidated account statement for all of
your account activity that combines all of your mutual fund activity into one
report.
READING THIS PROSPECTUS. For your ease of reading, we have italicized certain
terms which have been included in the glossary at the end of this Prospectus. If
you are unsure of the meaning of any italicized term, check the glossary.
References to "you" and "your" in this Prospectus refer to prospective investors
and/or current shareholders, while references to "us", "our", or "our Funds"
refer to the Value Advantage Shares or to the three Funds generally.
SPECIAL RISK CONSIDERATIONS. An investment in any of the Funds is subject to
certain risks arising out of each such Fund's investments in Municipal
Securities issued by a single state, municipal leases, participation interests
and certain other securities, as discussed in this Prospectus. (See "Investment
Techniques Used by the Funds" and "Special Risk Considerations" for more
information.)
2
<PAGE> 31
SUMMARY OF EXPENSES
ANNUAL OPERATING EXPENSES. Each class of our Funds incurs its own annual
operating expenses. These expenses include management fees paid to the
Investment Manager, transfer agency fees, and other expenses. These expenses
cover, for example, services such as investment research and management of the
portfolios, and maintaining shareholder records. Because these fees are paid
from the income of the Value Advantage Shares of each Fund, they are factored
into the dividends paid to holders of Value Advantage Shares. As a shareholder,
you are not charged any of these fees directly.
YOUR FEES FOR BUYING AND SELLING SHARES. You pay no sales fee when you buy
shares of our Funds. Because the Value Advantage Shares of the Funds are
designed for individuals who maintain high balances in their Schwab accounts,
the Transfer Agent charges a $5 administrative fee if you sell or exchange
shares worth less than $5,000. The Transfer Agent also charges a $5 fee each
month that your Fund account balance falls below the required $20,000 minimum.
The Transfer Agent will notify you in writing 15 days before this fee is
assessed in order to give you time to bring your account balance up to the
minimum amount.
The following fees (except the administrative fee) are stated as a percentage of
the average net assets of the Value Advantage Shares of each Fund.
<TABLE>
<CAPTION>
TAX-EXEMPT CALIFORNIA NEW YORK
FUND FUND FUND
---------- ---------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Administrative Fee(1)....... $5.00 $5.00 $5.00
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Management Fee (after fee
reduction)(2)........... 0.20% 0.19% 0.20%
12b-1 Fees................ None None None
Other Expenses (after
fee reductions
and/or expense
reimbursements(3,4)..... 0.25% 0.26% 0.25%
---------- ---------- --------
TOTAL FUND OPERATING
EXPENSES(4,5)............. 0.45% 0.45% 0.45%
</TABLE>
(1) If you sell or exchange shares in an amount less than $5,000, you will be
subject to a $5 administrative fee.
(2) This amount reflects a reduction by the Investment Manager, which is
guaranteed through at least August 31, 1996. If there were no such
reduction, the maximum management fee would be 0.46% of each Fund's average
daily net assets.
(3) "Other Expenses" are based on estimated amounts for the current fiscal year
for each Fund. See "Matching the Funds to Your Investment Needs" for
information regarding the differing Transfer Agency fees for the multiple
classes of shares of the Funds.
3
<PAGE> 32
(4) This amount reflects the guarantee by Schwab and our Investment Manager
that, through at least August 31, 1996, the total operating expenses of the
Value Advantage Shares of each Fund will not exceed 0.45% of average daily
net assets of the Value Advantage Shares of each Fund. If there were no such
reduction for the Tax-Exempt Fund, the California Fund, and the New York
Fund, the estimated maximum other expenses would be 0.49%*, 0.58%*, and
1.35%*, and the estimated maximum total operating expenses would be 0.95%*,
1.04%*, and 1.81%*, of the average daily net assets of the Value Advantage
Shares of each Fund, respectively.
(5) You may be charged a fee if applicable minimum balances are not maintained
in your Schwab brokerage account or Schwab One(R) account. (See "Investing
in Shares of the Funds - How to Buy Shares - Schwab Account Minimums and
Associated Fees."). For information regarding the differing minimum balance
and minimum investment requirements of the multiple classes of shares of the
Funds, see "How to Buy Shares."
EXAMPLE. You would pay the following expenses on a $1,000 investment in the
Value Advantage Shares of each Fund assuming (1) 5% annual return; and (2)
redemption at the end of each period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Tax-Exempt Fund............ $5 $14
California Fund............ $5 $14
New York Fund.............. $5 $14
</TABLE>
*Annualized
THE PRECEDING TABLE IS AN EXAMPLE ONLY, AND DOES NOT REPRESENT PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE EXPENSES SHOWN IN THE
EXAMPLE. This example reflects the guarantee by Schwab and the Investment
Manager that, through at least August 31, 1996, total operating expenses for the
Value Advantage Shares of each Fund will not exceed 0.45% of the class' average
daily net assets. Also, this example does not include the $5 administrative fee
on sales or exchanges of Fund shares equal to or less than $5,000. Nor does this
example include the $5 monthly fee charged on balances that fall below $20,000.
Please remember, that while this example assumes a 5% annual return on
investment, the actual return for the Value Advantage Shares of each Fund may be
more or less than the 5% annual return used in this example.
The purpose of the preceding table is to help you understand the various costs
and expenses you will bear directly or indirectly when you invest in the Value
Advantage Shares of the Funds. (See "Organization and Management of the
Funds - Operating Fees and Expenses.")
FINANCIAL HIGHLIGHTS
The following information with respect to per share data and ratios for the
Value Advantage Shares of the Funds referenced below has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report is included in
our Statement of Additional Information, which includes additional financial
data and related notes. You can get a free copy of this Statement by calling the
telephone number or writing to the address on the first page of this Prospectus.
Using information in the Fund's financial statements, we have prepared this
table to show you information such as investment income, dividends from
investment income and the total investment return.
4
<PAGE> 33
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1995
----------------------------------
TAX-EXEMPT CALIFORNIA NEW YORK
FUND(1) FUND(2) FUND(1)
---------- ---------- --------
<S> <C> <C> <C>
Net asset value at
beginning of
period............ $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations
Net investment
income.......... 0.02 0.01 0.02
Net realized and
unrealized gain
(loss) on
investments..... -- -- --
-------- -------- -------
Total from
investment
operations...... 0.02 0.01 0.02
Less distributions
Dividends from net
investment
income.......... (0.02) (0.01) (0.02 )
Distributions from
realized gain on
investments..... -- -- --
-------- -------- -------
Total
distributions..... (0.02) (0.01) (0.02 )
-------- -------- -------
Net asset value at
end of period..... $ 1.00 $ 1.00 $ 1.00
======== ======== =======
Total return (%).... 1.68 0.84 1.62
Ratios/Supplemental
data
Net assets, end of
period (000s)... $160,682 $108,008 $15,143
Ratio of expenses
to average net
assets (%)...... 0.45* 0.45* 0.45 *
Ratio of net
investment
income to
average net
assets (%)...... 3.50* 3.48* 3.42 *
</TABLE>
(1) For the period July 7, 1995 (commencement of operations) to
December 31, 1995.
(2) For the period October 3, 1995 (commencement of operations) to
December 31, 1995.
*Annualized
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each class' 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 and the ratio of net
investment income to average net assets for the period ended December 31, 1995,
for the Tax-Exempt Fund would have been 0.95%* and 3.00%*, respectively, the
California Fund would have been 1.04%* and 2.89%*, respectively, and the New
York Fund would have been 1.81%* and 2.06%*, respectively.
MATCHING THE FUNDS TO YOUR
INVESTMENT NEEDS
Because the Value Advantage Shares of the Funds are designed for Schwab accounts
with larger balances and less frequent shareholder transactions, we can keep the
operating expenses lower than the industry average, which helps provide more
competitive yields. The table below shows the total operating expenses of the
Value Advantage Shares of each Fund compared to the industry average for similar
type funds.
<TABLE>
<CAPTION>
VALUE
ADVANTAGE INDUSTRY
SHARES AVERAGES*
--------- ---------
<S> <C> <C>
Tax-Exempt Fund 0.45%
Tax-Exempt Money Market Funds 0.68%
California Fund 0.45%
California Tax-Exempt Money
Market Funds 0.60%
New York Fund 0.45%
New York Tax-Exempt Money Market
Funds 0.66%
</TABLE>
*Fourth quarter industry averages as reported by IBC/Donoghue Quarterly Report
on Money Fund Performance, 4th Quarter, 1995.
5
<PAGE> 34
Note: These amounts represent total operating expenses after fee waivers for
first tier money market funds, not including institutional money funds.
Our Funds invest in high-quality money market instruments and are designed for
high current yields. Keep in mind, however, that because the Value Advantage
Shares of the Funds are intended for larger balance accounts, you may be charged
a fee for redemptions or exchanges under the required minimum or if your balance
falls below the required minimum. These fees are designed to keep shareholder
transactions to a minimum which contributes to the Value Advantage Shares lower
operating expense ratio.
Schwab also offers an additional class of shares of each of the Funds ("Sweep
Shares") which automatically invest the uninvested cash balances in your Schwab
account in a Schwab money fund which you select. Sweep Shares may be more
suitable for providing income on fluctuating cash balances in your account in
between other investments. The Funds may be appropriate for a variety of
investment programs. Unlike the Sweep Shares, however, the Value Advantage
Shares have been designed for cash reserves which may be held for longer periods
of time and may not require frequent
investor access. The Funds should not be a substitute for building an investment
portfolio tailored to your individual investment needs and risk tolerance.
Additionally, the Funds are not suitable for tax-advantaged plans such as
Individual Retirement Plans and Keogh plans.
Schwab offers these multiple classes of shares pursuant to a multiple class plan
(the "Plan") adopted by the Board of Trustees of the Trust. Pursuant to the
Plan, Value Advantage Shares of each Fund are subject to lower transfer agency
expenses than the Sweep Shares, as the Sweep Shares offer the "sweep" services
described above not available to investors in Value Advantage Shares. In
addition, the minimum initial investment and minimum account balance
requirements are higher for the Value Advantage Shares than for the Sweep
Shares. See "Organization and Management of the Funds - Operating Fees and
Expenses" and "How to Buy Shares." For more information regarding the Sweep
Shares of the Funds, call your local Schwab office or 800-2 NO-LOAD. You may
also obtain information about Sweep Shares from your Schwab broker.
INVESTMENT OBJECTIVES AND
POLICIES
THE TAX-EXEMPT FUND
The investment objective of the Tax-Exempt Fund is to provide you with maximum
current income that is exempt from federal income taxes consistent with
stability of capital. Because any investment involves risk, we cannot guarantee
achieving this objective.
To achieve our investment objective, we normally will attempt to invest 100%,
and will invest at least 80%, of our total assets in short-term, high-quality
debt obligations issued by or on behalf of states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities that generate interest, which in
the opinion of bond counsel, is exempt from federal income taxes and not treated
as a tax preference item for purposes of the federal alternative minimum tax
("Municipal Securities").
The investment objective and policies stated above are fundamental to the
Tax-Exempt Fund.
6
<PAGE> 35
Provided that we meet certain minimum conditions (described in the Statement of
Additional Information under "Investment Restrictions"), dividends that
represent interest income received on Municipal Securities will be exempt from
federal income taxes when paid to you. However, such dividend income may be
subject to state and local taxes. See "Important Information About Your
Investment - Income Tax Information" and the Statement of Additional
Information.
THE CALIFORNIA FUND
The investment objective of the California Fund is to provide you with maximum
current income that is exempt from federal income and State of California
personal income taxes, to the extent consistent with stability of capital.
Because any investment involves risk, we cannot guarantee achieving this
objective.
To achieve our objective, we normally will attempt to invest 100%, and will
invest at least 80%, of our total assets in Municipal Securities.
Absent unusual market conditions, we will invest at least 65% of our total
assets in such obligations which also generate interest which, in the opinion of
bond counsel, is exempt from State of California personal income taxes
("California Municipal Securities").
The investment objective and policies stated above are fundamental to the
California Fund.
Provided that we meet certain minimum conditions (described in the Statement of
Additional Information under "Investment Restrictions"), dividends that
represent interest income received on California Municipal Securities will be
exempt from State of California personal income taxes. See "Important
Information About Your Investment - Income Tax Information" and the Statement of
Additional Information.
THE NEW YORK FUND
The investment objective of the New York Fund is to provide you with maximum
current income that is exempt from federal income taxes and personal income
taxes imposed by New York State and New York municipalities, to the extent
consistent with liquidity and stability of capital. Because any investment
involves risk, we cannot guarantee achieving this objective.
To achieve our objective, we normally will attempt to invest 100%, and will
invest at least 80%, of our total assets in Municipal Securities.
Absent unusual market conditions, we will invest at least 65% of our total
assets in such obligations which also generate interest which, in the opinion of
bond counsel, is exempt from State of New York and New York municipalities
personal income taxes ("New York Municipal Securities").
The investment objective and policies stated above are fundamental to the New
York Fund.
Provided that we meet certain minimum conditions (described in the Statement of
Additional Information under "Investment Restrictions"), dividends that
represent interest income received on New York Municipal Securities will be
exempt from State of New York and New York municipalities personal income taxes
when paid to New York residents. See "Important Information About Your
Investment - Income Tax Information" and the Statement of Additional
Information.
MUNICIPAL SECURITIES. Our Funds will invest only in Municipal Securities which
at the time
7
<PAGE> 36
of purchase: (a) are rated within 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 our Investment Manager; or (d) are unrated by any
NRSRO, if they are determined by our Investment Manager, using guidelines
approved by the Board of Trustees, to be at least equal in quality to one or
more of the securities mentioned above. (See "Appendix - Ratings of Investment
Securities" in the Statement of Additional Information.)
We may purchase a security that, after being purchased by a 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, we will keep such a security in its portfolio only if the
Board of Trustees determines that keeping the security is in the best interests
of that Fund.
Municipal Securities in which we 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 a particular
facility or class of facilities, or from a specific revenue source such as a
special excise tax or from 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 they 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, each of our Funds may invest
more than 25% of its total assets in industrial development and private activity
bonds.
We 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.
Our Funds may also invest up to 25% of their total 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. Some investments in municipal leases
may be considered to be illiquid. Municipal leases are subject to
"nonappropriation 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
8
<PAGE> 37
property is, however, generally less than value of the property to the
municipality. The Investment Manager, pursuant to guidelines established by the
Board of Trustees, is responsible for continuously determining the credit
quality of unrated municipal leases, including an assessment of the likelihood
that the lease will not be terminated.
Our Funds may also invest up to 25% of their 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 the
issuer 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 predetermined 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 are
considered to be Municipal Securities for purposes of each Fund's policy to
invest at least 80% of its total assets in Municipal Securities. Tender option
bond trust receipts generally are structured as private placements and,
accordingly, may be deemed to be restricted securities for purposes of the
Funds' investment limitations.
We 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 a Fund is not rated by credit
rating agencies, our 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, 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, each 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.
We 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 its demand rights at
certain times, or for other reasons.
Variable rate demand instruments will be subject to each 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.
9
<PAGE> 38
We 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.
We 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 our 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.
We may also acquire "stand-by commitments" for Municipal Securities held in our
portfolios. Under a stand-by commitment, a dealer agrees to purchase at our
option specified Municipal Securities at a price equal to their amortized cost
value plus accrued interest. We will acquire stand-by commitments solely to
improve portfolio liquidity. We do not intend to exercise our stand-by rights
solely for trading purposes.
VARIABLE RATE SECURITIES. We 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 is
ordinarily 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.
Generally, changes in the interest rate on Variable Rate Securities reduce the
fluctuation of their market value. Accordingly, as interest rates decrease (or
increase), Variable Rate Securities experience less capital appreciation (or
depreciation) than fixed-rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") allow the
purchaser to resell the securities at an amount approximately equal to amortized
cost, or to the principal amount plus accrued interest. Like other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard that is intended to minimize fluctuations
in the values of the securities. We determine the maturity of Variable Rate
Securities in accordance with SEC rules.
ILLIQUID SECURITIES. We may purchase illiquid securities, including repurchase
agreements maturing in more than 7 days, provided that no more than 10% of a
Fund's net assets valued at the time of the transaction are invested in such
securities.
GOVERNMENT SECURITIES. We 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,
for example, those issued by the Federal Home Loan Bank, while others, such as
those issued by the Federal National Mortgage Association, Farm Credit System,
and Student Loan Marketing Association 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
10
<PAGE> 39
securities may involve risk of loss of principal and interest.
INVESTMENT TECHNIQUES
USED BY THE FUNDS
MATURITY. We will purchase only securities that mature in 397 days or less, 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. We 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, we will not pay for such securities or start earning interest
on them until we receive 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.
Each Fund will not invest more than 25% of its assets in when-issued or delayed
delivery securities. We will not purchase such securities for speculative
purposes, and will expect to actually acquire the securities when we purchase
them. However, we reserve the right to sell any such securities before their
settlement dates, if our Investment Manager deems such a sale advisable.
REPURCHASE AGREEMENTS. Each of our Funds may engage in repurchase agreements. By
entering into a repurchase agreement, a 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. The repurchase price is higher than the
purchase price, thereby determining the yield during the Fund's holding period.
Repurchase agreements with broker-dealer firms will be limited to obligations of
the U.S. government, its agencies or instrumentalities. Maturity of the
securities subject to repurchase may exceed one year.
TEMPORARY INVESTMENTS. Each 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 within the two highest rating categories by any NRSRO;
commercial paper (other than "Municipal Securities") rated in 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 a
temporary investment could cause a Fund to generate dividends taxable to
shareholders as ordinary income, it is the Funds' primary intention to produce
dividends which are not subject to federal income taxes, or state personal
income taxes, in the case of the California Fund and the New York Fund. (See
"Important Information about Your Investment - Income Tax Information.")
BORROWING POLICY. We may not borrow money except for temporary purposes to meet
redemption requests that could not otherwise be met without immediately selling
portfolio securities. A Fund may borrow an amount up to one-third of the value
of its total assets and may pledge up to 10% of its net assets to secure such
borrowings. No Fund may borrow for leverage purposes. This borrowing policy is
fundamental to each Fund.
11
<PAGE> 40
LIMITATIONS ON INVESTMENTS. We are subject to the following limitations, which
apply to all investments by our Funds other than securities issued or guaranteed
by the U.S. Government, its agencies, and instrumentalities:
1. DIVERSIFICATION. Except as provided in this paragraph, no Fund may invest
more than 5% of the value of its total assets in the securities of one issuer.
The California Fund and the New York Fund, which are non-diversified portfolios,
may each invest up to 50% of the value of their total assets without regard to
this 5% limitation, provided no more than 25% of the value of each Fund's total
assets is invested in the securities of any one issuer. The Tax-Exempt Fund,
which is a diversified portfolio, may invest up to 25% of the value of its
assets without regard to this 5% limitation.
For purposes of this limitation with respect to each Fund, a security is
considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security. An industrial revenue bond that is backed only
by the assets and revenues of a non-governmental user is considered to be issued
by the non-governmental user. In certain circumstances, the guarantor of a
security may also be considered to be an issuer in connection with such a
guarantee.
2. CONCENTRATION. As a matter of fundamental policy, no Fund will invest 25% or
more of the value of its total assets in the securities of issuers conducting
their principal business activities in the same industry. However, this
limitation shall not apply to Municipal Securities issued by governmental
entities.
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 California or New York Municipal Securities is exempt from
California State or New York State and New York municipalities personal income
taxes. Bond counsel will render such opinions to the issuers of Municipal
Securities at the time the securities are issued. The Funds 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 California Fund and the New York Fund are non-diversified portfolios of the
Trust. The investment return on a non-diversified portfolio typically is
dependent on the performance of a smaller number of issuers, while the
investment return on a diversified portfolio is dependent on a larger number of
issuers. If financial conditions change, or if the market's assessment of
certain issuers changes, a Fund's policy of acquiring large positions in the
obligations of a relatively small number of issuers may affect the value of that
Fund's portfolio to a greater extent than that of a diversified portfolio.
Each 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,
we do not presently intend to invest in such securities on a regular basis, but
will do so if deemed necessary or appropriate by our Investment Manager. To the
extent that each Fund's assets are invested in Municipal Securities payable from
revenues on similar projects, that Fund will be subject to the particular risks
presented by such projects to a greater extent than it would be if that Fund's
assets were not so invested.
12
<PAGE> 41
Certain California or New York constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives could result
in adverse consequences affecting California or New York Municipal Securities.
For example, in recent years "Proposition 13" and similar California
constitutional and statutory amendments and initiatives have restricted the
ability of California taxing entities to increase real property tax revenues.
Other initiative measures approved by California voters, through limiting
various other taxes, have resulted in substantial reductions in state and local
revenues. Decreased state revenues may result in reductions in allocations of
state revenues to local governments. It is not possible to determine the impact
of these initiatives on the ability of California issuers to pay interest or
repay principal on their obligations. There is no assurance that any California
issuer will make full or timely payments of principal and interest or remain
solvent. For example, in December 1994, Orange County, California filed for
bankruptcy. In addition, from time to time, federal legislative proposals have
threatened the tax-exempt status or use of Municipal Securities. (An expanded
discussion of the risks associated with Municipal Securities and California and
New York issuers is contained in the Statement of Additional Information.)
We may purchase participation interests in Municipal Securities and other
derivative securities that involve special risks, including the risk that the
Internal Revenue Service may characterize some or all of the interest paid on
such securities 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 the lease that
supports the security owned by the Funds, or it may seek to cancel or otherwise
avoid its obligations under the lease. (See "Important Information about Your
Investment - How We Determine the Price of Your Shares.")
ORGANIZATION AND
MANAGEMENT OF THE FUNDS
MANAGEMENT FUNCTIONS AND RESPONSIBILITIES
GENERAL OVERSIGHT. Our Board of Trustees and officers meet regularly to review
our investments, performance, expenses and other business affairs.
THE INVESTMENT MANAGER. Our Investment Manager, Charles Schwab Investment
Management, Inc., manages our Funds, subject to the authority of the trustees
and officers of the Trust. Our Investment Manager, founded 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
21 mutual funds. As of March 18, 1996, the SchwabFunds had aggregate net assets
in excess of $35 billion.
Through a professional staff of portfolio managers and securities analysts, our
Investment Manager provides us with a continuous investment program, including
general investment and economic advice regarding our investment strategies,
manages our investment portfolio, performs expense management, accounting, and
record keeping, and provides other services necessary to our operation.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Schwab serves as our Transfer Agent and
Shareholder Services Agent. Schwab provides information to our shareholders,
reports share ownership and all account activities, and
13
<PAGE> 42
responds to all inquiries from shareholders. Schwab also distributes
informational literature, and furnishes the office space and equipment,
telephone facilities, and personnel that is necessary in providing shareholders
services.
Schwab was established in 1971 and is one of America's largest discount brokers.
Schwab 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 and, as of March 8, 1996, was the beneficial
owner of approximately 21.1% of the outstanding shares of that corporation. Mr.
Schwab may be deemed to be a controlling person of Schwab and our Investment
Manager.
ACCOUNTANTS. Price Waterhouse LLP is our independent accountant. Their address
is 555 California Street, San Francisco, California 94104.
OPERATING FEES AND EXPENSES
For investment management services, under the terms of its Investment Advisory
and Administration Agreement with the Trust, our Funds pay a graduated annual
fee to the Investment Manager. This fee is based on the value of the average
daily net assets of each Fund, and is payable monthly by each Fund in the amount
of 0.46% of each Fund's average daily net assets not in excess of $1 billion,
0.41% of such net assets over $1 billion, but not more than $2 billion, and
0.40% of such net assets over $2 billion.
Our Investment Manager guarantees that, through at least August 31, 1996, our
management fee will not exceed 0.20%, 0.19%, and 0.20% of the average daily net
assets of the Tax-Exempt Fund, the California Fund, and the New York Fund,
respectively, and total operating expenses will not exceed 0.45% of average
daily net assets of the Value Advantage Shares of each Fund. The effect of this
voluntary expense limitation is to maintain or increase each Fund's total return
to shareholders. For the fiscal period ended December 31, 1995, the Tax-Exempt
Fund, California Fund, and New York Fund paid an investment management fee of
0.20%, 0.19%, and 0.20%, respectively; and the Value Advantage Shares of each
such Fund paid total expenses of 0.45% of each such class' 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 and capital items such as costs of purchase or sale of portfolio
securities, including brokerage fees or commissions.
For its services as Transfer Agent, Schwab receives an annual fee of 0.05% of
the average daily net assets of each Fund's Value Advantage Shares. For transfer
agency services to each Fund's Sweep Shares, Schwab receives an annual fee of
0.25% of the average daily net assets of each Fund's Sweep Shares. In addition,
for shareholder services provided, Schwab receives an annual fee of 0.20% of the
average daily net assets of each Fund's Value Advantage Shares.
Schwab serves as our Funds' principal underwriter/distributor but receives no
compensa-
14
<PAGE> 43
tion for this service. PNC Bank, N.A. is our Funds' custodian.
OTHER EXPENSES. The Trust pays the expenses of our Funds' operations, including
the fees and expenses for independent auditors, legal counsel, custodians, the
cost of maintaining books and records of account, taxes, registration fees, and
the fees and expenses of qualifying the Trust and its shares for distribution
under federal and state securities laws, and industry association membership
dues.
The Trust generally allocates these expenses among its individual 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 Series or class of a Series will be charged
to that Series or class, respectively. The differing expenses applicable to the
Value Advantage Shares and Sweep Shares of the Funds will cause the performance
of the two classes to differ.
OTHER INFORMATION
The Trust 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 Trust offers
shares of nine Series, which may be organized into one or more classes of shares
of beneficial interest. The Tax-Exempt Fund was formerly known as the Schwab
Tax-Exempt Fund. The California Fund was formerly known as the Schwab California
Tax-Free Money Fund. The Board of Trustees may authorize the issuance of shares
of additional Series or classes, if it deems it to be desirable to do so. Shares
within each 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.
ANNUAL SHAREHOLDER MEETINGS. The Trust is not required to hold annual 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 a Fund's 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 Trust.
YOUR VOTING RIGHTS. If we were to make changes to a Fund's management or
fundamental policies, you would be asked to vote as a shareholder because
shareholders have voting rights on these matters. If a meeting is held and you
cannot attend, you may vote by proxy. Before the meeting, we will send you proxy
materials that explain the issues to be decided and include a voting card for
you to mail back. You are entitled to one vote for each share owned. Unless
permitted by the 1940 Act, shareholders vote by Series and not in the aggregate.
For example, when voting to approve an investment advisory agreement for a
Series, only shareholders of that Series may vote; when voting to elect
Trustees, shareholders of all the Series vote in the aggregate. In addition,
holders of Value Advantage Shares will vote exclusively as a class on any matter
relating solely to their arrangement as a class, and on any matter in which the
interests of the Value Advantage Shares of a Fund differ from the interests of
any other class of the Fund.
15
<PAGE> 44
INVESTING IN SHARES
OF THE FUNDS
You may place purchase and redemption orders as well as exchange requests by
telephone by calling your local Schwab office during regular business hours, or
by calling 800-2 NO-LOAD. 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.
We will follow reasonable procedures to confirm that your telephone instructions
are genuine. If we follow telephone orders that we reasonably believe to be
genuine, we will not be liable for any losses you may experience. If we do not
follow reasonable procedures to confirm that your telephone order is genuine, we
may be liable for any losses you may suffer from unauthorized or fraudulent
orders. These procedures may include:
- - requiring a form of personal identification before we act upon any
instructions received by telephone;
- - providing written confirmation of your telephone instructions; and
- - tape recording all telephone transactions.
You should remember that it may be difficult to reach us by telephone during
periods of drastic economic or market changes, when our phone lines become very
busy with calls from other investors. If you want to purchase, redeem or
exchange shares but have trouble reaching us by telephone, you may want to use
one of the other ways we offer 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.
HOW TO BUY SHARES
OPENING A SCHWAB ACCOUNT. You may buy our shares only through a Schwab account.
You can open a Schwab account by completing the appropriate account application.
(Corporations and other organizations should contact a Schwab office to find out
the additional forms that must be completed to open an account.)
Within your Schwab account, you have access to other investments available at
Schwab such as stocks, bonds and other mutual funds. Additionally, the
Securities Investor Protection Corporation (known as "SIPC") will provide
account protection up to $500,000 for your securities, including shares of the
Funds, which you hold in a Schwab account. However, SIPC account protection does
not protect you from any loss of principal due to market or economic conditions.
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
16
<PAGE> 45
Schwab if there have been fewer than two commissionable trades within the last
twelve months. Note that, in addition to these Schwab One(R) account minimums,
there are higher minimum investment and other requirements applicable to the
Value Advantage Shares of the Funds, which are described below.
DEPOSITING FUNDS AND MEETING THE FUNDS' INVESTMENT MINIMUMS. 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 Value
Advantage Shares using electronic products such as StreetSmart(TM), 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.
The minimum initial investment in the Value Advantage Shares of each Fund is
$25,000. After you have bought the minimum amount of Value Advantage Shares for
your initial investment, you can buy additional Value Advantage Shares in
amounts of at least $5,000. The Transfer Agent imposes a $5 fee for each month
your Fund account balance falls below the required $20,000 minimum. The minimum
initial investment to purchase Sweep Shares of each Fund is $1,000, and
subsequent investments in Sweep Shares must be at least $100. The Transfer Agent
reserves the right to waive these minimums from time to time for clients of
Schwab Institutional, a division of Schwab, and for certain other investors. See
the Statement of Additional Information for more details.
We, in our sole discretion and without prior notice to you, reserve the right to
reject orders to buy shares, to change the minimum investment requirements, and
to withdraw or suspend any part of the offering made by this Prospectus. In
particular, if you engage in excessive exchange or redemption activity, we
reserve the right to refuse your future orders to buy shares in order to
minimize the costs to the Funds associated with these practices. All orders to
buy shares must be accepted by us, and orders are not binding until we confirm
or accept them in writing. Schwab will charge your Schwab brokerage account a
$15 service fee for any check returned because of insufficient or uncollected
funds, or because of a stop payment order.
WHEN YOU CAN BUY SHARES. You must have funds in your Schwab account in order to
buy our shares. Funds (including those which are transmitted by wire) received
by Schwab before 4:00 p.m. (Eastern time) can be used to buy our shares on that
day. Funds that arrive after that time can be used to buy shares the next
Business Day.
METHODS OF BUYING SHARES. Schwab offers you several convenient ways to purchase
Fund shares. You may choose the one that works best for you, and Schwab will
confirm execution of your purchase order.
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
accompa-
17
<PAGE> 46
nied by a check made out 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, CA 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 the dollar amount of shares you would like to
purchase; and
- - (initial share purchase only) select one of the distribution options listed
below.
ELECTRONICALLY
For more information regarding how to buy shares electronically using
StreetSmart(TM), 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. When you first buy our shares, you may choose one of the
two following distribution options:
AUTOMATIC REINVESTMENT: All distributions will be reinvested in additional
full and fractional Value Advantage Shares of the Fund at the net asset
value next determined on their payable date; or
RECEIVE YOUR DIVIDENDS IN CASH: All distributions will be credited to your
Schwab account on the date distributions are payable. If you choose to have
your dividends mailed, a check normally will be mailed to you the Business
Day after distributions are credited to your account.
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.
HOW TO EXCHANGE SHARES
You can exchange your SchwabFunds(R) shares for shares of other SchwabFunds
Series or classes available to investors in your state provided you meet the
minimum initial or subsequent investment requirements and any other requirements
relating to the Series or class of shares you wish to purchase. Thus, you can
conveniently modify your investments if your goals or market conditions change.
The Transfer Agent will charge you a $5 administrative fee if you are exchanging
less than $5,000 of Value Advantage Shares.
We reserve the right to modify, limit, or terminate the exchange privilege upon
60 days' written notice. For federal income tax and other purposes, an exchange
is treated as a sale of your shares and a purchase of other shares.
BY TELEPHONE
We need the following information in order to process your telephone exchange
request:
- - your Schwab account number and your name for verification;
- - the number of our shares you want to exchange and the name of the Fund and
class, if applicable, from which you are exchanging shares;
18
<PAGE> 47
- - the name of the fund and class, if applicable, into which you want to exchange
shares; and
- - the distribution option you select.
BY MAIL
You can also exchange shares by writing to your local Schwab office or to the
address on the cover of this Prospectus.
We need the following information in a letter from you in order to process your
mail exchange request:
- - your Schwab account number;
- - the number of our shares you want to exchange and the name of the Fund from
which you are exchanging shares;
- - the name of the fund and class, if applicable, into which you want to exchange
shares;
- - the signature of at least one of the registered Schwab account holders of your
account in the exact form specified in the account; and
- - the distribution option you select.
Once mailed, an exchange request is irrevocable and may not be modified or
cancelled.
ELECTRONICALLY
For more information regarding how to exchange Value Advantage Shares
electronically using StreetSmart(TM), The Equalizer(R), and TeleBroker(R),
please call 800-2-NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
You can also request an exchange in person at your local Schwab office.
HOW TO SELL YOUR SHARES
You can sell our 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 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 New York Stock Exchange (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.
The Transfer Agent will charge you a $5 administrative fee if you sell Value
Advantage Shares equal to or less than $5,000 and may sell additional shares
from your account to pay the administrative fee. The Transfer Agent will waive
this minimum for certain clients of Schwab Institutional, a division of Schwab,
and for certain other investors. See the Statement of Additional Information for
more details.
19
<PAGE> 48
NON-SWEEP LIQUIDATION POLICY. If no cash assets or margin credit balance is
available in your Schwab Account, Schwab will redeem Value Advantage Shares
without prior notification to you to cover (a) debits in your account resulting
from transactions in securities; (b) payment of your Schwab One(R) checks; (c)
payment of charges made on your Visa(R) debit card; (d) purchases made under an
Automatic Investment Plan; and (e) electronic fund transactions. Schwab may
charge you a $10 fee each time Schwab must redeem your Value Advantage Shares in
one of these circumstances.
If your account contains more than one Value Advantage Investment, shares will
be redeemed from the Value Advantage Investment in your account with the highest
balance at the time of the settlement of the transaction. If those shares are
insufficient to satisfy the total amount due, then the Value Advantage
Investment with the next highest balance in your account will be used until no
Value Advantage Investment remains in your account. If the sum of the Value
Advantage Shares you own is insufficient to satisfy the total amount due, none
of your Value Advantage Shares will be redeemed.
For redemptions made under the circumstances outlined above, you will not be
charged an administrative fee for automatic redemptions which are less than the
amount required to satisfy each Fund's minimum redemption requirement.
BY TELEPHONE
You can sell your shares by telephone by calling your local Schwab office during
regular business hours, or by calling 800-2-NO-LOAD. 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
request:
- - your Schwab account number and your name for verification; and
- - the number of shares you want to sell; and
- - the name of the Fund and class, if applicable, from which you are selling
shares.
BY MAIL
You can also sell shares by writing to your local Schwab office or to the
address on the cover of this Prospectus.
We need the following information in a letter from you in order to process your
mail redemption request:
- - your Schwab account number;
- - the number of shares you want to sell and the name of the Fund from which you
are selling shares; and
- - the signature of at least one of the registered Schwab account holders of your
account in the exact form specified in the account.
Once mailed, a redemption request is irrevocable and may not be modified or
cancelled.
ELECTRONICALLY
For more information regarding how to sell shares electronically using
StreetSmart(TM), The Equalizer(R), and TeleBroker(R), please call 800-2-NO-LOAD.
IN PERSON AT A SCHWAB OFFICE
You can also request a sale of shares in person at your local Schwab office.
20
<PAGE> 49
IMPORTANT INFORMATION ABOUT
YOUR INVESTMENT
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Business Day we determine each class' net investment income, which we
compute by subtracting the expenses from the income related to the Value
Advantage Shares of a Fund. We declare dividends from this net investment income
each Business Day for those who were shareholders of record at the previous net
asset value calculation. We pay, or reinvest, dividends on the 15th day of each
month if it is a Business Day. If the 15th day of the month is not a Business
Day, we pay dividends on the next Business Day with the exception of the
dividend scheduled to be paid in December, which is paid on the last Business
Day in December.
INCOME TAX INFORMATION
The following is only a very brief summary of some of the federal, California
and New York income tax consequences that affect each Fund and its shareholders.
Therefore, it is important that you consult with advisers about your own tax
situation.
Our Funds have qualified as regulated investment companies under the Code. In
order for our Funds to continue to so qualify, each Fund will distribute to its
shareholders on a current basis substantially all of that Fund's net investment
income and its net capital gains (if any), and we will cause each Fund to meet
certain other requirements. As regulated investment companies, the Funds will
pay no federal income taxes (or California State or New York State or municipal
income taxes, in the case of the California Fund and the New York Fund,
respectively) to the extent that they distribute their earnings to their
shareholders.
THE TAX-EXEMPT FUND. Dividends representing net exempt-interest income received
by the Tax-Exempt Fund on Municipal Securities will generally be exempt from
federal income tax when distributed to you. However, such dividends may be
subject to the federal alternative minimum tax. Such dividend income may also be
taxable to you under state and local law as dividend income even though all or a
portion of such distributions may be derived from interest on tax-exempt
obligations which, if received directly by you, would be exempt from such income
taxes.
THE CALIFORNIA FUND. Dividends representing net exempt-interest income received
by the California Fund on Municipal Securities will generally be exempt from
federal income tax when distributed to you. However, such dividends may be
subject to the federal alternative minimum tax. Dividends paid to the extent of
exempt-interest income received on California Municipal Securities will also be
exempt from California personal income taxes provided that at the end of each
quarter of its taxable year, at least 50% of the Fund's total assets are
invested in California Municipal Securities and obligations of the U.S.
Government, its agencies and instrumentalities which are by federal law exempt
from local income taxes. Fund dividends derived from interest on U.S. Treasury
and agency obligations, if any, are subject to federal income tax. Dividends
paid to shareholders that are corporations subject to California franchise tax
or corporate income tax will be taxed as ordinary income to such shareholders
for California State tax purposes.
21
<PAGE> 50
THE NEW YORK FUND. Dividends representing net exempt-interest income received by
the New York Fund on Municipal Securities will generally be exempt from federal
income tax when distributed to you. However, such dividends may be subject to
the federal alternative minimum tax. Dividends paid to New York residents to the
extent of exempt-interest income received on New York Municipal Securities will
also be exempt from State of New York and New York municipalities personal
income taxes. Fund dividends derived from interest on U.S. Treasury and agency
obligations, if any, are subject to federal income tax. Dividends paid to
shareholders that are corporations subject to New York franchise tax or
corporate income tax will be taxed as ordinary income to such shareholders for
New York State tax purposes.
ADDITIONAL INFORMATION. Further, if you receive Social Security or railroad
retirement benefits, an investment in any of the Funds may affect the taxation
of your benefits.
Each Fund may at times purchase Municipal Securities, California Municipal
Securities, or New York Municipal Securities, as the case may be, at a discount
from the original issue price. 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 you as this ordinary income is distributed.
To the extent dividends are attributable to taxable interest or short-term
capital gains, such dividends will be taxable to you as ordinary income whether
you receive them as cash or as additional Value Advantage Shares.
We will provide you with a record of all dividends, distributions, purchases,
and sales on your regular Schwab brokerage account statement. At least once a
year we will notify you of the federal (and California and New York) income tax
consequences of all distributions made that year to your account.
HOW WE DETERMINE THE PRICE OF YOUR SHARES
The price of a Value Advantage Share is its net asset value, which we determine
each Business Day at the close of trading on the Exchange, generally at 4:00
p.m., Eastern time. We determine the price of a Value Advantage Share by taking
the total assets of each Fund allocable to the Value Advantage Shares,
subtracting any liabilities allocable to the Value Advantage Shares of the Fund,
and then dividing the resulting amount by the number of each Fund's Value
Advantage Shares outstanding. 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 we try to maintain our net
asset value at a constant $1 per share, we cannot guarantee this value.
We do not price the securities in our portfolios at market value. Instead, we
value our portfolio securities at the price we paid when we bought them,
adjusting this price to reflect amortization of premium or any discount. After
using this amortized cost method to determine the value of our investments, we
then compare this value with the market value of our investments.
We calculate the market value of our investments using one of the following
three methods: (1) we may use actual quotations provided by third-party pricing
services or market makers; (2) we may estimate the market value of the
instruments; or (3) we may use a value obtained from the yield data (published
by reputable sources) of money market instruments that are comparable to the
22
<PAGE> 51
securities we are valuing, using the mean between the bid and asked prices for
the instruments as the value of the instruments.
If deviation of 1/2 of 1% or more between our net asset value per share as
calculated by market values and our $1 per share amortized cost value, or if
there is any other deviation which the Board of Trustees believes would result
in a material dilution to shareholders or purchasers, the Board of Trustees will
promptly consider what action, if any, should be taken.
HOW THE FUNDS REPORT PERFORMANCE
From time to time, we may advertise the yield and effective yield, taxable
equivalent yield and taxable equivalent effective yield of our Value Advantage
Shares. Our actual performance will, of course, vary from year to year, and past
performance in no way represents or guarantees future performance. How we
perform in any given year will depend on the type and quality of securities in
which we invest, the market, and the operating expenses of each Fund's Value
Advantage Shares. Because the Value Advantage Shares are subject to different
expenses than Sweep Shares, the performance of the two classes of each Fund will
differ.
YIELD. When we calculate the yield of the Value Advantage Shares, we make some
hypothetical assumptions about how the Fund will do for one year. Using the
income generated over one 7-day period by a hypothetical investment, we assume
that this amount of income is generated each week for one year. This income for
the year is then shown as a percentage of our hypothetical investment. (See the
section entitled "Yield" in the Statement of Additional Information for more
information.)
EFFECTIVE YIELD. We calculate effective yield the same way, but we assume that
the income generated by our hypothetical investment is compounded weekly over
our hypothetical year. Because of the effect of compounding, the effective yield
will be slightly higher than the yield.
TAXABLE EQUIVALENT YIELD. The taxable equivalent yield is the yield that a
taxable investment must generate in order to equal (after applicable taxes are
deducted, assuming the investor is in the highest federal income tax bracket)
the yield for a tax-free investment. The taxable equivalent yield may be
reported for the Value Advantage Shares of our Funds and will be higher than the
yield for the Sweep Shares of our Funds.
TAXABLE EQUIVALENT EFFECTIVE YIELD. The taxable equivalent effective yield is
computed in the same manner as the taxable equivalent yield, except that the
effective yield is substituted for yield in the calculation.
COMPARING THE PERFORMANCE OF THE VALUE ADVANTAGE SHARES OF THE FUNDS WITH OTHER
FUNDS. We may compare the performance of the Value Advantage Shares of our Funds
with the performance of other mutual funds by comparing the ratings of mutual
fund rating services, various indices of investment performance, United States
Government obligations, bank certificates of deposit, the consumer price index,
and other investments for which reliable data is available.
ANNUAL AND SEMI-ANNUAL REPORT MAILINGS
Twice a year, we will provide a report to all shareholders describing the
performance of the Value Advantage Shares of the Funds and outlining the
investments held in the portfolios. In order to reduce mailing costs, we
consoli-
23
<PAGE> 52
date these shareholder mailings by household. If a household has multiple
accounts and the same address of record for all the accounts, we will send
mailings for all accounts at that address in a single package. If you do not
want this consolidation of mailings to apply to your account, please write to
SchwabFunds(R) at the address on the front of this Prospectus. To request a free
copy of our Annual Report (or Semi-Annual Report) to Shareholders, call your
local Schwab office or call 800-2 NO-LOAD.
24
<PAGE> 53
GLOSSARY OF IMPORTANT TERMS
AMORTIZED COST METHOD: the method of calculating a money market mutual fund's
net asset value whereby portfolio securities are valued at the fund's
acquisition cost, as adjusted for amortization or premium or accretion of
discount, rather than at their value based on current market factors.
ANNUALIZED: calculated to represent a year; a statement produced by calculating
financial results covering less than a year to show what would happen if the
results were hypothetically extended to cover an entire year.
BOND: a debt obligation that requires the issuer to pay a fixed sum of money
each year (the interest payments) until maturity, the date on which the bond
comes due and the principal (the amount borrowed) must be paid. Floating or
variable rate bonds have an interest rate that rises or falls if general
interest rates or some other security (such as Treasury bills) rises or falls.
BUSINESS DAY: any day both the Federal Reserve Bank of New York and the New York
Stock Exchange are open for business. A Business Day normally begins at 9:30
a.m. (Eastern time) when the Exchange opens and usually ends at 4 p.m. (Eastern
time) when the Exchange closes.
CAPITAL GAIN OR LOSS: the increase or decrease in the value of a security
relative to the original purchase price. A gain is realized when the security
that has increased in value is sold. If a security is held for more than 12
months and then sold at a profit, that profit is a realized long-term capital
gain. If it is sold at a profit after being held for less than 12 months, that
profit is a realized short-term capital gain.
CODE: The Internal Revenue Code of 1986, as amended.
COMMERCIAL PAPER: unsecured debt obligations issued by businesses and sold at a
discount but redeemed at par within 2 to 270 days.
DISTRIBUTION: payment a fund makes to shareholders. There are two kinds of
distributions: dividends, or the profits (after expenses) from a fund's
investments, and capital gains distributions.
DIVERSIFIED: Under the 1940 Act, a diversified money market fund generally may
not invest more than 5% of its assets in the securities of any one issuer, and
may not hold more than 10% of the voting shares of any one issuer. Certain minor
exceptions apply to this policy, which are described under "INVESTMENT
TECHNIQUES USED BY THE FUNDS - Limitations on Investments - Diversification."
DUFF: Duff & Phelps Credit Rating Co., an NRSRO.
FIRST-TIER: The highest ratings category assigned by an NRSRO. A first-tier
money market fund invests only in securities that are rated first-tier.
FITCH: Fitch Investor Services, Inc., an NRSRO.
FUNDAMENTAL: a policy that cannot be changed without the approval of a majority
(as defined in the 1940 Act) of the shareholders of a fund.
HIGH-QUALITY: rated in one of the two highest ratings categories assigned by any
NRSRO.
INVESTMENT MANAGER: Charles Schwab Investment Management, Inc.
LIQUIDITY: ability to convert assets into cash or cash equivalents within 7-days
at a fair value.
25
<PAGE> 54
MATURITY: the date on which the principal of a debt obligation such as a bond
comes due and must be repaid.
MONEY MARKET INSTRUMENT: short-term, liquid debt such as Treasury bills and
commercial paper, which is sold at a discount but redeemed at par. See
Commercial Paper.
MOODY'S: Moody's Investors Service, an NRSRO.
NET ASSET VALUE (NAV): on a per share basis, the value of one share of a class
of a fund. This value is determined by adding the total fund assets, subtracting
all liabilities applicable to the class, and then dividing the resulting number
by the number of shares of the class outstanding.
1940 ACT: the Investment Company Act of 1940, as amended.
NONCUMULATIVE VOTING RIGHTS: the right of a shareholder to vote only the number
of shares owned at the time of voting.
NON-DIVERSIFIED: under the 1940 Act no fund may invest more than 5% of the value
of its total assets in the securities of one issuer except that, a
non-diversified money market fund may invest up to 50% of the value of its total
asset without regard to the 5% limitation, provided no more than 25% of the
Fund's total assets are invested in the securities of any one issuer.
NRSRO: a Nationally Recognized Statistical Rating Organization, such as Moody's,
S&P, Duff or Fitch.
PAR: for a stock, par is the value assigned to the stock at the time it is
issued. It does not reflect either the intrinsic value of the security nor its
market value. For a bond, par is the price at which the bond will be redeemed at
its date of maturity, and the value on which the calculation interest payments
is based.
PORTFOLIO: the total stocks, bonds, and other securities held by an individual
investor, a mutual fund, or a financial institution.
PRINCIPAL: capital; the original value of an investment or a debt; the face
value of a bond.
PRIVATE PLACEMENT: the sale of stocks or bonds directly to an investor without
the services of an underwriter or without registering them with the SEC.
PUT: an option that allows the holder to sell the stated amount of a specified
stock or commodity for a specific amount within a certain time period.
RESTRICTED SECURITY: securities that cannot be sold publicly without prior
agreement with the issuer to register the securities under the Securities Act of
1933, which permits only limited sale under specified conditions.
RISK: the possibility of losing all or part of an investment, that the value of
the investment will decrease, or that the investor will receive little or no
return on the investment.
S&P: Standard & Poor's Corporation, an NRSRO.
SCHWAB: Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA
94104.
SECURITIES AND EXCHANGE COMMISSION (SEC): established by Congress to administer
the Securities Act of 1933 and other securities-related laws.
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC): a government sponsored
private corporation that insures securities accounts held in brokerages for up
to $500,000 in the event
26
<PAGE> 55
of the bankruptcy or financial failure of the brokerage. The insurance does not
cover loss due to financial risk.
SHORT-TERM: with respect to a fund's portfolio investments, maturing in 397 days
or less.
SYNTHETIC: an investment instrument (such as a fixed rate municipal bond) and an
option contract (such as a put) combined to create a security with desired
maturity or risk/return characteristics that may not be achievable through other
available investments.
TRANSFER AGENT: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104.
TRUST: The Charles Schwab Family of Funds.
- ------------------------------------------------------
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 FUNDS OR THEIR
DISTRIBUTOR.
- ------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH AN OFFER MAY NOT BE LAWFULLY MADE.
- ------------------------------------------------------
27
<PAGE> 56
SCHWAB MONEY
FUNDS VALUE
ADVANTAGE
INVESTMENTS TM
PROSPECTUS April 1, 1996
[SchwabFunds Logo]
2400-3 (4/96) CRS 3917 Printed on recycled paper
[SchwabFunds Logo]
101 Montgomery Street
San Francisco, California 94104
<PAGE> 57
PART B
THE CHARLES SCHWAB FAMILY OF FUNDS
The information required by Items 10 through 23 for Schwab
Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury
Money Fund, Schwab Tax-Exempt Money Fund-Sweep Shares, Schwab
California Tax-Exempt Money Fund-Sweep Shares, Schwab Retirement Money
Fund(R), Schwab Institutional Advantage Money Fund(TM), and Schwab New
York Tax-Exempt Money Fund-Sweep Shares, separate portfolios of
Registrant, are hereby incorporated by reference to the joint
Statement of Additional Information for these Portfolios, filed with
the SEC pursuant to Rule 497(e) on September 1, 1995.
<PAGE> 58
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Value Advantage Money Fund
<TABLE>
<CAPTION>
Statement of Additional
Part B Item Information Caption
- ----------- -----------------------
<S> <C>
Cover Page Cover Page
Table of Contents Table of Contents
General Information and History General Information
Investment Objectives and Policies Investment Restrictions
Management of the Fund Management of the Trust
Control Persons and Principal Holders of Management of the Trust
Securities Being Offered
Investment Advisory and Other Services Management of the Trust
Brokerage Allocation and Other Practices Portfolio Transactions and Turnover
Capital Stock and Other Securities General Information
Purchase, Redemption and Pricing of Share Price Calculation; Purchase and
Securities Being Offered Redemption of Shares
Tax Status Distributions and Taxes
Underwriters Management of the Trust
Calculation of Performance Data Yield
Financial Statements Financial Statements
</TABLE>
<PAGE> 59
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
APRIL 1, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus dated April 1, 1996 (as amended from
time to time) for the Schwab Value Advantage Money Fund (the "Fund"), a
separately managed investment portfolio of The Charles Schwab Family of Funds
(the "Schwab Fund Family" or the "Trust"). To obtain a copy of the Prospectus,
please contact Charles Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours
a day, or 101 Montgomery Street, San Francisco, CA 94104. TDD users may contact
Schwab at 800-345-2550, 24 hours a day. The Prospectus may be available
electronically by using our Internet address: http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
(800-266-5623)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT RESTRICTIONS................................................... 2
INVESTMENT SECURITIES..................................................... 3
MANAGEMENT OF THE TRUST................................................... 6
PORTFOLIO TRANSACTIONS AND TURNOVER....................................... 12
DISTRIBUTIONS AND TAXES................................................... 13
SHARE PRICE CALCULATION................................................... 16
YIELD..................................................................... 17
GENERAL INFORMATION....................................................... 17
PURCHASE AND REDEMPTION OF SHARES......................................... 21
OTHER INFORMATION......................................................... 21
APPENDIX - RATINGS OF INVESTMENT SECURITIES............................... 23
FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
<PAGE> 60
INVESTMENT RESTRICTIONS
The restrictions set forth below are fundamental and cannot be changed
without approval of the holders of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940, as amended,
hereinafter the "1940 Act") of the Fund.
THE FUND MAY NOT:
(1) Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter under the federal securities laws in
connection with the disposition of securities from its investment
portfolio.
(2) Invest in commodities or commodity contracts, including futures
contracts, or in real estate, although it may invest in securities
which are secured by real estate and securities of issuers which invest
or deal in real estate.
(3) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that the Fund reserves freedom of action to invest
up to 100% of its assets in certificates of deposit or bankers'
acceptances issued by U.S. banks and U.S. branches of those foreign
banks which the Investment Manager has determined to be subject to the
same regulation as U. S. banks, or obligations of or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(4) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(5) Issue senior securities as defined in the 1940 Act.
The following restrictions are non-fundamental and may be changed by
the Board of Trustees.
THE FUND MAY NOT:
(6) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of its
assets would be invested in securities of that issuer.
2
<PAGE> 61
(7) Invest more than 10% of its net assets in illiquid securities,
including repurchase agreements maturing in more than 7 days.
(8) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one
class.
(9) Invest more than 5% of its total net assets in securities of issuers
(other than obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities) which with their
predecessors have a record of less than three years continuous
operation.
(10) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Schwab Fund Family or the Investment
Manager beneficially own more than 1/2 of 1% of the securities of such
issuer, and together beneficially own more than 5% of the securities of
such issuer.
(11) Invest for the purpose of exercising control or management of another
issuer.
(12) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets(1)
(13) Write, purchase or sell puts, calls or combinations thereof.
(14) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(15) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of
issuers which invest in or sponsor such programs. Except as otherwise
noted, if a percentage restriction is adhered to at the time of
investment, a later increase in percentage beyond the specified limit
resulting from a change in values or net assets will not be considered
a violation.
INVESTMENT SECURITIES
The Fund will only purchase securities that present minimal credit
risks and which are First Tier or Second Tier Securities (otherwise referred to
"Eligible Securities"). An Eligible Security is:
- --------------------
(1) See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
3
<PAGE> 62
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's Investors Service, Standard &
Poor's Corporation, Duff and Phelps Credit Inc., Fitch Investors
Services, Inc., Thomson Bankwatch; and, IBCA Limited and its affiliate,
IBCA, Inc. with respect to debt issued by banks, bank holding
companies, United Kingdom building societies, broker-dealers and
broker-dealers' parent companies, and bank-supported debt) in one of
the two highest rating categories for short-term debt obligations (the
requisite NRSROs being any two or, if rated by one, that one NRSRO), or
(b) that itself was unrated by an NRSRO, but was issued by an issuer
that has outstanding a class of short-term debt obligations (or any
security within that class) meeting the requirements of subparagraph
1(a) above that is of comparable priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less and (a) whose issuer
received a rating within one of the two highest rating categories from
the requisite NRSROs for short-term debt obligations with respect to a
class of short-term debt obligations (or any security within that
class) that is now comparable in priority and security with the subject
security; or (b) that has long-term ratings from the requisite NRSROs
that are in one of the two highest categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
</ R>
A First Tier Security is any Eligible Security which carries (or other
relevant securities issued by its issuer carry) top NRSRO ratings from at least
two NRSROs (a single top rating is sufficient if only one NRSRO rates the
security), or has been determined by the Investment Manager, pursuant to
guidelines adopted by the Board of Trustees, to be of comparable quality to such
a security. A Second Tier Security is any other Eligible Security.
The Fund will limit its investments in the First Tier Securities of any
one issuer to no more than five percent of its assets. (Repurchase agreements
collateralized by non-Government securities will be taken into account when
making this calculation.) Moreover, the Fund's total holdings of Second Tier
Securities will not exceed 5% of its assets, with investment in the Second Tier
Securities of any one issuer being limited to the greater of 1% of the Fund's
assets or $1 million. In addition, the underlying securities involved in
repurchase agreements collateralized by non-Government securities will be First
Tier Securities at the time the repurchase agreements are executed.
4
<PAGE> 63
ASSET-BACKED COMMERCIAL PAPER AND OTHER SECURITIES
The Schwab Value Advantage Money Fund(R) can invest a portion of its
assets in asset-backed commercial paper and other money market fund Eligible
Securities (as that term is hereinafter defined). The credit quality of most
asset-backed commercial paper depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two classes: liquidity protection and protection against ultimate default
on the underlying assets. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that scheduled payments on the underlying pool are made in a timely fashion.
Protection against ultimate default ensures payment on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained from third parties, through
various means of structuring the transaction, or through a combination of such
approaches. The degree of credit support provided on each issue is based
generally on historical information respecting the level of credit risk
associated with such payments. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-backed security.
5
<PAGE> 64
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and trustees of the Trust, their
principal occupations over the past five years and their affiliations, if any,
with The Charles Schwab Corporation, Charles Schwab & Co., Inc. ("Schwab"), and
Charles Schwab Investment Management, Inc., are as follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Founder, Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation; Founder,
Chairman and Director, Charles Schwab & Co., Inc.
and Charles Schwab Investment Management, Inc.;
Chairman and Director, The Charles Schwab Trust
Company; Chairman and Director, and Director
(officer position) until December 1995, Mayer &
Schweitzer, Inc. (a securities brokerage subsidiary
of The Charles Schwab Corporation); Director, The
Gap, Inc. (a clothing retailer), Transamerica
Corporation (a financial services organization),
AirTouch Communications (a telecommunications
company) and Siebel Systems (a software company).
TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles
September 19, 1951 Schwab & Co., Inc. and The Charles Schwab
Corporation; Chief Executive Officer, Charles Schwab
Investment Management, Inc. From 1994 to 1995, Mr.
McCarthy was Chief Executive Officer, Jardine
Fleming Unit Trusts Ltd.; Executive Director,
Jardine Fleming Holdings Ltd.; Chairman, Jardine
Fleming Taiwan Securities Ltd.; and Director of JF
India and Fleming Flagship, Europe. Prior to 1994,
he was President of Fidelity Investments Advisor
Group, a division of Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
</TABLE>
- --------------------
*Mr. Schwab is an "interested person" of the Trust.
**Mr. McCarthy is an "interested person" of the Trust.
6
<PAGE> 65
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. (international financial
services).
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (real estate
June 28, 1938 investment). Prior to 1993, Mr. Stephens was
Chairman and Chief Executive Officer of the Bank of
San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment and management, and
investments).
A. JOHN GAMBS Treasurer and Principal Executive Vice President - Finance and Chief
November 16, 1945 Financial Officer Financial Officer, The Charles Schwab Corporation;
Executive Vice President, Chief Financial Officer
and Director, Charles Schwab & Co., Inc.; Chief
Financial Officer and Director, Charles Schwab
Investment Management, Inc.; and Chief Financial
Officer, The Charles Schwab Trust Company.
WILLIAM J. KLIPP* Senior Vice President, Senior Vice President, Charles Schwab & Co., Inc.;
December 9, 1955 Chief Operating Officer President and Chief Operating Officer, Charles
and Trustee Schwab Investment Management, Inc. Prior to 1993,
Mr. Klipp was Treasurer of Charles Schwab & Co.,
Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President & Senior Vice President and Chief Investment Officer,
April 5, 1955 Chief Investment Charles Schwab Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance
September 9, 1955 Officer and Assistant Corporate Secretary, Charles
Schwab Investment Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel - Charles Schwab
October 14, 1960 Investment Management, Inc. From 1991 to 1992, he
was Assistant Secretary and Assistant Corporate
Counsel for the Franklin Group of Mutual Funds.
</TABLE>
- --------------------
*Mr. Klipp is an "interested person" of the Trust.
7
<PAGE> 66
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel - Charles Schwab
June 16, 1961 Investment Management, Inc. Prior to 1994, she was
Counsel and Assistant Secretary for North American
Security Life Insurance Company and Secretary for
North American Funds.
</TABLE>
Each of the above-referenced individuals also serves in the same
capacity as described for the Trust, Schwab Investments, Schwab Capital Trust,
Schwab Annuity Portfolios, and Schwab Advantage Trust (which has not commenced
operations). The address of each individual listed above is 101 Montgomery
Street, San Francisco, California 94104.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or Estimated Annual
Retirement Benefits Benefits Upon
Aggregate Accrued as Part of Retirement from the Total Compensation
Name of Person, Compensation from Fund Expenses from Fund from the Fund
Position the Trust the Fund Complex(2) Complex(2) Complex(2)
- -------------------- ----------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
Elizabeth G. Sawi(3), 0 N/A N/A 0
President and Trustee
Timothy F. McCarthy(4), 0 N/A N/A 0
President and Trustee
William J. Klipp, 0 N/A N/A 0
Sr. Vice President, Chief
Operating Officer and
Trustee
</TABLE>
8
<PAGE> 67
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or Estimated Annual
Retirement Benefits Benefits Upon
Aggregate Accrued as Part of Retirement from the Total Compensation
Name of Person, Compensation from Fund Expenses from Fund from the Fund
Position the Trust the Fund Complex(2) Complex(2) Complex(2)
- -------------------- ----------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Donald F. Dorward, 38,500 N/A N/A 73,000
Trustee
Robert G. Holmes, 38,500 N/A N/A 73,000
Trustee
Donald R. Stephens, 38,500 N/A N/A 73,000
Trustee
Michael W. Wilsey, 38,500 N/A N/A 73,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended December 31, 1995.
(2) "Fund Complex" comprises all 22 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
-------------------------
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to participate in the Fee Deferral Plan. In the
event an Independent Trustee does elect to participate in the Plan, the Plan
would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or
9
<PAGE> 68
SchwabFunds(R) selected by the participating Trustee (the "Selected
SchwabFund Securities"). "SchwabFunds" include the series or classes of shares
of beneficial interest of the Trust, Schwab Investments, Schwab Capital Trust,
and Schwab Advantage Trust (which has not commenced operations).
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. These transactions would otherwise be limited or
prohibited by the investment policies and/or restrictions of the Funds. See
"Investment Restrictions."
INVESTMENT MANAGER
Charles Schwab Investment Management, Inc. (the "Investment Manager"),
a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the
Fund's investment adviser and administrator pursuant to an Investment Advisory
and Administration Agreement (the "Advisory Agreement") between it and the
Trust. The Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended and currently provides investment
management services to the SchwabFunds(R), a family of 21 mutual funds with over
$35 billion in assets as of March 18, 1996. The Investment Manager is an
affiliate of Schwab, the Trust's distributor and shareholder services and
transfer agent.
The Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of the majority (as defined in the 1940 Act) of
the outstanding voting securities of each Fund subject thereto. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement, or interested persons (as defined
in the 1940 Act) of any such party, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Fund subject thereto, and will terminate
automatically upon assignment.
Pursuant to the Advisory Agreement, the Investment Manager is
entitled to receive a graduated annual fee, payable monthly, of 0.46% of the
Fund's average daily net assets not in excess of $2 billion, 0.45% of such net
assets over $2 billion but not in excess of $3 billion, and 0.40% of such net
assets over $3 billion.
For the fiscal years ended December 31, 1993, 1994, and 1995, the
investment advisory and administration fees paid by the Fund were $592,000 (fees
were reduced by $1,882,000), $2,144,000 (fees were reduced by $6,741,000), and
10
<PAGE> 69
515,877,000 (fees were reduced by $7,922,000), respectively.
Expenses. The Trust pays the expenses of its operations, including
the fees and expenses of independent accountants, counsel, custodian and the
cost of reports and notices to shareholders, costs of calculating net asset
value, brokerage commissions or transaction costs, taxes, registration fees, the
fees and expenses of qualifying the Trust and its shares for distribution under
federal and state securities laws and membership dues in the Investment Company
Institute or any similar organization. The Trust's expenses generally are
allocated among the Funds on the basis of relative net assets at the time the
expense is incurred, except that expenses directly attributable to a particular
Fund or class of shares are charged to that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for its
prospectus and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when engaged to do so by the Trust. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, 1301 K Street, N.W., Suite 800 East, Washington, D.C.
20005, is counsel to the Trust.
11
<PAGE> 70
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of the Fund in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. Portfolio transactions may increase or decrease the yield of the Fund,
depending upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of the Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager generally selects broker-dealers primarily on the basis of the quality
and reliability of services provided, including execution capability and
financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for the Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as the
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
the Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, the Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
12
<PAGE> 71
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of the Fund is
determined ("Business Day"), the Fund's net investment income will be declared
as of the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) as a daily dividend to shareholders of record as of the last
calculation of net asset value prior to the declaration. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will normally be reinvested monthly in full and fractional shares of
the Fund at the net asset value on the 15th day of each month if a Business Day,
otherwise on the next Business Day. If cash payment is requested, checks will
normally be mailed on the Business Day following the reinvestment date. The Fund
will pay shareholders who redeem all of their shares all dividends accrued to
the time of the redemption within 7 days.
The Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Fund consists of: (1)
accrued interest income, plus or minus amortized discount or premium, minus (2)
accrued expenses allocated to the Fund. If the Fund realizes any capital gains,
they will be distributed at least once during the year as determined by the
Board of Trustees. Any realized capital losses to the extent not offset by
realized capital gains will be carried forward. It is not anticipated that the
Fund will realize any long-term capital gains. Expenses of the Trust are accrued
each day. Should the net asset value of the Fund deviate significantly from
market value, the Board of Trustees could decide to value the investments at
market value and any unrealized gains and losses could affect the amount of
distributions.
FEDERAL INCOME TAXES
It is the policy of the Fund to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, the
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, the Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stocks, securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
13
<PAGE> 72
total assets is represented by cash or cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to a value not greater than 5%
of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or securities of any other regulated investment company)
or of two or more issuers that the Fund controls, within the meaning of the
Code, and that are engaged in the same, similar or related trades or businesses.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range of
the Fund's investments. If the Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its net investment
income and net realized capital gains, if any, which it distributes to
shareholders, provided that the Fund distributes during its taxable year at
least 90% of its "investment company taxable income" (as defined in the Code).
The Fund intends to make sufficient distributions to shareholders to meet this
requirement.
If the Fund fails to distribute in a calendar year (regardless of
whether it has a non-calendar taxable year) substantially all of its (i)
ordinary income for such year and (ii) capital gain net income for the year
ending October 31 (or later if the Fund is permitted so to elect and so elects),
plus any retained amount from the prior year, the Fund will be subject to a
nondeductible 4% excise tax on the undistributed amounts. The Fund intends
generally to make distributions sufficient to avoid imposition of this excise
tax.
Any distribution declared in October, November or December to
shareholders of record during those months and paid during the following January
is treated, for tax purposes, as if it were received by each shareholder on
December 31 of the year declared . The Fund may adjust its schedule for the
reinvestment of distributions for the month of December to assist in complying
with the reporting and minimum distribution requirements of the Code.
The Fund does not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder (1) who
fails to provide a correct taxpayer identification number certified under
penalty of perjury; (2) who provides an incorrect taxpayer identification
number; (3) who is subject to withholding by the Internal Revenue
14
<PAGE> 73
Service for failure to properly report all payments of interest or dividends; or
(4) who fails to provide a certified statement that he or she is not subject to
"backup withholding." This "backup withholding" is not an additional tax and any
amounts withheld may be credited against the shareholder's ultimate U.S. tax
liability.
The Fund may engage in investment techniques that may alter the timing
and character of the Fund's income. The Fund may be restricted in its use of
these techniques by rules relating to its qualification as a regulated
investment company.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) generally are subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or disposition of shares of the Fund
generally are not subject to U.S. taxation, unless the recipient is an
individual who meets the Code's definition of "resident alien." Different tax
consequences may result if the foreign shareholder is engaged in a trade or
business within the United States. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by the Fund may also be
subject to state, local and foreign taxes, and their treatment under applicable
tax laws may differ from the federal income tax treatment.
The discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of shares of the Fund. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Fund and its
shareholders, and the discussion is not intended as a substitute for careful tax
planning. Accordingly, prospective investors (particularly those not residing or
domiciled in the United States) should consult their own tax advisers regarding
the consequences of investing in the Fund.
15
<PAGE> 74
SHARE PRICE CALCULATION
The Fund values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of the Fund's investments at
amortized cost with market values. Market valuations are obtained by using
actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and the Fund's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees of the Trust believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If the Fund's net
asset value per share (computed using market values) declined, or were expected
to decline, below $1.00 (computed using amortized cost), the Board of Trustees
might temporarily reduce or suspend dividend payments in an effort to maintain
the net asset value at $1.00 per share. As a result of such reduction or
suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the other
hand, if the Fund's net asset value per share (computed using market values)
were to increase, or were anticipated to increase above $1.00 (computed using
amortized cost), the Board of Trustees might supplement dividends in an effort
to maintain the net asset value at $1.00 per share.
16
<PAGE> 75
YIELD
The historical performance of the Fund may be shown in the form of
yield and effective yield. These measures of performance are described below.
YIELD
Yield refers to the net investment income generated by a hypothetical investment
in the Fund over a specific 7-day period. This net investment income is then
annualized, which means that the net investment income generated during the
7-day period is assumed to be generated in each 7-day period over an annual
period, and is shown as a percentage of the investment. The Fund's 7-day yield
for the period ended December 31, 1995 was 5.47%.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect. The Fund's 7-day effective yield for the period ended December 31, 1995
was 5.62%.
GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of Trust
(other than amendments changing the name of the Trust or any of its investment
portfolios, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5)
determining whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) such additional matters as may be required by law,
the Declaration of Trust, the Bylaws or any registration of the Trust with the
SEC or any state or as the Board of Trustees may consider desirable. The
shareholders also would vote upon changes to the Fund's fundamental investment
objective, policies or restrictions.
17
<PAGE> 76
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of these Bylaws
permits or requires that (i) holders of any series shall vote as a series, then
a majority of the aggregate number of shares of that series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series; or (ii) holders of any class shall vote as a class, then a majority
of the aggregate number of shares of that class entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class.
Any lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. The Declaration of
Trust specifically authorizes the Board of Trustees to terminate the Trust (or
any of its investment portfolios) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of
18
<PAGE> 77
a shareholder incurring financial loss on account of shareholder liability is
considered remote, because it is limited to circumstances in which a disclaimer
is inoperative and the Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of March 22, 1996, the officers and trustees of the Trust, as a
group, owned of record or beneficially less than 1% of the outstanding voting
securities of the remaining series of the Trust.
ACCESS TO SCHWAB'S MUTUAL FUND ONESOURCE SERVICE(TM)
With Schwab's Mutual Fund OneSource Service(TM) ("OneSource"), a
shareholder can invest in over 200 mutual funds from many fund companies,
subject to the following. If a shareholder makes five or more short-term
redemptions of OneSource mutual funds (other than the SchwabFunds) within any
12-month period, a fee will be charged on all future trades. A short-term
redemption in this context refers to the sale of mutual fund shares held for six
months or less. Some mutual funds available through OneSource may charge fees
permitted under Rule 12b-1 in excess of one quarter of one percent per year.
Schwab reserves the right to modify OneSource's terms and conditions at any
time. For more information, a shareholder should contact their Schwab office
during its regular business hours or 800-2 NO-LOAD, 24 hours a day.
19
<PAGE> 78
SchwabFunds(R). SchwabFunds offers a variety of series and classes of shares of
beneficial interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(TM)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(3)
Schwab California Long-Term Tax-Free Bond Fund(3)
MONEY MARKET FUNDS(4)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares(3)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)(3)
Schwab Retirement Money Fund(R)(5)
Schwab Institutional Advantage Money Fund(TM)(5)
Schwab New York Tax-Exempt Money Fund-Sweep Shares(6)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)(6)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios of Schwab Capital Trust.
(3) Designed for California taxpayers.
(4) All listed money market funds are separate investment portfolios of the
Trust.
(5) Designed for institutional investors only.
(6) Designed for New York taxpayers.
20
<PAGE> 79
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment for the Schwab Value Advantage Money
Fund(R) is $25,000 ($15,000 for IRAs and other retirement plans) and subsequent
investments of $5,000 ($2,000 for IRAs and other retirement plans) or more may
be made. These minimum requirements may be changed at any time.
A Fund shareholder may request that the Trust waive the minimum initial
and subsequent investment requirements, as well as the minimum balance
requirement and the minimum redemption amount described in the Fund's
Prospectus, if (a) that shareholder owns Fund shares equaling an aggregate of $5
million or more; or (b) that shareholder is the customer of a financial adviser
whose assets under management include a current aggregate balance of $5 million
or more invested in Fund shares and an average balance of at least $20,000 per
customer account. In addition, the Trust may waive the minimums for purchases by
trustees, directors, officers or employees of the Trust, Schwab or the
Investment Manager.
The Trust has made an election with the SEC to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90 day period to the lesser of $250,000 or 1% of its net assets at the beginning
of such period. This election is irrevocable without the SEC's prior approval.
Redemption requests in excess of the stated limits may be paid, in whole or in
part, in investment securities or in cash, as the Trust's Board of Trustees may
deem advisable; however, payment will be made wholly in cash unless the Board of
Trustees believes that economic or market conditions exist that would make such
a practice detrimental to the best interests of the Fund. If redemption proceeds
are paid in investment securities, such securities will be valued as set forth
in the Prospectus of the Fund affected under "Share Price Calculation" and a
redeeming shareholder would normally incur brokerage expenses if he or she
converted the securities to cash.
OTHER INFORMATION
The Prospectus of the Fund and this Statement of Additional Information
do not contain all the information included in the Registration Statement filed
with the SEC under the Securities Act of 1933, as amended, with respect to the
securities offered by the Prospectus. Certain portions of the Registration
Statement have been omitted from the Prospectus and this Statement of
Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
21
<PAGE> 80
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR, IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
22
<PAGE> 81
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's
Investors Service ("Moody's"). Issuers (or related supporting institutions) of
commercial paper with this rating are considered to have a superior ability to
repay short-term promissory obligations. Issuers (or related supporting
institutions) of securities rated Prime-2 are viewed as having a strong capacity
to repay short-term promissory obligations. This capacity will normally be
evidenced by many of the characteristics of issuers whose commercial paper is
rated Prime-1 but to a lesser degree.
STANDARD & POOR'S CORPORATION
A Standard & Poor's Corporation ("S&P") A-1 commercial paper rating
indicates either an overwhelming or very strong degree of safety regarding
timely payment of principal and interest. Issues determined to possess
overwhelming safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is strong, but the relative degree of
safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term United States Treasury obligations), a Duff-1
rating signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
Fitch Investors Service, Inc.'s ("Fitch") F-1+ is the highest category,
and indicates the strongest degree of assurance for timely payment. Issues rated
F-1 reflect an assurance of timely payment only slightly less than issues rated
F-1+. Issues assigned an F-2 rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues in the
first two rating categories.
23
<PAGE> 82
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
strong capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protections, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal
24
<PAGE> 83
and differs from an AAA rating only in small degree.
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free United States Treasury debt. AA
rated bonds are of high credit quality and have strong protection factors. The
risks associated with them are modest but may vary slightly from time to time
because of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS
ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very strong. TBW-2 is
the second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
25
<PAGE> 84
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
CORPORATE
OBLIGATIONS--62.4%(a)
ASSET BACKED SECURITIES--13.2%
Alpha Finance Corp.
5.57%, 03/15/96 $ 5,000 $ 4,943
Alpine Securitization Corp.
5.83%, 01/09/96 15,224 15,205
Apreco, Inc.
5.80%, 01/29/96 32,200 32,057
5.75%, 02/23/96 7,000 6,942
Beta Finance, Inc.
5.71%, 01/22/96 12,000 11,961
5.87%, 02/16/96 13,000 12,905
5.79%, 03/25/96 12,000 11,842
5.65%, 04/10/96 5,000 4,923
Briarcliff Capital Corp.
5.78%, 02/05/96 20,000 19,889
Broadway Capital Corp.
5.91%, 01/03/96 7,616 7,614
5.91%, 01/05/96 25,000 24,984
5.87%, 01/05/96 10,000 9,994
5.86%, 01/09/96 40,941 40,888
5.86%, 01/10/96 40,000 39,942
5.86%, 01/11/96 15,748 15,723
5.99%, 01/16/96 25,365 25,303
5.88%, 01/19/96 18,000 17,948
5.99%, 01/22/96 50,753 50,578
6.05%, 02/05/96 5,000 4,971
6.05%, 02/12/96 18,000 17,875
Corporate Asset Funding Corp.
5.77%, 02/05/96 45,600 45,348
Corporate Receivables Corp.
5.80%, 01/25/96 20,000 19,924
5.76%, 02/02/96 21,375 21,267
5.76%, 02/16/96 31,400 31,172
ESC Securitization, Inc.
5.81%, 01/11/96 30,000 29,952
5.79%, 01/26/96 22,000 21,913
5.76%, 02/01/96 10,000 9,951
5.58%, 03/21/96 26,000 25,682
Enterprise Funding Corp.
5.82%, 01/09/96 5,073 5,067
5.80%, 01/10/96 8,111 8,099
5.83%, 01/18/96 5,886 5,870
5.83%, 01/19/96 5,074 5,059
5.83%, 01/23/96 4,384 4,369
5.78%, 02/02/96 11,155 11,098
5.77%, 02/23/96 7,986 7,919
5.76%, 03/08/96 6,096 6,032
5.58%, 03/20/96 6,083 6,010
5.54%, 06/12/96 10,281 10,030
Eureka Securitization, Inc.
5.78%, 02/12/96 16,000 15,894
5.79%, 02/13/96 53,000 52,639
First Deposit Master Trust
Series 1993-3
5.81%, 02/27/96 28,349 28,091
Ranger Funding Corp.
5.84%, 01/08/96 6,000 5,993
5.82%, 01/11/96 15,206 15,182
5.83%, 01/24/96 8,000 7,971
5.83%, 01/25/96 10,000 9,962
5.83%, 02/13/96 5,075 5,040
5.76%, 02/20/96 6,000 5,953
5.76%, 02/21/96 8,000 7,936
5.71%, 03/18/96 20,000 19,759
Riverwoods Funding Corp.
5.79%, 02/15/96 40,000 39,715
Special Purpose Accounts
Receivable Cooperative Corp.
5.76%, 02/07/96 7,000 6,959
5.78%, 02/14/96 20,000 19,861
WCP Funding, Inc.
5.74%, 02/23/96 25,000 24,792
-------
916,996
-------
AUTOMOTIVE--5.0%
Ford Credit Europe PLC
5.76%, 02/14/96 20,000 19,861
5.77%, 02/16/96 50,000 49,637
General Motors
Acceptance Corp.
5.81%, 02/01/96 4,000 3,980
5.76%, 02/02/96 25,000 24,873
5.81%, 02/13/96 24,000 23,836
5.82%, 02/14/96 50,000 49,650
5.62%, 03/19/96 13,000 12,844
5.72%, 04/26/96 50,000 49,103
5.72%, 05/01/96 30,000 29,439
Renault Credit
International SA Banque
5.84%, 01/08/96 52,300 52,242
5.87%, 01/24/96 18,700 18,631
5.88%, 01/25/96 15,000 14,942
-------
349,038
-------
BANKING--AUSTRALIA--1.7%
ANZ (Delaware), Inc.
5.80%, 02/01/96 40,000 39,803
5.58%, 05/14/96 22,000 21,554
National Australia Funding
(Delaware), Inc.
5.55%, 05/29/96 10,000 9,777
5.53%, 06/12/96 29,000 28,294
Westpac Capital Corp.
5.80%, 05/02/96 20,000 19,618
-------
119,046
-------
BANKING--BELGIUM--0.4%
Generale Bank, Inc.
5.74%, 03/12/96 5,000 4,945
5.81%, 04/04/96 22,000 21,676
-------
26,621
-------
BANKING--CANADA--2.0%
Bank of Montreal
5.81%, 01/29/96 23,000 22,898
</TABLE>
F-1
<PAGE> 85
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
Bank of Nova Scotia
5.75%, 01/19/96 $10,000 $ 9,972
5.75%, 01/24/96 50,000 49,820
5.81%, 02/02/96 16,000 15,919
Toronto-Dominion Holdings
5.51%, 07/10/96 39,000 37,897
-------
136,506
-------
BANKING--DENMARK--0.5%
Den Danske Corp.
5.80%, 04/10/96 37,000 36,421
-------
BANKING--DOMESTIC BANK HOLDING COMPANY--2.0%
Bankers Trust New York Corp.
5.77%, 02/12/96 57,000 56,622
5.77%, 02/20/96 47,000 46,629
NationsBank Corp.
5.55%, 05/21/96 10,000 9,788
5.61%, 05/28/96 25,000 24,439
-------
137,478
-------
BANKING--DOMESTIC--0.2%
Vehicle Services of
America/
(NationsBank of Texas
LOC)
5.80%, 02/08/96 16,700 16,599
-------
BANKING--GERMANY--0.6%
Banco Boavista S.A./
(Bayerische Vereinsbank
AG LOC)
5.80%, 03/11/96 9,000 8,901
5.80%, 04/08/96 10,000 9,846
Kredietbank N.A. Finance
Corp.
5.78%, 01/11/96 20,500 20,468
-------
39,215
-------
BANKING--ITALY--0.8%
Cariplo Finance, Inc.
5.76%, 02/20/96 10,000 9,921
5.76%, 02/22/96 40,000 39,672
5.74%, 02/22/96 9,000 8,926
-------
58,519
-------
BANKING--JAPAN--0.5%
Bancal Tri-State Corp./
(Mitsubishi Bank Keepwell
Agreement)
5.81%, 03/15/96 10,000 9,883
Ridge Capital II/(Dai-Ichi
Kangyo Bank Ltd. LOC)
6.26%, 01/04/96 6,000 5,997
Stellar Capital Corp./
(Bank of Tokyo
Liquidity Agreement)
6.00%, 02/20/96 15,155 15,031
-------
30,911
-------
BANKING--SPAIN--0.6%
BEX America Finance, Inc.
5.79%, 01/16/96 10,000 9,976
5.76%, 02/26/96 30,000 29,735
-------
39,711
-------
BANKING--UNITED KINGDOM--2.1%
Abbey National N.A. Corp.
5.79%, 01/17/96 75,000 74,810
Cheltenham & Gloucester PLC
5.80%, 02/02/96 50,000 49,746
Yorkshire Building Society
5.53%, 06/07/96 25,000 24,410
-------
148,966
-------
COMPUTER AND OFFICE EQUIPMENT--0.2%
CSC Enterprises
5.74%, 02/12/96 15,000 14,900
-------
ELECTRICAL AND ELECTRONICS--0.1%
Panasonic Finance, Inc.
5.75%, 02/09/96 5,000 4,969
-------
FINANCE (COMMERCIAL)--7.1%
CIT Group Holdings, Inc.
5.76%, 02/15/96 30,000 29,787
General Electric
Capital Corp.
5.80%, 03/01/96 25,000 24,764
5.74%, 03/06/96 31,000 30,688
5.70%, 04/03/96 42,000 41,393
5.55%, 05/02/96 13,338 13,093
5.62%, 05/08/96 9,000 8,825
5.61%, 05/08/96 30,000 29,415
5.52%, 06/13/96 60,000 58,535
5.52%, 06/14/96 41,000 39,993
General Electric Capital
Services
5.76%, 02/14/96 46,000 45,681
5.74%, 03/07/96 36,000 35,632
5.59%, 05/06/96 50,000 49,045
5.62%, 05/07/96 40,000 39,227
5.58%, 05/10/96 50,000 49,016
-------
495,094
-------
FINANCE (CONSUMER)--2.3%
American Express Credit Corp.
5.50%, 06/05/96 30,000 29,305
5.50%, 06/06/96 35,000 34,183
Associates Corp. of North
America
5.65%, 05/09/96 53,000 51,952
Sears Roebuck Acceptance
Corp.
5.82%, 01/11/96 15,000 14,976
5.79%, 02/15/96 28,000 27,800
-------
158,216
-------
</TABLE>
F-2
<PAGE> 86
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
GOVERNMENT LOCALITY--FOREIGN--0.3%
New South Wales Treasury
Corp.
5.80%, 01/30/96 $23,000 $ 22,894
-------
MINING AND MINERAL RESOURCES--0.5%
BHP Finance (U.S.A.), Inc.
5.75%, 02/22/96 15,000 14,877
5.76%, 03/05/96 17,000 16,829
-------
31,706
-------
MISCELLANEOUS MANUFACTURING--3.7%
Hanson Finance (U.K.) PLC
5.75%, 01/12/96 20,000 19,965
5.80%, 01/18/96 10,000 9,973
5.80%, 01/19/96 72,500 72,293
5.79%, 01/23/96 30,000 29,896
5.80%, 01/31/96 30,000 29,858
5.80%, 02/07/96 50,000 49,708
5.82%, 02/09/96 39,000 38,759
5.75%, 02/29/96 5,000 4,954
-------
255,406
-------
MORTGAGE BANKING--1.6%
Fleet Mortgage Group, Inc.
5.83%, 01/26/96 22,000 21,912
5.82%, 02/21/96 54,000 53,560
5.79%, 02/22/96 9,000 8,926
5.80%, 02/23/96 27,000 26,772
-------
111,170
-------
PERSONAL CARE PRODUCTS--0.9%
Colgate-Palmolive Company
5.79%, 01/22/96 31,000 30,897
5.79%, 01/24/96 31,200 31,086
-------
61,983
-------
PHARMACEUTICALS--0.1%
Glaxo Wellcome PLC
5.79%, 01/18/96 8,000 7,978
-------
SECURITIES BROKERAGE-DEALER--15.7%
BT Securities Corp.
5.85%, 01/18/96 15,000 14,959
5.84%, 01/25/96 30,000 29,885
5.82%, 01/29/96 18,000 17,920
5.83%, 01/30/96 29,000 28,866
5.77%, 02/16/96 10,000 9,927
Bear Stearns
Companies, Inc.
5.80%, 01/29/96 13,000 12,942
5.78%, 02/05/96 25,000 24,861
5.79%, 02/08/96 35,000 34,789
5.72%, 02/29/96 35,000 34,676
CS First Boston, Inc.
5.82%, 02/01/96 45,000 44,778
Goldman Sachs Group, LP
5.83%, 01/17/96 30,000 29,924
5.80%, 03/07/96 77,000 76,201
5.77%, 03/19/96 55,000 54,329
5.77%, 03/21/96 56,000 55,299
5.77%, 03/22/96 53,000 52,329
5.72%, 04/09/96 58,000 57,107
Lehman Brothers
Holdings, Inc.
5.83%, 01/26/96 10,000 9,960
5.94%, 02/01/96 10,000 9,949
5.82%, 02/06/96 33,000 32,811
5.80%, 02/12/96 32,000 31,787
5.81%, 02/13/96 35,000 34,760
Morgan Stanley Group, Inc.
5.83%, 01/08/96 40,000 39,955
5.83%, 01/09/96 8,000 7,990
5.78%, 02/06/96 36,000 35,795
5.78%, 02/07/96 20,000 19,883
5.82%, 02/08/96 20,000 19,879
5.79%, 02/08/96 42,000 41,747
5.79%, 02/09/96 55,000 54,660
5.79%, 02/12/96 17,000 16,887
5.89%, 02/13/96 10,000 9,932
Nomura Holdings
America, Inc.
5.92%, 01/03/96 8,000 7,997
5.91%, 01/09/96 10,000 9,987
5.88%, 01/12/96 15,000 14,973
5.86%, 01/18/96 5,000 4,986
Paine Webber Group, Inc.
5.86%, 01/02/96 20,000 19,997
5.89%, 01/04/96 24,000 23,988
5.84%, 02/01/96 18,000 17,910
Salomon, Inc.
6.15%, 01/02/96 454 454
6.02%, 02/15/96 20,000 19,852
6.02%, 02/16/96 30,000 29,773
---------
1,094,704
---------
STUDENT LOANS--0.3%
Student Loan Corp.
5.80%, 01/12/96 22,000 21,962
---------
TOTAL CORPORATE OBLIGATIONS (Cost
$4,337,009) 4,337,009
---------
VARIABLE RATE OBLIGATIONS--8.6%(b)
ASSET BACKED SECURITIES--1.6%
Advanta Credit Card
Master Trust
5.87%, 01/07/96 21,200 21,200
Beta Finance, Inc.
5.91%, 01/16/96 50,000 49,989
Corporate Asset
Funding Corp.
5.84%, 01/29/96 40,000 39,988
--------
111,177
--------
BANKING--DOMESTIC BANK HOLDING COMPANY--1.1%
Bankers Trust New York
Corp.
6.14%, 01/02/96 50,000 50,000
6.13%, 01/02/96 25,000 25,000
--------
75,000
--------
</TABLE>
F-3
<PAGE> 87
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
BANKING--DOMESTIC--0.3%
Huntington National Bank
5.87%, 01/02/96 $20,000 $20,000
Keystone Health Resources
Corp. Variable Rate
Taxable Demand Notes
Series 1993/ (PNC Bank
LOC)
6.00%, 01/07/96 3,400 3,400
------
23,400
------
BANKING--FRANCE--0.8%
New York City, General
Obligation Bonds
Fiscal 1995 Series F-8/
(Societe Generale LOC)
6.00%, 01/07/96 19,500 19,500
New York City, General
Obligation Bonds
Fiscal 1996 Series A-2/
(Societe Generale LOC)
6.00%, 01/07/96 36,000 36,000
------
55,500
------
BANKING--GERMANY--0.1%
Hudson County, New Jersey
General Obligation
Refunding Bonds
Variable Rate Demand
Obligations Taxable
Series 1995/
(Landesbank
Hessen-Thuringen
Girozentrale LOC)
6.05%, 01/07/96 10,000 10,000
------
BANKING--JAPAN--0.5%
Missouri Economic
Development Export &
Infrastructure Board
Adjustable Rate Taxable
Securities (Biocraft
Laboratories, Inc.
Project) Series 1989/
(Bank of Tokyo LOC)
6.30%, 01/07/96 22,000 22,000
New York City Industrial
Development Agency
Industrial Development
Revenue Bonds (G.A.F.
Seelig Inc. Project)
Series 1993/ (IBJ
Schroder Bank & Trust
LOC)
6.25%, 01/07/96 2,225 2,225
Riverside County,
California 1990 Taxable
Variable Rate
Certificates of
Participation (Monterey
Avenue Project)/ (Sanwa
Bank Ltd. LOC)
6.15%, 01/07/96 8,100 8,100
Town of Islip Industrial
Development Agency 1992
Taxable Adjustable Rate
Industrial Development
Revenue Bonds (Nussdorf
Associates/Quality King
Distributors, Inc.
Facility)/
(Bank of Tokyo LOC)
5.84%, 01/07/96 1,560 1,560
-------
33,885
-------
BANKING--UNITED KINGDOM--0.4%
New Jersey Economic
Development Authority
Variable Rate Title IX Loan
Portfolio Securitization
Bonds/(National
Westminister Bank LOC)
5.86%, 01/01/96 28,300 28,300
-------
INSURANCE--0.1%
Commonwealth Life
Insurance Co.
6.03%, 01/01/96 10,000 10,000
-------
MONOLINE INSURANCE--0.2%
Baptist Health Systems of
South Florida, Inc.
Taxable Variable Rate
Direct Note Obligations
Series 1995A/
(MBIA Insurance)
6.05%, 01/07/96 6,600 6,600
Baptist Health Systems of
South Florida, Inc.
Taxable Variable Rate
Direct Note Obligations
Series 1995B/
(MBIA Insurance)
6.05%, 01/07/96 4,500 4,500
New Orleans Aviation Board
Taxable Refunding Bonds
Series 1993A/ (MBIA
Insurance)
6.01%, 01/07/96 700 700
-------
11,800
-------
SECURITIES BROKERAGE-DEALER--3.5%
Bear Stearns Companies,
Inc.
6.03%, 01/04/96 75,000 75,000
5.99%, 01/08/96 50,000 50,000
5.99%, 02/01/96 50,000 50,000
5.91%, 03/21/96 45,000 45,000
Lehman Brothers Holdings,
Inc.
5.90%, 01/30/96 20,000 20,000
-------
240,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $599,062) 599,062
-------
</TABLE>
F-4
<PAGE> 88
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
AGENCY OBLIGATIONS--1.1%
COUPON NOTES--1.1%
Federal National Mortgage
Assoc.
5.50%, 06/12/96 $24,000 $ 23,983
5.62%, 07/02/96 24,000 23,985
5.91%, 08/19/96 30,000 30,047
-------
TOTAL AGENCY OBLIGATIONS (Cost
$78,015) 78,015
-------
BANKER'S
ACCEPTANCES--0.4%
BANKING--DOMESTIC--0.4%
Mellon Bank N.A.
5.86%, 02/26/96 9,000 8,920
5.58%, 05/06/96 5,000 4,904
5.55%, 06/07/96 15,000 14,645
-------
TOTAL BANKER'S ACCEPTANCES (Cost
$28,469) 28,469
-------
BANK NOTES--2.1%
BANKING--DOMESTIC--2.1%
NationsBank of Texas, N.A.
5.74%, 03/08/96 50,000 50,000
NationsBank, N.A.
(Carolinas)
5.54%, 06/04/96 30,000 30,000
PNC Bank, N.A.
5.62%, 05/24/96 15,000 15,014
Sea First--Seattle
5.80%, 01/12/96 50,000 50,000
-------
TOTAL BANK NOTES
(Cost $145,014) 145,014
-------
CERTIFICATES OF DEPOSIT--24.5%
BANKING--CANADA--2.2%
Bank of Montreal
5.84%, 01/05/96 25,000 25,000
5.80%, 01/30/96 40,000 40,000
Canadian Imperial Bank of
Commerce
5.81%, 01/26/96 25,000 25,000
5.81%, 01/31/96 60,000 60,000
-------
150,000
-------
BANKING--DOMESTIC--1.1%
MBNA America Bank N.A.
5.75%, 04/10/96 42,000 42,000
5.63%, 04/16/96 36,000 36,000
-------
78,000
-------
BANKING--FRANCE--2.9%
Banque Nationale de Paris
5.80%, 04/03/96 17,000 17,001
Societe Generale
5.84%, 01/18/96 33,000 33,000
5.80%, 01/25/96 54,000 54,000
5.84%, 03/14/96 25,000 25,002
5.85%, 03/20/96 58,000 58,001
5.61%, 04/12/96 13,000 13,032
-------
200,036
-------
BANKING--GERMANY--3.4%
Bayerische Vereinsbank AG
5.80%, 01/10/96 34,000 34,000
Deutsche Bank
5.79%, 01/23/96 75,000 75,000
5.79%, 01/29/96 30,000 30,000
5.79%, 01/30/96 45,000 45,000
Dresdner Bank AG
5.58%, 06/07/96 10,000 10,010
5.75%, 07/05/96 15,000 15,002
Westdeutsche Landesbank
5.71%, 01/16/96 30,000 29,998
-------
239,010
-------
BANKING--ITALY--0.2%
Cariplo SPA
5.70%, 03/04/96 10,000 10,001
-------
BANKING--JAPAN--10.2%
Dai-Ichi Kangyo Bank, Ltd.
6.10%, 01/12/96 30,000 30,000
6.13%, 01/16/96 19,000 19,000
6.12%, 01/16/96 6,000 6,000
6.22%, 01/18/96 28,000 28,000
6.42%, 01/26/96 42,000 42,000
6.14%, 02/02/96 17,000 17,002
5.88%, 02/21/96 12,000 11,999
5.86%, 03/20/96 18,000 17,998
Industrial Bank of Japan,
Ltd.
6.25%, 01/02/96 6,000 6,000
6.25%, 01/03/96 25,000 25,000
6.23%, 01/04/96 29,000 29,000
6.14%, 01/05/96 17,000 17,000
5.94%, 02/07/96 19,000 19,000
Mitsubishi Bank, Ltd.
6.14%, 01/02/96 50,000 50,000
6.06%, 01/04/96 25,000 25,000
5.82%, 03/08/96 30,000 30,000
5.83%, 03/12/96 31,000 30,999
5.83%, 03/14/96 40,000 40,000
5.83%, 03/19/96 30,000 30,000
Sanwa Bank, Ltd.
6.12%, 01/17/96 8,000 7,998
5.95%, 01/22/96 6,000 6,000
6.02%, 02/09/96 11,000 11,000
6.15%, 02/20/96 31,000 31,001
5.81%, 04/23/96 35,000 35,001
Sumitomo Bank, Ltd.
6.18%, 01/03/96 25,000 25,000
6.05%, 01/05/96 18,000 18,000
6.18%, 01/09/96 18,000 18,000
6.15%, 01/17/96 29,000 29,000
6.25%, 01/31/96 31,000 31,000
5.98%, 02/20/96 25,000 25,001
-------
710,999
-------
BANKING--NETHERLANDS--1.1%
ABN-AMRO Bank N.V.
5.80%, 01/16/96 40,000 39,998
5.58%, 06/05/96 10,000 9,998
Rabobank Nederland N.V.
5.95%, 07/25/96 25,000 25,001
-------
74,997
-------
</TABLE>
F-5
<PAGE> 89
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
BANKING--SWITZERLAND--1.4%
Union Bank of Switzerland
5.55%, 05/03/96 $100,000 $ 100,003
--------
BANKING--UNITED KINGDOM--2.0%
Abbey National PLC
5.61%, 04/01/96 20,000 20,042
5.53%, 06/14/96 50,000 50,002
5.58%, 06/21/96 30,000 30,009
Lloyds Bank PLC
5.80%, 04/22/96 10,000 10,013
National Westminster Bank
PLC
5.79%, 02/06/96 14,000 13,999
5.72%, 02/06/96 7,000 7,000
5.75%, 06/10/96 10,000 9,996
--------
141,061
--------
TOTAL CERTIFICATES OF DEPOSIT (Cost
$1,704,107) 1,704,107
---------
REMARKETED CERTIFICATES--0.8%
ASSET BACKED SECURITIES--0.8%
Black & Decker
RECOP Trust
5.80%, 02/06/96 17,000 17,000
5.80%, 02/15/96 18,311 18,311
Circuit City RECOP Trust
5.75%, 03/04/96 23,000 23,000
--------
TOTAL REMARKETED CERTIFICATES (Cost
$58,311) 58,311
--------
TAXABLE BONDS--0.1%
BANKING--JAPAN--0.1%
Oklahoma Industrial
Finance Authority Taxable
General Obligation
Industrial Finance Bonds
Series P/ (Mitsubishi
Bank LOC)
6.00%, 02/01/96 6,250 6,251
---------
TOTAL TAXABLE BONDS
(Cost $6,251) 6,251
---------
TOTAL INVESTMENTS--100.0%
(Cost $6,956,238) $6,956,238
=========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below. Yields for each type of
security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income
tax purposes) and carrying value are the same.
(a) Certain securities purchased by the 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 Value Advantage Money Fund. Any resale by
the Fund must be in an exempt transaction, normally to a qualified
institutional buyer. At December 31, 1995, the aggregate value of
private placement securities held by the Fund was $1,106,106,000 which
represented 15.98% of net assets. Of this total, $1,017,795,000 or
14.70% of net assets, was determined by the Investment Manager to be
liquid in accordance with a resolution adopted by the Board of Trustees
relating to Rule 144A, promulgated under the Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 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.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE> 90
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $6,956,238) $6,956,238
Interest receivable 28,312
Receivable for fund shares sold 37,105
Deferred organization costs 29
Prepaid expenses 771
----------
Total assets 7,022,455
----------
LIABILITIES
Payable for:
Dividends 48,255
Fund shares redeemed 47,728
Investment advisory and administration fee 2,084
Transfer agency and shareholder service fees 133
Other 365
----------
Total liabilities 98,565
----------
Net assets applicable to outstanding shares $6,923,890
==========
NET ASSETS CONSIST OF:
Capital paid in $6,924,021
Accumulated net realized loss on investments sold (131)
----------
$6,923,890
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 6,924,021
Net asset value, offering and redemption price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-7
<PAGE> 91
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $333,064
--------
Expenses:
Investment advisory and administration fee 23,799
Transfer agency and shareholder service fees 13,812
Custodian fees 483
Registration fees 1,251
Professional fees 130
Shareholder reports 262
Trustees' fees 27
Amortization of deferred organization costs 22
Insurance and other expenses 67
--------
39,853
Less expenses reduced (17,754)
--------
Total expenses incurred by Fund 22,099
--------
Net investment income 310,965
Net realized loss on investments sold (5)
--------
Increase in net assets resulting from operations $310,960
========
</TABLE>
See accompanying Notes to Financial Statements.
F-8
<PAGE> 92
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 310,965 $ 85,792
Net realized loss on investments sold (5) (124)
----------- -----------
Increase in net assets resulting
from operations 310,960 85,668
----------- -----------
Dividends to shareholders from
net investment income (310,965) (85,792)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 10,404,416 6,042,841
Net asset value of shares issued in
reinvestment of dividends 262,426 63,079
Less payments for shares redeemed (7,474,576) (3,103,523)
----------- -----------
Increase in net assets from capital
share transactions 3,192,266 3,002,397
----------- -----------
Total increase in net assets 3,192,261 3,002,273
Net Assets:
Beginning of period 3,731,629 729,356
----------- -----------
End of period $ 6,923,890 $ 3,731,629
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-9
<PAGE> 93
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Value Advantage Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
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 (Sweep and Value Advantage Shares), the Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
Institutional Advantage Money FundTM and the Schwab Retirement Money Fund(R).
The assets of each series are segregated and accounted for separately.
The Schwab Value Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and 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.
F-10
<PAGE> 94
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$23,799,000 for the year ended December 31, 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 .25% of average daily net assets. In addition,
Schwab receives a fee of $5.00 for redemptions in amounts less than $5,000 and
may impose a $5.00 fee for monthly balances below the minimum required. For the
year ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $13,812,000 before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 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 $27,000 related to
the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $7,922,000 and $9,832,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $24,387,423 and $21,192,127,
respectively.
F-11
<PAGE> 95
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
ended
\----For the year ended December 31,-----\ December 31,
1995 1994 1993 1992 1
<S> <C> <C> <C> <C>
-----------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .06 .04 .03 .02
Net realized and unrealized gain
(loss) on investments -- -- -- --
---------- ---------- -------- --------
Total from investment operations .06 .04 .03 .02
Less distributions
- ------------------
Dividends from net investment income (.06) (.04) (.03) (.02)
Distributions from realized gains
on investments -- -- -- --
---------- ---------- -------- --------
Total distributions (.06) (.04) (.03) (.02)
---------- ---------- -------- --------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00
========== ========== ======== ========
Total return (%) 5.80 4.09 3.02 2.33
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $6,923,890 $3,731,629 $729,356 $319,024
Ratio of expenses to
average net assets (%) .40 .40 .39 .29*
Ratio of net investment income to
average net assets (%) 5.63 4.40 2.97 3.27*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended
December 31, 1995, 1994, 1993 and 1992 would have been .72%, .79%, .82% and
.94%*, respectively, and the ratio of net investment income to average net
assets would have been 5.31%, 4.01%, 2.54% and 2.62%*, respectively.
1 For the period April 30, 1992 (commencement of operations) to December 31,
1992.
* Annualized
F-12
<PAGE> 96
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Value Advantage Money Fund(R)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab Value Advantage Money Fund (one
of the series constituting The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each period presented,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
withfp
generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-13
<PAGE> 97
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Tax-Exempt Money Fund-Value Advantage Shares
Schwab California Tax-Exempt Money Fund-Value Advantage Shares
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares
<TABLE>
<CAPTION>
Statement of Additional
Part B Item Information Caption
----------- -----------------------
<S> <C>
Cover Page Cover Page
Table of Contents Table of Contents
General Information and History General Information
Investment Objectives and Policies Investment Restrictions
Management of the Fund Management of the Trust
Control Persons and Principal Holders of Securities Management of the Trust
Investment Advisory and Other Services Management of the Trust
Brokerage Allocation and Other Practices Portfolio Transactions and Turnover
Capital Stock and Other Securities General Information
Purchase, Redemption and Pricing of Securities Share Price Calculation; Purchase and
Being Offered Redemption of Shares
Tax Status Distributions and Taxes
Underwriters Management of the Trust
Calculation of Performance Data Yield
Financial Statements Financial Statements
</TABLE>
<PAGE> 98
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
THE SCHWAB MONEY FUNDS: VALUE ADVANTAGE SHARES
SCHWAB TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
APRIL 1, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus dated April 1, 1996, which may be
amended from time to time, for the Value Advantage Shares of the Schwab
Tax-Exempt Money Fund, Schwab California Tax-Exempt Money Fund, and Schwab New
York Tax-Exempt Money Fund (each a "Fund" and collectively, the "Funds"), three
separately managed investment portfolios of The Charles Schwab Family of Funds
(the "Trust").
This Statement of Additional Information relates to the Value Advantage
Shares of the Funds. To obtain a copy of the Prospectus, please contact Charles
Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours a day, or 101
Montgomery Street, San Francisco, CA 94104. TDD users may contact Schwab at
800-345-2550, 24 hours a day. The Prospectus may be available electronically by
using our Internet address: http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
(800-266-5623)
TABLE OF CONTENTS
Page
----
MUNICIPAL SECURITIES...................................................... 2
INVESTMENT RESTRICTIONS................................................... 8
MANAGEMENT OF THE TRUST................................................... 11
PORTFOLIO TRANSACTIONS AND TURNOVER....................................... 17
DISTRIBUTIONS AND TAXES................................................... 18
SHARE PRICE CALCULATION................................................... 23
YIELD..................................................................... 24
GENERAL INFORMATION....................................................... 26
PURCHASE AND REDEMPTION OF SHARES......................................... 31
OTHER INFORMATION......................................................... 31
APPENDIX - RATINGS OF INVESTMENT SECURITIES............................... 32
FINANCIAL STATEMENTS...................................................... F-1
<PAGE> 99
MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that the Funds may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. The Funds may not be desirable
investments for "substantial users" of facilities financed by private activity
bonds or industrial development bonds or for "related persons" of substantial
users for whom dividends attributable to interest on such bonds may not be
tax-exempt. Shareholders should consult their own tax advisers regarding the
potential effect on them (if any) of any investment in these Funds.
Municipal Securities generally are classified as "general obligation"
or "revenue." General obligation bonds are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
bonds are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Private activity bonds and industrial development
bonds that are Municipal Securities are in most cases revenue bonds and
generally do not constitute the pledge of the credit of the issuer of such
bonds.
Examples of Municipal Securities that are issued with original
maturities of one year or less are short-term tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes,
pre-refunded municipal bonds and tax-free commercial paper. Tax anticipation
notes typically are sold to finance working capital needs of municipalities in
anticipation of receiving property taxes on a future date. Bond anticipation
notes are sold on an interim basis in anticipation of a municipality issuing a
longer term bond in the future. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue such as those available under
the Federal Revenue Sharing Program. Construction loan
2
<PAGE> 100
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds that are not
yet refundable, but for which securities have been placed in escrow to refund an
original municipal bond issue when it becomes refundable. Tax-free commercial
paper is an unsecured promissory obligation issued or guaranteed by a municipal
issuer. The Funds may purchase other Municipal Securities similar to the
foregoing, which are or may become available, including securities issued to
pre-refund other outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
RISK FACTORS
The Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund's concentration in securities issued by a single state and its
political subdivisions provides a greater level of risk than does a fund that is
diversified across numerous states and municipal entities. The ability of a
single state and its municipalities to meet their obligations will depend on the
availability of tax and other revenues, economic, political, and demographic
conditions within the state, and the underlying fiscal condition of the state
and its municipalities.
CALIFORNIA MUNICIPAL SECURITIES
In addition to general economic pressures which affect the State of
California's ability to raise revenues to meet its financial obligations,
certain California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could also result in
the adverse effects described below. The following information is only a brief
summary, is not a complete description, and is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State of California that have come to the attention of the Trust and were
available before the date of this Statement of Additional Information. The Trust
has not independently verified the accuracy and completeness of the information
contained in those statements and prospectuses.
As used in this section, "California Municipal Securities" includes
issues that are secured by a direct payment obligation of the State and
obligations of issuers that rely in whole or in part on State revenues for
payment of their obligations. Property tax revenues and part of the State's
General Fund surplus are distributed to counties, cities and their various
taxing entities; whether and to what extent a portion of the State's General
Fund will be distributed in the future to them is unclear.
Overview. From mid-1990 to late 1993, the State suffered a recession
with the worst economic, fiscal and budget
3
<PAGE> 101
conditions since the 1930's. Construction, manufacturing (especially aerospace),
exports and financial services, among others, all have been severely affected.
Job losses were the worst of any post-war recession.
The recession seriously affected State tax revenues and caused an
increase in expenditures for health and welfare programs. As a result, the State
has experienced recurring budget deficits. The State Controller reports that
expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93. The State
General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit
of about $1.8 billion. A further consequence of the large budget imbalances has
been that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs.
As a result of the deterioration in the State's budget and cash
situation, the State's credit ratings were reduced. Since October, 1992, all
three major nationally recognized statistical rating organizations have lowered
the State's general obligation bond rating from the highest ranking of "AAA" to
"A" by S&P, "A1" by Moody's Investors Service ("Moody's") and "A+" by Fitch
Investors Service, Inc. ("Fitch").
Since the start of 1994, California's economy has been on a steady
recovery. Employment grew significantly in 1994 and 1995, especially in
export-related industries, business services, electronics, entertainment, and
tourism.
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit imposed by its Constitution on
"proceeds of taxes." Various expenditures, including but not limited to debt
service on certain bonds and appropriations for qualified capital outlay
projects, are not included in the appropriations limit.
1994-95 FISCAL YEAR
Revenues. The 1994-95 Budget Act projected General Fund revenues and
transfers in 1994-95 of $41.9 billion, or about $2.1 billion more than 1993-94,
as revised. This projection includes the receipt of approximately $760 million
in new federal aid to reimburse the State for certain costs related to refugee
assistance and undocumented foreign immigrants. Only about $33 million of this
amount was received, with about another $98 million scheduled to be received in
the 1995-96 fiscal year. The 1994-95 Budget Act also projected Special Fund
revenues of $12.1 billion, a decrease of 2.4 percent from 1993-94.
Expenditures. The 1994-95 Budget Act projected General Fund
expenditures of $40.9 billion (a $1.6 billion increase from projected 1993-94
expenditures), in order to keep a balanced budget which pays off the accumulated
deficit, within available revenues. The 1994-95 Budget Act also projected
Special Fund expenditures of $12.3 billion, a 4.7 percent decrease from 1993-94.
The 1994-95 Budget Act balanced the budget with a number of major adjustments,
including the receipt of about $1.1 billion in health and welfare costs, and an
increase of about $526 million in Proposition 98 General Fund support for K-14
schools.
Cash resources at the beginning of the 1994-95 fiscal year were
insufficient
4
<PAGE> 102
to meet all obligations without external borrowing, such as occurred in 1992.
The 1994-95 Budget Act assumed that the State would use a cash flow borrowing
program in 1994-95 which combined one-year notes and two-year warrants, which
have now been issued. Issuance of the warrants allows the State to defer
repayment of about $1 billion of its accumulated budget deficit into the 1995-96
fiscal year. Additional legislation was passed with the 1994-95 Budget Act
designed to ensure that the warrants will be repaid in the 1995-96 fiscal year.
As a result of the improving economy, the California Department of
Finance's final estimates for the fiscal year showed revenues and transfers of
$42.7 billion and expenditures of $42 billion.
1995-96 FISCAL YEAR
Revenues. Notwithstanding the improved economy, serious policy
differences between the Governor and the Legislature delayed passage of the
1995-96 Budget Act until August 3, 1995, 34 days after the start of the fiscal
year. The 1995-96 Budget Act projected General Fund revenues and transfers of
$44.1 billion, a 3.5 percent increase from the prior year, and Special Fund
revenues of $12.7 billion.
Expenditures. The 1995-96 Budget Act included General Fund expenditures
of $43.4 billion, and Special Fund expenditures of $13.0 billion. The California
Department of Finance projected that, after repaying the last of the budget
deficit carried over from prior fiscal years, there would be a positive balance
of $28 million in the budget reserve at June 30, 1996.
The Governor's proposed budget for the 1996-97 fiscal year, released on
January 10, 1996, updated the projections for the 1995-96 fiscal year; revenues
and transfers are estimated to be $45 billion and expenditures to be $44.2
billion. As a result, the budget reserve was projected to have a positive
balance of about $50 million on June 30, 1996, with available cash (after
payment of all obligations due) of about $2.2 billion.
1996-97 FISCAL YEAR
The Governor's proposed budget for 1996-97 projected General Fund
revenues and transfers of about $45.6 billion and requested total General Fund
appropriations of about $45.2 billion, which would leave a budget reserve of
about $400 million on June 30, 1997. The Governor's proposed budget renewed a
proposal, which had been rejected by the Legislature in 1995, for a 15 percent
cut in personal and corporate tax rates, phased in over a three-year period. On
the assumption that the proposed tax rate cut would be enacted, the Governor's
proposed budget shows a reduction in revenues of about $600 million for 1996-97.
The Governor's proposed budget also projects external cash flow borrowing of up
to $3.2 billion to mature by June 30, 1997.
The foregoing discussions of the 1994-95 Budget, the 1995-96 Budget,
and the proposed 1996-97 Budget are based upon the Budget Acts for 1994-95 and
1995-96 and the Governor's proposed 1996-97 Budget, respectively, and should not
be construed as a statement of fact. The assumptions used to construct a budget,
which include estimates and projections of revenues and expenditures, may be
affected by numerous factors, including future economic conditions in
5
<PAGE> 103
the State and the nation. There can be no assurances that any estimates will be
achieved.
ISSUES AFFECTING LOCAL
GOVERNMENTS AND SPECIAL DISTRICTS
Proposition 13. Certain California Municipal Securities may be
obligations of issuers that rely in whole or in part on ad valorem real property
taxes as a source of revenue. In 1978, California voters approved Proposition
13, which limits ad valorem taxes on real property and restricts the ability of
taxing entities to increase property tax and other revenues.
With certain exceptions, the maximum ad valorem tax on real property is
limited to 1% of the property's full cash value to be collected by the counties
and apportioned according to law. One exception is for debt service on bonded
indebtedness if approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by substantial damage, destruction or other factors or adjusted when
there is a "change in ownership" or "new construction."
The State, in response to the significant reduction in local property
tax revenues as a result of the passage of Proposition 13, enacted legislation
to provide local government with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.
Proposition 62. This initiative, approved by voters in 1986, placed
further restrictions on the ability of local governments to raise taxes and
allocate approved tax receipts. Although some of the California Courts of Appeal
held that parts of Proposition 62 were unconstitutional, the California Supreme
Court recently issued a decision that upheld Proposition 62's requirement that
special taxes be approved by a two-thirds vote of the voters voting in an
election on the issue. This recent decision may invalidate other taxes that have
been imposed by local governments in California and make it more difficult for
local governments to raise taxes.
Propositions 98 and 111. These initiatives changed the State
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues. The
initiatives require that the State establish a prudent state reserve fund for
public education.
Appropriations Limit. Local governmental bodies are also subject to
annual appropriations limits. If a local government's revenues in any year
exceed the amount permitted to be spent, the excess must be returned to the
public through a revision of tax rates or fee schedules over the subsequent two
years.
Conclusion. The effect of these constitutional and statutory changes
and of budget developments on the ability of California issuers to pay interest
and principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent.
6
<PAGE> 104
For example, in December 1994, Orange County filed for bankruptcy. The
California Tax-Exempt Money Fund's concentration in California Municipal
Securities provides a greater level of risk than a fund that is diversified
across numerous states and municipal entities.
ADDITIONAL ISSUES
Mortgages and Deeds of Trust. The California Tax-Exempt Money Fund may
invest in issues which are secured in whole or in part by a mortgage or deed of
trust on real property. California law limits the remedies of a creditor secured
by a mortgage or deed of trust, which may result in delays in the flow of
revenues to an issuer.
Lease Financings. Some local governments and districts finance certain
activities through lease arrangements. It is uncertain whether such lease
financings are debt that require voter approval.
Seismic Risk. It is impossible to predict the time, magnitude or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck Los Angeles, causing significant damage
to structures and facilities in a four county area. The possibility exists that
another such earthquake could create a major dislocation of the California
economy.
NEW YORK MUNICIPAL SECURITIES
The State of New York has experienced fiscal problems for several years
as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Though the State
enjoyed good growth throughout the early to mid-1980's, unemployment has risen
drastically and over 250,000 jobs have been lost in the past four years. The
State's economy is highly developed with a large emphasis in service, trade,
financial services, and real estate. While very diverse, extensive job losses in
each of these areas has placed a burden on the State to maintain employment,
company development and a stable tax base.
As reflected in its financial results, the State has a large
accumulated deficit. The overall wealth of the State's population as reflected
by the per capita income offers a positive credit enhancement and is among the
highest in the nation. The debt per capita, though, is also among the highest
and poses a large burden on its residents.
The importance of New York City to the State's economy is also an
important consideration since it represents a significant portion of the overall
economy of the State. The City has struggled to maintain fiscal stability and
has performed adequately in contrast to the difficult economic conditions in the
New York/New Jersey metropolitan area. Any major changes to the financial
condition of the City would ultimately have an effect on the State. The overall
financial condition of the State can also be illustrated by the changes of its
debt ratings. During the last several years during which the State experienced
its financial difficulties, its general obligation long-term debt ratings as
determined by Moody's declined from A1 to A in 1990 while S&P downgraded the
State's debt from A to A- in early 1992. The State has the second lowest long-
term debt rating among those states with outstanding general obligation ratings.
The short-term debt ratings are within the top two rating categories: MIG-2 for
Moody's and
7
<PAGE> 105
SP-1 for S&P. In February 1991, Moody's lowered its rating on New York City
general obligation bonds from A to Baa1.
The Schwab New York Tax-Exempt Money Fund's concentration in securities
issued by the State of New York and its political subdivisions provides a
greater level of risk than a fund which is diversified across numerous states
and municipal entities. The ability of the State of New York or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political, and demographic conditions within the
State; and the underlying fiscal condition of the State and its municipalities.
OTHER ISSUES
Repurchase Agreements. If the seller of a repurchase agreement becomes
bankrupt or otherwise defaults, a 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. Therefore, a Fund will enter in
repurchase agreements only with banks and other recognized financial
institutions that the Investment Manager deems creditworthy.
INVESTMENT RESTRICTIONS
EXCEPT AS OTHERWISE NOTED, THE RESTRICTIONS BELOW ARE FUNDAMENTAL AND CANNOT BE
CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
HEREINAFTER THE "1940 ACT") OF THE FUND TO WHICH THEY APPLY. THE FUNDS MAY NOT:
(1) Purchase securities or make investments other than in accordance with
its investment objectives and policies.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
the Schwab California Tax-Exempt Money Fund and the Schwab New York
Tax-Exempt Money Fund, provided no more than 25% of the Fund's total
assets would be invested in the securities of a single issuer, up to
50% of the value of the Fund's assets may be invested without regard to
this 5% limitation. For purposes of this limitation, the Fund will
regard the entity which has the primary responsibility for the payment
of interest and principal as the issuer.
(3) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or
more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of
governments are not considered to be securities subject to this
industry concentration restriction) or in any one state (although the
limitation
8
<PAGE> 106
as to investments in a state or its political subdivisions shall not
apply to the Schwab California Tax-Exempt Money Fund or the Schwab New
York Tax-Exempt Money Fund), nor may it enter into a repurchase
agreement if more than 10% of its net assets would be subject to
repurchase agreements maturing in more than 7 days.
(4) Invest more than 5% of its total assets in industrial development bonds
sponsored by companies which with their predecessors have less than
three years continuous operation, although each Fund may invest more
than 25% of its total net assets in industrial development bonds.
(5) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to the Schwab California Tax-Exempt Money
Fund and the Schwab New York Tax-Exempt Money Fund.
(6) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or of its Investment Manager
individually owns beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.
(7) Invest in commodities or commodity futures contracts or in real estate
except that each Fund may invest in Municipal Securities secured by
real estate or interests therein.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.*
(10) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(11) Borrow money except from banks for temporary purposes (but not for the
purpose of purchase of investments) and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Funds
are permitted within the limitations of this paragraph. No Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.
* See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
9
<PAGE> 107
(12) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.
(13) Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance
of transactions.
(14) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.
(15) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(16) Issue senior securities as defined in the 1940 Act.
Except for restrictions (6) and (11), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation. None of the
Funds has a present intention of borrowing during the coming year and, in any
event, each Fund would limit borrowings as required by the restrictions
previously stated.
Each Fund will only purchase securities that present minimal credit risks and
which are First Tier or Second Tier Securities (otherwise referred to as
"Eligible Securities")*. An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's, S&P, Duff and Phelps Credit
Rating Co., Inc., Fitch, Thomson Bankwatch, and, with respect to debt
issued by banks, bank holding companies, United Kingdom building
societies, broker-dealers and broker-dealers' parent companies, and
bank-supported debt, IBCA Limited and its affiliate, IBCA, Inc.) in one
of the two highest rating categories for short-term debt obligations
(the requisite NRSROs being any two or, if rated by one, that one
NRSRO), or (b) that itself was unrated by any NRSRO, but was issued by
an issuer that has outstanding a class of short-term debt obligations
(or any security within that class) meeting the requirements of
subparagraph 1(a) above that is of comparable priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less and (a) whose issuer
received a rating within one of the
- ------------------------
* See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
10
<PAGE> 108
two highest rating categories from the requisite NRSROs for short-term
debt obligations with respect to a class of short-term debt obligations
(or any security within that class) that is now comparable in priority
and security with the subject security; or (b) that has long-term
ratings from the requisite NRSROs that are in one of the two highest
categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating is sufficient if only one NRSRO rates the security),
or has been determined by the Investment Manager, pursuant to guidelines adopted
by the Board of Trustees, to be of comparable quality to such a security. A
Second Tier Security is any other Eligible Security.
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and trustees of the Trust, their principal
occupations over the past five years and their affiliations, if any, with The
Charles Schwab Corporation, Schwab, and Charles Schwab Investment Management,
Inc., are as follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Founder, Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation; Founder, Chairman and
Director, Charles Schwab & Co., Inc. and Charles Schwab Investment
Management, Inc.; Chairman and Director, The Charles Schwab
Trust Company; Chairman and Director, and Director (officer
position) until December 1995, Mayer & Schweitzer, Inc. (a securities
brokerage subsidiary of The Charles Schwab Corporation); Director,
The Gap, Inc. (a clothing retailer), Transamerica Corporation (a
financial services organization), AirTouch Communications (a
telecommunications company) and Siebel Systems (a software company).
</TABLE>
- --------------------
*Mr. Schwab is an "interested person" of the Trust.
11
<PAGE> 109
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles
September 19, 1951 Schwab & Co., Inc. and The Charles Schwab
Corporation; Chief Executive Officer, Charles Schwab Investment
Management, Inc. From 1994 to 1995, Mr. McCarthy was Chief Executive
Officer, Jardine Fleming Unit Trusts Ltd.; Executive Director,
Jardine Fleming Holdings Ltd.; Chairman, Jardine Fleming Taiwan
Securities Ltd.; and Director of JF India and Fleming Flagship,
Europe. Prior to 1994, he was President of Fidelity Investments
Advisor Group, a division of Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. (international financial
services).
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (real estate
June 28, 1938 investment). Prior to 1993, Mr. Stephens was
Chairman and Chief Executive Officer of the Bank of
San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment and management, and
investments).
A. JOHN GAMBS Treasurer and Principal Executive Vice President - Finance and Chief
November 16, 1945 Financial Officer Financial Officer, The Charles Schwab Corporation;
Executive Vice President, Chief Financial Officer and Director,
Charles Schwab & Co., Inc.; Chief Financial Officer and Director,
Charles Schwab Investment Management, Inc.; and Chief Financial
Officer, The Charles Schwab Trust Company.
</TABLE>
**Mr. McCarthy is an "interested person" of the Trust.
12
<PAGE> 110
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
WILLIAM J. KLIPP* Senior Vice President, Senior Vice President, Charles Schwab & Co., Inc.;
December 9, 1955 Chief Operating Officer President and Chief Operating Officer, Charles
and Trustee Schwab Investment Management, Inc. Prior to 1993,
Mr. Klipp was Treasurer of Charles Schwab & Co.,
Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President & Senior Vice President and Chief Investment Officer,
April 5, 1955 Chief Investment Charles Schwab Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance
September 9, 1955 Officer and Assistant Corporate Secretary, Charles
Schwab Investment Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel - Charles Schwab
October 14, 1960 Investment Management, Inc. From 1991 to 1992, he
was Assistant Secretary and Assistant Corporate
Counsel for the Franklin Group of Mutual Funds.
CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel - Charles Schwab
June 16, 1961 Investment Management, Inc. Prior to 1994, she was
Counsel and Assistant Secretary for North American
Security Life Insurance Company and Secretary for
North American Funds.
</TABLE>
Each of the above-referenced individuals also serves in the same
capacity as described for the Trust, Schwab Investments, Schwab Capital Trust,
Schwab Annuity Portfolios, and Schwab Advantage Trust (which has not commenced
operations). The address of each individual listed above is 101 Montgomery
Street, San Francisco, California 94104.
- ----------------------------
*Mr. Klipp is an "interested person" of the Trust.
13
<PAGE> 111
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Annual
Benefits Accrued Benefits Upon Total
Aggregate as Part of Fund Retirement from Compensation
Name of Person, Compensation from Expenses from the the Fund from the Fund
Position the Trust Fund Complex(2) Complex(2) Complex(2)
- --------------- ----------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
Elizabeth G. Sawi(3), 0 N/A N/A 0
President and Trustee
Timothy F. McCarthy(4), 0 N/A N/A 0
President and Trustee
William J. Klipp, 0 N/A N/A 0
Sr. Vice President,
Chief Operating Officer
and Trustee
Donald F. Dorward, 38,500 N/A N/A 73,000
Trustee
Robert G. Holmes, 38,500 N/A N/A 73,000
Trustee
Donald R. Stephens, 38,500 N/A N/A 73,000
Trustee
Michael W. Wilsey, 38,500 N/A N/A 73,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended December 31, 1995.
(2) "Fund Complex" comprises all 22 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
----------------------------------------------------
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to
14
<PAGE> 112
participate in the Fee Deferral Plan. In the event an Independent Trustee does
elect to participate in the Plan, the Plan would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities"). "SchwabFunds"
include the series or classes of shares of beneficial interest of the Trust,
Schwab Investments, Schwab Capital Trust, and Schwab Advantage Trust (which has
not commenced operations).
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. These transactions would otherwise be limited or
prohibited by the investment policies and/or restrictions of the Funds. See
"Investment Restrictions."
INVESTMENT MANAGER
Charles Schwab Investment Management, Inc. (the "Investment Manager"),
a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the
Funds' investment adviser and administrator pursuant to two separate yet
otherwise substantially similar Investment Advisory and Administration
Agreements (the "Advisory Agreements") between it and the Trust. The Investment
Manager is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended, and currently provides investment management services to
the SchwabFunds(R), a family of 21 mutual funds with over $35 billion in assets
as of March 18, 1996. The Investment Manager is an affiliate of Schwab, the
Trust's distributor and shareholder services and transfer agent.
Each Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of the majority (as defined in the 1940 Act) of
the outstanding voting securities of each Fund subject thereto. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement, or interested persons (as defined
in the 1940 Act) of any such party, by vote cast in person at a meeting called
for the purpose of voting on such approval. Each Advisory Agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Fund subject thereto, and will terminate
automatically upon assignment.
Pursuant to an Advisory Agreement dated June 15, 1994, as may be
amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of the Schwab Tax-Exempt Fund's
15
<PAGE> 113
average daily net assets not in excess of $1 billion, 0.41% of such net assets
over $1 billion but not in excess of $2 billion, and 0.40% of such net assets
over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995 the
investment advisory fees paid by the Schwab Tax-Exempt Money Fund were
$3,494,000 (fees were reduced by $5,424,000), $5,421,000 (fees were reduced by
$6,646,000), and $6,482,000 (fees were reduced by $7,237,000), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to an annual
fee, payable monthly from the Schwab California Tax-Exempt Money Fund and the
Schwab New York Tax-Exempt Money Fund of 0.46% of each Fund's average daily net
assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but
not in excess of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995 the
investment advisory fees paid by the Schwab California Tax-Exempt Money Fund
were $1,437,000 (fees were reduced by $2,450,000), $2,254,000 (fees were reduced
by $3,274,000), and $2,748,000 (fees were reduced by $3,703,000), respectively.
For the Schwab New York Tax-Exempt Money Fund for the period from
February 27, 1995 (commencement of operations) to the period ended December 31,
1995, the investment advisory fees paid was $464,000 (fees were reduced by
$277,000).
EXPENSES
The Trust pays the expenses of its operations, including the fees and
expenses of independent accountants, counsel, custodian and the cost of reports
and notices to shareholders, costs of calculating net asset value, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Trust and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. The Trust's expenses generally are
allocated among the Funds on the basis of relative net assets at the time the
expense is incurred, except that expenses directly attributable to a particular
Fund or class of shares are charged to that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution
16
<PAGE> 114
Agreement are identical to those described above with respect to the Advisory
Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS
TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when engaged to do so by the Trust. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, D.C. 20005, is counsel to the Trust.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of each Fund in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. Portfolio transactions may increase or decrease the yield of a Fund
depending upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of each Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager generally selects broker-dealers for the Funds primarily on the basis of
the quality and reliability of services provided, including execution capability
and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other
17
<PAGE> 115
investment advisory clients, including mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for each Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as a
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
a Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of the Value Advantage
Shares of a Fund is determined ("Business Day"), such Shares' net investment
income will be declared as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) as a daily dividend to shareholders
of record as of the last calculation of net asset value prior to the
declaration. For the Value Advantage Shares of each Fund, Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will normally be reinvested monthly in full and fractional Value
Advantage Shares of the Fund at the net asset value on the 15th day of each
month, if a Business Day, otherwise on the next Business Day. If cash payment is
requested, checks will normally be mailed on the Business Day following the
reinvestment date. Each Fund will pay shareholders, who redeem all of their
shares, all dividends accrued to the time of the redemption within 7 days.
Each Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment
18
<PAGE> 116
income of the Value Advantage Shares of a Fund consists of: (1) accrued interest
income, plus or minus amortized discount or premium, allocated to the Value
Advantage Shares of that Fund minus (2) accrued expenses allocated to the Value
Advantage Shares of that Fund. If a Fund realizes any capital gains, such gains
will be distributed at least once during the year as determined by the Board of
Trustees. Any realized capital losses to the extent not offset by realized
capital gains will be carried forward. It is not anticipated that a Fund will
realize any long-term capital gains. Expenses of the Trust are accrued each day.
Should the net asset value of the Value Advantage Share of a Fund deviate
significantly from market value, the Board of Trustees could decide to value the
investments at market value and any unrealized gains and losses could affect the
amount of the Fund's distributions to holders of Value Advantage Shares.
FEDERAL INCOME TAXES
It is the policy of each Fund to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, each of the
Funds must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash or cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to a value not greater than 5%
of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or securities of any other regulated investment company)
or of two or more issuers that the Fund controls, within the meaning of the
Code, and that are engaged in the same, similar or related trades or businesses.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range of
the Fund's investments. If a Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its net investment
income and net realized capital gains, if any, which it distributes to
shareholders, provided that the Fund meets certain minimum distribution
requirements. To comply with these requirements, a Fund must distribute at least
(a) 90% of its "investment company taxable income" (as that term is defined in
the Code) and (b)
19
<PAGE> 117
90% of the excess of its (i) tax-exempt interest income over (ii) certain
deductions attributable to that income (with certain exceptions), for its
taxable year. Each Fund intends to make sufficient distributions to shareholders
to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net income for the year ending October 31
(or later if the Fund is permitted so to elect and so elects), plus any retained
amount from the prior year, the Fund will be subject to a nondeductible 4%
excise tax on the undistributed amounts. Each Fund intends generally to make
distributions sufficient to avoid imposition of this excise tax.
Any distributions declared by the Funds in October, November or
December to shareholders of record during those months and paid during the
following January are treated, for tax purposes, as if they were received by
each shareholder on December 31 of the year declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.
The Funds do not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder (1) who
fails to provide a correct taxpayer identification number certified under
penalty of perjury; (2) who provides an incorrect taxpayer identification
number; (3) who is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (4) who
fails to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The Funds may engage in investment techniques that may alter the timing
and character of the Funds' income. The Funds may be restricted in their use of
these techniques by rules relating to their qualification as regulated
investment companies.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) generally are subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or disposition of shares of the Fund
generally are not
20
<PAGE> 118
subject to U.S. taxation, unless the recipient is an individual who meets the
Code's definition of "resident alien." Different tax consequences may result if
the foreign shareholder is engaged in a trade or business within the United
States. In addition, the tax consequences to a foreign shareholder entitled to
claim the benefits of a tax treaty may be different than those described above.
Distributions by a Fund may also be subject to state, local and foreign taxes,
and their treatment under applicable tax laws may differ from the federal income
tax treatment.
The Code permits a regulated investment company that invests at least
50% of its assets at the close of each quarter in Municipal Securities to pass
through to its investors, on a tax-exempt basis, net Municipal Securities
interest income. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by any Fund and designated as an
exempt-interest dividend in a written notice mailed to shareholders after the
close of such Fund's taxable year, but not to exceed in the aggregate the net
Municipal Securities interest income received by each such Fund during the
taxable year. The percentage of the total dividends paid for any taxable year
that qualified as exempt-interest dividends will be the same for all
shareholders receiving dividends from each Fund during such year, regardless of
the period for which the Shares were held. If for any taxable year any Fund does
not qualify for the special federal tax treatment afforded regulated investment
companies, all of its taxable income will be subject to federal tax at regular
corporate rates (without any deduction for distributions to its shareholders)
when distributed, and Municipal Securities interest income, although not taxed
to the Funds, would be taxable to shareholders.
This discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of Fund shares. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund and its shareholders,
and the discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a Fund.
STATE TAXES
With respect to the Schwab California Tax-Exempt Money Fund, if, at the
close of each quarter of its taxable year, at least 50% of the value of the
total assets of the Fund consists of obligations the interest on which is exempt
from California personal income taxation under the Constitution or laws of
California or of the United States when held by an individual ("California
Exempt Obligations"), then the Fund will be qualified to pay dividends exempt
from State of California personal income tax to its non-corporate shareholders
(hereinafter referred to as "California exempt-interest dividends"). The Schwab
California Tax-Exempt Money Fund intends to qualify under the above requirement
so that it can pay California exempt-interest dividends. If the Schwab
California Tax-Exempt Money Fund fails to so qualify, no part of its dividends
will
21
<PAGE> 119
be exempt from State of California personal income tax.
With respect to the Schwab New York Tax-Exempt Money Fund, there is no
analogous requirement, so all dividends representing interest on New York
Municipal Securities that is exempt from New York personal income taxation will
be exempt from New York personal income taxes in the hands of non-corporate
shareholders ("New York exempt-interest dividends"). Not later than 60 days
after the close of its taxable year, the Schwab California and New York
Tax-Exempt Money Funds will notify each shareholder of the portion of the
dividends paid by it to the shareholder with respect to such taxable year which
is exempt from State of California personal income tax or New York personal
income tax, respectively.
The total amount of California exempt-interest dividends paid by the
Schwab California Tax-Exempt Money Fund to all of its shareholders with respect
to any taxable year cannot exceed the amount of interest received by the Fund
during such year on California Exempt Obligations, less any expenses or
expenditures (including any expenditures attributable to the acquisition of
additional securities for the Schwab California Tax-Exempt Money Fund) that are
allocable to such interest. Dividends paid by the Schwab California Tax-Exempt
Money Fund in excess of this limitation will be treated as ordinary dividends
subject to State of California personal income tax at ordinary rates. For
purposes of this limitation, expenses or other expenditures paid during any year
generally will be deemed to be allocable to interest received by the Fund from
California Exempt Obligations for such year in the same ratio as such interest
from California Exempt Obligations for such year bears to the total gross income
earned by the Fund for the year. The effect of this accounting convention is
that amounts of interest from California Exempt Obligations received by the
Schwab California Tax-Exempt Money Fund that would otherwise be available for
distribution as California exempt-interest dividends will be reduced by the
expenses and expenditures deemed to be allocable to such amounts.
To the extent, if any, dividends paid to shareholders by the Schwab
California Tax-Exempt Money Fund or New York Tax-Exempt Money Fund are derived
from long-term and short-term capital gains, such dividends will not constitute
California or New York exempt-interest dividends. Rules similar to those
regarding the treatment of such dividends for federal income tax purposes are
also applicable for State of California and New York personal income tax
purposes. Moreover, interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Schwab California Tax-Exempt Money Fund or New
York Tax-Exempt Money Fund is not deductible for state personal income tax
purposes if the Fund distributes California or New York exempt-interest
dividends to the shareholder during his or her taxable year.
The foregoing is only a summary of some of the important state personal
income tax considerations generally affecting the Schwab California Tax-Exempt
and New York Tax-Exempt Money Funds and their shareholders. No attempt is made
to present a detailed
22
<PAGE> 120
explanation of the state personal income tax treatment of the Schwab California
Tax-Exempt and New York Tax-Exempt Money Funds or their shareholders, and this
discussion is not intended as a substitute for careful planning. Further, it
should be noted that the portion of the Schwab California Tax-Exempt and New
York Tax-Exempt Money Funds' dividends constituting California or New York
exempt-interest dividends, respectively, is excludable from income for State of
California or State of New York personal income tax purposes only.
Any dividends paid to shareholders of the Funds subject to state
franchise or corporate income tax will be taxed as ordinary dividends to such
shareholders, notwithstanding that all or a portion of such dividends is exempt
from state personal income tax. Accordingly, potential investors in the Schwab
California Tax-Exempt or New York Tax-Exempt Money Funds, including, in
particular, corporate investors which may be subject to California or New York
franchise or corporate income tax, should consult their tax advisers with
respect to the application of such tax to the receipt of dividends from the
Funds and as to their own state tax situation, in general.
SHARE PRICE CALCULATION
Each Fund values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of a Fund's investments at amortized
cost with market values. Market valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and a Fund's $1.00 per share net asset value for its Value Advantage Shares, or
if there were any other deviation that the Board of Trustees of the Trust
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If the net asset value per share for a Fund's Value Advantage Shares
(computed using market values) declined, or were expected to decline, below
$1.00 (computed using amortized cost), the Board of Trustees might temporarily
reduce or suspend dividend payments in an effort to maintain the net asset value
at $1.00 per
23
<PAGE> 121
share for a Fund's Value Advantage Shares. As a result of such reduction or
suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the other
hand, if a Fund's net asset value per share for its Value Advantage Shares
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share for its Value Advantage Shares.
YIELD
The historical performance of the Value Advantage Shares of each Fund
may be shown in the form of yield, effective yield, taxable equivalent yield and
taxable equivalent effective yield. These measures of performance are described
below.
YIELD
Yield refers to the net investment income generated by a hypothetical
investment in the Value Advantage Shares of a Fund over a specific 7-day period.
This net investment income is then annualized, which means that the net
investment income generated during the 7-day period is assumed to be generated
in each 7-day period over an annual period, and is shown as a percentage of the
investment.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Value Advantage Share of the Schwab
Tax-Exempt Money Fund is computed by dividing that portion of the Value
Advantage Shares' yield (computed as described above) that is tax-exempt by an
amount equal to one minus the stated federal income tax rate (normally assumed
to be the maximum applicable marginal tax bracket rate) and adding the result
to that portion, if any, of the yield of the Value Advantage Shares that is not
tax-exempt. The taxable equivalent yield of the Value Advantage Shares of the
Schwab California Tax-Exempt Money Fund is calculated by dividing that portion
of the Value Advantage Shares' yield (computed as described above) which is
tax-exempt by an amount equal to one minus the stated combined State of
California and federal income tax rate (normally assumed to be the maximum
federal marginal rate of 39.6% and the
24
<PAGE> 122
California marginal rate of 9.3%, although other rates may be used at times),
and adding the result to that portion, if any, of the Value Advantage Shares'
yield that is not tax-exempt. The taxable equivalent yield of the Value
Advantage Shares of the Schwab New York Tax-Exempt Money Fund is calculated by
dividing that portion of the Value Advantage Shares' yield (computed as
described above) which is tax-exempt by an amount equal to one minus the stated
combined New York municipal, State of New York and federal income tax rate
(normally assumed to be the maximum federal marginal rate of 39.6%, the State of
New York marginal rate of 7.125% and the New York municipal marginal rate of
3.91%, although other rates may be used at times), and adding the result to that
portion, if any, of the Value Advantage Shares' yield that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, the Schwab Tax-Exempt Money Fund generally assumes an effective tax rate
of 39.6%, the Schwab California Tax-Exempt Money Fund generally assumes an
effective tax rate (combining the federal 39.6% rate and the California 9.3%
rate, and assuming the taxpayer deducts California state taxes paid) of 45.22%,
and the Schwab New York Tax-Exempt Money Fund generally assumes an effective tax
rate (combining the federal 39.6% rate, the New York state 7.125% rate, and the
New York municipal 3.91% rate, and assuming the taxpayer deducts New York state
and municipal taxes paid) of 46.27%. Investors in the Schwab New York Tax-Exempt
Money Fund should understand that, under legislation enacted in New York State
and New York City, the maximum effective tax rate for 1997 will be 45.79%. The
tax rate cut reflected herein is subject to postponement or elimination. The
effective tax rates used in determining such yields do not reflect the tax costs
resulting from the full or partial loss of the benefits of personal exemptions,
itemized deductions and California exemption credits that may result from the
receipt of additional taxable income by taxpayers with adjusted gross incomes
exceeding $117,950 ($58,975 for married filing separate returns) in 1996. Actual
taxable equivalent yields and taxable equivalent effective yields may be higher
for taxpayers subject to the loss of these benefits than the rates reported by
the Funds.
TAX-EXEMPT VERSUS TAXABLE YIELD
Investors may want to determine which investment, tax-exempt or
taxable, will provide a higher after-tax return. To determine the taxable
equivalent yield, or taxable equivalent effective yield, simply divide the yield
or effective yield of the Value Advantage Shares of the Fund by 1 minus your
marginal federal tax rate (or combined state and federal tax rate in the case of
the Schwab California Tax-Exempt Money Fund, or combined municipal, state, and
federal tax rate in the case of the Schwab New York Tax-Exempt Money Fund).
Note, however, that as discussed above full or partial loss
25
<PAGE> 123
by certain investors of the described federal tax benefits could cause the
resulting figure to understate the after-tax return produced by the Value
Advantage Shares of the Fund in question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1995 is presented below. The taxable equivalent yield and
taxable equivalent effective yield figures are based, in the case of the Schwab
Tax- Exempt Money Fund, upon an assumed 1995 effective tax rate of 39.6%; in the
case of the Schwab California Tax-Exempt Money Fund, upon an assumed effective
tax rate of 46.24%; and in the case of the Schwab New York Tax-Exempt Money
Fund, upon an assumed effective tax rate of 46.88%. (Based on the maximum rates
in effect for 1995. See the discussion above relating to federal, State of
California, and State of New York tax rates.)
<TABLE>
<CAPTION>
Taxable
Taxable Equivalent
Yield Effective Yield Equivalent Yield Effective Yield
----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Schwab Tax-Exempt Money 4.17% 4.26% 6.90% 7.05%
Fund-Value Advantage Shares
Schwab California Tax-Exempt 3.99% 4.06% 7.42% 7.55%
Money Fund-Value Advantage
Shares
Schwab New York Tax-Exempt 4.07% 4.16% 7.66% 7.83%
Money Fund-Value Advantage
Shares
</TABLE>
GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of
26
<PAGE> 124
Trust (other than amendments changing the name of the Trust or any of its
investment portfolios, supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision thereof);
(5) determining whether a court action, proceeding or claim should or should not
be brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of these Bylaws
permits or requires that (i) holders of any series shall vote as a series, then
a majority of the aggregate number of shares of that series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series; or (ii) holders of any class shall vote as a class, then a majority
of the aggregate number of shares of that class entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class.
Any lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. The Declaration of
Trust specifically authorizes the Board of Trustees to terminate the Trust (or
any of its investment portfolios) by notice to the shareholders without
shareholder approval.
27
<PAGE> 125
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote, because
it is limited to circumstances in which a disclaimer is inoperative and the
Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of March 15, 1996, the following persons directly or beneficially
owned 5% or more of each Fund's Value Advantage Shares:
<TABLE>
<CAPTION>
Percentage
Name/Address Ownership
- ------------ ---------
<S> <C>
Schwab Tax-Exempt Money Fund -- Value Advantage
Shares(TM)
Walter R. Koepp (EX) and 5.98%
EST E. H. Shumway
15717 Larch Way
Lynnwood, WA 98037
Schwab California Tax-Exempt Money Fund --
Value Advantage Shares(TM)
Louis A. Simpson 7.68%
P.O. Box 1487
Rancho Santa Fe, CA
92067
Schwab New York Tax-Exempt Money Fund --
Value Advantage Shares(TM)
Victoria Shaw 10.49%
14 East 90th Street
New York, NY 10128
PEI Partnership Architects 6.43%
257 Park Avenue South
New York, NY 10010
Patricia Meehan 12.29%
18 Heather Lane
Miller Place, NY 11764
</TABLE>
As of March 22, 1996, the officers and trustees of the Trust, as a
group, owned of record or beneficially less than 1% of the outstanding voting
securities of the remaining series of the Trust.
28
<PAGE> 126
ACCESS TO SCHWAB'S MUTUAL
FUND ONESOURCE SERVICE(TM)
With Schwab's Mutual Fund OneSource Service(TM) ("OneSource"), a
shareholder can invest in over 200 mutual funds from many fund companies,
subject to the following. If a shareholder makes five or more short-term
redemptions of OneSource mutual funds (other than the SchwabFunds) within any
12-month period, a fee will be charged on all future trades. A short-term
redemption in this context refers to the sale of mutual fund shares held for six
months or less. Some mutual funds available through OneSource may charge fees
permitted under Rule 12b-1 in excess of one quarter of one percent per year.
Schwab reserves the right to modify OneSource's terms and conditions at any
time. For more information, a shareholder should contact their Schwab office
during its regular business hours or 800-2 NO-LOAD, 24 hours a day.
29
<PAGE> 127
SchwabFunds(R). SchwabFunds offers a variety of series and classes of shares of
beneficial interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(TM)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(3)
Schwab California Long-Term Tax-Free Bond Fund(3)
MONEY MARKET FUNDS(4)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares(3)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)(3)
Schwab Retirement Money Fund(R)(5)
Schwab Institutional Advantage Money Fund(TM)(5)
Schwab New York Tax-Exempt Money Fund-Sweep Shares(6)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)(6)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios of Schwab Capital Trust.
(3) Designed for California taxpayers.
(4) All listed money market funds are separate investment portfolios of the
Trust.
(5) Designed for institutional investors only.
(6) Designed for New York taxpayers.
30
<PAGE> 128
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment for the Value Advantage Shares of each
Fund is $25,000 and subsequent investments of $5,000 or more may be made. These
minimum requirements may be changed at any time and are not applicable to
certain types of investors. The Trust may waive the minimums for purchases by
trustees, directors, officers or employees of the Trust, Schwab or the
Investment Manager. The Trust has made an election with the SEC to pay in cash
all redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of its net assets at the
beginning of such period. This election is irrevocable without the SEC's prior
approval. Redemption requests in excess of the stated limits may be paid, in
whole or in part, in investment securities or in cash, as the Trust's Board of
Trustees may deem advisable; however, payment will be made wholly in cash unless
the Board of Trustees believes that economic or market conditions exist that
would make such a practice detrimental to the best interests of the Fund. If
redemption proceeds are paid in investment securities, such securities will be
valued as set forth in the Prospectus of the Fund affected under "Share Price
Calculation" and a redeeming shareholder would normally incur brokerage expenses
if he or she converted the securities to cash.
OTHER INFORMATION
The Prospectus of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
31
<PAGE> 129
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.
STANDARD & POOR'S CORPORATION
A S&P A-1 commercial paper rating indicates either an overwhelming or
very strong degree of safety regarding timely payment of principal and interest.
Issues determined to possess overwhelming safety characteristics are denoted
A-1+. Capacity for timely payment on commercial paper rated A-2 is strong, but
the relative degree of safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term United States Treasury obligations), a Duff-1
rating signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
F-1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F-1 reflect an assurance of timely
payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.
32
<PAGE> 130
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
strong capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protection, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
33
<PAGE> 131
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree.
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free United States Treasury debt. AA
rated bonds are of high credit quality and have strong protection factors. The
risks associated with them are modest but may vary slightly from time to time
because of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT
OBLIGATIONS ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very strong. TBW-2 is
the second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
34
<PAGE> 132
FINANCIAL STATEMENTS
35
<PAGE> 133
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--57.8%(a)
ALABAMA--2.0%
Alabama Housing Finance
Authority Single Family
Housing Revenue Bonds
Collateralized Home
Mortgage Program Series
1995C-1/ (Bayerische
Landesbank Girozentrale
LOC)
5.05%, 01/07/96 $10,400 $10,400
Citronelle, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(AZKO Chemicals, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 1,100 1,100
Jefferson County, Alabama
Sewer Revenue Warrants
Series 1995A/
(Bayerische Landesbank
Girozentrale LOC)
5.20%, 01/07/96 12,500 12,500
Mobile County, Alabama
Industrial Development
Board Revenue Bonds
(Ultraform Co.
Project) Series B/
(Bayerische Landesbank
Girozentrale LOC)
5.00%, 01/07/96 1,000 1,000
Mobile County, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Ultraform Co. Project)
Series A/ (Bayerische
Landesbank Girozentrale
LOC)
5.00%, 01/07/96 7,480 7,480
Mobile, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding
Bonds (Alabama
Power Co. Project)
Series 1993C
5.15%, 01/07/96 12,000 12,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985C/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 2,000 2,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985F/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 9,000 9,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 6,390 6,390
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 5,295 5,295
Opelika, Alabama Industrial
Development Board Revenue
Bonds (Power Guard
Project) Series
1994/(SouthTrust Bank of
Alabama LOC)
5.35%, 01/07/96 3,100 3,100
------
70,265
------
ALASKA--0.0%
Alaska Industrial
Development Authority
Flexible Demand Revenue
Bonds (Advanced Health
Systems)/(Citibank LOC)
5.35%, 01/07/96 600 600
------
ARIZONA--0.5%
Arizona Educational Loan
Marketing Corp.
Revenue Bonds Series A/
(MBIA Insurance &
Fuji Bank SBPA)
5.45%, 01/07/96 10,000 10,000
Yavapai County, Arizona
Industrial Development
Authority Revenue Bonds
(First Health
Care Corp. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,230 4,230
</TABLE>
F-1
<PAGE> 134
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series A/(Citibank LOC)
5.20%, 01/07/96 $3,000 $ 3,000
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series B/(Citibank LOC)
5.50%, 01/07/96 275 275
------
17,505
------
CALIFORNIA--1.4%
California Higher Education
Loan Authority Student
Loan Refunding Bonds
Series E1/(SLMA LOC)
5.25%, 01/07/96 5,000 5,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986B
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 200 200
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Packaging Innovation DZ
Industries, Inc.) Series
1994A-2/ (Bank of Tokyo
LOC)
5.35%, 01/07/96 585 585
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 8,900 8,900
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
A/(Industrial Bank of
Japan LOC)
6.10%, 01/01/96 100 100
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)
5.00%, 01/07/96 300 300
Orange County, California
Various Sanitation
Districts Certificates of
Participation Capital
Improvement Programs
Series 1990-92C/ (FGIC
Insurance)
6.00%, 01/01/96 200 200
Orange County, California
Water District
Certificates of
Participation (Sanitation
Districts #1,2,3)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 19,500 19,500
Simi Valley, California
Multi Family Housing
Certificates of
Participation (Lincoln
Wood Ranch Project)/
(Sumitomo Bank LOC)
5.05%, 01/07/96 5,600 5,600
Southern California Public
Power Authority
Transmission Project
Revenue Bonds (Southern
Transmission Project)
Series 1991/ (AMBAC
Insurance & Swiss Bank
LOC)
4.75%, 01/07/96 9,700 9,700
------
50,185
------
COLORADO--4.2%
Colorado Health Facilities
Authority Revenue Bonds
(Sisters of Charity
Health) Series B/(Multiple
Credit Enhancements)
5.05%, 01/07/96 23,300 23,300
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1990A/ (SLMA LOC)
5.20%, 01/07/96 10,790 10,790
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993B/ (SLMA LOC)
5.20%, 01/07/96 2,100 2,100
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993C-2/ (SLMA LOC)
5.05%, 01/07/96 2,200 2,200
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992D/(Morgan Guaranty
Trust LOC)
5.30%, 01/07/96 48,400 48,400
</TABLE>
F-2
<PAGE> 135
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992E/ (Bank of Tokyo LOC)
5.50%, 01/07/96 $30,000 $ 30,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992F/
(Bank of Montreal LOC)
5.30%, 01/07/96 16,000 16,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992G/(Credit Local de
France LOC)
5.30%, 01/07/96 8,500 8,500
Douglas County, Colorado
Multi Family Housing
Revenue Bonds (Autumn
Chase Project)/ (Citibank
LOC)
5.25%, 01/07/96 9,300 9,300
-------
150,590
-------
CONNECTICUT--1.0%
Connecticut State General
Obligation Economic
Recovery Bonds Series
1991B/(Multiple Credit
Enhancements)
5.10%, 01/07/96 11,700 11,700
Connecticut State Special
Assessment Unemployment
Compensation Advance
Fund Revenue Bonds
Series 1993B/(Multiple
Credit Enhancements)
5.40%, 01/07/96 15,900 15,900
Connecticut State Special Tax
Obligation Bonds (Second
Lien Transportation
Information) Series 1990-1/
(Industrial Bank of Japan LOC)
5.10%, 01/07/96 5,800 5,800
-------
33,400
-------
DISTRICT OF COLUMBIA--0.1%
District of Columbia
Revenue Bonds Adjustable
Convertible Extendable
Securities (Georgetown
University) Series 1988D/
(Sanwa Bank LOC)
5.65%, 01/07/96 4,200 4,200
-------
FLORIDA--1.1%
Brevard County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Palm Place Project)/
(Chemical Bank LOC)
5.05%, 01/07/96 5,000 5,000
Dade County, Florida
Solid Waste Industrial
Development Revenue Bonds
(Montenay-Dade, Ltd.
Project)/
(Banque Paribas LOC)
5.10%, 01/07/96 1,280 1,280
Hillsborough County,
Florida Industrial
Development Authority
Revenue Bonds (Seaboard
Tampa Terminals) Series
1986A/ (Barclays Bank LOC)
5.00%, 01/07/96 5,500 5,500
Indian Trace, Florida
Community Development
District (Water & Sewer
Special Assessment
Basin 1 Water)/
(MBIA Insurance &
Swiss Bank SBPA)
4.90%, 01/07/96 2,500 2,500
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Rio Vista Project)/
(First Union Bank of
North Carolina LOC)
5.20%, 01/07/96 3,865 3,865
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds (Smokewood
Project)/ (Citibank LOC)
5.25%, 01/07/96 10,000 10,000
Palm Beach County, Florida
Health Facilities
Authority Revenue
Refunding Bonds
(Joseph L. Morse
Geriatric Center)/
(Sun Bank LOC)
5.20%, 01/07/96 9,800 9,800
Palm Beach County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Crystal II Project)/
(Citibank LOC)
5.15%, 01/07/96 2,850 2,850
------
40,795
------
GEORGIA--3.1%
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 15,300 15,300
</TABLE>
F-3
<PAGE> 136
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1994A/
(FGIC Insurance &
Credit Local de
France SBPA)
5.15%, 01/07/96 $24,000 $24,000
Cobb County, Georgia
Housing Authority
Multi Family Housing
Revenue Bonds
(Walton Green Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 14,000 14,000
Cobb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Williamstown
Apartment Project)/
(Wachovia Bank LOC)
5.20%, 01/07/96 2,000 2,000
Dekalb County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Siemens
Energy, Inc. Project)/
(Siemens AG Guaranty)
5.20%, 01/07/96 3,750 3,750
Dekalb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Wood Hills
Apartment Project)/ (Bank
of Montreal LOC)
5.15%, 01/07/96 5,250 5,250
Douglas County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Mima Inc.
Project)/ (Wachovia Bank
LOC)
5.10%, 01/07/96 4,300 4,300
Laurens County, Georgia
Development Authority
Solid Waste Disposal
Revenue Bonds (Southeast
Paper Co. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 25,000 25,000
Richmond County, Georgia
Industrial Development
Authority Revenue Bonds
(Bok Group Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Rockmart, Georgia
Development Authority
Industrial Development
Revenue Bonds (CW Matthews
Contracting)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 2,500 2,500
Smyrna, Georgia Housing
Authority Multi Family
Housing Revenue Bonds
(Walton Park LP)/
(Wachovia Bank LOC)
5.25%, 01/07/96 8,000 8,000
Villa Rica, Georgia
Industrial Development
Revenue Bonds (Lowes Home
Centers, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,200 1,200
-------
110,300
-------
HAWAII--1.6%
Hawaii State Department of
Budget and Finance Special
Purpose Mortgage Revenue
Bonds (Adventist Health
System West)/ (Bank of
California LOC)
5.15%, 01/07/96 3,100 3,100
Hawaii State Housing
Finance & Development
Corp. Multi-Family Housing
Revenue Bonds (Nani Mauna
Loa Project) Series 1995A/
(Citibank LOC)
4.00%, 01/07/96 4,350 4,350
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 17,100 17,100
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990B/(Industrial
Bank of Japan LOC)
5.20%, 01/07/96 19,600 19,600
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(HaleKa Gardens Project)
Series A/ (Bank of Tokyo
LOC)
5.70%, 01/07/96 5,256 5,256
</TABLE>
F-4
<PAGE> 137
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(Lolani Regents Project)
Series 1990A/
(Bank of Hawaii LOC)
5.55%, 01/07/96 $ 9,300 $ 9,300
------
58,706
------
ILLINOIS--10.2%
Centralia, Illinois
Industrial Development
Authority Revenue Bonds
(Consolidated Foods
Corp./Hollywood
Brands, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,500 4,500
Chicago, Illinois
General Obligation
Bonds Series 1985/
(Sanwa Bank LOC)
5.45%, 01/07/96 14,440 14,440
Chicago, Illinois
General Obligation
Bonds Series 1992B/
(Canadian Imperial Bank of
Commerce LOC)
5.10%, 01/07/96 10,400 10,400
Chicago, Illinois
Industrial Development
Revenue Bonds (Morse
Automotive)/ Series 1995
(American National Bank &
Trust Co. LOC)
5.25%, 01/07/96 3,000 3,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (Adjustable
Convertible Extendable
Securities General Airport
Second Lien) Series B-1/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(Adjustable Convertible
Extendable Securities
General Airport Second
Lien) Series B-2/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series 1994C/
(Societe Generale LOC)
5.15%, 01/07/96 16,100 16,100
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (General
Airport Second Lien)
Series A/(Westpac Banking
Corp. LOC)
5.10%, 01/07/96 13,100 13,100
Illinois Development
Finance Authority Hospital
Revenue Bonds (Palos
Community Hospital) Series
1994/ (Credit Suisse SBPA)
5.20%, 01/07/96 37,700 37,700
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Knead Dough
Baking Co.)/
(Bank of America LOC)
5.35%, 01/07/96 8,870 8,870
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Marriott
Corp. Deerfield Project)/
(National Westminster Bank
LOC)
5.15%, 01/07/96 1,300 1,300
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Rerkin
Paperboard Co. LP) Series
1994/ (Northern Trust LOC)
5.40%, 01/07/96 5,500 5,500
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (F.C. Harris
Pavillion Project) Series
1994/(FNMA LOC)
5.15%, 01/07/96 3,000 3,000
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (River Oak)/ (Swiss
Bank LOC)
5.20%, 01/07/96 3,790 3,790
Illinois Educational
Facility Authority Revenue
Bonds (Chicago Zoological
Society Brookfield Zoo)
Series B/
(Chemical Bank LOC)
5.25%, 01/07/96 2,000 2,000
Illinois Educational
Facility Authority Revenue
Bonds (Chicago
Historical Society)/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 8,300 8,300
</TABLE>
F-5
<PAGE> 138
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Illinois Educational
Facility Authority
Revenue Bonds
(Illinois Institute of
Technology) Series 1990A/
(Northern Trust LOC)
5.05%, 01/07/96 $11,300 $11,300
Illinois Educational
Facility Authority Revenue
Bonds (Northwestern
University)/ (FNB Chicago
LOC)
5.15%, 01/07/96 22,200 22,200
Illinois Educational
Facility Authority Revenue
Bonds (University Pooled
Financing Program)
Series 1985/
(FGIC Insurance &
Sakura Bank SBPA)
5.95%, 01/07/96 17,325 17,325
Illinois Health Facility
Authority Revenue Bonds
(Franciscan Village
Project) Series 1989A/
(Commonwealth Bank of
Australia LOC)
5.20%, 01/07/96 2,000 2,000
Illinois Health Facility
Authority Revenue Bonds
(Hospital Sisters
Services) Series E/(MBIA
Insurance &
Morgan Guaranty SBPA)
5.00%, 01/07/96 4,300 4,300
Illinois Health Facility
Authority Revenue Bonds
(Ingalls Memorial
Hospital) Series
1985C/(LaSalle National
Bank LOC)
5.60%, 01/07/96 1,100 1,100
Illinois Health Facility
Authority Revenue Bonds
(Streeterville Corp.)
Series A/
(FNB Chicago LOC)
5.10%, 01/07/96 14,400 14,400
Illinois Health Facility
Authority Revenue Bonds
(Washington & Jane Smith
Home) Series 1991/
(Comerica Bank LOC)
5.20%, 01/07/96 2,800 2,800
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985C/ (FNB Chicago
LOC)
5.20%, 01/07/96 6,000 6,000
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985D/ (FNB Chicago
LOC)
5.20%, 01/07/96 20,000 20,000
Illinois State Toll Highway
Authority Revenue Bonds
Series B/(MBIA Insurance &
Societe Generale SBPA)
5.05%, 01/07/96 63,400 63,400
Kane County, Illinois
Revenue Bonds (Glenwood
School for Boys)/(Harris
Trust & Savings Bank LOC)
5.10%, 01/07/96 9,000 9,000
Lombard, Illinois
Industrial Development
Revenue Refunding Bonds (B
& H Partnership Project)/
(Comerica Bank LOC)
5.38%, 01/07/96 1,500 1,500
McHenry County, Illinois
Industrial Development
Authority Revenue
Refunding Bonds (Dean
Foods Co. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 2,675 2,675
Oak Forest, Illinois
Revenue Bonds (Homewood
Pool) Series 1989/
(FNB Chicago LOC)
5.15%, 01/07/96 37,000 37,000
-------
367,000
-------
INDIANA--0.4%
Crawfordsville, Indiana
Industrial Development
Revenue Bonds (National
Service Industries, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 2,000 2,000
Hammond, Indiana Adjustable
Rate Economic Development
Revenue Bonds (Lear
Seating Corp. Project)
Series 1994/ (Chemical
Bank LOC)
4.25%, 01/07/96 5,750 5,750
Indiana Health Facility
Financing Authority
Hospital Adjustable
Convertible Extentable
Securities Revenue Bonds
(Methodist Hospital)
Series C/
(Credit Suisse SBPA)
5.15%, 01/07/96 4,100 4,100
Indianapolis, Indiana
Economic Development
Authority Revenue Bonds
(Herff-Jones, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 4,100 4,100
-------
15,950
-------
</TABLE>
F-6
<PAGE> 139
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
IOWA--0.2%
Iowa Higher Education Loan
Authority Revenue Bonds
Adjustable Convertible
Extendable Securities
Education Loan (Private
College Facility)/
(MBIA Insurance &
Dai-Ichi Kangyo
Bank SBPA)
5.50%, 01/07/96 $ 4,100 $ 4,100
Iowa Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Small Business Loan
Project) Series 1985A/
(FHLB of Des Moines LOC)
5.30%, 01/07/96 2,100 2,100
Iowa State Financing
Authority Solid Waste
Disposal Revenue Bonds
(Cedar River Paper
Project) Series 1995A/
(Swiss Bank LOC)
6.10%, 01/01/96 1,000 1,000
------
7,200
------
KANSAS--0.2%
Kansas City, Kansas
Industrial Revenue Bonds
(Owen Industries, Inc.
Project) Series 1987/
(Sanwa Bank LOC)
5.45%, 01/07/96 2,400 2,400
Wichita, Kansas Airport
Facilities Revenue Bonds
(Flightsafety
International, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,000 3,000
Wichita, Kansas Health
Facilities Revenue
Authority (CSJ Health
System) Series XXV/
(Sumitomo Bank LOC)
5.30%, 01/07/96 1,900 1,900
------
7,300
------
KENTUCKY--0.7%
Lebanon, Kentucky
Industrial Development
Revenue Bonds (Wallace
Computer Services, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 5,000 5,000
Mason County, Kentucky
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (East Kentucky Power
Corp.) Series 1984B-1/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 10,600 10,600
Murray, Kentucky Industrial
Development Authority
Revenue Bonds
(Dean Foods Co.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Owensboro, Kentucky Limited
Obligation Revenue Bonds
(Dart Polymers, Inc.
Project) Series 1985A/
(National Westminster Bank
LOC)
4.05%, 01/07/96 1,900 1,900
Wilson County, Kentucky
Industrial Development
Board Revenue Bonds
(Perma Pipe I North
Carolina Project)/ (Harris
Trust & Savings Bank LOC)
5.50%, 01/07/96 3,150 3,150
------
25,650
------
LOUISIANA--3.5%
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991A/
(Swiss Bank LOC)
5.05%, 01/07/96 400 400
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991B/
(Swiss Bank LOC)
5.05%, 01/07/96 15,000 15,000
East Baton Rouge Parish,
Louisiana Pollution
Control Revenue Refunding
Bonds (Exxon Corp.) Series
1989
5.90%, 01/01/96 1,900 1,900
Louisiana Public Facilities
Authority Hospital Revenue
Bonds (Willis Knighton
Medical Project)/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 15,300 15,300
New Orleans, Louisiana
Aviation Board Revenue
Bonds (Passenger Facility
Charge Projects)/ (Banque
Paribas & Canadian
Imperial Bank of Commerce
LOC)
5.50%, 01/07/96 7,000 7,000
</TABLE>
F-7
<PAGE> 140
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New Orleans, Louisiana
Aviation Board Revenue
Bonds Series B/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
4.95%, 01/07/96 $73,020 $ 73,020
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
(Hotel Occupancy Project)
Series B/ (Sanwa Bank LOC)
5.50%, 01/07/96 1,300 1,300
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
Series 1989B/ (Sanwa Bank
LOC)
5.50%, 01/07/96 3,800 3,800
Rapides Parish, Louisiana
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Central Louisiana
Electric Co.)
Series 1991/
(Swiss Bank LOC)
5.05%, 01/07/96 8,150 8,150
-------
125,870
-------
MARYLAND--2.5%
Baltimore, Maryland
Industrial Development
Authority Revenue Bonds
(City of Baltimore Capital
Acquisition Program)
Series 1986/(Dai-Ichi
Kangyo Bank LOC)
5.35%, 01/07/96 52,400 52,400
Maryland State Health and
Higher Educational
Facility Authority Pooled
Revenue Bonds (Kennedy
Kreiger) Series 1993D/
(FNB Maryland LOC)
5.10%, 01/07/96 2,000 2,000
Maryland State Health and
Higher Educational Facility
Authority Pooled Revenue
Bonds (Pooled Loan
Program) Series A/
(Dai-Ichi Kangyo Bank LOC &
FNB Chicago SBPA)
5.00%, 01/07/96 9,700 9,700
Montgomery County, Maryland
Housing Opportunity
Commission Housing Revenue
Bonds (Draper Lane)
Series 1991I/
(FGIC Insurance &
Sumitomo Bank SBPA)
5.30%, 01/07/96 16,500 16,500
Northeast Maryland Waste
Disposal Authority
Resource Recovery Bonds
(Hartford County)/ (AMBAC
Insurance &
Credit Local de France
LOC)
5.05%, 01/07/96 9,600 9,600
------
90,200
------
MICHIGAN--0.1%
Grand Rapids, Michigan
Water Supply Variable Rate
Revenue Bonds/
(FGIC Insurance &
Societe Generale SBPA)
5.90%, 01/07/96 1,000 1,000
Michigan State Strategic
Fund Limited Obligation
Revenue Bonds (Dean Foods
Co. Project)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 3,500 3,500
------
4,500
------
MINNESOTA--0.9%
Bloomington, Minnesota Port
Authority Tax Increment
Revenue Refunding Bonds
(Mall of America)
Series 1995A/
(Credit Local de
France SBPA &
FSA Insurance)
5.20%, 01/07/96 7,000 7,000
St. Paul, Minnesota Housing
Redevelopment Authority
Rental Multi Family
Housing Development Bonds
Multi City Series 1985A/
(FHLB Des Moines LOC)
5.30%, 01/07/96 19,900 19,900
------
26,900
------
MISSISSIPPI--0.4%
Jackson County, Mississippi
Pollution Control Revenue
Bonds (Chevron U.S.A. Inc.
Project)
5.90%, 01/07/96 14,700 14,700
------
MISSOURI--1.0%
Independence, Missouri
Industrial Development
Authority Revenue Bonds
(Resthaven Project)/
(Credit Local de France
LOC)
5.20%, 01/07/96 9,640 9,640
</TABLE>
F-8
<PAGE> 141
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Industrial Development
Authority of Mexico,
Missouri Revenue Bonds
(ABP Midwest
Manufacturing Co.
Project) Series 1995/
(Royal Bank of Scotland
LOC)
5.25%, 01/07/96 $7,600 $ 7,600
Missouri State Development
Finance Board Industrial
Development Revenue Bonds
(H.R. Williams Mill Supply
Project) Series 1995/
(Union Bank of
Switzerland LOC)
5.30%, 01/07/96 3,100 3,100
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy)
Series 1988A/(Multiple
Credit Enhancements)
5.10%, 01/07/96 3,200 3,200
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy) Series
1992B/ (Toronto-Dominion
Bank SBPA)
5.10%, 01/07/96 3,400 3,400
Missouri State Health and
Educational Facilities
Authority Health
Facilities
Revenue Bonds (St. Anthony
Medical Center)/
(Mitsubishi Bank SBPA)
5.60%, 01/07/96 900 900
St. Charles, Missouri
Industrial Development
Authority Variable Rate
Demand Revenue Refunding
Bonds (Casalon Apartments
Project)/ (Citibank LOC)
5.25%, 01/07/96 3,100 3,100
Washington, Missouri
Industrial Development
Authority Revenue
Bonds (Pauwels
Transformer Project)/
(Generale Bank LOC)
5.40%, 01/07/96 4,000 4,000
------
34,940
------
MONTANA--0.4%
Forsyth, Montana Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Portland General Electric
Coal Stripping Project)
Series 1983B/ (Swiss Bank
LOC)
5.00%, 01/07/96 6,500 6,500
Montana State Health
Facility Authority Revenue
Bonds (Health Care Pooled
Loan Program) Series
1985A/ (FGIC Insurance &
Norwest Bank of
Minnesota SBPA)
5.15%, 01/07/96 7,195 7,195
------
13,695
------
NEVADA--1.6%
Clark County, Nevada Airport
Improvement Revenue
Refunding Bonds
Series 1993A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 55,350 55,350
Clark County, Nevada
Industrial Development
Revenue Bonds
(Cogeneration Project No.
2)/(Swiss Bank LOC)
6.15%, 01/07/96 2,700 2,700
------
58,050
------
NEW HAMPSHIRE--0.2%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (VHA New
England, Inc.) Series
1985B/ (AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 1,000 1,000
New Hampshire State Housing
Finance Authority Multi
Family Housing Revenue
Bonds (Fairways Project)
Series 1994-1/ (General
Electric Capital Corp.
LOC)
5.20%, 01/07/96 7,000 7,000
------
8,000
------
NEW JERSEY--0.1%
New Jersey Turnpike
Authority Revenue Bonds
Series 1991D/
(FGIC Insurance &
Societe General LOC)
4.80%, 01/07/96 3,000 3,000
------
</TABLE>
F-9
<PAGE> 142
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW MEXICO--0.1%
Albuquerque, New Mexico
Gross Receipts Lodgers Tax
Revenue Adjustable Rate
Tender Revenue Bonds
Series 1994/ (Canadian
Imperial Bank of Commerce
LOC)
5.15%, 01/07/96 $ 1,300 $ 1,300
Belen, New Mexico
Industrial Development
Revenue Bonds
(Solo Cup, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,250 3,250
------
4,550
------
NEW YORK--3.2%
Babylon, New York Variable
Rate General Obligation
Bonds Series B/(Bank of
Nova Scotia SBPA & AMBAC
Insurance)
4.90%, 01/07/96 3,500 3,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries
A-8B/ (Sanwa Bank LOC)
5.95%, 01/07/96 715 715
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-2/
(MBIA Insurance &
Bank Austria AG SBPA)
5.90%, 01/01/96 400 400
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-3/
(MBIA Insurance &
Bank of Nova Scotia SBPA)
5.90%, 01/01/96 1,000 1,000
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 11,900 11,900
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC Insurance &
FGIC SPA)
5.90%, 01/07/96 9,000 9,000
New York City, New York
Trust for Cultural
Resources Revenue Bonds
(Solomon R. Guggenheim
Project) Series 1990B/
(Swiss Bank LOC)
5.90%, 01/01/96 100 100
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B Subseries
B-10/(Union Bank of
Switzerland LOC)
5.00%, 01/07/96 7,500 7,500
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 2,000 2,000
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1993A/ (Multiple
Credit Enhancements)
4.95%, 01/07/96 9,500 9,500
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1994B/ (Credit
Suisse & Swiss Bank LOC)
4.95%, 01/07/96 1,000 1,000
New York Local Government
Assistance Corp. Public
Improvement Revenue
Bonds Series 1995F/
(Toronto-Dominion Bank LOC)
5.05%, 01/07/96 12,700 12,700
New York Municipal Water
Finance Authority Water &
Sewer System Revenue Bonds
Series 1994C/ (FGIC
Insurance & FGIC SPA)
5.90%, 01/01/96 5,500 5,500
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/
(AMBAC Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 3,100 3,100
New York State Energy
Research & Development
Authority Electric Facilities
Revenue Bonds (Long
Island Lighting Co.
Project) Series 1993A/
(Toronto-Dominion Bank LOC)
5.00%, 01/07/96 1,000 1,000
</TABLE>
F-10
<PAGE> 143
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New York State Energy
Research & Development
Authority Pollution
Control Refunding Revenue
Bonds (Orange & Rockland
Utilities, Inc. Project)
Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 $10,700 $ 10,700
New York State Energy
Research & Development
Authority Pollution Control
Revenue Bonds (Central
Hudson Gas & Electric
Corp. Project) Series 1985A/
(Morgan Guaranty Trust LOC)
5.00%, 01/07/96 5,700 5,700
New York State Energy
Research & Development
Authority Pollution
Control Revenue Refunding
Bonds Series B/(Union Bank
of Switzerland LOC)
6.00%, 01/01/96 1,400 1,400
New York State Local
Government Assistance
Corp. Variable Rate
Revenue Bonds Series
1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 14,000 14,000
Triborough Bridge and
Tunnel Authority, New York
Special Obligation Bridge
Revenue Bonds Series 1994/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 11,000 11,000
Yonkers, New York Industrial
Development Authority
Revenue Bonds
Consumers Union Facility/
(AMBAC Insurance &
Credit Local de France SBPA)
4.95%, 01/07/96 1,400 1,400
-------
113,115
-------
NORTH CAROLINA--1.7%
Charlotte, North Carolina
Airport Revenue Refunding
Bonds Series 1993A/ (MBIA
Insurance & Industrial
Bank of Japan SBPA)
5.15%, 01/07/96 6,400 6,400
Haywood County, North
Carolina Industrial
Development Facilities and
Pollution Control
Financing Authority
Revenue Bonds (Solid
Waste--Champion
International Corp.)/
(Bank Austria AG LOC)
4.95%, 01/07/96 2,200 2,200
North Carolina Medical Care
Community Hospital Revenue
Bonds (Pooled Equipment
Finance Project)/(MBIA
Insurance &
Banque Paribas SBPA)
5.05%, 01/07/96 11,300 11,300
North Carolina Medical Care
Community Hospital Revenue
Bonds Adjustable
Convertible Extendable
Securities (Pooled
Financial Project)/ (MBIA
Insurance & Sakura Bank
SPA)
5.05%, 01/07/96 1,810 1,810
North Carolina Medical Care
Community Hospital Revenue
Pooled Finance
Bonds/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/07/96 5,800 5,800
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985B/
(Sumitomo Bank LOC)
5.50%, 01/07/96 2,900 2,900
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985C/
(Sumitomo Bank LOC)
5.50%, 01/07/96 29,400 29,400
------
59,810
------
NORTH DAKOTA--0.2%
Mercer County, North Dakota
National Rural Utility
Pollution Control Revenue
Bonds (Basin Electric
Power Cooperative Antelope
Project) Series 1984C/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 7,150 7,150
------
OHIO--1.0%
Columbus, Ohio Electric
System Revenue Bonds
Series 1984/(Dai-Ichi
Kangyo Bank LOC)
3.90%, 01/07/96 6,880 6,880
</TABLE>
F-11
<PAGE> 144
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Columbus, Ohio General
Obligation Bonds Series
1995-1/ (Westdeutsche
Landesbank LOC)
4.90%, 01/07/96 $ 6,000 $ 6,000
Dayton, Ohio Special
Facilities Revenue
Refunding Bonds (Emery Air
Freight) Series 1993F/
(ABN-AMRO Bank LOC)
5.31%, 01/07/96 8,000 8,000
Ohio Air Quality
Development Authority
Revenue Bonds (JMG
Funding, LP) Series 1994A/
(Societe Generale LOC)
5.00%, 01/07/96 12,000 12,000
Ohio Housing Finance Agency
Multi Family Housing
Revenue Bonds (Kenwood
Congregate Retirement
Community) Series
1985/(Morgan Guaranty
Trust LOC)
3.90%, 01/07/96 2,000 2,000
------
34,880
------
OKLAHOMA--0.0%
Tulsa, Oklahoma Industrial
Development Authority
Hospital Revenue Bonds
(Hillcrest Medical Center)
Series 1988/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 685 685
Tulsa, Oklahoma Industrial
Development Authority
Revenue Bonds
(Thomas & Betts Project)
Series 1991/ (Wachovia
Bank LOC)
5.25%, 01/07/96 300 300
------
985
------
OREGON--1.3%
Medford, Oregon Hospital
Facility Authority (Rogue
Valley Manor Project)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 7,700 7,700
Oregon State Economic
Development Commission
Economic and Industrial
Development Revenue
Bonds/(Wachovia Bank LOC)
5.15%, 01/07/96 4,100 4,100
Oregon State General
Obligation Notes Series
1973F/ (Mitsubishi Bank
LOC)
5.15%, 01/07/96 11,185 11,185
Oregon State General
Obligation Notes Series
1973H/ (Bank of Tokyo LOC)
5.25%, 01/07/96 18,100 18,100
Port of Portland, Oregon
Industrial Development
Revenue Bonds (Schnitzer
Steel Project)/ (Comerica
Bank LOC)
5.30%, 01/07/96 5,000 5,000
------
46,085
------
PENNSYLVANIA--1.4%
Montgomery County,
Pennsylvania Industrial
Development Authority
Revenue Bonds (Seton
Medical Supply Co. Project)/
(Banque Paribas LOC)
5.25%, 01/07/96 5,500 5,500
Pennsylvania Higher
Education Assistance
Agency Student Loan
Revenue Bonds Series
1995A/ (SLMA LOC)
5.25%, 01/07/96 17,000 17,000
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985B/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,365 4,365
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985F/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,100 4,100
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985J/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 9,800 9,800
Washington County,
Pennsylvania Authority
Revenue Bonds Higher
Education Pooled Equipment
Lease/ (Sanwa Bank LOC)
5.35%, 01/07/96 9,400 9,400
------
50,165
------
RHODE ISLAND--0.1%
Rhode Island State Student
Loan Authority Higher
Education Revenue Bonds
Series 1995-1/(National
Westminster Bank LOC)
5.30%, 01/07/96 2,000 2,000
------
</TABLE>
F-12
<PAGE> 145
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.4%
Greenville County, South
Carolina Industrial
Development Revenue Bonds
(Quality Thermoforming
Project)/ (South Carolina
National Bank LOC)
5.25%, 01/07/96 $1,200 $ 1,200
South Carolina Jobs
Economic Development
Authority Hospital
Facilities Revenue Bonds
(Baptist Health Care
System)/ (Credit Local de
France LOC)
5.05%, 01/07/96 6,900 6,900
South Carolina Jobs
Economic Development
Authority Industrial
Development Revenue Bonds
(Ado Corp. Project)/(South
Carolina National Bank
LOC)
5.25%, 01/07/96 800 800
Spartanburg County, South
Carolina Industrial
Development Authority
Revenue Bonds
(Bemis, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,750 4,750
------
13,650
------
SOUTH DAKOTA--0.3%
Rapid City, South Dakota
Industrial Development
Revenue Corp. (Property
Associates Project)/
(Lloyds Bank LOC)
5.15%, 01/07/96 6,025 6,025
South Dakota State Health &
Educational Facilities
Authority Revenue Bonds
(McKenna Hospital)
Series 1994/
(MBIA Insurance &
Banque Paribas SBPA)
5.20%, 01/07/96 5,000 5,000
------
11,025
------
TENNESSEE--0.2%
Metropolitan Nashville and
Davidson County, Tennessee
Health and Education
Facility Board Revenue
Bonds Series A/
(FGIC Insurance &
Barclays Bank LOC)
5.00%, 01/07/96 1,300 1,300
Metropolitan Nashville and
Davidson County, Tennessee
Industrial Development
Revenue Bonds
(Multi-Family
Housing--Western)/
(Sumitomo Bank LOC)
5.60%, 01/07/96 7,035 7,035
------
8,335
------
TEXAS--7.9%
Amarillo, Texas Health
Facilities Corp. Hospital
Revenue Bonds (High Plains
Baptist Hospital)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 9,300 9,300
Bexar County, Texas Health
Facilities Development
Corp. Revenue Bonds
(Chandler Memorial Home
Project) Series 1995/
(Bank One LOC)
5.20%, 01/07/96 5,170 5,170
Capital Industrial
Development Corp., Texas
Industrial Development
Revenue Refunding Bonds
(National Service
Industries, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 3,950 3,950
Euless, Texas Industrial
Development Authority
Revenue Bonds (Ferguson
Enterprises, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,850 4,850
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1988A/ (AMBAC
Insurance & Citibank SBPA)
5.25%, 01/07/96 18,300 18,300
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1992A/ (SLMA LOC)
5.10%, 01/07/96 16,000 16,000
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993A/ (SLMA LOC)
5.25%, 01/07/96 48,150 48,150
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993B-1/ (SLMA LOC)
5.25%, 01/07/96 11,000 11,000
</TABLE>
F-13
<PAGE> 146
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1995B/ (SLMA LOC)
5.00%, 01/07/96 $30,000 $30,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990A/
(Swiss Bank LOC)
5.10%, 01/07/96 9,000 9,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990B/
(Swiss Bank LOC)
5.10%, 01/07/96 16,300 16,300
Lavaca-Navidad River
Authority, Texas Water
Supply System Contract
Revenue Bonds (Formosa
Plastics Corp. Project)/
(Canadian Imperial Bank of
Commerce LOC)
5.30%, 01/07/96 9,900 9,900
Lower Neches Valley
Authority, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Mobil Corp.
Neches River Treatment
Project) Series 1994
5.00%, 01/07/96 12,000 12,000
Midlothian, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Box-Crow
Co. Project)/(Union Bank
of Switzerland LOC)
5.80%, 01/07/96 1,400 1,400
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1992A/ (SLMA LOC)
5.20%, 01/07/96 2,300 2,300
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1995A/ (SLMA LOC)
5.20%, 01/07/96 10,400 10,400
Port Authority of Corpus
Christi, Texas Nueces
County Marine Terminal
Revenue Bonds (Reynolds
Metals Co.)/ (Barclays
Bank LOC)
5.25%, 01/07/96 3,100 3,100
Robertson County, Texas
Industrial Development
Corp. Variable Rate
Revenue Bonds (Sanderson
Farms Project) Series
1995/ (Harris Trust &
Savings Bank LOC)
5.20%, 01/07/96 4,300 4,300
Texas Health Facilities
Development Corp.
Adjustable Convertible
Extendable Securities
Revenue Bonds (North Texas
Pooled Health) Series
1985B/ (Banque Paribas
LOC)
5.05%, 01/07/96 11,000 11,000
Texas Small Business
Industrial Development
Corp. Revenue Bonds
(Texas Public
Facility Capital Access)/
(Multiple Credit
Enhancements)
5.20%, 01/07/96 41,795 41,795
Texas State Revenue
Refunding Bonds (Veterans
Housing Assistance Fund)
Series 1995
5.05%, 01/07/96 13,000 13,000
Trinity River Authority,
Texas Pollution Control
Revenue Bonds (Lafarge
Corp. Project)/(Banque
Nationale de Paris LOC)
5.20%, 01/07/96 3,100 3,100
-------
284,315
-------
VERMONT--0.1%
Vermont Education and
Health Buildings Financing
Agency Revenue Bonds (VHA
New England) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 4,240 4,240
-------
</TABLE>
F-14
<PAGE> 147
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VIRGINIA--0.4%
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985A/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 $ 500 $ 500
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985B/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 400 400
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985C/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 600 600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985F/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 5,600 5,600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985G/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 8,100 8,100
------
15,200
------
WASHINGTON--1.0%
Snohomish County,
Washington Public
Utilities District #1
Electric Revenue Bonds
(Generation Systems)/
(MBIA Insurance &
Industrial Bank of Japan
SBPA)
5.15%, 01/07/96 20,000 20,000
Washington State Health
Care Facilities Authority
Revenue Refunding Bonds
(Sisters of St. Joseph of
Peace) Series 1993/ (MBIA
Insurance & U.S. Bank of
Washington SBPA)
5.20%, 01/07/96 12,700 12,700
Washington State Housing
Finance Commission Multi
Family Mortgage Revenue
Bonds (Canyon Lake) Series
1993A/
(U.S. Bank of
Washington LOC)
5.40%, 01/07/96 4,565 4,565
------
37,265
------
WEST VIRGINIA--0.3%
West Virginia State
Hospital Finance Authority
Hospital Revenue Bonds
(St. Joseph's Hospital
Project) Series 1987/
(Mitsubishi Bank LOC)
5.20%, 01/07/96 2,200 2,200
West Virginia State
Hospital Finance Authority
Hospital Revenue
Bonds (VHA
Mid Atlantic States, Inc.)
Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 8,600 8,600
------
10,800
------
WISCONSIN--0.8%
Chilton, Wisconsin
Industrial Development
Revenue Refunding Bonds
(Kaytee Products, Inc.
Project) Series 1995/(Bank
One Milwaukee LOC)
5.35%, 01/07/96 1,865 1,865
Fairwater, Wisconsin
Industrial Development
Revenue Bonds (Dean Foods
Co. Project) Series 1990/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,450 1,450
Lac Du Flambeau Band of
Lake Superior Chippewa
Indians, Wisconsin Special
Obligation Bonds (Simpson
Electric) Series 1985/
(Barclays Bank LOC)
5.25%, 01/07/96 6,300 6,300
</TABLE>
F-15
<PAGE> 148
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Milwaukee, Wisconsin
Redevelopment Authority
Industrial Development
Revenue Bonds (Field
Container Corp. LP) Series
1994/
(Northern Trust LOC)
5.40%, 01/07/96 $ 5,000 $ 5,000
Sheboygan, Wisconsin
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Wisconsin Power &
Light Co.)
5.25%, 01/07/96 1,000 1,000
Wisconsin State Health and
Education Facilities
Authority Revenue Bonds
(Sinai Samaritan) Series
1994A/(Marshall & Ilsley
Bank LOC)
5.20%, 01/07/96 13,755 13,755
---------
29,370
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $2,072,441) 2,072,441
---------
VARIABLE RATE TENDER
OPTION BONDS--2.5%(a)
GEORGIA--0.6%
Georgia State Public
Improvement General
Obligation Tender Option
Bonds Series 1995B
(Citi-157)/
(Citibank Tender Option)
5.25%, 01/07/96 16,000 16,000
Metropolitan Atlanta Rapid
Transit Authority, Georgia
Sales Tax Revenue
Tender Option Bonds
Series M (BT-69)/
(AMBAC Insurance & Bankers
Trust
Tender Option)
4.44%, 01/07/96 5,280 5,280
--------
21,280
--------
NEVADA--0.7%
Nevada State General
Obligation Tender Option
Bonds (Colorado River
Community) Series 1994
(Citi-143)/
(Citibank Tender Option)
5.30%, 01/07/96 25,000 25,000
--------
TEXAS--0.3%
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-138)/
(Citibank Tender Option)
5.30%, 01/07/96 7,000 7,000
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-139)/
(Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
12,000
------
WASHINGTON--0.9%
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-136)/
(Citibank Tender Option)
5.30%, 01/07/96 15,570 15,570
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-137)/
(Citibank Tender Option)
5.30%, 01/07/96 10,000 10,000
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Tender Option
Bonds Series 1990C
(Citi-145)/
(FGIC Insurance, Escrowed
to Maturity with
Government Securities &
Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
30,570
------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $88,850) 88,850
------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--3.9%(a)(c)
CONNECTICUT--0.2%
Connecticut State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1991A (BTP-151)/
(Bankers Trust Tender
Option)
5.20%, 01/07/96 7,365 7,365
------
GEORGIA--0.4%
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-135)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 3,865 3,865
</TABLE>
F-16
<PAGE> 149
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-140)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 $4,575 $ 4,575
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1994B (BTP-148)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,100 7,100
------
15,540
------
ILLINOIS--0.4%
Chicago, Illinois
Metropolitan Water
Reclamation District
Greater Chicago General
Obligation Tender Option
Bond Partnership
(Cook County) (BTP-71)/
(Automated Data
Processing, Inc. Tender
Option)
4.99%, 01/07/96 9,870 9,870
Chicago, Illinois School
Finance Authority General
Obligation School Finance
Tender Option Bond
Partnership (BTP-70)/
(MBIA Insurance &
Automated Data Processing,
Inc. Tender Option)
4.66%, 01/07/96 5,365 5,365
------
15,235
------
MARYLAND--0.1%
Baltimore County, Maryland
General Obligation
Consolidated Public
Improvement Tender Option
Bond Partnership Series
1991 (BTP-132)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 3,621 3,621
------
MINNESOTA--0.1%
Minnesota State Various
Purpose Sports Health Club
Tax Tender Option
Bond Partnership
(BTP-65)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.28%, 01/07/96 4,455 4,455
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
Revenue Refunding Tender
Option Bond Partnership
(BTP-147)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 5,370 5,370
------
TEXAS--1.0%
Regents of the University
of Texas Permanent
University Fund Revenue
Tender Option Bond
Partnership Series 1992A
(BTP-143)/ (Permanent
University
Fund Guaranty,
Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 10,685 10,685
Texas State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1993B/(BTP-116)
(Bankers Trust Tender
Option)
4.69%, 01/07/96 10,170 10,170
Texas State Public Finance
Authority General
Obligation Tender Option
Bond Partnership Series
1994 (BTP-127)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 14,980 14,980
------
35,835
------
VIRGINIA--0.4%
Chesterfield County,
Virginia General
Obligation Public
Improvement and Refunding
Tender Option Bond
Partnership Series 1991
(BTP-136)/ (Bankers Trust
Tender Option)
5.20%, 01/07/96 6,025 6,025
Fairfax County, Virginia
Public Improvement General
Obligation Tender Option
Bond Partnership Series
1991A (BTP-131)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,146 7,146
------
13,171
------
</TABLE>
F-17
<PAGE> 150
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
WASHINGTON--0.7%
King County, Washington
Unlimited Tax General
Obligation Tender Option
Bond Partnership Series
1993C (BTP-56)/ (Automated
Data Processing, Inc.
Tender Option)
4.15%, 01/07/96 $6,365 $ 6,365
Washington State General
Obligation Tender Option
Bond Partnership Series
1990 (BTP-152)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 5,655 5,655
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1990C (BTP-130)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 5,740 5,740
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1993B (BTP-137)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 6,685 6,685
-------
24,445
-------
WISCONSIN--0.4%
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership
(BTP-62)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.25%, 01/07/96 4,500 4,500
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1992A (BTP-142)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 9,480 9,480
-------
13,980
-------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS (Cost $139,017) 139,017
-------
CERTIFICATES OF PARTICIPATION--2.1%(b)
CALIFORNIA--2.1%
San Jose, California
Certificates of Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 72,315 75,662
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $75,662) 75,662
------
GENERAL OBLIGATIONS--4.5%(b)
ALASKA--0.3%
Anchorage, Alaska Unlimited
General Obligation Bonds
Series 1986/
(FGIC Insurance &
Escrowed to Maturity with
Government Securities)
3.72%, 06/01/96 8,600 8,924
Valdez, Alaska Unlimited
General Obligation Bonds
Series 1990/ (MBIA
Insurance)
3.70%, 01/01/97 1,000 1,028
------
9,952
------
ARKANSAS--0.1%
Arkansas State Unlimited
General Obligation Bonds
(College Savings)
3.32%, 06/01/96 1,975 1,977
------
CONNECTICUT--0.0%
Connecticut State General
Obligation Bonds Series
1992B
5.20%, 05/15/96 1,000 1,004
------
DELAWARE--0.1%
Delaware State General
Obligation
Bonds Series 1994A
3.47%, 03/01/96 2,240 2,243
Delaware State General
Obligation Bonds Series B/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 3,000 3,108
------
5,351
------
FLORIDA--0.2%
Dade County, Florida School
District General
Obligation Bonds/(MBIA
Insurance)
3.70%, 08/01/96 5,450 5,548
Florida State Board of
Education Capital Outlay
General Obligation Bonds
3.65%, 06/01/96 2,000 2,012
------
7,560
------
</TABLE>
F-18
<PAGE> 151
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
GEORGIA--0.3%
Chatham County, Georgia
School District Unlimited
General Obligation Bonds
Series 1995B/ (FGIC
Insurance)
3.65%, 08/01/96 $ 1,160 $ 1,170
Clayton County, Georgia
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 10/01/96 1,335 1,370
Gwinnett County, Georgia
School District General
Obligation Bonds Series
1995A
3.78%, 02/01/96 7,035 7,043
------
9,583
------
HAWAII--0.1%
Honolulu, Hawaii City and
County Refunding and
Improvement General
Obligation Bonds Series
1993B
3.65%, 10/01/96 2,000 2,004
------
ILLINOIS--0.0%
Du Page, Illinois Water
Commission General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 03/01/96 1,000 1,026
------
KANSAS--0.7%
Wichita, Kansas General
Obligation Bonds Renewal
and Improvement Temporary
Notes Series 186
3.65%, 02/29/96 24,600 24,614
------
MASSACHUSETTS--0.3%
Massachusetts State
Dedicated Income Tax
Unlimited Tax General
Obligation Bonds Series
1990A/ (FGIC Insurance)
4.30%, 06/01/96 5,000 5,059
Massachusetts State General
Obligation Bonds Series
1986/
(Escrowed to Maturity with
Government Securities)
3.72%, 10/01/96 3,170 3,310
Massachusetts State General
Obligation Bonds Series
1990A/ (MBIA Insurance)
3.63%, 06/01/96 3,000 3,044
------
11,413
------
MINNESOTA--0.6%
Minneapolis, Minnesota
Special School District
General Obligation Bonds
3.73%, 02/01/96 5,500 5,506
Minnesota State General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.89%, 08/01/96 9,500 9,668
Minnesota State General
Obligation Bonds
Series 1995
3.70%, 08/01/96 5,400 5,455
Minnesota State Unlimited
General Obligation Bonds
Series 1993
3.70%, 08/01/96 1,000 1,007
------
21,636
------
NEW MEXICO--0.1%
Albuquerque, New Mexico
Municipal School District
Number 12 General
Obligation Bonds
3.60%, 08/01/96 1,700 1,705
New Mexico State Capital
Projects General
Obligation Bonds
3.75%, 08/01/96 2,000 2,000
------
3,705
------
OHIO--0.1%
Columbus, Ohio Limited Tax
General Obligation Bonds
Series 1993A
3.40%, 07/01/96 4,945 4,951
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
General Obligation Bonds
Series 1995B-1
3.70%, 08/01/96 6,400 6,474
------
TENNESSEE--0.0%
Tennessee State General
Obligation Bonds Series
1995A
4.25%, 03/01/96 1,000 1,001
------
TEXAS--0.3%
Amarillo, Texas Independent
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.72%, 08/01/96 1,000 1,027
Dallas County, Texas
Hospital District
Refunding General
Obligation Bonds
4.05%, 02/15/96 1,500 1,502
</TABLE>
F-19
<PAGE> 152
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Dallas, Texas Equipment
Acquisition Contractual
Obligation General
Obligation Bonds
3.73%, 02/15/96 $ 3,405 $ 3,407
Dallas, Texas Limited
General Obligation Bonds
Series 1995
3.75%, 02/15/96 2,750 2,757
Houston, Texas General
Obligation Bonds Series C
3.73%, 04/01/96 1,430 1,436
Tarrant County, Texas
Limited General Obligation
Bonds
3.68%, 07/15/96 1,000 1,029
------
11,158
------
VIRGINIA--0.1%
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989A/
(Escrowed to Maturity with
Government Securities)
3.50%, 06/01/96 1,000 1,028
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989B/
(Escrowed to Maturity with
Government Securities)
3.75%, 11/01/96 1,320 1,359
------
2,387
------
WASHINGTON--0.8%
Washington State
General Obligation Bonds
Series 1986D/
(Escrowed to Maturity with
Government Securities)
3.85%, 09/01/96 13,200 13,554
Washington State
General Obligation Bonds
Series 1990A
3.60%, 02/01/96 2,000 2,004
Washington State
General Obligation Bonds
Series R-1992-C
3.70%, 09/01/96 1,850 1,863
Washington State
Motor Vehicles Fuel Tax
Series 1995B
3.68%, 06/01/96 1,495 1,503
Washington State
Motor Vehicles Fuel Tax
Unlimited General
Obligation Bonds
Series 1986E/
(Escrowed to Maturity with
Government Securities)
3.65%, 09/01/96 1,000 1,028
Washington State
Unlimited General
Obligation Bonds Series
R-1994-A
3.60%, 08/01/96 4,000 4,002
Washington State
Unlimited General
Obligation Bonds Series
R-1996-B
3.62%, 04/01/96 4,005 4,008
-------
27,962
-------
WISCONSIN--0.2%
Milwaukee, Wisconsin
Metropolitan Sewer
District Unlimited Tax
General Obligation Bonds
Series 1987A
3.70%, 09/01/96 1,000 1,011
Milwaukee, Wisconsin
Public Improvement
Unlimited General
Obligation Bonds Series
1995CA
3.28%, 06/15/96 1,000 1,004
Wisconsin State
General Obligation Bonds
Series 1995A
3.65%, 05/01/96 2,410 2,432
Wisconsin State
Unlimited General
Obligation Bonds Series
1992
3.70%, 05/01/96 3,000 3,012
-------
7,459
-------
TOTAL GENERAL OBLIGATIONS
(Cost $161,217) 161,217
-------
MANDATORY PUT BONDS--3.1%(b)
CALIFORNIA--0.5%
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 5,000 5,000
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1995E-5/ (SLMA LOC)
4.25%, 06/01/96 11,700 11,700
-------
16,700
-------
FLORIDA--0.1%
Orange County, Florida
Industrial Development
Authority Revenue Bonds
(General Accident
Insurance Co.
of America Project)
4.28%, 06/01/96 3,500 3,500
-------
</TABLE>
F-20
<PAGE> 153
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.6%
Chicago, Illinois
General Obligation Tender
Notes
3.65%, 05/01/96 $22,600 $22,600
------
INDIANA--0.2%
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994C
4.00%, 07/01/96 3,500 3,500
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994D
3.90%, 07/01/96 4,700 4,700
------
8,200
------
KENTUCKY--0.1%
Calvert City, Kentucky
Industrial Development
Revenue Refunding Bonds
(SKW Alloys, Inc. Lease
Rent) Series 87/
(Bayerische Vereinsbank
LOC)
4.00%, 04/01/96 2,220 2,220
------
OREGON--0.3%
Klamath Falls, Oregon
Electric Revenue Bonds
(Salt Caves Hydro
Electric) Series 1986E/
(Escrowed to Maturity with
Government Securities)
4.40%, 05/01/96 10,000 10,000
------
TEXAS--0.8%
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 14,000 14,000
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1993B-2/ (SLMA LOC)
4.10%, 06/01/96 6,500 6,500
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1995B/ (SLMA LOC)
3.90%, 07/01/96 10,000 10,000
------
30,500
------
VIRGINIA--0.3%
Harrisonburg, Virginia
Redevelopment and Housing
Authority
Multi Family Housing
Revenue Bonds
(Rolling Brook
Village Apts.)
Series 1985A/
(Guardian Savings &
Loan Assoc. LOC)
5.10%, 02/01/96 10,000 10,000
-------
WASHINGTON--0.2%
Washington State Housing
Finance Committee
Adjustable Single Family
Mandatory Put Bonds Series
1995-1A-S
4.10%, 06/01/96 5,785 5,785
-------
TOTAL MANDATORY PUT BONDS (Cost
$109,505) 109,505
-------
OPTIONAL PUT BONDS--2.3%(b)
IDAHO--0.3%
Custer County, Idaho
Pollution Control
Revenue Bonds
(Amoco Project)
Series 1983
3.80%, 04/01/96 11,500 11,500
-------
MISSOURI--1.7%
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985A/ (Swiss Bank
LOC)
4.00%, 06/01/96 31,000 31,000
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985B/
(Union Bank of
Switzerland LOC)
4.00%, 06/01/96 28,500 28,500
-------
59,500
-------
NEW HAMPSHIRE--0.1%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (Dartmouth
College) Series 1985A-G
4.10%, 06/01/96 3,000 3,000
-------
</TABLE>
F-21
<PAGE> 154
SchwabFunds(R) 22
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TEXAS--0.1%
Yoakum County, Texas
Industrial Development
Authority Pollution
Control Revenue Bonds
(Amoco Project)
3.75%, 05/01/96 $ 5,265 $ 5,265
------
WYOMING--0.1%
Carbon County, Wyoming
Pollution Control Revenue
Bonds (Amoco Project)
Series 1985
3.75%, 05/01/96 4,800 4,800
------
TOTAL OPTIONAL PUT BONDS (Cost
$84,065) 84,065
------
REVENUE ANTICIPATION NOTES--0.6%(b)
ILLINOIS--0.4%
Illinois State Revenue
Anticipation Notes Series
1995-April, 1996
3.70%, 04/12/96 15,000 15,033
------
OHIO--0.1%
Cleveland, Ohio City
School District Special
Obligation Revenue
Anticipation Notes/ (AMBAC
Insurance)
3.60%, 06/01/96 3,000 3,007
------
WISCONSIN--0.1%
Milwaukee, Wisconsin
Revenue Anticipation
Notes Series A
4.20%, 02/22/96 5,000 5,009
------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $23,049) 23,049
------
REVENUE BONDS--4.0%(b)
ALASKA--0.3%
Anchorage, Alaska Electric
Utilities Revenue Bonds
(Secondary Lien) Series
1986A/ (MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.70%, 06/01/96 8,770 9,083
------
ARIZONA--0.5%
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series A/
(AMBAC Insurance)
3.80%, 07/01/96 12,910 12,953
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series B/
(AMBAC Insurance)
3.80%, 07/01/96 2,470 2,478
Arizona State University
Revenue Bonds Series 1988/
(AMBAC Insurance &
Escrowed to Maturity with
Government Securities)
3.80%, 07/01/96 1,795 1,860
------
17,291
------
CALIFORNIA--0.2%
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series A/(Escrowed
to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,039
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project)/ (Escrowed to
Maturity with Government
Securities)
3.80%, 07/01/96 5,015 5,262
------
6,301
------
FLORIDA--0.1%
Florida State Municipal
Power Agency Revenue
Refunding Bonds (St. Lucie
Project)/ (Escrowed to
Maturity with Government
Securities)
3.65%, 10/01/96 1,000 1,044
Jacksonville, Florida
Electric Authority Revenue
Bonds Series 1988-3A/
(Escrowed to Maturity with
Government Securities)
3.73%, 10/01/96 2,030 2,118
------
3,162
------
HAWAII--0.1%
Hawaii State Department
of Budget and Finance
Special Purpose Mortgage
Revenue Bonds (Kapiolani
Medical Center for
Women and Children)/
(Escrowed to Maturity with
Government Securities)
3.73%, 07/01/96 3,900 4,051
------
</TABLE>
F-22
<PAGE> 155
SchwabFunds(R) 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.2%
Chicago, Illinois
Waterworks Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.65%, 11/01/96 $1,000 $ 1,037
Illinois State Sales
Tax Revenue Bonds
Series 1986B/
(Escrowed to Maturity with
Government Securities)
4.00%, 06/15/96 5,500 5,698
Illinois State Toll
Highway Authority
Priority Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.00%, 01/01/96 1,000 1,020
------
7,755
------
INDIANA--0.1%
Purdue University,
Indiana University Student
Fee Revenue Bonds Series
1993J
3.65%, 07/01/96 4,800 4,812
------
KENTUCKY--0.3%
Kentucky State Turnpike
Authority Economic
Development Road Revenue
Bonds Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,040
3.70%, 07/01/96 1,350 1,402
3.80%, 07/01/96 8,600 8,923
------
11,365
------
MARYLAND--0.1%
Maryland Department
of Transportation
Consolidated
Transportation Revenue
Refunding Bonds Series
1991
3.80%, 09/01/96 1,200 1,215
Washington, Maryland
Suburban Sanitation
District (Maryland Sewer
Disposal) Revenue Bonds
3.65%, 06/01/96 600 609
------
1,824
------
MINNESOTA--0.1%
Southern Minnesota
Municipal Power Agency
Power Supply System
Revenue Bonds/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.44%, 01/01/96 1,000 1,020
University of Minnesota
Refunding Revenue Bonds
Series A/
(Escrowed to Maturity with
Government Securities)
3.50%, 02/01/96 3,925 4,017
-----
5,037
-----
NEW MEXICO--0.2%
New Mexico State
Severence Tax Revenue
Bonds Series 1995B
3.80%, 07/01/96 3,110 3,136
New Mexico State
Severence Tax Revenue
Refunding Bonds Series
1992B (d)
3.50%, 07/01/96 1,000 1,008
Santa Fe, New Mexico
Single Family Mortgage
Revenue Bonds (FNMA/GNMA
Mortgage Backed Securities
Project) Series 1995B/
(FGIC Insurance)
4.00%, 11/15/96 3,000 3,000
-----
7,144
-----
NEW YORK--0.2%
Metropolitan Transportation
Authority, New York
Revenue Bonds Series
1986F/(Escrowed
to Maturity with
Government Securities)
3.70%, 07/01/96 8,445 8,799
-----
NORTH DAKOTA--0.0%
Fargo, North Dakota
Sales Tax Revenue
Refunding Bonds/ (AMBAC
Insurance)
3.85%, 07/01/96 710 714
-----
PENNSYLVANIA--0.2%
Pennsylvania State Turnpike
Commission Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.67%, 12/01/96 6,865 7,254
-----
RHODE ISLAND--0.0%
Rhode Island Depositors
Economic Protection Corp.
Special Obligation Revenue
Bonds Series A/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.90%, 08/01/96 1,400 1,454
-----
</TABLE>
F-23
<PAGE> 156
SchwabFunds(R) 24
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.1%
South Carolina State
Public Service Authority
Expansion Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.80%, 07/01/96 $ 2,695 $ 2,829
------
TEXAS--1.2%
Harris County, Texas
Hospital District Mortgage
Revenue Bonds/ (Escrowed
to Maturity with
Government Securities)
3.52%, 04/01/96 23,000 23,734
Houston, Texas
Water & Sewer System
Revenue Exchange Prior
Lien Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 12/01/96 300 315
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
4.25%, 02/01/96 2,150 2,190
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1985B/
(Escrowed to Maturity with
Government Securities)
3.70%, 02/01/96 10,000 10,198
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1991A
4.25%, 02/01/96 3,000 3,004
Trinity River Authority,
Texas Regional
Wastewater System
Revenue Refunding Bonds
Series A/ (AMBAC
Insurance)
3.80%, 08/01/96 1,500 1,504
University of Texas
Constitutional
Appropriation Revenue
Bonds Series 1995(d)
3.50%, 08/15/96 1,115 1,118
------
42,063
------
VIRGINIA--0.0%
Henrico County, Virginia
Water & Sewer Revenue
Refunding Bonds
Series 1986/
(Escrowed to Maturity with
Government Securities)
3.70%, 05/01/96 1,055 1,090
------
WASHINGTON--0.0%
Seattle, Washington
Municipal Metropolitan
Seattle Sewer Revenue
Bonds Series 1988R2/
(Escrowed to Maturity with
Government Securities)
3.70%, 01/01/96 750 765
-------
WISCONSIN--0.1%
Wisconsin State
Clean Water Revenue Bonds
Series 1991-1
3.70%, 06/01/96 1,690 1,704
-------
TOTAL REVENUE BONDS (Cost $144,497)
144,497
-------
TAX ANTICIPATION NOTES--0.8%(b)
NEW YORK--0.2%
New York City, New York
Tax Anticipation Notes
Series 1995-1996A
3.60%, 02/15/96 4,500 4,505
South Huntington, New York
Unified School District
Tax Anticipation Notes
Series 1995-1996
3.64%, 06/28/96 3,850 3,861
-------
8,366
-------
OREGON--0.4%
Lane County, Oregon Tax
Anticipation Notes Series
1995-1996
3.88%, 06/28/96 3,500 3,510
Multnomah County, Oregon
School District Number 1J
Portland Tax Anticipation
Notes
3.65%, 05/30/96 10,500 10,546
-------
14,056
-------
SOUTH CAROLINA--0.2%
Charleston County, South
Carolina School District
Tax Anticipation Notes
Series 1995-1996
3.75%, 04/15/96 8,300 8,317
-------
TOTAL TAX ANTICIPATION NOTES (Cost
$30,739) 30,739
-------
TAX AND REVENUE ANTICIPATION NOTES--6.0%(b)
CALIFORNIA--3.6%
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes Series
1995A/ (MBIA Insurance)
3.75%, 07/03/96 56,500 56,774
</TABLE>
F-24
<PAGE> 157
SchwabFunds(R) 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Fullerton, California
Joint Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.80%, 11/14/96 $ 3,725 $ 3,747
Kern County, California
High School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.05%, 09/19/96 20,000 20,096
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.83%, 07/01/96 1,500 1,505
3.68%, 07/01/96 1,200 1,204
Pleasanton, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.00%, 07/05/96 4,030 4,045
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-96
3.89%, 07/25/96 10,000 10,033
San Joaquin County,
California Tax and Revenue
Anticipation Notes Series
1995-1996
3.97%, 10/15/96 30,000 30,121
-------
127,525
-------
IOWA--0.7%
Iowa School Corp.
Warrant Certificates
Iowa School Cash
Anticipation Program
Series 1995A/(Capital
Guaranty Insurance)
3.85%, 06/28/96 25,000 25,106
-------
TEXAS--1.4%
Texas State Tax and Revenue
Anticipation Notes Series
1995-1996A
4.05%, 08/30/96 24,000 24,107
3.95%, 08/30/96 8,190 8,232
3.94%, 08/30/96 1,000 1,005
3.90%, 08/30/96 3,000 3,016
3.73%, 08/30/96 13,000 13,080
-------
49,440
-------
WISCONSIN--0.3%
Kenosha, Wisconsin
Tax and Revenue
Anticipation Notes
3.78%, 06/28/96 4,500 4,510
Wisconsin State Operating
Tax and Revenue
Anticipation Notes
3.50%, 06/17/96 5,000 5,021
-------
9,531
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $211,602) 211,602
-------
TAX-EXEMPT COMMERCIAL PAPER--12.4%(b)
ARIZONA--1.5%
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985B
3.80%, 02/12/96 6,450 6,450
3.85%, 02/26/96 5,000 5,000
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985C
3.85%, 02/08/96 6,250 6,250
3.50%, 02/08/96 5,500 5,500
3.80%, 02/12/96 3,100 3,100
3.75%, 02/14/96 6,450 6,450
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985G
3.85%, 02/26/96 4,000 4,000
Salt River, Arizona
Agricultural Improvement
Program/(Multiple Credit
Enhancements)
3.75%, 01/12/96 15,200 15,200
-------
51,950
-------
COLORADO--1.1%
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990B/ (Sumitomo
Bank LOC)
4.05%, 02/15/96 7,520 7,520
</TABLE>
F-25
<PAGE> 158
SchwabFunds(R) 26
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990C/ (Sumitomo
Bank LOC)
4.00%, 02/08/96 $15,000 $15,000
Platte River, Colorado
Power Authority
Adjustable Tender
Electric Secondary
Lien Bonds Series S-1/
(Morgan Guaranty
Trust LOC)
3.75%, 02/07/96 1,800 1,800
3.75%, 02/08/96 15,000 15,000
------
39,320
------
GEORGIA--1.5%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) 1st Series 1989/
(Credit Suisse LOC)
3.85%, 02/08/96 4,300 4,300
3.80%, 02/08/96 2,700 2,700
3.45%, 02/08/96 1,400 1,400
3.75%, 02/15/96 7,500 7,500
3.75%, 02/26/96 2,000 2,000
3.75%, 02/27/96 11,500 11,500
3.70%, 02/27/96 22,700 22,700
------
52,100
------
KANSAS--0.4%
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987A/
(Toronto-Dominion Bank LOC)
3.75%, 02/15/96 12,150 12,150
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987B/
(Deutsche Bank LOC)
3.80%, 02/07/96 2,200 2,200
------
14,350
------
KENTUCKY--0.1%
Pendleton County, Kentucky
Multiple County Lease
Revenue Bonds (Kentucky
Association of Counties
Lease Program) Series
1989/ (Commonwealth Bank
of Australia LOC)
3.70%, 02/08/96 2,300 2,300
------
LOUISIANA--2.0%
Louisiana State Adjustable
Tender General Obligation
Refunding Bonds Series
1991A/(Credit Local de
France & Fuji Bank LOC)
3.85%, 02/08/96 4,275 4,275
3.80%, 02/13/96 2,500 2,500
3.75%, 02/14/96 4,745 4,745
3.80%, 02/26/96 11,000 11,000
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988B
3.65%, 02/09/96 48,900 48,900
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988C
3.65%, 02/09/96 1,000 1,000
------
72,420
------
MASSACHUSETTS--0.3%
Massachusetts Water
Resource Authority
Commercial Paper Series
1995/(Morgan Guaranty
Trust LOC)
3.75%, 02/22/96 9,400 9,400
------
MICHIGAN--0.9%
Michigan State Building
Authority Commercial Paper
Notes Series 1/ (Canadian
Imperial Bank of Commerce
LOC)
4.10%, 01/16/96 33,600 33,600
------
MINNESOTA--0.2%
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1988E/
(Credit Suisse SBPA)
3.70%, 02/14/96 3,100 3,100
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992A
3.75%, 02/15/96 3,000 3,000
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992C
3.45%, 03/07/96 1,550 1,550
------
7,650
------
</TABLE>
F-26
<PAGE> 159
SchwabFunds(R) 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW YORK--0.1%
New York City, New York
Municipal Water Finance
Authority Tax-Exempt
Commercial Paper/ (Credit
Suisse LOC)
3.75%, 02/08/96 $ 5,000 $ 5,000
------
NORTH CAROLINA--1.7%
North Carolina Eastern
Municipal Power Agency
Power System Revenue Bonds
Series 1988B/ (Union Bank
of Switzerland & Morgan
Guaranty Trust LOC)
3.70%, 02/07/96 20,500 20,500
3.75%, 02/26/96 5,400 5,400
North Carolina Eastern
Municipal Power Agency
Tax-Exempt Commercial
Paper/(Industrial Bank of
Japan LOC)
3.80%, 02/07/96 24,321 24,321
3.60%, 02/08/96 9,824 9,824
3.55%, 02/08/96 2,500 2,500
------
62,545
------
TEXAS--2.6%
Lower Colorado River
Authority Tax-Exempt
Commercial Paper Series
B/(Morgan Guaranty Trust
Revolving Credit Agreement
3.80%, 02/14/96 15,800 15,800
Texas Municipal Power
Agency Commercial
Paper/(Bank of America,
Canadian Imperial Bank of
Commerce & Morgan Guaranty
Trust Revolving Credit
Agreement)
3.80%, 01/11/96 49,025 49,025
Texas State Tax-Exempt
Commercial Paper Series
1995
3.35%, 08/12/96 30,000 30,000
----------
94,825
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $445,460) 445,460
----------
TOTAL INVESTMENTS--100.0%
(Cost $3,586,104) $3,586,104
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-27
<PAGE> 160
SchwabFunds(R) 28
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--52.2%(a)
ABAG Finance Authority for
Nonprofit Organizations
Certificates of
Participation
(Lucile Salter Packard
Project)/(AMBAC Insurance
& Industrial
Bank of Japan LOC)
5.00%, 01/07/96 $ 4,000 $ 4,000
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Aitchison
Family Project)
Series 1993A/
(Wells Fargo Bank LOC)
5.45%, 01/07/96 2,920 2,920
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Scientific
Technology Project) Series
1994A/(Banque Nationale de
Paris LOC)
5.45%, 01/07/96 3,000 3,000
Anaheim, California
Certificates of
Participation (Anaheim
Memorial Hospital Assoc.
Project)/ (AMBAC Insurance
& Industrial Bank of
Japan SBPA)
5.30%, 01/07/96 26,820 26,820
Anaheim, California
Certificates of
Participation (Police
Facility Financing
Project)/(AMBAC Insurance
& Industrial
Bank of Japan SBPA)
5.25%, 01/07/96 1,550 1,550
Anaheim, California Housing
Authority Multi Family
Housing Revenue Bonds
(Heritage Village
Apartments Project) Series
1992A/(Multiple Credit
Enhancements)
4.70%, 01/07/96 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)
5.05%, 01/07/96 12,500 12,500
California Educational
Facilities Authority
Revenue Bonds
(California Institute of
Technology) Series 1994
4.60%, 01/07/96 16,300 16,300
California Health
Facilities Financing
Authority
Revenue Bonds
(Adventist Health System--
Sutter Health)
Series 1991A/
(Toronto-Dominion Bank LOC)
4.85%, 01/07/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Childrens Hospital
Project) Series 1991/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 9,900 9,900
California Health
Facilities Financing
Authority Revenue Bonds
(Huntington Memorial
Hospital) Series 1985/
(Morgan Guaranty
Trust LOC)
4.90%, 01/07/96 9,600 9,600
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993A
4.90%, 01/07/96 8,200 8,200
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993B
4.90%, 01/07/96 1,600 1,600
California Health
Facilities Financing
Authority Revenue Bonds
(Saint Joseph's Hospital)
Series 1985B
5.90%, 01/01/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1985B/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 15,120 15,120
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991A/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 1,100 1,100
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991B/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 13,900 13,900
</TABLE>
F-28
<PAGE> 161
SchwabFunds(R) 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Health
Facilities Financing
Authority Revenue Bonds
(St. Francis Hospital)
Series 1995F/
(MBIA Insurance &
Rabobank Nederland N.V.
SBPA)
4.85%, 01/07/96 $30,000 $30,000
California Health
Facilities Financing
Authority Revenue Bonds
Pooled Loan Program
Series 1985B/
(FGIC Insurance &
FGIC SPA)
4.95%, 01/07/96 2,000 2,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1988A/(National
Westminster Bank LOC)
5.95%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1989A/(National
Westminster Bank LOC)
5.95%, 01/01/96 200 200
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Reynolds Metals Co.
Project) Series 1985/
(National Westminster Bank
LOC)
5.10%, 01/07/96 1,300 1,300
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southdown, Inc. Project)
Series B/(Societe
Generale LOC)
4.20%, 01/08/96 3,900 3,900
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986A
5.40%, 01/01/96 6,700 6,700
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986D
5.40%, 01/01/96 1,300 1,300
California Pollution
Control Financing
Authority Resource
Recovery Revenue Bonds
(Sanger Project) Series
1990A/ (Credit Suisse LOC)
5.05%, 01/07/96 9,200 9,200
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Athens Disposal Company
Project) Series 1995A/
(Wells Fargo Bank LOC)
5.20%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Burrtec Waste Industries
Project) Series 1995A/
(Union Bank LOC)
5.25%, 01/07/96 4,000 4,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990A/ (Swiss Bank
LOC)
5.05%, 01/07/96 12,900 12,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990B/ (Swiss Bank
LOC)
5.05%, 01/07/96 8,900 8,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990C/ (Swiss Bank
LOC)
5.05%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Contra Costa Services)
Series 1995A/ (Bank of
America LOC)
5.15%, 01/07/96 4,500 4,500
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Shell Oil Co. Martinez
Project) Series 1994A
6.05%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Taormina Industries
Project) Series
1994B/(Sanwa
Bank LOC)
5.40%, 01/07/96 11,000 11,000
</TABLE>
F-29
<PAGE> 162
SchwabFunds(R) 30
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Statewide
Community Development
Authority Apartment
Development Revenue Bonds
Series 1995-A3/ (FNMA LOC)
4.90%, 01/07/96 $10,000 $10,000
California Statewide
Community Development
Authority Hospital Revenue
Bonds Certificates of
Participation (Sutter
Health Obligation Group)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.90%, 01/01/96 1,100 1,100
California Statewide
Community Development
Authority Revenue
Bonds Certificates of
Participation (Kaiser
Foundation Hospitals)
4.90%, 01/07/96 10,000 10,000
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (13th I
Associates Project)/
(Union Bank LOC)
5.30%, 01/07/96 5,540 5,540
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (ARM Inc. Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 675 675
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Aerostar
Properties Project)/
(Union Bank LOC)
5.40%, 01/07/96 5,095 5,095
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Agricultural Products
Inc. Project)/ (Union Bank
LOC)
5.55%, 01/07/96 1,440 1,440
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Development Industries)
Series 1994A/ (Bank of
Tokyo LOC)
5.35%, 01/07/96 1,640 1,640
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Industrial Dynamics Co.
Project)/ (Union Bank LOC)
5.55%, 01/07/96 5,190 5,190
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Lorber Industries
of California Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,050 1,050
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific
Handy Cutter
Products Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,210 1,210
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific Scientific
Project) Series 1989/
(Bank of California LOC)
5.25%, 01/07/96 5,125 5,125
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Packaging
Innovation Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 2,440 2,440
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (The Diamond
Foods Project)
Series 1991/
(Union Bank LOC)
5.55%, 01/07/96 1,465 1,465
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Z-Nix Co., Inc.
Project)/(Union Bank LOC)
5.55%, 01/07/96 920 920
California Statewide
Community Development
Corp. Revenue
Bonds (ORA
Real Estate Project)
Series 1995D/
(Union Bank LOC)
5.35%, 01/07/96 3,000 3,000
</TABLE>
F-30
<PAGE> 163
SchwabFunds(R) 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Carlsbad, California Multi
Family Housing Revenue
Refunding Bonds
Certificates of
Participation (La Costa
Apartment Project) Series
1993A/ (Bank of America
LOC)
4.80%, 01/07/96 $ 4,920 $ 4,920
Concord, California Multi
Family Housing Mortgage
Revenue Bonds (Bel Air
Apartments Project)
Series 1986A/
(Bank of America LOC)
5.00%, 01/07/96 3,000 3,000
Contra Costa, California
Multi Family Housing
Mortgage Revenue Bonds (El
Cerrito Project) Series A/
(Bank of America LOC)
5.00%, 01/07/96 980 980
Contra Costa, California
Transportation Authority
Sales Tax Revenue Bonds
Series 1993A/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 30,300 30,300
Duarte, California
Redevelopment Agency
Certificates of
Participation (Johnson
Duarte Partners Project)
Series 1984B/ (Bank of
America LOC)
4.90%, 01/07/96 1,600 1,600
Duarte, California
Redevelopment Agency
Certificates of
Participation (Piken
Duarte Partners Project)
Series 1984A/ (Bank of
America LOC)
4.90%, 01/07/96 4,250 4,250
Emeryville, California
Redevelopment Agency Multi
Family Housing Revenue
Bonds (Emery Bay
Apartments II Project)
Series 1991A/
(Bank of America LOC)
4.90%, 01/07/96 6,000 6,000
Encinitas, California Multi
Family Housing Revenue
Refunding Bonds
(Torrey Pines Project)
Series A/
(Bank of America LOC)
4.80%, 01/07/96 8,100 8,100
Foothill Eastern
Transportation Corridor
Agency, California Toll
Road Revenue Bonds
Series 1995D/
(Industrial Bank of
Japan LOC)
5.00%, 01/07/96 1,000 1,000
Fremont, California Multi
Family Housing Revenue
Refunding Certificates of
Participation (Amber Court
Apartments Project)
Series 1990A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 10,380 10,380
Fresno, California Multi
Family Mortgage Revenue
Bonds (Oak Cornelia
Apartments Project) Series
1985A/(First Interstate
Bank of California LOC)
5.10%, 01/07/96 25,265 25,265
Glenn, California
Industrial Development
Authority Revenue Bonds
(Land 'O Lakes Project)/
(Sanwa Bank LOC)
5.60%, 01/07/96 1,900 1,900
Grand Terrace, California
Community Redevelopment
Agency Multi Family
Housing Revenue Bonds
(Mount Vernon Villas
Project) Series 1985A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 1,865 1,865
Irvine Ranch, California
Water District
Consolidated District
Numbers 102,103,105,106
Revenue Refunding Bonds/
(Commerzbank AG LOC)
5.90%, 01/01/96 4,300 4,300
Irvine Ranch, California
Water District
Consolidated District
Numbers 105,250,290
Revenue Refunding Bonds
Series 1991/(National
Westminster Bank LOC)
5.90%, 01/01/96 1,200 1,200
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 100 100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-3/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 1,400 1,400
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985B-1/ (Sumitomo Bank
LOC)
6.10%, 01/01/96 100 100
</TABLE>
F-31
<PAGE> 164
SchwabFunds(R) 32
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding
Bonds Series 1993A/
(Bank of America LOC)
6.00%, 01/01/96 $1,200 $1,200
Irvine, California
Improvement Bond Act 1915
Revenue Bonds (Special
Assessment District
No. 94-15)/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/01/96 500 500
Kern County, California
Certificates of
Participation (Kern Public
Facilities Project)
Series A/
(Sanwa Bank LOC)
4.85%, 01/07/96 200 200
Lancaster, California
Redevelopment Agency Multi
Family Revenue Bonds
(Woodcreek Garden
Apartments Project) Series
1985J/ (Bank of Tokyo LOC)
5.10%, 01/07/96 8,400 8,400
Livermore, California Multi
Family Housing Revenue
Refunding Bonds (Arbors
Apartment Project)
Series 1991A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 9,255 9,255
Livermore, California Multi
Family Housing Revenue
Refunding Bonds
(Diablo Vista
Apartments Project)
Series 1990A/
(Union Bank LOC)
5.30%, 01/07/96 6,950 6,950
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985A/
(Bank of America LOC)
4.85%, 01/07/96 3,800 3,800
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985B/
(Bank of America LOC)
4.85%, 01/07/96 3,500 3,500
Los Angeles County,
California Metropolitan
Transportation Authority
General Revenue Bonds
(Union Station Project)
Series 1985A/
(FSA Insurance &
Societe Generale SBPA)
4.75%, 01/07/96 33,100 33,100
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Casden Community
Complex) Series 1991C/
(FHLB LOC)
4.80%, 01/07/96 3,200 3,200
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Valencia Village
Project) Series 1984C/
(Industrial Bank of Japan
LOC)
5.35%, 01/07/96 900 900
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series 1992A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 9,700 9,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Baldwin
Hills Public Parking
Project) Series B/
(Wells Fargo Bank LOC)
4.85%, 01/07/96 10,700 10,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Broadway
Springs Center Project)
Series 1987/
(Bank of America LOC)
4.90%, 01/07/96 10,900 10,900
Los Angeles, California
Multi Family Housing
Revenue Bonds (Poinsettia
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.35%, 01/07/96 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)
5.45%, 01/07/96 7,200 7,200
</TABLE>
F-32
<PAGE> 165
SchwabFunds(R) 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Modesto, California
High School District and
Modesto City School
District Certificates of
Participation (Capital
Facilities Project)
Series 1991/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 $3,700 $3,700
Monterey County, California
Financing Authority
Revenue Bonds (Reclamation
& Distribution Projects)/
(Dai-Ichi Kangyo
Bank LOC)
5.30%, 01/07/96 5,000 5,000
Moorpark, California Multi
Family Housing Revenue
Refunding Bonds (Le Club
Apartments Project) Series
A/(Citibank LOC)
4.80%, 01/07/96 6,000 6,000
Oakland, California
Economic Development
Revenue Refunding Bonds
(Leamington Hotel Project)
Series 1994A/ (First
Interstate Bank of
California LOC)
4.90%, 01/07/96 4,250 4,250
Oakland, California Health
Facilities Revenue Bonds
Certificates of
Participation (Children's
Hospital Project) Series
1988A/ (Banque Nationale
de Paris LOC)
4.95%, 01/07/96 3,300 3,300
Ontario, California
Redevelopment Agency Multi
Family Housing Revenue
Refunding Bonds
Series 1991A/
(FHLB LOC)
4.80%, 01/07/96 4,492 4,492
Orange County, California
Apartment Development
Revenue Refunding Bonds
(Jess L. Frost Project)
Series 1985B/
(Wells Fargo Bank LOC)
5.40%, 01/07/96 8,200 8,200
Orange County, California
Certificates of
Participation (Florence
Crittenton Services
Project) Series 1990/
(Swiss Bank LOC)
5.00%, 01/07/96 6,900 6,900
Orange County, California
Municipal Water District
Water Facilities Corp.
Certificates of
Participation/
(Barclays Bank &
National Westminster
Bank LOC)
5.20%, 01/07/96 31,225 31,225
Orange County, California
Various Sanitation
Districts Certificates of
Participation (Capital
Improvement Programs)
Series 1990-92C/
(FGIC Insurance &
FGIC SPA)
6.00%, 01/01/96 7,800 7,800
Orange County, California
Various Sanitation
Districts Certificates of
Participation Series
1990-92A/
(National Westminster
Bank LOC)
5.90%, 01/01/96 12,500 12,500
Orange County, California
Water District
Certificates of
Participation Sanitation
Districts #1,2,3/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 11,600 11,600
Panama Buena Vista,
California Unified School
District Certificates of
Participation (1994
Capital Improvement
Financing Project)/(Bank
of California LOC)
5.45%, 01/07/96 4,000 4,000
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985A/
(Sanwa Bank LOC)
4.80%, 01/07/96 8,800 8,800
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985B/
(Sanwa Bank LOC)
5.00%, 01/07/96 100 100
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985C/
(Sanwa Bank LOC)
5.00%, 01/07/96 5,600 5,600
</TABLE>
F-33
<PAGE> 166
SchwabFunds(R) 34
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Riverside County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Briarwood Apartment
Project) Series 1985C/
(FHLB LOC)
5.15%, 01/07/96 $ 4,500 $ 4,500
Riverside County,
California
Industrial Development
Authority Revenue Bonds
(Cryogenic Project) Series
1989B-1/ (Rabobank
Nederland N.V. LOC)
5.05%, 01/07/96 4,100 4,100
Sacramento County,
California Certificates of
Participation
(Administration
Center & Court House
Project)/(Union Bank of
Switzerland LOC)
4.75%, 01/07/96 28,200 28,200
Salinas, California
Apartment Development
Multi Family Housing
Revenue Bonds (Mariner
Villa Project)
Series 1985B/
(Bank of America LOC)
4.80%, 01/07/96 2,725 2,725
San Bernardino County,
California Certificates of
Participation (Glen Helen
Blockbuster Project)
Series 1994C/
(Mitsubishi Bank LOC)
5.50%, 01/07/96 7,255 7,255
San Bernardino County,
California Multi Family
Housing Revenue Bonds
(Western Properties
Project IV) Series 1985/
(Bank of America LOC)
4.55%, 01/07/96 1,100 1,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-1/ (Citibank LOC)
5.30%, 01/07/96 26,500 26,500
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-2/ (Citibank LOC)
5.30%, 01/07/96 3,750 3,750
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series B-2/
(Bank of Nova Scotia LOC)
5.15%, 01/07/96 13,100 13,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue
Bonds (Rincon
Center Apartments)
Series 1985B/
(Citibank LOC)
5.30%, 01/07/96 5,705 5,705
San Francisco, California
Housing Authority Multi
Family Housing Revenue
Bonds (737 Post Project)
Series 1985D/
(Banque Nationale de
Paris LOC)
4.95%, 01/07/96 16,800 16,800
San Jose/Santa Clara,
California Water Financing
Authority Sewer Revenue
Bonds Series B/
(AMBAC Insurance &
Bank of Nova Scotia LOC)
4.75%, 01/07/96 7,600 7,600
San Mateo County,
California Certificates of
Participation (Capital
Projects) Series 1985B/
(Swiss Bank LOC)
4.75%, 01/07/96 3,145 3,145
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985A/(National
Westminster Bank LOC)
4.85%, 01/07/96 7,900 7,900
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985B/(National
Westminster Bank LOC)
4.85%, 01/07/96 8,100 8,100
Santa Clara, California
Electric Revenue Bonds
Series 1985A/(National
Westminster Bank LOC)
4.90%, 01/07/96 13,300 13,300
Santa Clara, California
Electric Revenue Bonds
Series 1985B/(National
Westminster Bank LOC)
4.90%, 01/07/96 12,100 12,100
Santa Clara, California
Electric Revenue Bonds
Series 1985C/(National
Westminster Bank LOC)
4.90%, 01/07/96 8,800 8,800
</TABLE>
F-34
<PAGE> 167
SchwabFunds(R) 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Santa Cruz County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Paloma del Mar Apartments
Project) Series 1992A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 $ 7,700 $ 7,700
Simi Valley, California
Multi Family Housing
Certificates of
Participation
(Lincoln Wood
Ranch Project)/ (Sumitomo
Bank LOC)
5.30%, 01/07/96 5,600 5,600
South San Francisco,
California Multi Family
Revenue Bonds
(Magnolia Plaza Apartments
Project) Series A/
(Wells Fargo Bank LOC)
5.35%, 01/07/96 4,500 4,500
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project) Series 1991/
(AMBAC Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 21,000 21,000
Vallejo, California
Commercial Development
Revenue Bonds
(Vallejo Center
Association Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 900 900
Victor, California
Elementary School District
Certificates of
Participation
(School Construction
Financing
Project)/(National
Westminster Bank LOC)
5.30%, 01/07/96 4,000 4,000
Visalia, California
Public Building Authority
Certificates of
Participation
(Convention Center
Expansion
Project) Series 1991/
(Bank of California LOC)
5.35%, 01/07/96 1,000 1,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $874,397) 874,397
-------
VARIABLE RATE TENDER
OPTION BONDS--0.2%(A)
Southern California Rapid
Transit District,
California Certificates of
Participation Short Mode
Tender Option
Bonds (BT-9)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 4,200 4,200
------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $4,200) 4,200
------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS--5.4%(a)(c)
California State
Department of
Water Resources Revenue
Bonds (Central Valley
Project) Series J3
Tender Option Bond
Partnership (BTP-141)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 5,155 5,155
California State Revenue
Anticipation Warrants
Series 1994C Tender
Option Bond Partnership
(BTP-150)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 10,000 10,000
California State Revenue
Anticipation Warrants
Series C Tender Option
Bond Partnership
(BTP-96)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 18,465 18,465
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Tender Option
Bond Partnership
(BTP-146)/(Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.15%, 01/07/96 23,078 23,078
Los Angeles, California
Department of Water &
Power Electric Plant
Revenue Refunding Bonds
Series 1994 Tender Option
Bond Partnership
(BTP-68)/(Automatic
Data Processing, Inc.
Tender Option)
4.37%, 01/07/96 5,195 5,195
</TABLE>
F-35
<PAGE> 168
SchwabFunds(R) 36
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Metropolitan Water District
of Southern California
Waterworks General
Obligation Revenue
Refunding Bonds Series
1993A1 and
1993A2 Tender Option
Bond Partnership
(BTP-115)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 $10,145 $10,145
San Diego County,
California Regional
Transportation Commission
Sales Tax Tender Option
Bonds Partnership
(BTP-135)/
(FGIC Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 2,000 2,000
Southern California Public
Power Authority Power
Project Class A
Tender Option
Bond Partnership (BTP-90)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 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)
3.00%, 01/07/96 8,710 8,710
------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS
(Cost $91,038) 91,038
------
CERTIFICATES OF PARTICIPATION--2.0%(b)
Desert Sands, California
Unified School District
Certificates of
Participation (Measure O
Project) Series B/
(Escrowed to Maturity with
Government Securities)
2.60%, 03/01/96 10,000 10,257
San Jose, California
Certificates of
Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 12,500 13,080
San Mateo, California
Redevelopment Agency
Certificates of
Participation Revenue
Refunding Bonds (Bridge
and Water
Pumping Station)/
(Escrowed to Maturity with
Government Securities)
3.67%, 08/01/96 9,305 9,721
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $33,058) 33,058
------
REVENUE ANTICIPATION WARRANTS--2.2%(b)
California State Revenue
Anticipation Warrants
Series C/(FGIC Insurance)
4.61%, 04/25/96 35,900 36,099
------
TOTAL REVENUE ANTICIPATION WARRANTS
(Cost $36,099) 36,099
------
REVENUE BONDS--0.3%(b)
Santa Clara Valley Water
District, California
Revenue Refunding Bonds/
(Escrowed to Maturity with
Government Securities)
3.55%, 06/01/96 1,000 1,009
Southern California Public
Power Authority Revenue
Bonds (Southern California
Public Power
Transmission Project)/
(Escrowed to Maturity with
Government Securities)
3.50%, 07/01/96 3,575 3,756
------
TOTAL REVENUE BONDS
(Cost $4,765) 4,765
------
SPECIAL TAX BONDS--0.1%(b)
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 1,039
------
TOTAL SPECIAL TAX BONDS
(Cost $1,039) 1,039
------
</TABLE>
F-36
<PAGE> 169
SchwabFunds(R) 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TAX AND REVENUE
ANTICIPATION
NOTES--17.3%(b)
Berkeley, California
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.95%, 07/17/96 $10,500 $10,543
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes
Series 1995A/
(MBIA Insurance)
3.95%, 07/03/96 2,800 2,811
3.86%, 07/03/96 25,000 25,102
3.85%, 07/03/96 225 226
3.75%, 07/03/96 40,000 40,194
Desert Sands, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 10,000 10,024
East Side Unified High
School District
Santa Clara County
California Tax and Revenue
Anticipation Notes
4.00%, 10/10/96 8,000 8,030
Elk Grove, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/31/96 10,400 10,429
Fremont, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 07/11/96 13,000 13,034
Fresno, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 06/28/96 19,900 19,947
Livermore, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/10/96 4,600 4,612
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.87%, 07/01/96 7,260 7,281
3.82%, 07/01/96 10,000 10,031
3.80%, 07/01/96 1,000 1,003
3.70%, 07/01/96 5,000 5,018
3.68%, 07/01/96 10,000 10,037
Marin County, California
Tax and Revenue
Anticipation Notes
Series 1995-96
3.85%, 07/03/96 37,000 37,161
Mountain View, California
School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 2,000 2,005
Mountain View/Los Altos,
California Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 4,200 4,210
Oxnard, California Unified
High School District
(Ventura County)
Tax and Revenue
Anticipation Notes
Series 1995-96
3.90%, 10/11/96 5,500 5,535
San Diego County,
California Tax and Revenue
Anticipation Notes
3.76%, 09/30/96 2,000 2,011
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.89%, 07/25/96 40,000 40,131
Santa Rosa, California
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 09/27/96 10,000 10,057
Sutter County, California
Office of Education
Tax and Revenue
Anticipation Notes
Series 1995-96
4.05%, 09/14/96 10,000 10,030
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $289,462) 289,462
-------
TAX-EXEMPT COMMERCIAL PAPER--20.3%(b)
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A/
(Swiss Bank LOC)
3.75%, 01/11/96 6,200 6,200
3.75%, 02/07/96 5,000 5,000
3.65%, 02/08/96 3,975 3,975
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988B/
(Sumitomo Bank LOC)
3.65%, 02/08/96 58,700 58,700
3.60%, 03/07/96 17,600 17,600
</TABLE>
F-37
<PAGE> 170
SchwabFunds(R) 38
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988C/
(Credit Suisse LOC)
3.70%, 01/10/96 $ 5,500 $ 5,500
3.75%, 02/07/96 1,000 1,000
3.70%, 02/07/96 6,800 6,800
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988D/
(Bank of Tokyo LOC)
3.95%, 01/10/96 4,350 4,350
3.60%, 02/08/96 3,495 3,495
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988F/
(Banque Nationale de Paris
LOC)
4.25%, 01/09/96 10,000 10,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985A
3.65%, 02/07/96 900 900
3.65%, 02/08/96 12,000 12,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985B
3.65%, 02/07/96 800 800
3.65%, 02/08/96 14,000 14,000
California Pollution
Control Financing
Authority
Solid Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP) Series
1988A/(National
Westminster Bank LOC)
3.55%, 02/08/96 35,000 35,000
East Bay Municipal Utility
District, California
(Wastewater Systems)
Tax-Exempt Commercial
Paper/(National
Westminster Bank LOC)
3.65%, 01/12/96 10,700 10,700
Long Beach, California
Harbor Revenue Commercial
Paper Notes Series
1994A/(Multiple Credit
Enhancements)
3.50%, 02/06/96 20,000 20,000
3.45%, 02/09/96 4,000 4,000
Los Angeles County,
California Department of
Water and Power Electric
Plant Short Term
Revenue Bonds
3.65%, 01/12/96 7,000 7,000
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds
Series A/(Multiple
Credit Enhancements)
3.75%, 01/11/96 6,100 6,100
Los Angeles, California
Wastewater System Tax-
Exempt Commercial Paper
3.65%, 01/12/96 10,000 10,000
Metropolitan Water District
of Southern California
Tax-Exempt Commercial
Paper
3.75%, 02/21/96 10,000 10,000
Orange County, California
Local Transportation
Authority Sales Tax
Revenue Commercial
Paper Notes/
(Industrial Bank of
Japan LOC)
3.75%, 01/11/96 8,000 8,000
3.70%, 01/11/96 3,000 3,000
3.65%, 02/08/96 52,200 52,200
Sacramento, California
Municipal Utility District
Tax-Exempt Commercial
Paper Series I/
(Bank of America &
Morgan Guaranty
Trust LOC)
3.75%, 02/08/96 2,133 2,133
West and Central Basin
Financing Authority
West Basin
Municipal Water District
Tax-Exempt Commercial
Paper Notes/
(Toronto-Dominion Bank
LOC)
3.75%, 01/24/96 7,500 7,500
3.50%, 02/09/96 14,000 14,000
--------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $339,953) 339,953
-------
TOTAL INVESTMENTS--100.0%
(Cost $1,674,011) $1,674,011
=========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-38
<PAGE> 171
SchwabFunds(R) 39
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--59.9%(a)
Albany, New York Industrial
Development Agency
Adjustable Revenue Bonds
(Newkirk Products, Inc.)
Series 1995A/
(Fleet Bank of
New York LOC)
5.15%, 01/04/96 $1,000 $1,000
Babylon, New York Variable
Rate General Obligation Bonds
Series B/(Bank of Nova
Scotia SBPA &
AMBAC Insurance)
4.90%, 01/07/96 2,000 2,000
Cortland County, New York
Industrial Development Agency
Revenue Bonds (General Signal
Corp. Project) Series 1983/
(Wachovia Bank LOC)
4.85%, 01/07/96 1,750 1,750
Erie County, New York Water
Authority Revenue Bonds
Series 1993B/
Industrial Bank of
Japan SBPA &
AMBAC Insurance)
5.10%, 01/07/96 1,400 1,400
Franklin County, New York
Industrial Development Agency
Revenue Bonds
(Kes Chateaugay LP
Project) Series A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 3,000 3,000
Geneva, New York
Industrial Development
Agency Civic Facility
Revenue Bonds
(Colleges of The Seneca)
Series 1993A/
(Sumitomo Bank LOC)
5.10%, 01/07/96 2,500 2,500
Monroe County, New York
Industrial Development Agency
Revenue Bonds (ENBI Corp.
Lease Rent Project)
Series 1988/
(ABN-AMRO Bank LOC)
4.95%, 01/07/96 2,000 2,000
New Rochelle, New York
Industrial Development
Authority Revenue Bonds (Chas
Sadek Import Corp.)/ (Bank of
New York LOC)
5.15%, 01/07/96 5,500 5,500
New York City, New York
General Obligation
Bonds Series 1992B/
(FGIC Insurance)
5.00%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1993
Subseries A-8B/
(Sanwa Bank LOC)
5.95%, 01/01/96 385 385
New York City, New York
General Obligation
Bonds Series 1993
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/01/96 1,000 1,000
New York City, New York
General Obligation
Bonds Series 1994
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/07/96 700 700
New York City, New York
General Obligation
Bonds Series 1994B
Subseries B-4/
(MBIA Insurance &
National Westminster
Bank SBPA)
5.90%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1995B
Subseries B-2/
(Bank Austria AG SBPA &
MBIA Insurance)
5.90%, 01/01/96 1,900 1,900
New York City, New York
Housing Development Corp.
Mortgage Revenue Multi Family
Housing Revenue Bonds
(Columbus Gardens Project)
Series 1993A/ (Citibank LOC)
4.75%, 01/07/96 3,500 3,500
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 9,700 9,700
New York City, New York
Industrial Development Agency
Floating Rate
Revenue Bonds
(White Plains Auto)/
(Societe Generale LOC)
5.15%, 01/07/96 300 300
</TABLE>
F-39
<PAGE> 172
SchwabFunds(R) 40
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994C/
(FGIC Insurance)
5.90%, 01/01/96 $1,200 $1,200
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC SPA &
FGIC Insurance)
5.90%, 01/01/96 2,100 2,100
New York City, New York
Municipal Water Finance
Authority Water and Sewer
System Revenue Bonds
Series 1995A/
(FGIC Insurance)
5.50%, 01/01/96 2,000 2,000
New York City, New York
Various Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 700 700
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 7,000 7,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993A/
(Toronto-Dominion
Bank LOC)
5.00%, 01/07/96 2,000 2,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993B/
(Toronto-Dominion
Bank LOC)
5.05%, 01/07/96 6,000 6,000
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds (Orange &
Rockland Utilities, Inc.
Project) Series 1994A/ (FGIC
Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 9,100 9,100
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds/ (Union Bank of
Switzerland LOC)
5.30%, 01/07/96 1,900 1,900
New York State Energy Research
& Development Authority
Pollution Control Revenue
Bonds (Central Hudson Gas &
Electric Corp. Project)
Series 1985A/
(J. P. Morgan Delaware LOC)
5.00%, 01/07/96 4,300 4,300
New York State Housing Finance
Agency Revenue Bonds (East
84th Street Project)
Series 1995A/
(Fleet Bank of
New York LOC)
5.10%, 01/07/96 5,000 5,000
New York State Housing Finance
Agency Variable Rate Housing
Revenue Bonds (Hospital
Special Surgery Staff)
Series 1985A/
(Sakura Bank LOC)
4.70%, 01/07/96 6,700 6,700
New York State Housing Finance
Agency Variable Rate Multi
Family Housing Revenue Bonds
(Normandie Court II)
Series 1987A/
(Bankers Trust Co. LOC)
4.95%, 01/07/96 2,900 2,900
New York State Housing Finance
Agency Variable
Rate Revenue Bonds
(Mount Sinai School of
Medicine) Series 1984A/
(Sanwa Bank LOC)
4.70%, 01/07/96 5,900 5,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1994B/
(Credit Suisse &
Swiss Bank LOC)
4.95%, 01/07/96 6,900 6,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995F/(Toronto-
Dominion Bank LOC)
5.05%, 01/07/96 1,900 1,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 1,100 1,100
</TABLE>
F-40
<PAGE> 173
SchwabFunds(R) 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
Niagara County, New York
Industrial Development Agency
Revenue Bonds (Allegheny
Ludlum Steel Company)
Series 1984/
(PNC Bank LOC)
5.00%, 01/07/96 $3,500 $3,500
Niagara Falls, New York Bridge
Commission Revenue Bonds
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 3,400 3,400
Port Authority, New York and
New Jersey Special Obligation
Revenue Bonds Series 1993/
(Deutsche Bank LOC)
5.10%, 01/07/96 4,000 4,000
Puerto Rico--Puerto Rico
Government Development
Bank Revenue
Refunding Bonds
Series 1985/
(Credit Suisse LOC)
4.50%, 01/07/96 5,000 5,000
Schenectady, New York
Industrial Development Agency
Industrial Development
Revenue Bonds (Fortitech
Holding Corp. Project)
Series A/
(Fleet Bank of
New York LOC)
5.15%, 01/07/96 1,500 1,500
St. Lawrence County, New York
Industrial Development Agency
Environmental Improvement
Revenue
Bonds (Reynolds Metals
Project) Series 1995/
(Royal Bank of Canada LOC)
5.00%, 01/07/96 4,000 4,000
Triborough Bridge and Tunnel
Authority, New York Special
Obligation Bridge Revenue
Bonds Series 1994/
(FGIC SPA &
FGIC Insurance)
4.90%, 01/07/96 2,700 2,700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1989/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 1,500 1,500
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1991/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 700 700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1994/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.95%, 01/07/96 1,100 1,100
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $130,935) 130,935
-------
VARIABLE RATE TENDER
OPTION BONDS--1.9%(a)
New York City, New York
General Obligation Bonds
(Citi-1I)/(AMBAC Insurance,
Escrowed to Maturity with
Government Securities &
Citibank Tender Option)
5.29%, 01/07/96 4,100 4,100
-------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $4,100) 4,100
-------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--2.5%(a)(c)
New York State Dormitory
Authority, New York
University Insured
Revenue Bonds
(BTP-26)/(Automatic
Data Processing, Inc.
Tender Option &
MBIA Insurance)
4.11%, 01/07/96 5,375 5,375
-------
TOTAL VARIABLE RATE TENDER OPTION BOND
PARTNERSHIPS
(Cost $5,375) 5,375
-------
BOND ANTICIPATION
NOTES--8.1%(b)
Broome County, New York
Bond Anticipation Notes
Series 1995-96
4.33%, 04/19/96 3,812 3,819
3.77%, 04/19/96 3,000 3,010
Dutchess County, New York Bond
Anticipation Notes Series
1995-96
3.75%, 08/02/96 2,825 2,833
Rochester, New York General
Obligation Bond Anticipation
Notes Series 1995I
3.80%, 10/31/96 5,000 5,018
Schenectady, New York General
Obligation Bond Anticipation
Notes Series 1995
4.63%, 02/16/96 3,068 3,070
-------
TOTAL BOND ANTICIPATION NOTES (Cost
$17,750) 17,750
-------
</TABLE>
F-41
<PAGE> 174
SchwabFunds(R) 42
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
GENERAL
OBLIGATIONS--0.8%(b)
Buffalo, New York General
Obligation Revenue Bonds/
(MBIA Insurance)
3.50%, 12/01/96 $1,824 $ 1,832
------
TOTAL GENERAL OBLIGATIONS
(Cost $1,832) 1,832
------
REVENUE BONDS--4.9%(b)
New York State Power Authority
Revenue and General Purpose
Bonds Series 1993C
3.32%, 01/01/97 1,600 1,600
New York State Urban
Development Corp.
Correctional Facilities
Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.80%, 01/01/96 7,000 7,140
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds
Series 1986-1/
(Escrowed to Maturity with
Government Securities)
4.07%, 01/01/96 1,000 1,020
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds Series
I/(Escrowed to Maturity
with Government Securities)
4.45%, 01/01/96 1,000 1,020
------
TOTAL REVENUE BONDS
(Cost $10,780) 10,780
------
TAX ANTICIPATION NOTES--15.3%(b)
East Hampton, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.76%, 06/28/96 5,000 5,004
Half Hollow Hills Huntington-
Babylon, New York Centralized
School District Suffolk
County Tax and Revenue
Anticipation Notes
3.70%, 06/28/96 5,800 5,815
New York City, New York
Tax Anticipation Notes Series
1995-1996A
3.80%, 02/15/96 3,000 3,003
3.70%, 02/15/96 5,000 5,005
South Huntington, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.78%, 06/28/96 5,000 5,010
3.60%, 06/28/96 2,500 2,508
West Islip, New York Unified
Free School District General
Obligation Tax Anticipation
Notes Series 1995
4.00%, 06/27/96 5,000 5,018
3.40%, 06/27/96 2,000 2,013
-------
TOTAL TAX ANTICIPATION NOTES
(Cost $33,376) 33,376
-------
TAX-EXEMPT COMMERCIAL
PAPER--6.6%(b)
New York City, New York
General Obligation Bonds
Fiscal 1994 Series H-4/
(AMBAC Insurance &
Kredietbank, N.V. SBPA)
3.75%, 02/15/96 1,500 1,500
New York City, New York
Municipal Water
Finance Authority/
(Credit Suisse LOC)
3.75%, 02/08/96 7,000 7,000
New York State Dormitory
Authority Revenue Bonds
(Memorial Sloan Kettering
Project) Series 1989C/
(Chemical Bank LOC)
3.75%, 02/08/96 6,000 6,000
-------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $14,500) 14,500
-------
TOTAL INVESTMENTS--100.0%
(Cost $218,648) $218,648
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-42
<PAGE> 175
SchwabFunds(R) 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 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) Certain securities purchased by the Funds 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 Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund. Any resale by the Funds must be in an exempt transaction,
normally to a qualified institutional buyer. At December 31, 1995, the
aggregate value of private placement securities held by the Schwab
Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund were $139,017,000,
$91,038,000 and $5,375,000, respectively, which represented 3.90%,
5.40% and 2.44%, respectively, of the net assets of each Fund. All of
these private placement securities were determined by the Investment
Manager to be liquid in accordance with procedures adopted by the Board
of Trustees.
(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 initiated. The Fund has set aside
sufficient investment securities as collateral for securities purchased
on a delayed-delivery basis.
Abbreviations
-------------------
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
N.R.U.-C.F.C. National Rural Utilities Cooperative Financing
Corporation
SBPA Standby Purchase Agreement
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-43
<PAGE> 176
SchwabFunds(R) 44
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost: $3,586,104,
$1,674,011 and $218,648, respectively) $3,586,104 $1,674,011 $ 218,648
Cash 166 38 39
Interest receivable 30,491 14,817 2,232
Receivable for fund shares sold 2,940 4,914 250
Receivable from adviser -- -- 4
Deferred organization costs -- -- 23
Prepaid expenses 551 162 3
---------- ---------- --------
Total assets 3,620,252 1,693,942 221,199
---------- ---------- --------
LIABILITIES
Payable for:
Dividends 15,284 6,832 899
Fund shares redeemed 670 485 120
Investments purchased 37,735 -- --
Investment advisory and administration fee 603 267 37
Transfer agency and shareholder service fees 1,157 536 68
Other 284 119 69
---------- ---------- --------
Total liabilities 55,733 8,239 1,193
---------- ---------- --------
Net assets applicable to outstanding shares $3,564,519 $1,685,703 $ 220,006
========== ========== ========
NET ASSETS CONSIST OF:
Capital paid in $3,566,367 $1,686,367 $ 220,012
Accumulated net realized loss on investments
sold (1,848) (664) (6)
---------- ---------- --------
$3,564,519 $1,685,703 $ 220,006
========== ========== ========
THE PRICING OF SHARES
3,405,684, 1,578,359 and 204,869, respectively,
outstanding Sweep Shares and
160,683, 108,008 and 15,143, respectively,
outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares
authorized) 3,566,367 1,686,367 220,012
Net asset value, offering and redemption price
per each Sweep Share and Value Advantage Share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-44
<PAGE> 177
SchwabFunds(R) 45
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund*
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 127,090 $55,134 $ 6,178
-------- ------- ------
Expenses:
Investment advisory and administration fee 13,694 6,445 741
Transfer agency and shareholder service fees:
Sweep Shares 14,432 6,469 708
Value Advantage Shares 103 31 9
Custodian fees 380 244 60
Registration fees 400 207 120
Professional fees 187 103 26
Shareholder reports 296 64 28
Trustees' fees 21 9 1
Amortization of deferred organization costs and
other prepaid expenses 76 50 4
Insurance and other expenses 139 75 4
-------- ------- ------
29,728 13,697 1,701
Less expenses reduced and absorbed (8,375) (4,297) (690)
-------- ------- ------
Total expenses incurred by Fund 21,353 9,400 1,011
-------- ------- ------
Net investment income 105,737 45,734 5,167
Net realized gain (loss) on
investments sold (21) 8 (6)
-------- ------- ------
Increase in net assets resulting
from operations $ 105,716 $45,742 $ 5,161
======== ======= ======
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-45
<PAGE> 178
SchwabFunds(R) 46
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- ------------
For the
period
ended
\-------------For the year ended December 31,------------\ December 31,
1995 1994 1995 1994 1995*
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 105,737 $ 65,678 $ 45,734 $ 27,608 $ 5,167
Net realized gain (loss)
on investments sold (21) (1,586) 8 (600) (6)
---------- ----------- ----------- ----------- -----------
Increase in net assets
resulting from operations 105,716 64,092 45,742 27,008 5,161
---------- ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income:
Sweep Shares (104,288) (65,678) (45,302) (27,608) (5,046)
Value Advantage Shares (1,449) -- (432) -- (121)
---------- ----------- ----------- ----------- -----------
Total dividends to
shareholders (105,737) (65,678) (45,734) (27,608) (5,167)
---------- ----------- ----------- ----------- -----------
Capital share transactions
(dollar amounts and
number of shares
are the same):
Proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares
issued in reinvestment of
dividends 100,567 57,664 43,226 24,116 4,181
Less payments for
shares redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
---------- ----------- ----------- ----------- -----------
Increase in net assets from
capital share transactions 548,589 594,220 391,812 232,441 220,012
---------- ----------- ----------- ----------- -----------
Total increase in net assets 548,568 592,634 391,820 231,841 220,006
Net Assets:
Beginning of period 3,015,951 2,423,317 1,293,883 1,062,042 --
---------- ----------- ----------- ----------- -----------
End of period $ 3,564,519 $ 3,015,951 $ 1,685,703 $ 1,293,883 $ 220,006
========== =========== =========== =========== ===========
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-46
<PAGE> 179
SchwabFunds(R) 47
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund
and the Schwab New York Tax-Exempt Money Fund (the "Funds") are series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management
investment company organized as a Massachusetts business trust on October 20,
1989 and registered under the Investment Company Act of 1940, as amended. The
Schwab New York Tax-Exempt Money Fund commenced operations on February 27, 1995.
The Board of Trustees of the Trust adopted a multiple class plan for the Funds
on May 9, 1995. Commencing July 7, 1995, with respect to the Schwab Tax-Exempt
Money Fund and Schwab New York Tax-Exempt Money Fund and October 3, 1995, with
respect to the Schwab California Tax-Exempt Money Fund, the Funds began offering
more than one class of shares. Pursuant to the plan, the existing shares were
redesignated as Sweep Shares ("Sweep Shares"), and a new class of shares was
added -- the Value Advantage Shares ("Value Advantage Shares"). Both classes
represent interests in the same portfolio of investments of the respective Fund
and are substantially the same in all respects except that the classes are
subject to different transfer agency and shareholder service fees (see Note 3),
investment minimums and certain other expenses.
In addition to the three Funds described above, the Trust also offers -- the
Schwab Money Market Fund, the Schwab Government Money Fund, the Schwab U.S.
Treasury Money Fund, the Schwab Value Advantage Money Fund(R), the Schwab
Institutional Advantage Money Fund(TM) and the Schwab Retirement Money Fund(R).
The assets of each series are segregated and accounted for separately.
The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of
short-term high quality municipal securities. 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 personal income tax. The
Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
F-47
<PAGE> 180
SchwabFunds(R) 48
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by a Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds and their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from each Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets. Expenses attributable to both
classes of shares of a Fund are allocated daily to each class of that Fund based
on the value of settled shares outstanding of each respective class. Transfer
agency, shareholder service fees and certain other expenses which are class
specific, are calculated daily at the class level.
Interest income and realized gains (losses) -- 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. Income and realized gains (losses) are allocated daily to each class of
shares of a Fund based on the value of settled shares outstanding of each
respective class.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
Each Fund is considered a separate entity for tax purposes.
F-48
<PAGE> 181
SchwabFunds(R) 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, each 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 Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt
Money Fund and the Schwab New York Tax-Exempt Money Fund incurred investment
advisory and administration fees of $13,694,000, $6,445,000, and $741,000,
respectively, for the period ended December 31, 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% and .25% of each Fund's average daily net
assets of the Sweep Shares and Value Advantage Shares, respectively. For the
period ended December 31, 1995, the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred transfer agency and shareholder service fees of $14,432,000, $6,469,000
and $708,000, respectively, for the Sweep Shares and $103,000, $31,000, and
$9,000, respectively, for the Value Advantage Shares, before Schwab reduced its
fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the period
ended December 31, 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 Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred fees of $21,000, $9,000 and $1,000, respectively, related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the ratio of operating expenses to average
net assets for each Fund. For the period ended December 31, 1995, the total of
such fees reduced and absorbed by the Investment Manager was $7,229,000,
$3,707,000 and $302,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively, and the total of such fees reduced by Schwab was $1,146,000,
$590,000 and $388,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively.
F-49
<PAGE> 182
SchwabFunds(R) 50
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period ended
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
---------- ---------- ----------
<S> <C> <C> <C>
Purchases $6,419,657 $3,297,957 $527,752
Proceeds of sales and maturities $5,869,911 $2,925,680 $308,751
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
Each Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the respective Fund. Transactions in capital shares were as follows (in
thousands):
<TABLE>
<CAPTION>
Schwab Schwab New
Schwab California York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- -------------
Period ended
\----------------Year ended December 31,----------------\ December 31,
1995 1 1994 1995 2 1994 1995 3
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 9,911,852 $ 8,184,151 $ 4,257,465 $ 3,435,641 $ 671,692
Value Advantage Shares 236,471 -- 125,848 -- 21,284
----------- ----------- ----------- ----------- ---------
Total proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares issued
in reinvestment of dividends:
Sweep Shares 99,813 57,664 43,152 24,116 4,126
Value Advantage Shares 754 -- 74 -- 55
----------- ----------- ----------- ----------- ---------
Total net asset value of
shares issued in
reinvestment of dividends 100,567 57,664 43,226 24,116 4,181
Less payments for shares redeemed:
Sweep Shares (9,623,759) (7,647,595) (4,016,813) (3,227,316) (470,949)
Value Advantage Shares (76,542) -- (17,914) -- (6,196)
----------- ----------- ----------- ----------- ---------
Total payments for shares
redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
----------- ----------- ----------- ----------- ---------
Total increase in net assets from
capital share transactions $ 548,589 $ 594,220 $ 391,812 $ 232,441 $ 220,012
----------- ----------- ----------- ----------- ---------
</TABLE>
1 The Value Advantage Shares commenced operations on July 7, 1995.
2 The Value Advantage Shares commenced operations on October 3, 1995.
3 The Value Advantage Shares commenced operations on July 7, 1995 and the
Sweep Shares commenced operations on February 27, 1995.
F-50
<PAGE> 183
SchwabFunds(R) 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Tax-Exempt Money Fund
---------------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ ------------------------------------------------------------------
For the
period
ended
December 31, \-----------------For the year ended December 31,----------------\
1995(1) 1995 1994 1993 1992 1991
<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 .03 .02 .02 .03 .04
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .02 .03 .02 .02 .03 .04
Less distributions
- ------------------
Dividends from net investment
income (.02) (.03) (.02) (.02) (.03) (.04)
Distributions from realized
gain on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.03) (.02) (.02) (.03) (.04)
-------- ---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========== ========== ========== ========== ==========
Total return (%) 1.68 3.30 2.32 1.93 2.49 4.01
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of
period (000s) $160,682 $3,403,837 $3,015,951 $2,423,317 $1,744,903 $1,359,121
Ratio of expenses to
average net assets (%) .45* .66 .65 .63 .63 .63
Ratio of net investment
income to average
net assets (%) 3.50* 3.25 2.31 1.92 2.45 3.91
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab Tax-Exempt Money Fund's
ratio of operating expenses to average net assets. Had these fees and expenses
not been reduced and absorbed, with respect to the Value Advantage Shares, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets for the period ended December 31, 1995 would have been
.95%* and 3.00%* respectively. With respect to the Sweep Shares, the ratio of
expenses to average net assets for the periods ended December 31, 1995, 1994,
1993, 1992, and 1991 would have been .91%, .91%, .93%, .94% and .95%,
respectively, and the ratio of net investment income to average net assets would
have been 3.00%, 2.05%, 1.62%, 2.14%, and 3.59%, respectively.
(1) For the period July 7, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-51
<PAGE> 184
SchwabFunds(R) 52
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab California Tax-Exempt Money Fund
-------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ --------------------------------------------------------------
For the
period
ended
December 31, \---------------For the year ended December 31,--------------\
1995 1 1995 1994 1993 1992 1991
---------- --------------------------------------------------------------
<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 .01 .03 .02 .02 .02 .04
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total from investment
operations .01 .03 .02 .02 .02 .04
Less distributions
- ------------------
Dividends from net
investment income (.01) (.03) (.02) (.02) (.02) (.04)
Distributions from realized gain
on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total distributions (.01) (.03) (.02) (.02) (.02) (.04)
-------- ---------- ---------- ---------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ---------- ---------- ---------- -------- --------
Total return (%) .84 3.20 2.26 1.91 2.35 3.77
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $108,008 $1,577,695 $1,293,883 $1,062,042 $691,176 $494,214
Ratio of expenses to
average net assets (%) .45* .65 .64 .63 .63 .61
Ratio of net investment
income to average
net assets (%) 3.48* 3.15 2.25 1.89 2.31 3.70
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab California Tax-Exempt
Money Fund's ratio of operating expenses to average net assets. Had these fees
and expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.89%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets for the periods ended
December 31, 1995, 1994, 1993, 1992, and 1991 would have been .94%, .94%, .96%,
.97%, and .98%, respectively, and the ratio of net investment income to average
net assets would have been 2.86%, 1.95%, 1.56%, 1.97%, and 3.33%, respectively.
1 For the period October 3, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-52
<PAGE> 185
SchwabFunds(R) 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab New York Tax-Exempt Money Fund
---------------------------------------------
Value Advantage
Shares Sweep Shares
-------------------- --------------------
For the period For the period
ended ended
December 31, 1995 1 December 31, 1995 2
-------------------- --------------------
<S> <C> <C>
Net asset value at beginning of period $1.00 $1.00
Income from investment operations
- --------------------------------
Net investment income .02 .03
Net realized and unrealized gain (loss) on investments -- --
------- --------
Total from investment operations .02 .03
Less distributions
- -----------------
Dividends from net investment income (.02) (.03)
Distributions from realized gain on investments -- --
------- --------
Total distributions (.02) (.03)
------- --------
Net asset value at end of period $1.00 $1.00
======= ========
Total return (%) 1.62 2.75
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 15,143 $204,863
Ratio of expenses to average net assets (%) .45* .63*
Ratio of net investment income to average net assets (%) 3.42* 3.20*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab New York Tax-Exempt Money
Fund's ratio of operating expenses to average net assets. Had these fees and
expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.81%* and 2.06%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.79%*, respectively.
1 For the period July 7, 1995 (commencement of operations) to December 31,
1995.
2 For the period February 27, 1995 (commencement of operations) to December
31, 1995.
* Annualized
F-53
<PAGE> 186
SchwabFunds(R) 54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund (three series constituting part of The Charles Schwab Family of
Funds, hereafter referred to as the "Trust") at December 31, 1995, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-54
<PAGE> 187
PART C
OTHER INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
-- Included in Part B, Statement of Additional Information:
Incorporated by reference to the joint Statement of Additional
Information for Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund, Schwab Tax-Exempt Money
Fund-Sweep Shares, Schwab California Tax-Exempt Money Fund-Sweep
Shares, Schwab Retirement Money Fund(R), Schwab Institutional
Advantage Money Fund(TM), and Schwab New York Tax-Exempt Money
Fund-Sweep Shares, separate portfolios of Registrant, filed with the
Securities and Exchange Commission pursuant to Rule 497(e) on
September 1, 1995.
-- Schwab Money Market Fund Schedule of Investments dated December 31,
1994 (Audited)
-- Schwab Government Money Fund Schedule of Investments dated
December 31, 1994 (Audited)
-- Schwab U.S. Treasury Money Fund Schedule of Investments dated
December 31, 1994 (Audited)
C-1
<PAGE> 188
-- Schwab Money Market Fund, Schwab Government Money Fund, and Schwab
U.S. Treasury Money Fund Statement of Assets and Liabilities dated
December 31, 1994 (Audited)
-- Schwab Money Market Fund, Schwab Government Money Fund, and Schwab
U.S. Treasury Money Fund Statement of Operations for the year
ended December 31, 1994 (Audited)
-- Schwab Money Market Fund, Schwab Government Money Fund, and Schwab
U.S. Treasury Money Fund Statement of Changes in Net Assets dated
December 31, 1994 (Audited)
-- Schwab Money Market Fund, Schwab Government Money Fund, and Schwab
U.S. Treasury Money Fund Notes to Financial Statements for the
year ended December 31, 1994 (Audited)
-- Report of Independent Accountants for the Schwab Money Market
Fund, Schwab Government Money Fund and Schwab U.S. Treasury Money
Fund dated January 31, 1995
-- Schwab Tax-Exempt Money Fund Schedule of Investments dated
December 31, 1994 (Audited)
-- Schwab Tax-Exempt Money Fund Statement of Assets and Liabilities
dated December 31, 1994 (Audited)
-- Schwab Tax-Exempt Money Fund Statement of Operations for the year
ended December 31, 1994 (Audited)
-- Schwab Tax-Exempt Money Fund Statement of Changes in Net Assets
dated December 31, 1994 (Audited)
-- Schwab Tax-Exempt Money Fund Notes to Financial Statements for the
year ended December 31, 1994 (Audited)
-- Report of Independent Accountants for the Schwab Tax-Exempt Money
Fund dated January 31, 199
-- Schwab California Tax-Exempt Money Fund Schedule of Investments
dated December 31, 1994 (Audited)
-- Schwab California Tax-Exempt Money Fund Statement of Assets and
Liabilities dated December 31, 1994 (Audited)
-- Schwab California Tax-Exempt Money Fund Statement of Operations
for the year ended December 31, 1994 (Audited)
-- Schwab California Tax-Exempt Money Fund Statement of Changes in
Net Assets dated December 31, 1994 (Audited)
C-2
<PAGE> 189
-- Schwab California Tax-Exempt Money Fund Notes to Financial
Statements for the year ended December 31, 1994 (Audited)
-- Report of Independent Accountants for the Schwab California
Tax-Exempt Money Fund dated January 31, 1995
-- Schwab Institutional Advantage Money Fund Schedule of Investments
dated December 31, 1994 (Audited)
-- Schwab Institutional Advantage Money Fund Statement of Assets and
Liabilities dated December 31, 1994 (Audited)
-- Schwab Institutional Advantage Money Fund Statement of Operations
for the period January 4, 1994 (commencement of operations) to
December 31, 1994 (Audited)
-- Schwab Institutional Advantage Money Fund Statement of Changes in
Net Assets for the period January 4, 1994 (commencement of
operations) to December 31, 1994 (Audited)
-- Schwab Institutional Advantage Money Fund Notes to Financial
Statement for the period January 4, 1994 (commencement of
operations) to December 31, 1994 (Audited)
-- Report of Independent Accountants for the Schwab Institutional
Advantage Money Fund dated January 31, 1995
-- Schwab Retirement Money Fund Schedule of Investments dated
December 31, 1994 (Audited)
-- Schwab Retirement Money Fund Statement of Assets and
Liabilities dated December 31, 1994 (Audited)
-- Schwab Retirement Money Fund Statement of Operations for the
period March 2, 1994 (commencement of operations) to December
31, 1994 (Audited)
-- Schwab Retirement Money Fund Statement of Changes in Net Assets
for the period March 2, 1994 (commencement of operations) to
December 31, 1994 (Audited)
-- Schwab Retirement Money Fund Notes to Financial Statements for the
period March 2, 1994 (commencement of operations) to December 31,
1994 (Audited)
-- Report of Independent Accountants for the Schwab Retirement
Money Fund dated January 31, 1995
-- Schwab New York Tax-Exempt Money Fund Report of Independent
Accountants dated January 31, 1995 (Audited)
C-3
<PAGE> 190
-- Schwab New York Tax-Exempt Money Fund Statement of Assets and
Liabilities dated December 31, 1994 (Audited)
-- Schwab New York Tax-Exempt Money Fund Notes to Statement of Assets
and Liabilities dated December 31, 1994 (Audited)
-- Schwab New York Tax-Exempt Money Fund Schedule of Investments
dated June 30, 1994 (Unaudited)
-- Schwab New York Tax-Exempt Money Fund Statement of Assets and
Liabilities dated June 30, 1994 (Unaudited)
-- Schwab New York Tax-Exempt Money Fund Statement of Operations for
the period February 27, 1995 (commencement of operations) to June
30, 1995 (Unaudited)
-- Schwab New York Tax-Exempt Money Fund Statement of Changes in Net
Assets for the period February 27, 1995 (commencement of
operations) to June 30, 1995 (Unaudited)
-- Schwab New York Tax-Exempt Money Fund Notes to Financial
Statements for the period February 27, 1995 (commencement of
operations) to June 30, 1995 (Unaudited)
-- Incorporated by reference to the Statement of Additional
Information of Schwab Value Advantage Money Fund filed herewith.
-- Schwab Value Advantage Money Fund Schedule of Investments
dated December 31, 1995 (Audited)
-- Schwab Value Advantage Money Fund Statement of Assets and
Liabilities dated December 31, 1995 (Audited)
-- Schwab Value Advantage Money Fund Statement of Operations for the
year ended December 31, 1995 (Audited)
-- Schwab Value Advantage Money Fund Statement of Changes in Net
Assets dated December 31, 1995 (Audited)
-- Schwab Value Advantage Money Fund Notes to Financial Statements
for the year ended December 31, 1995 (Audited)
-- Report of Independent Accountants for the Schwab Value Advantage
Money Fund dated January 31, 1996
-- Incorporated by reference to the joint Statement of Additional
Information of Schwab Tax-Exempt Money Fund-Value Advantage Shares,
Schwab California Tax-Exempt Money Fund-Value Advantage Shares, and
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares filed
herewith.
C-4
<PAGE> 191
-- Schwab Tax-Exempt Money Fund Schedule of Investments dated
December 31, 1995 (Audited)
-- Schwab California Tax-Exempt Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab New York Tax-Exempt Money Fund Schedule of Investments
dated December 31, 1995 (Audited)
-- Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt Money
Fund, and Schwab New York Tax-Exempt Money Fund Statements of
Assets and Liabilities dated December 31, 1995 (Audited)
-- Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt Money
Fund, and Schwab New York Tax-Exempt Money Fund Statements of
Operations for the year ended December 31, 1995 (Audited)
-- Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt Money
Fund, and Schwab New York Tax-Exempt Money Fund Statement of
Changes in Net Assets for the year ended December 31, 1995
(Audited)
-- Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt Money
Fund, and Schwab New York Tax-Exempt Money Fund Notes to Financial
Statements for the year ended December 31, 1995 (Audited)
-- Report of Independent Accountants for Schwab Tax-Exempt Money
Fund, Schwab California Tax-Exempt Money Fund, and Schwab New York
Tax-Exempt Money Fund dated January 31, 1996
(a) Exhibits:
(1) Amended and Restated Agreement and Declaration of Trust is
incorporated by reference to Exhibit (1) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A, filed on June 6, 1995
(2) Amended and Restated By-Laws are filed herewith
(3) Inapplicable
(4) (a) Article III, Sections 4 and 5; Article IV, Section 1;
Article V; Article VI, Section 2; Article VIII, Section 4;
and Article IX, Sections 1, 4, and 7 of the Agreement and
Declaration of Trust is incorporated by reference to Exhibit
(1) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A, filed on June 6, 1995
(b) Article 9 and Article 11 of the By-Laws are incorporated by
reference to Exhibit (2) filed herewith
C-5
<PAGE> 192
(5) (a) Investment Advisory and Administration Agreement between
Registrant and Charles Schwab Investment Management, Inc.
(the "Investment Manager") with respect to Schwab Money
Market Fund, Schwab Government Money Fund, and Schwab
Tax-Exempt Money Fund, dated June 15, 1994, is incorporated
by reference to Exhibit (5)(a) to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A,
filed on June 29, 1994
(b) Investment Advisory and Administration Agreement between
Registrant and the Investment Manager with respect to Schwab
California Tax-Exempt Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Value Advantage Money Fund, Schwab
Institutional Advantage Money Fund, Schwab Retirement Money
Fund, and New York Tax-Exempt Money Fund, dated June 15,
1994, is incorporated by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 13 to Registrant's Registration
Statement on Form N-1A, filed on June 29, 1994
(c) Amended Schedules to the Investment Advisory and
Administration Agreement between Registrant and the
Investment Manager referred to at Exhibit (5)(b) above is
incorporated by reference to Exhibit (5)(c) to
Post-Effective Amendment No. 16 to Registrant's Registration
Statement on Form N-1A, filed on February 28, 1995
(6) (a) Distribution Agreement between Registrant an Charles Schwab
& Co., Inc. ("Schwab"), dated June 15, 1994, is incorporated
by reference to Exhibit (6)(a) to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A,
filed on June 29, 1994
(b) Amended Schedule to the Distribution Agreement between
Registrant and Schwab referred to at Exhibit (6)(a) above is
incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 16 to Registrant's Registration
Statement on Form N-1A, filed on February 28, 1995
(7) Inapplicable
(8) (a) Accounting Services Agreement between Registrant and PFPC
Inc. (formerly, Provident Financial Processing Corporation)
dated April 8, 1991 is incorporated by reference to Exhibit
(8)(c) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A, filed on December 10,
1991
(b) Amended Schedule to the Accounting Services Agreement
referred to
C-6
<PAGE> 193
at Exhibit (8)(a) above is incorporated by
reference to Exhibit (8)(b) to Post-Effective Amendment No.
16 to Registrant's Registration Statement on Form N-1A,
filed on February 28, 1995
(c) Amendment Nos. 1 and 2 to the Accounting Services Agreement
referred to at Exhibit (8)(a) above is filed herewith
(d) Amended and Restated Transfer Agency Agreement between
Registrant and Schwab dated June 5, 1995 is incorporated by
reference to Exhibit (8)(c) to Post- Effective Amendment No.
19 to Registrant's Registration Statement on Form N- 1A,
filed on June 6, 1995
(e) Shareholder Service Agreement between Registrant and Schwab
dated May 1, 1993 is incorporated by reference to Exhibit
(8)(f) to Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A, filed on September
28, 1993
(f) Amended Schedules to the Shareholder Service Agreement
between Registrant and Schwab referred to at Exhibit (8)(e)
above are incorporated by reference to Exhibit (8)(f) to
Post-Effective Amendment No. 16 to Registrant's Registration
Statement on Form N-1A, filed on February 28, 1995
(g) Custodian Services Agreement between Registrant and PNC
Bank, N.A. (formerly, Provident National Bank) dated April
8, 1991 is incorporated by reference to Exhibit (8)(b) to
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A, filed on December 10, 1991
(h) Amended Schedule to the Custodian Services Agreement
referred to at Exhibit (8)(g) above is incorporated by
reference to Exhibit (8)(h) to Post-Effective Amendment No.
16 to Registrant's Registration Statement on Form N-1A,
filed on February 28, 1995
(i) Amendment Nos. 1 and 2 to the Custodian Services Agreement
referred to at Exhibit (8)(g) above is filed herewith
(9) Inapplicable
(10) Opinion and Consent of Ropes & Gray as to legality of the
securities being registered is incorporated by reference to
Registrant's Rule 24f-2 Notice, filed on February 21,
1996
(11) (a) Consent of Ropes & Gray is filed herewith
C-7
<PAGE> 194
(b) Consent of Price Waterhouse LLP, Independent Accountants,
is filed herewith
(12) Inapplicable
(13) (a) Purchase Agreement between Registrant and Schwab relating
to the Schwab U.S. Treasury Money Fund is incorporated by
reference to Exhibit (13)(a) to Post- Effective Amendment
No. 5 to Registrant's Registration Statement on Form N-1A,
filed on December 10, 1992
(b) Purchase Agreement between Registrant and Schwab relating
to the Schwab Value Advantage Money Fund is incorporated by
reference to Exhibit (13)(b) to Post- Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A,
filed on March 3, 1992
(c) Purchase Agreement between Registrant and Schwab relating
to the Schwab Retirement Money Fund and the Schwab
Institutional Advantage Money Fund is incorporated by
reference to Exhibit (13)(c) to Post-Effective Amendment No.
11 to Registrant's Registration Statement on Form N-1A,
filed on December 1, 1993
(d) Purchase Agreement between Registrant and Schwab relating
to the Schwab New York Tax-Exempt Money Fund is incorporated
by reference to Exhibit (13)(d) to Post-Effective Amendment
No. 16 to Registrant's Registration Statement on Form N-1A,
filed on February 28, 1995
(e) Purchase Agreement between Registrant and Schwab relating
to the Schwab Tax- Exempt Money Fund-Value Advantage Shares
is incorporated by reference to Exhibit (13)(e) to
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A, filed on June 6, 1995
(f) Purchase Agreement between Registrant and Schwab relating
to the Schwab California Tax-Exempt Money Fund-Value
Advantage Shares is incorporated by reference to Exhibit
(13)(f) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A, filed on June 6,
1995
(g) Purchase Agreement between Registrant and Schwab relating
relating to the Schwab New York Tax-Exempt Money Fund-Value
Advantage Shares is incorporated by reference to Exhibit
(13)(g) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A, filed on June 6, 1995
C-8
<PAGE> 195
(14) (a) Model Charles Schwab & Co., Inc. Individual Retirement Plan
is incorporated by reference to Exhibit (14)(a) to
Post-Effective Amendment No. 14 to Registrant's Registration
Statement on Form N-1A, filed on August 25, 1994
(b) Model Charles Schwab & Co., Inc. KEOGH Plan is incorporated
incorporated by reference to Exhibit (14)(b) to
Post-Effective Amendment No. 14 to Registrant's Registration
Statement on Form N-1A, filed on August 25, 1994
(15) Inapplicable
(16) (a) Performance Calculations for Schwab Money Market Fund,
Schwab Government Money Fund, Schwab Tax-Exempt Money Fund,
Schwab California Tax-Exempt Money Fund, and Schwab U.S.
Treasury Money Fund are incorporated by reference to Exhibit
(16) to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A, filed on March 3,
1992
(b) Performance Calculations for Schwab Value Advantage Money
Fund are incorporated by reference to Exhibit (16) to
Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A, filed on August 7, 1992
(c) Performance Calculations for Schwab Institutional Advantage
Money Fund and Schwab Retirement Money Fund are incorporated
by reference to Exhibit (16) to Post-Effective Amendment No.
17 to Registrant's Registration Statement on Form N-1A,
filed on April 6, 1995
(d) Performance Calculations for Schwab New York Tax-Exempt
Money Fund-Sweep Shares are incorporated by reference to
Exhibit (16)(d) to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A, filed on
August 25, 1995
(17) (a) Financial Data Schedule for Schwab Money Market Fund is
filed herewith
(b) Financial Data Schedule for Schwab Government Money Fund is
filed herewith
(c) Financial Data Schedule for Schwab Tax-Exempt Money
Money Fund-Sweep Shares is filed herewith
C-9
<PAGE> 196
(d) Financial Data Schedule for Schwab Tax-Exempt Money
Fund-Value Advantage Shares is filed herewith
(e) Financial Data Schedule for Schwab California Tax-Exempt
Money Fund-Sweep Shares is filed herewith
(f) Financial Data Schedule for Schwab California Tax-Exempt
Money Fund-Value Advantage Shares is filed herewith
(g) Financial Data Schedule for Schwab U.S. Treasury Money Fund
is filed herewith
(h) Financial Data Schedule for Schwab Value Advantage Money
Fund is filed herewith
(i) Financial Data Schedule for Schwab Institutional Advantage
Money Fund is filed herewith
(j) Financial Data Schedule for Schwab Retirement Money Fund is
filed herewith
(k) Financial Data Schedule for Schwab New York Tax-Exempt Money
Fund-Sweep Shares is filed herewith
(l) Financial Data Schedule for Schwab New York Tax-Exempt Money
Fund-Value Advantage Shares is filed herewith
(18) Multiple Class Plan of Registrant is incorporated by
reference to Exhibit (18) to Post-Effective Amendment No.
19 to Registrant's Registration Statement on Form N-1A,
filed on June 6, 1995
Item 25. Persons Controlled by or under Common Control with Registrant.
Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios,
and Schwab Advantage Trust each are Massachusetts business trusts registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); are
advised by the Investment Manager; and employ Schwab as their principal
underwriter, transfer agent, and shareholder services agent. As a result,
Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, and Schwab
Advantage Trust may be deemed to be under common control with Registrant.
C-10
<PAGE> 197
Item 26. Number of Holders of Securities.
As of March 15, 1996, the number of record holders of shares of
beneficial interest for the series of Registrant was:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- -------------- ------------------------
<S> <C>
Schwab Money Market Fund 1 (for the benefit of 1,468,789 accounts)
Schwab Government Money Fund 1 (for the benefit of 130,128 accounts)
Schwab U.S. Treasury Money Fund 1 (for the benefit of 52,354 accounts)
Schwab Tax-Exempt Money Fund-Sweep Shares 1 (for the benefit of 125,864 accounts)
Schwab Tax-Exempt Money Fund-Value Advantage Shares 1 (for the benefit of 1,275 accounts)
Schwab California Tax-Exempt Money Fund-Sweep Shares 1 (for the benefit of 45,803 accounts)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares 1 (for the benefit of 718 accounts)
Schwab Value Advantage Money Fund 1 (for the benefit of 73,747 accounts)
Schwab Retirement Money Fund 1 (for the benefit of 583 accounts)
Schwab Institutional Advantage Money Fund 1 (for the benefit of 201 accounts)
Schwab New York Tax-Exempt Money Fund-Sweep Shares 1 (for the benefit of 7,644 accounts)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares 1 (for the benefit of 131 accounts)
</TABLE>
Item 27. Indemnification.
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust (Exhibit (1) hereto, which is incorporated herein by
reference) provides in effect that Registrant will indemnify its officers and
trustees against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise, or as fines and
penalties, and counsel fees reasonably incurred by any such officer or trustee
in connection with the defense or disposition of any action, suit, or other
proceeding. However, in accordance with Section 17(h) and 17(i) of the 1940
Act and its own terms, said Agreement and Declaration of Trust does not protect
any person against any liability to Registrant or its shareholders to which he
or she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. In any event, Registrant will
comply with 1940 Act Releases No. 7221 and 11330 respecting the permissible
boundaries of indemnification by an investment company of its officers and
trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees,
officers, and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been
C-11
<PAGE> 198
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
(a) Information pertaining to business and other connections of
Registrant's Investment Manager is hereby incorporated by reference to the
section of the Prospectuses for Schwab Money Market Fund, Schwab Government
Money Fund, Schwab U.S. Treasury Money Fund, Schwab Tax-Exempt Money
Fund-Sweep Shares, Schwab California Tax-Exempt Money Fund-Sweep Shares, Schwab
Retirement Money, Fund, Schwab Institutional Advantage Money Fund, and Schwab
New York Tax-Exempt Money Fund-Sweep Shares captioned "Management of the
Fund(s)"; and the section of the Prospectuses for Schwab Value Advantage Money
Fund, Schwab Tax-Exempt Money Fund-Value Advantage Shares, Schwab California
Tax-Exempt Money Fund-Value Advantage Shares, and Schwab New York Tax-Exempt
Money Fund-Value Advantage Shares captioned "Organization and Management of Our
Fund(s)" and to the section of the Statements of Additional
<PAGE> 199
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles R. Schwab, Charles Schwab & Co., Inc. Founder, Chairman and Director
Chairman and Trustee
The Charles Schwab Corporation Chairman, Chief Executive Officer
and Director
Charles Schwab Investment Management, Chairman and Director
Inc.
The Charles Schwab Trust Chairman and Director
Company
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer
and Director
The Charles Schwab Corporation President, Chief Operating Officer
and Director
Charles Schwab Investment Management, Director
Inc.
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
and Director
</TABLE>
C-13
<PAGE> 200
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January 1996; Senior Executive
Vice President and Chief Operating
Officer until January 1995
The Charles Schwab Corporation Executive Vice President until
January 1996; Senior Executive
Vice President until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President - Schwab
Institutional
The Charles Schwab Corporation Executive Vice President - Schwab
Institutional
The Charles Schwab Trust Company Director and Executive Vice
President
A. John Gambs, Charles Schwab & Co., Inc. Executive Vice President, Chief
Treasurer and Principal Financial Officer and Director
Financial Officer
The Charles Schwab Corporation Executive Vice President and Chief
Financial Officer
Charles Schwab Investment Management, Chief Financial Officer and
Inc. Director
The Charles Schwab Trust Chief Financial Officer
Company
Mayer & Schweitzer, Inc. Director
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
</TABLE>
C-14
<PAGE> 201
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President -
Business Strategy
Charles Schwab & Co., Inc. Executive Vice President -
Business Strategy
Trustee and President Management, Inc.
Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds
The Charles Schwab Corporation Executive Vice President - Mutual
Funds
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
October 1995
Fidelity Investment Advisor Group President until 1994
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President -
Electronic Brokerage
The Charles Schwab Corporation Executive Vice President -
Electronic Brokerage
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President - Retail
Brokerage
The Charles Schwab Corporation Executive Vice President - Retail
Brokerage
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - Capital
Markets and Trading until February
1996
</TABLE>
C-15
<PAGE> 202
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President - Human
Resources and Corporate Support
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
Commercial Credit Corporation Managing Director until February
1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice
President
The Charles Schwab Corporation Treasurer and Senior Vice
President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp, Charles Schwab & Co., Inc. Senior Vice President -
Trustee, Senior Vice President SchwabFunds
and Chief Operating Officer
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer
Stephen B. Ward, Charles Schwab Investment Senior Vice President and Chief
Senior Vice President and Chief Management, Inc. Investment Officer
Investment Officer
Frances Cole, Charles Schwab Investment Vice President, Chief Counsel,
Secretary Management, Inc. Chief Compliance Officer and
Assistant Corporate Secretary
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
</TABLE>
C-16
<PAGE> 203
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Corporate Secretary
Management, Inc.
The Charles Schwab Trust Assistant Corporate Secretary
Company
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Assistant Corporate Secretary
Management, Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary
Company until February 1996
David H. Lui Charles Schwab Investment Vice President and Senior Counsel
Assistant Secretary Inc.
Christina M. Perrino Charles Schwab Investment Vice President and Senior Counsel
Assistant Secretary Management, Inc.
</TABLE>
Item 29. Principal Underwriters.
(a) Schwab acts as principal underwriter and distributor of
Registrant's shares. Schwab currently also acts as principal underwriter for
Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab
Advantage Trust, and intends to act as such for any other investment company
which Schwab may sponsor in the future.
C-17
<PAGE> 204
(b) See Item 28(b) for information on the officers and directors of
Schwab. The principal business address of Schwab is 101 Montgomery Street,
San Francisco, California 94104.
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the 1940 Act and the Rules thereunder are
maintained at the offices of: Registrant (transfer agency and shareholder
records); Registrant's investment manager and administrator, Charles Schwab
Investment Management, Inc., 101 Montgomery Street, San Francisco, California
94104; Registrant's sub-investment adviser, Dimensional Fund Advisors Inc.,
1299 Ocean Avenue, Suite 1100, Santa Monica, California 90401; Registrant's
principal underwriter, Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, California 94104; Registrant's Custodian, PNC Bank, National
Association, Broad and Market Streets, Philadelphia, Pennsylvania 19104
(ledgers, receipts, and brokerage orders); Registrant's fund accountants, PFPC,
Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809; or Ropes & Gray,
counsel to Registrant, 1301 K Street, N.W., Suite 800 East, Washington, D.C.
20005 (minute books, bylaws, and declaration of trust).
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to call a meeting of Shareholders, at the
request of at least 10% of registrant's outstanding shares, for the purpose of
voting upon the question of removal of a trustee or trustees and to assist in
communications with other Shareholders as required by Section (16) of the
1940 Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
C-18
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended,
Registrant certifies that it meets all the requirements for effectiveness of
this Post-Effective Amendment No. 23 to the Registrant's Registration Statement
on Form N-1A pursuant to Rule 485(b) of the 1933 Act and has duly caused this
Post- Effective Amendment No. 23 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California,
on the 29th day of March, 1996.
THE CHARLES SCHWAB FAMILY OF FUNDS
Registrant
Charles R. Schwab*
Charles R. Schwab, Chairman
Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 23 to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities indicated this 29th
day of March, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Charles R. Schwab* Chairman and Trustee
-------------------------
Charles R. Schwab
Timothy F. McCarthy* President and Trustee
--------------------------
Timothy F. McCarthy
William J. Klipp* Senior Vice President, Chief
----------------------------
William J. Klipp Operating Officer, and Trustee
Donald F. Dorward* Trustee
-------------------------
Donald F. Dorward
Robert G. Holmes* Trustee
-------------------------
Robert G. Holmes
Donald R. Stephens* Trustee
-------------------------
Donald R. Stephens
Michael W. Wilsey* Trustee
-------------------------
Michael W. Wilsey
A. John Gambs* Treasurer and Principal Financial Officer
-------------------------
A. John Gambs
</TABLE>
*By: /s/ Alan G. Priest
Alan G. Priest, Attorney-in-Fact pursuant
to Powers of Attorney previously filed
<PAGE> 206
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO
----------
<S> <C>
2. Amended and Restated By-Laws
8.(c) Amendment Nos. 1 and 2 to the Accounting Services Agreement
8.(i) Amendment Nos. 1 and 2 to the Custodian Services Agreement
11.(a) Consent of Ropes & Gray
11.(b) Consent of Price Waterhouse LLP
17.(a) Financial Data Schedule for Schwab Money Market Fund
17.(b) Financial Data Schedule for Schwab Government Money Fund
17.(c) Financial Data Schedule for Schwab Tax-Exempt Money Fund-Sweep Shares
17.(d) Financial Data Schedule for Schwab Tax-Exempt Money Fund-Value Advantage
17.(e) Financial Data Schedule for Schwab California Tax-Exempt Money Fund-Sweep
17.(f) Financial Data Schedule for Schwab California Tax-Exempt Money Fund-Value
17.(g) Financial Data Schedule for Schwab U.S. Treasury Money Fund
17.(h) Financial Data Schedule for Schwab Value Advantage Money Fund
17.(i) Financial Data Schedule for Schwab Institutional Advantage Money Fund
17.(j) Financial Data Schedule for Schwab Retirement Money Fund
17.(k) Financial Data Schedule for Schwab New York Tax-Exempt Money Fund-Sweep
17.(l) Financial Data Schedule for Schwab New York Tax-Exempt Money Fund-Value
</TABLE>
<PAGE> 1
EXHIBIT 2
AMENDED AND RESTATED BYLAWS
OF
THE CHARLES SCHWAB FAMILY OF FUNDS,
SCHWAB INVESTMENTS,
SCHWAB CAPITAL TRUST,
AND
SCHWAB ANNUITY PORTFOLIOS
* * * * *
ARTICLE 1
Agreement and Declaration of Trust,
Resident Agent and Principal Office
1.1 Applicability of Bylaws. These Bylaws are
the Bylaws of each of The Charles Schwab Family of Funds, Schwab Investments,
Schwab Capital Trust, and Schwab Annuity Portfolios (each a "Trust"). With
respect to each Trust, the term "Declaration of Trust" as used herein shall
mean the Declaration of Trust establishing such Trust, in effect and as amended
from time to time.
1.2 Agreement and Declaration of Trust. With
respect to each Trust, these Bylaws shall be subject to the Declaration of
Trust. Unless otherwise specified herein, capitalized terms in these Bylaws
shall have the meaning given such terms in The Declaration of Trust.
1.3 Resident Agent of the Trust. Each Trust
shall have an agent for service of process residing in the Commonwealth of
Massachusetts.
1.4 Principal Office of the Trust. The initial
principal office of each Trust shall be located in San Francisco, California.
Each Trust may have such other offices as the Trustees may determine or as they
may authorize.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the
Trustees may be held without call or notice at such places and at such times as
the Trustees may determine from time to time, provided that notice of the first
regular meeting following any such determination shall be given to absent
Trustees. A regular meeting of the Trustees may be held without call or notice
immediately after and at the same place as an annual meeting of the
Shareholders.
<PAGE> 2
2.2 Special Meetings. Special meetings of the
Trustees may be held at any time and at any place designated in the call of the
meeting when called by the Chairman of the Board of the Trustees, the
President, the Treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary, an Assistant Secretary or the
officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to the
Trustee of a special meeting to send notice by special delivery at least
forty-eight hours or by telegram, telex or telecopy or other electronic
facsimile transmission method at least twenty-four hours before the meeting
addressed to the Trustee at his or her usual or last known business or
residential address or to give notice to him or her in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him or her
before the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting nor a waiver of
a notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees, a
majority of the Trustees then in office shall constitute a quorum. Any meeting
may be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
ARTICLE 3
Officers
3.1 Enumeration: Qualification. The officers of
each Trust shall be a President; a Treasurer; and a Secretary, who shall also
be the Clerk; and such other officers including a Chairman of the Board of the
Trustees, if any, as the Trustees from time to time may in their discretion
elect. Each Trust may also have such agents as the Trustees may appoint at
their discretion from time to time. The Chairman of the Board of the Trustees,
if one is elected, shall be a Trustee and may but need not be a Shareholder;
and any other officer may but not need be a Trustee or a Shareholder. Any two
or more offices may be held by the same person.
3.2 Election. The President, the Treasurer and
the Secretary shall be elected by the Trustees upon the occurrence of a vacancy
in any such office. Other officers, if any, may be elected or appointed by the
Trustees at any time. Vacancies in any office may be filled at any time.
3.3 Tenure. The Chairman of the Board of the
Trustees, if one is elected; the President; the Treasurer and the Secretary
shall hold office until their respective successors are chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
-2-
<PAGE> 3
3.4 Powers. Subject to the other provisions of
these Bylaws, each officer shall have, in addition to the duties and powers
herein and as set forth in the Declaration of Trust, such duties and powers as
are commonly incident to the office occupied by him or her as if the Trust were
organized as a Massachusetts business corporation and such other duties and
powers as the Trustees may designate from time to time.
3.5 Chairman; President. Unless the Trustees
otherwise provide, the Chairman of the Board of the Trustees or, if there is
none or in the absence of the Chairman, the President shall preside at all
meetings of the Shareholders and of the Trustees. The Chairman of the Board of
the Trustees, if there is one, shall be the chief executive officer and, unless
the Trustees otherwise provide, the President shall be the chief operating
officer. If there is no Chairman of the Board of the Trustees, the President
shall be the chief executive officer.
3.6 Treasurer. Unless otherwise provided by the
Trustees, the Treasurer shall be the chief financial and accounting officer of
the Trust, and shall, subject to the provisions of the Declaration of Trust and
to any arrangement made by the Trustees with a custodian; investment adviser or
manager; or transfer, shareholder servicing or similar agent, be in charge of
the valuable papers, books of account and accounting records of the Trust, and
shall have such other duties and powers as may be designated from time to time
by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all
proceedings of the Shareholders and the Trustees in books to be kept therefor,
which books or a copy thereof shall be kept at the principal office of the
Trust. In the absence of the Secretary from any meeting of the Shareholders or
Trustees, an assistant secretary, or if there be none or if he or she is
absent, a temporary secretary chosen at such meeting shall record the
proceedings thereof in the aforesaid books
3.8 Resignations. Any officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman
of the Board of the Trustees, the President, the Secretary or to a meeting of
the Trustees. Such resignation shall be effective upon receipt unless
specified to be effective at some other time. Except to the extent expressly
provided in a written agreement with a Trust, no officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on
account of such removal.
-3-
<PAGE> 4
ARTICLE 4
Committees
4.1 Quorum; Voting. A majority of the members of
any Committee of the Trustees shall constitute a quorum for the transaction of
business, and any action of such a Committee may be taken at a meeting by a
vote of a majority of the members present (a quorum being present) or evidenced
by one or more writings signed by such a majority. Members of a Committee may
participate in a meeting of such Committee by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time and participation by such
means shall constitute presence in person at a meeting. The Trustees may not
use methods described herein to approve a Trust's Investment Advisory
Agreement(s).
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall
render reports at the time and in the manner required by the Declaration of
Trust or any applicable law. Officers and Committees shall render such
additional reports as they may deem desirable or as may from time to time be
required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time
otherwise provided by the Trustees, the initial fiscal year of the Trust shall
end on such date as is determined in advance or in arrears by the Treasurer,
and subsequent fiscal years shall end on such date in subsequent years.
ARTICLE 7
Seal
7.1 General. Absent adoption by Trustees, a
Trust will not have a seal.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may
generally or in particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations made by the
Trustees shall be signed by the President, any Vice President, the Treasurer or
the Secretary and need not bear the seal of the Trust.
-4-
<PAGE> 5
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing
certificates for Shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of a Trust for the record
holders of such Shares, who shall in either case be deemed, for all purposes
hereunder, to be the holders of certificates for such Shares as if they had
accepted such certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance
of Share certificates. In that event, each Shareholder shall be entitled to a
certificate stating the number of Shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificates shall
be signed by the Chairman of the Board of the Trustees, the President or any
Vice President and by the Treasurer or Assistant Treasurer. Such signatures
may be facsimile if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of a Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued,
it may be issued by a Trust with the same effect as if he were such officer at
the time of its issue.
9.2 Loss of Certificates. In case of the alleged
loss or destruction or the mutilation of a Share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as the Trustees
shall prescribe.
9.3 Issuance of New Certificates to Pledgee. A
pledgee of Shares transferred as collateral security shall be entitled to a new
certificate if the instrument of transfer substantially describes the debt or
duty that is intended to be secured thereby. Such new certificate shall
express on its face that it is held as collateral security, and the name of the
pledgor shall be stated thereon, who alone shall be liable as a Shareholder and
entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates.
The Trustees may at any time discontinue the issuance of Share certificates and
may, by written notice to each Shareholder, require the surrender of Share
certificates to a Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in a Trust.
-5-
<PAGE> 6
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 General. Each Trust shall at all times conduct its
business in accordance with applicable provisions of the Investment Company Act
of 1940 (the "1940 Act").
ARTICLE 11
Shareholders' Voting Powers and Meetings
11.1 Voting Powers. The Shareholders of a Trust shall
have power to vote only (i) for the election of Trustees as provided in the
Declaration of Trust, provided, however, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Manager or Sub-Adviser as provided in
the Declaration of Trust to the extent required by the 1940 Act, (iii) with
respect to any termination of such Trust to the extent and as provided in the
Declaration of Trust, (iv) with respect to any amendment of the Declaration of
Trust to the extent and as provided in the Declaration of Trust, (v) to the
same extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by law, the Declaration of Trust, these Bylaws
or any registration of the Trust with the U.S. Securites and Exchange
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. The Shareholders of any
particular class or series shall not be entitled to vote on any matters as to
which such class or series is not affected. Except with respect to matters as
to which the Trustees have determined that only the interests of one or more
particular series or one or more classes are affected or as required by law,
all of the Shares of each series shall, on matters as to which it is entitled
to vote, vote with shares of other series so entitled in the aggregate.
Notwithstanding the foregoing, with respect to matters which would otherwise be
voted on by two or more series in the aggregate, the Trustees may, in their
sole discretion, submit such matters to the Shareholders of any or all such
series separately. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy the Trust receives
a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the
-6-
<PAGE> 7
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration of Trust or these Bylaws to be taken by
Shareholders.
11.2 Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of electing Trustees
as provided in the Declaration of Trust and for such other purposes as may be
prescribed by law, by the Declaration of Trust or by these Bylaws. Meetings of
the Shareholders may also be called by the Trustees from time to time for the
purpose of taking action upon any other matter deemed by the Trustees to be
necessary or desirable. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by mailing such notice at
least seven days before such meeting, postage prepaid, stating the time and
place of the meeting, to each Shareholder at the Shareholder's address as it
appears on the records of a Trust. Whenever notice of a meeting is required to
be given to a Shareholder under the Declaration of Trust or these Bylaws, a
written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the records of
the meeting, shall be deemed equivalent to such notice.
11.3 Quorum and Required Vote. A majority of Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law, of the
Declaration of Trust or of these Bylaws permits or requires that (i) holders of
any series shall vote as a series, then a majority of the aggregate number of
Shares of that series entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that series; or (ii) holders of any
class shall vote as a class, then a majority of the aggregate number of Shares
of that class entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that class. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting, without
the necessity of further notice. Except when a larger vote is required by any
provision of law or the Declaration of Trust or these Bylaws, a majority of the
Shares voted shall decide any questions and a plurality shall elect a Trustee,
provided that where any provision of law, of the Declaration of Trust or of
these Bylaws permits or requires that the holders of any series or class shall
vote as a series or class, then a majority of the Shares of that series or
class, as the case may be, voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar as that series or
class is concerned.
11.4 Action by Written Consent. Any action taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of law, of the Declaration of Trust or of
these Bylaws) consents to the action in writing and such written consents are
filed with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
11.5 Record Dates. For the purpose of determining
the Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to
-7-
<PAGE> 8
receive payment of any dividend or of any other distribution, the Trustees may
fix a date from time to time, which shall be not more than 90 days before the
date of any meeting of Shareholders or the date for the payment of any dividend
or other distribution, as the record date for determining the Shareholders
having the right to notice of and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution, and in such case
only Shareholders of record on such record date shall have such right
notwithstanding any transfer of Shares on the books of a Trust after the record
date; or without fixing such record date the Trustees may for any of such
purposes close the register or transfer books for all or any part of such
period.
ARTICLE 12
Amendments to the Bylaws
12.1 General. These Bylaws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at any meeting
of the Trustees, or by one or more writings signed by such a majority.
Adopted as of February 7, 1996.
-8-
<PAGE> 1
EXHIBIT 8(c)
AMENDMENT NO. 1 TO ACCOUNTING SERVICES AGREEMENT
This Amendment, dated August 8, 1995, is entered into between THE
CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"),
and PFPC INC. (formerly Provident Financial Processing Corporation), a Delaware
corporation which is an indirect wholly-owned subsidiary of PNC Bank Corp.
(formerly, PNC Financial Corp.) ("PFPC"). WHEREAS, the Fund and PFPC have
entered into an Accounting Services Agreement dated as of April 8, 1991 (the
"Agreement"), pursuant to which the Fund appointed PFPC to provide accounting
services to its investment portfolios listed on schedule B to the Agreement;
and
WHEREAS, the Fund and PFPC desire to amend the Agreement and remove
the limitation on the duration of the Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. All references in the Agreement to "Provident Financial Processing
Corporation" are hereby revised to read "PFPC Inc." and all references to "PNC
Financial Corp." are revised to read "PNC Bank Corp."
2. Paragraph 15 is hereby deleted and replaced with the following:
Duration and Termination. This Agreement shall continue with respect to each
Portfolio, unless terminated by the Fund or by PFPC for "cause" (as defined
below) on sixty (60) days prior written notice to the other party. For
purposes of this
<PAGE> 2
Agreement "cause" shall mean any circumstances which materially impair the
ability of either party to this Agreement to perform all of its duties and
obligations hereunder.
3. Any defined terms not defined herein shall have the same meaning
as given in the Agreement.
4. Miscellaneous. Except to the extent amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as amended and supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
THE CHARLES SCHWAB FAMILY OF FUNDS
By: /s/ William J. Klipp
William J. Klipp
Title: Chief Operating Officer
PFPC INC.
By: /s/ Joseph T. Gramlich
Joseph T. Gramlich
Title: Senior Vice President
<PAGE> 3
AMENDMENT NO. 2 TO ACCOUNTING SERVICES AGREEMENT
This Amendment, dated February 5, 1996, is entered into between THE
CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"),
and PFPC INC. (formerly Provident Financial Processing Corporation), a Delaware
corporation which is an indirect wholly-owned subsidiary of PNC Bank Corp.
(formerly, PNC Financial Corp.) ("PFPC").
WHEREAS, the Fund and PFPC have entered into an Accounting Services
Agreement dated as of April 8, 1991 (the "Agreement"), and amended as of August
8, 1995, pursuant to which the Fund appointed PFPC to provide accounting
services to its investment portfolios listed on schedule A to the Agreement;
and
WHEREAS, the Fund and PFPC desire to amend the Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Paragraph 15 is hereby deleted and replaced with the following:
Duration and Termination. This Agreement shall continue in full force and
effect with respect to each Portfolio, unless terminated as hereinafter
provided or amended by mutual, written agreement of the parties hereto. This
Agreement may be terminated by either party by an instrument in writing
delivered, faxed or mailed, postage prepaid, to the other party, such
termination to take effect on the date stated therein, which date shall not be
sooner than sixty (60) days after the date of such delivery or mailing.
<PAGE> 4
2. Any defined terms not defined herein shall have the same meaning
as given in the Agreement.
3. Miscellaneous. Except to the extent amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as amended and supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
THE CHARLES SCHWAB FAMILY OF FUNDS
By: /s/ William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
PFPC INC.
By: /s/ Robert J.Perlsweig
Robert J. Perlsweig
Title: Executive Vice President
<PAGE> 1
EXHIBIT 8(i)
AMENDMENT NO. 1 TO CUSTODIAN SERVICES AGREEMENT
This Amendment, dated August 8, 1995, is entered into between THE
CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"),
and PNC Bank, National Association (formerly Provident National Bank), a
national banking association ("PNC Bank").
WHEREAS, the Fund and PNC Bank have entered into a Custodian Services
Agreement dated as of April 8, 1991 (the "Agreement"), pursuant to which the
Fund appointed PNC Bank to provide custodian services to its investment
portfolios listed on Schedule A to the Agreement; and
WHEREAS, the Fund and PNC Bank desire to amend the Agreement and
remove the limitation on the duration of the Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. All references in the Agreement to "Provident National Bank" are
hereby revised to read "PNC Bank, National Association" and references to
"Provident" are revised to read "PNC Bank."
2. Paragraph 15 is hereby deleted and replaced with the following:
the Fund or by PNC Bank for "cause" (as defined below) on sixty (60) days prior
written notice to the other party. For purposes of this Agreement, "cause"
shall mean any circumstances which materially impair the ability of either
party to this Agreement to perform all of its duties and
<PAGE> 2
obligations hereunder. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of a
Portfolio of the Fund to dissolve or to function without a custodian of its
cash, securities or other property), PNC Bank shall not deliver cash,
securities or other property of the applicable Portfolio to the Portfolio or
the Fund. It may deliver them to a bank or trust company of PNC Bank's,
having an aggregate capital, surplus and undivided profits, as shown by its
last published report, of not less than twenty million dollars ($20,000,000),
as a custodian for such Portfolio of the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against Property in such
Portfolio's possession as security for the payment of such fees,
compensation, costs and expenses.
3. Any defined terms not defined herein shall have the same meaning
as given in the Agreement.
4. Miscellaneous. Except to the extent amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as amended and supplemented
hereby.
<PAGE> 3
\ IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
THE CHARLES SCHWAB FAMILY OF FUNDS
By: /s/ William J. Klipp
William J. Klipp
Title: Chief Operating Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Joseph T. Gramlich
Joseph T. Gramlich
Title: Vice President
<PAGE> 4
AMENDMENT NO. 2 TO CUSTODIAN SERVICES AGREEMENT
This Amendment, dated February 5, 1996, is entered into between THE
CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"),
and PNC BANK, NATIONAL ASSOCIATION (formerly Provident National Bank), a
national banking association ("PNC Bank").
WHEREAS, the Fund and PNC Bank have entered into a Custodian Services
Agreement dated as of April 8, 1991 (the "Agreement"), and amended as of August
8, 1995, pursuant to which the Fund appointed PNC Bank to provide custodian
services to its investment portfolios listed on Schedule A to the Agreement;
and
WHEREAS, the Fund and PNC Bank desire to amend the Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Paragraph 15 is hereby deleted and replaced with the following:
Duration and Termination. This Agreement shall continue in full force and
effect unless terminated as hereinafter provided or amended at any time by
mutual, written agreement of the parties hereto. This Agreement may be
terminated by either party by an instrument in writing delivered, faxed or
mailed, postage prepaid, to the other party, such termination to take effect on
the date stated therein, which date shall not be sooner than sixty (60) days
after the date of such delivery or mailing. In the event this Agreement is
terminated (pending appointment of a successor to PNC Bank or vote of the
shareholders of any Portfolio of the Fund to
<PAGE> 5
dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
applicable Portfolio to the Portfolio or the Fund. It may deliver them to a
bank or trust company of PNC Bank's, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000), as a custodian for such Portfolio to be
held under terms similar to those of this Agreement. PNC Bank shall not be
required to make any such delivery or payment until full payment shall have
been made to PNC Bank of all of its fees, compensation, costs and expenses.
PNC Bank shall have a security interest in and shall have a right of setoff
against Property in such Portfolio's possession as security for the payment of
such fees, compensation, costs and expenses.
2. Any defined terms not defined herein shall have the same meaning
as given in the Agreement.
3. Miscellaneous. Except to the extent amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as amended and supplemented
hereby.
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
THE CHARLES SCHWAB FAMILY OF FUNDS
By: /s/ William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert J. Perlsweig
Robert J. Perlsweig
Title: Senior Vice President
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Legal Counsel" included in or made a part of
Post-Effective Amendment No. 23 to the Registration Statement of The Charles
Schwab Family of Funds on Form N-1A (Nos. 33-31894 and 811-05954) under the
Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
March 26th, 1996
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information
constituting parts of this Post-Effective Amendment No. 23 to the registration
statement of The Charles Schwab Family of Funds on Form N-1A (the "Registration
Statement") of our reports dated January 31, 1996, relating to the financial
statements and financial highlights of the Schwab Tax-Exempt Money Fund, the
Schwab California Tax-Exempt Money Fund, the Schwab New York Tax-Exempt Money
Fund and the Schwab Value Advantage Money Fund, which appear in such Statements
of Additional Information, and to the incorporation by reference of our reports
into the Prospectuses which constitute part of this Registration Statement. We
also consent to the references to us under the heading "Accountants and Reports
to Shareholders" in such Statements of Additional Information and to the
references to us under the headings "Financial Highlights" and "Accountants" in
such Prospectuses.
We further consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information which are incorporated by reference as
parts of this Post-Effective Amendment No. 23 to the Registration Statement of
our reports dated January 31, 1995, relating to the financial statements and
financial highlights appearing in the December 31, 1994 Annual Reports of the
Schwab Money Market Fund, the Schwab Government Money Fund, the Schwab U.S.
Treasury Money Fund, the Schwab Tax-Exempt Money Fund, the Schwab California
Tax-Exempt Money Fund, the Schwab New York Tax-Exempt Money Fund, the Schwab
Retirement Money Fund and the Schwab Institutional Advantage Money Fund, which
are also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Accountants and Reports to
Shareholders" in such Statement of Additional Information and to the
references to us under the headings "Financial Highlights" and "Accountants" in
such Prospectuses.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
March 26, 1996
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] SCHWAB MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 14040471
[INVESTMENTS-AT-VALUE] 14040471
[RECEIVABLES] 67867
[ASSETS-OTHER] 2426
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 14110764
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 100377
[TOTAL-LIABILITIES] 100377
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14010737
[SHARES-COMMON-STOCK] 14070737
[SHARES-COMMON-PRIOR] 11227659
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (350)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 14010387
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 760926
[OTHER-INCOME] 0
[EXPENSES-NET] 94788
[NET-INVESTMENT-INCOME] 666138
[REALIZED-GAINS-CURRENT] 4
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 666142
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 666138
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 35277474
[NUMBER-OF-SHARES-REDEEMED] 33124743
[SHARES-REINVESTED] 630347
[NET-CHANGE-IN-ASSETS] 2783082
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (354)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 52254
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 113420
[AVERAGE-NET-ASSETS] 12638433
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] SCHWAB GOVERNMENT MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1879758
[INVESTMENTS-AT-VALUE] 1879758
[RECEIVABLES] 18397
[ASSETS-OTHER] 104
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1898259
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 13690
[TOTAL-LIABILITIES] 13690
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1884838
[SHARES-COMMON-STOCK] 1884838
[SHARES-COMMON-PRIOR] 1897435
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (269)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1884569
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 113106
[OTHER-INCOME] 0
[EXPENSES-NET] 14233
[NET-INVESTMENT-INCOME] 98873
[REALIZED-GAINS-CURRENT] (162)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 98711
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 98873
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4120476
[NUMBER-OF-SHARES-REDEEMED] 4229013
[SHARES-REINVESTED] 95940
[NET-CHANGE-IN-ASSETS] (12759)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (107)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8280
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 17501
[AVERAGE-NET-ASSETS] 1897685
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] SCHWAB TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3586104
[INVESTMENTS-AT-VALUE] 3586104
[RECEIVABLES] 33431
[ASSETS-OTHER] 717
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3620252
[PAYABLE-FOR-SECURITIES] 37735
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 17998
[TOTAL-LIABILITIES] 55733
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3405684
[SHARES-COMMON-STOCK] 3405684
[SHARES-COMMON-PRIOR] 3017778
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1847)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3403837
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 125455
[OTHER-INCOME] 0
[EXPENSES-NET] 21167
[NET-INVESTMENT-INCOME] 104288
[REALIZED-GAINS-CURRENT] (20)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 104268
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 104288
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 9911852
[NUMBER-OF-SHARES-REDEEMED] 9623759
[SHARES-REINVESTED] 99813
[NET-CHANGE-IN-ASSETS] 387886
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1827)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 13504
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 29309
[AVERAGE-NET-ASSETS] 3207145
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 4
[NAME] SCHWAB TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3586104
[INVESTMENTS-AT-VALUE] 3586104
[RECEIVABLES] 33431
[ASSETS-OTHER] 717
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3620252
[PAYABLE-FOR-SECURITIES] 37735
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 17998
[TOTAL-LIABILITIES] 55733
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 160683
[SHARES-COMMON-STOCK] 160683
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 160682
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1635
[OTHER-INCOME] 0
[EXPENSES-NET] 186
[NET-INVESTMENT-INCOME] 1449
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 1448
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1449
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 236471
[NUMBER-OF-SHARES-REDEEMED] 76542
[SHARES-REINVESTED] 754
[NET-CHANGE-IN-ASSETS] 160682
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 190
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 419
[AVERAGE-NET-ASSETS] 84933
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .02
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 5
[NAME] SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1674011
[INVESTMENTS-AT-VALUE] 1674011
[RECEIVABLES] 19731
[ASSETS-OTHER] 200
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1693942
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8239
[TOTAL-LIABILITIES] 8239
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1578359
[SHARES-COMMON-STOCK] 1578359
[SHARES-COMMON-PRIOR] 1294555
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (664)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1577695
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 54646
[OTHER-INCOME] 0
[EXPENSES-NET] 9344
[NET-INVESTMENT-INCOME] 45302
[REALIZED-GAINS-CURRENT] 8
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 45310
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 45302
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4257465
[NUMBER-OF-SHARES-REDEEMED] 4016813
[SHARES-REINVESTED] 43152
[NET-CHANGE-IN-ASSETS] 283812
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (672)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 6388
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 13561
[AVERAGE-NET-ASSETS] 1437526
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE
SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1674011
[INVESTMENTS-AT-VALUE] 1674011
[RECEIVABLES] 19731
[ASSETS-OTHER] 200
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1693942
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8239
[TOTAL-LIABILITIES] 8239
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 108008
[SHARES-COMMON-STOCK] 108008
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 108008
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 488
[OTHER-INCOME] 0
[EXPENSES-NET] 56
[NET-INVESTMENT-INCOME] 432
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 432
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 432
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 125848
[NUMBER-OF-SHARES-REDEEMED] 17914
[SHARES-REINVESTED] 74
[NET-CHANGE-IN-ASSETS] 108008
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 57
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 136
[AVERAGE-NET-ASSETS] 50342
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .01
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .01
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 7
[NAME] SCHWAB U.S. TREASURY MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1184456
[INVESTMENTS-AT-VALUE] 1184456
[RECEIVABLES] 17149
[ASSETS-OTHER] 52
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1201657
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7968
[TOTAL-LIABILITIES] 7968
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1193821
[SHARES-COMMON-STOCK] 1193821
[SHARES-COMMON-PRIOR] 803943
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (132)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1193689
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 57635
[OTHER-INCOME] 0
[EXPENSES-NET] 6503
[NET-INVESTMENT-INCOME] 51132
[REALIZED-GAINS-CURRENT] (60)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 51072
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 51132
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2979266
[NUMBER-OF-SHARES-REDEEMED] 2635740
[SHARES-REINVESTED] 46352
[NET-CHANGE-IN-ASSETS] 389818
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (72)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4575
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9653
[AVERAGE-NET-ASSETS] 1000438
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 8
[CIK]
[NAME] SCHWAB VALUE ADVANTAGE MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 6956238
[INVESTMENTS-AT-VALUE] 6956238
[RECEIVABLES] 65417
[ASSETS-OTHER] 800
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7022455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 98565
[TOTAL-LIABILITIES] 98565
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6924021
[SHARES-COMMON-STOCK] 6924021
[SHARES-COMMON-PRIOR] 3731755
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (131)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 6923890
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 333064
[OTHER-INCOME] 0
[EXPENSES-NET] 22099
[NET-INVESTMENT-INCOME] 310965
[REALIZED-GAINS-CURRENT] (5)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 310960
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 310965
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10404416
[NUMBER-OF-SHARES-REDEEMED] 7474576
[SHARES-REINVESTED] 262426
[NET-CHANGE-IN-ASSETS] 3192261
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (126)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 23799
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 39853
[AVERAGE-NET-ASSETS] 5524637
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 9
[NAME] SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 80518
[INVESTMENTS-AT-VALUE] 80518
[RECEIVABLES] 864
[ASSETS-OTHER] 67
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 81449
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 703
[TOTAL-LIABILITIES] 703
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 80747
[SHARES-COMMON-STOCK] 80747
[SHARES-COMMON-PRIOR] 60088
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 80746
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4774
[OTHER-INCOME] 0
[EXPENSES-NET] 420
[NET-INVESTMENT-INCOME] 4354
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 4353
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4354
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 281164
[NUMBER-OF-SHARES-REDEEMED] 262289
[SHARES-REINVESTED] 1784
[NET-CHANGE-IN-ASSETS] 18874
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 364
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 710
[AVERAGE-NET-ASSETS] 79107
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 10
[NAME] SCHWAB RETIREMENT MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 99911
[INVESTMENTS-AT-VALUE] 99911
[RECEIVABLES] 573
[ASSETS-OTHER] 59
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100543
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1551
[TOTAL-LIABILITIES] 1551
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 98992
[SHARES-COMMON-STOCK] 98992
[SHARES-COMMON-PRIOR] 31415
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 98992
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4616
[OTHER-INCOME] 0
[EXPENSES-NET] 561
[NET-INVESTMENT-INCOME] 4055
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 4055
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4055
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 173890
[NUMBER-OF-SHARES-REDEEMED] 109877
[SHARES-REINVESTED] 3564
[NET-CHANGE-IN-ASSETS] 67577
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 354
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 705
[AVERAGE-NET-ASSETS] 76879
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 11
[NAME] SCHWAB NEW YORK TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 218648
[INVESTMENTS-AT-VALUE] 218648
[RECEIVABLES] 2486
[ASSETS-OTHER] 65
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 221199
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1193
[TOTAL-LIABILITIES] 1193
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 204869
[SHARES-COMMON-STOCK] 204869
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (6)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220006
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 6041
[OTHER-INCOME] 0
[EXPENSES-NET] 995
[NET-INVESTMENT-INCOME] 5046
[REALIZED-GAINS-CURRENT] (6)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5040
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5046
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 671692
[NUMBER-OF-SHARES-REDEEMED] 470949
[SHARES-REINVESTED] 4126
[NET-CHANGE-IN-ASSETS] 204863
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 724
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1637
[AVERAGE-NET-ASSETS] 186583
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .63
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 12
[NAME] SCHWAB NEW YORK TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 218648
[INVESTMENTS-AT-VALUE] 218648
[RECEIVABLES] 2486
[ASSETS-OTHER] 65
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 221199
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1193
[TOTAL-LIABILITIES] 1193
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 15143
[SHARES-COMMON-STOCK] 15143
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220006
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 137
[OTHER-INCOME] 0
[EXPENSES-NET] 16
[NET-INVESTMENT-INCOME] 121
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 121
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 121
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 21284
[NUMBER-OF-SHARES-REDEEMED] 6196
[SHARES-REINVESTED] 55
[NET-CHANGE-IN-ASSETS] 15143
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 17
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 64
[AVERAGE-NET-ASSETS] 7262
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .02
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
