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STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
THE SCHWAB MONEY FUNDS:
SCHWAB MONEY MARKET FUND
SCHWAB GOVERNMENT MONEY FUND
SCHWAB U.S. TREASURY MONEY FUND
SCHWAB TAX-EXEMPT MONEY FUND-SWEEP SHARES
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND-SWEEP SHARES
SCHWAB RETIREMENT MONEY FUND(R)
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R)
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND-SWEEP SHARES
APRIL 29, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectuses dated April 29, 1996, which may be
amended from time to time, 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 (each a "Fund" and collectively, the
"Funds"), 8 separately managed investment portfolios of The Charles Schwab
Family of Funds (the "Trust"). With respect to Schwab Tax-Exempt Money Fund,
Schwab California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money
Fund, each of which is offered in two classes of shares, this Statement of
Additional Information relates to the Sweep Shares of each of those Funds. Prior
to June 6, 1995, Schwab Tax-Exempt Money Fund, Schwab California Tax-Exempt
Money Fund and Schwab New York Tax-Exempt Money Fund were not offered in
multiple classes of shares. The existing shares of those Funds are redesignated
as Sweep Shares. The other Funds listed above are not offered in multiple
classes of shares. To obtain a free copy of one or more of the above-referenced
Prospectuses, please contact Charles Schwab & Co., Inc. ("Schwab") at 800-2
NO-LOAD (800-266-5623), 24 hours a day, or 101 Montgomery Street, San Francisco,
CA 94104. TDD users may contact Schwab at 800-345-2550, 24 hours a day. The
Prospectuses 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 TECHNIQUES...................................................... 8
INVESTMENT RESTRICTIONS.................................................... 9
MANAGEMENT OF THE TRUST.................................................... 17
PORTFOLIO TRANSACTIONS AND TURNOVER........................................ 24
DISTRIBUTIONS AND TAXES.................................................... 25
SHARE PRICE CALCULATION.................................................... 31
YIELD...................................................................... 32
GENERAL INFORMATION........................................................ 35
PURCHASE AND REDEMPTION OF SHARES.......................................... 38
OTHER INFORMATION.......................................................... 38
APPENDIX - RATINGS OF INVESTMENT SECURITIES................................ 40
FINANCIAL STATEMENTS....................................................... F-1
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MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that Schwab Tax-Exempt Money Fund, Schwab
California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund may
purchase include, without limitation, debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which Municipal Securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. The Schwab Tax-Exempt Money Fund, Schwab
California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund may
not be desirable investments for "substantial users" of facilities financed by
private activity 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 securities are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue securities 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.
Municipal notes are instruments issued by or on behalf of governments
and political sub-divisions thereof. Examples include: tax anticipation notes
("TANS"), which are short-term debt instruments issued by a municipality or
state to finance working capital needs of the issuer in anticipation of
receiving taxes on a future date; revenue anticipation notes ("RANS"), which
are short-term debt instruments issued by a municipality or state to provide
cash prior to receipt of expected non-tax revenues from a specific source;
bond anticipation notes ("BANS"), which are short-term debt
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instruments issued by a municipality or state that will be paid off with the
proceeds of an upcoming bond issue; and tax revenue anticipation notes
("TRANS"), which are short-term debt instruments issued by a municipality or
state to finance working capital needs in anticipation of receiving taxes or
other revenues. Construction loan notes are instruments insured by the Federal
Housing Administration with permanent financing by "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by
a municipal issuer. The Schwab Tax-Exempt Money Fund, Schwab California
Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund may purchase
other Municipal Securities similar to the foregoing, which are or may become
available, including securities issued to pre-refund other outstanding
obligations of municipal issuers.
Taxable municipal securities are municipal securities the interest on
which is not exempt from federal income tax. Taxable municipal securities may
include "private activity bonds" that are issued by or on behalf of states or
political subdivisions thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and pollution control and to
finance facilities for charitable institutions. The payment of the principal and
interest on private activity bonds is not backed by a pledge of tax revenues,
and is dependent solely on the ability of the facility's user to meet its
financial obligations. Taxable municipal securities also may include remarketed
certificates of participation.
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
Schwab California Tax-Exempt Money Fund and 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.
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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" include
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. Part of the State's General Fund surplus is
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 conditions since the 1930's.
Construction, manufacturing (especially aerospace), exports and financial
services, among other industries, were 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
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"). However, 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. Fitch recognized
this rebound by raising the State's rating from "A" to "A+" on February 26,
1996.
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit, imposed by its Constitution, on
"proceeds
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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.
1995-96 FISCAL YEAR
Revenues. The 1995-96 Budget Act projected General Fund revenues and
transfers of $44.1 billion, a 3.5% 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 on 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 Governors' 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% 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 1995-96 Budget and the proposed
1996-97 Budget are based upon the Budget Act for 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 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
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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; 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 governments 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 decisions of the California Courts
of Appeal held that parts of Proposition 62 were unconstitutional, the
California Supreme Court recently 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
them 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 governments 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 budget developments on the ability of California issuers to pay interest and
principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent; for example, in December 1994, Orange County filed for
bankruptcy. The California Tax-Exempt Money Fund's concentration in California
municipal securities provides a greater level of risk than a fund that is
diversified across numerous states and municipal entities.
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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 4 counties. Another 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. Although the State
enjoyed good growth throughout the early to mid-1980's, unemployment continues
to be a problem. The State's economy is highly developed and diverse, with a
large emphasis in service, trade, financial services and real estate; however,
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.
The State has a large accumulated deficit, as reflected in its
financial results. The overall wealth of the State's population, as reflected by
its 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 State 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 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 be illustrated by
the changes of its debt rating during the last several years of financial
difficulties: Moody's downgraded the State's general obligation long-term debt
from A1 to A in 1990 and S&P downgraded it from A to A- in early 1992. The State
also carries a long-term rating of A+ from Fitch. The short-term rating
assigned by S&P of A1 is within that NRSRO's two highest rating categories.
Moody's rating on New York City general obligation bonds is Baa1, while S&P
rates them BBB+.
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
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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.
INVESTMENT TECHNIQUES
EURODOLLAR CERTIFICATES OF DEPOSIT
AND FOREIGN SECURITIES
Before investing in Eurodollar certificates of deposit, a Fund will
consider their marketability, possible restrictions on international currency
transactions, and any regulations imposed by the domicile country of the foreign
issuer. Eurodollar certificates of deposit may not be subject to the same
regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes.
Investments in securities of foreign issuers or securities principally
traded overseas may involve certain special risks due to foreign economic,
political and legal developments, including expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, and possible difficulty in obtaining and enforcing judgments against
foreign entities.
SECTION 4(2) PAPER
Commercial Paper and other securities are issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). Federal
securities laws restrict the disposition of Section 4(2) paper. Section 4(2)
paper generally is sold to institutional investors such as the Funds who agree
that they are purchasing the paper for investment and not for public
distribution. Any resale by the purchaser must be in an exempt transaction and
may be accomplished in accordance with Rule 144A. Section 4(2) paper normally is
resold to other institutional investors such as the Funds 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 this market for Section 4(2) paper sold and offered under
Rule 144A will continue to develop, Charles Schwab Investment Management, Inc.
(the "Investment Manager"), pursuant to guidelines approved by the Board of
Trustees, will carefully monitor a Fund's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information.
ASSET-BACKED COMMERCIAL PAPER
AND OTHER SECURITIES
The Schwab Money Market Fund, Schwab Retirement Money Fund(R) and
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Schwab Institutional Advantage Money Fund(R) can invest a portion of their
assets in asset-backed commercial paper and other money market fund Eligible
Securities (as that term is hereinafter defined). The credit quality of most
asset-backed commercial paper depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities) and the amount and quality of any credit support provided to the
securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these 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.
Bank notes are notes used to represent debt obligations issued by banks
in large denominations.
Tax-exempt commercial paper is an unsecured short-term obligation
issued by a government or political sub-division thereof.
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.
EACH OF THE SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND, SCHWAB
RETIREMENT MONEY FUND(R) AND SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) MAY
NOT:
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(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 thereof, more than 5% of the value of its assets would
be invested in the securities of such issuer.
(3) Purchase, in the aggregate with all other Schwab Money Funds, more than
10% of any class of securities of any issuer. All debt securities and
all preferred stocks are each considered as one class.
(4) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers'
acceptances issued by domestic branches of U.S. banks and U.S. branches
of foreign banks (which the Fund has determined to be subject to the
same regulation as U.S. banks), or obligations of, or guaranteed by,
the U.S. Government, its agencies or instrumentalities in accordance
its investment objective and policies.
(5) Invest more than 5% of its total net assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) that, with their predecessors, have a
record of less than three years of continuous operation.
(6) Enter into repurchase agreements if, as a result thereof, more than 10%
its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days and invested in
securities restricted as to disposition under the federal securities
laws (except commercial paper issued under Section 4(2) of the
Securities Act of 1933, as amended). Each Fund will invest no more than
10% of its net assets in illiquid securities.
(7) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except commercial paper
issued under Section 4(2) of the Securities Act of 1933, as amended).
(8) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or its Investment Manager or the
Sub-Adviser individually own beneficially more than 1/2 of 1% of the
securities of such issuer and together beneficially own more than 5% of
the securities of such issuer.
(9) Invest in commodities or commodity contracts, futures contracts, real
estate or real estate limited partnerships, although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
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(10) Invest for the purpose of exercising control or management of another
issuer.
(11) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets. 1
(12) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objectives
and policies), except that Schwab Retirement Money Fund(R) anD Schwab
Institutional Advantage Money Fund(R) may (i) purchase a portion of an
issue of short-term debt securities or similar obligations (including
repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio
securities.
(13) Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the
value of its total assets in order to meet redemption requests without
immediately selling any portfolio securities. The Fund will not borrow
for leverage purposes or purchase securities or make investments while
reverse repurchase agreements or borrowings are outstanding. Any
borrowings by Schwab Money Market Fund or Schwab Government Money Fund
will not be collateralized. If for any reason the current value of the
total net assets of any Fund falls below an amount equal to three
times the amount of indebtedness from money borrowed, such Fund will
within three business days, reduce its indebtedness to the extent
necessary.
(14) Write, purchase or sell puts, calls or combinations thereof.
(15) Make short sales of securities, or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(16) Invest in interests in oil, gas, mineral leases or other mineral
exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(17) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(18) Issue senior securities as defined in the 1940 Act.
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1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
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Except for restrictions (4) and (13), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation.
EACH OF THE SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY
FUND AND SCHWAB NEW YORK TAX-EXEMPT MONEY FUND MAY NOT:
(1) Purchase securities or make investments other than in accordance with
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
Schwab California Tax-Exempt Money Fund and Schwab New York Tax-Exempt
Money Fund, provided no more than 25% of the Fund's total assets would
be invested in the securities of a single issuer, up to 50% of the
value of the Fund's assets may be invested without regard to this 5%
limitation. For purposes of this limitation, the Fund will regard the
entity which has the primary responsibility for the payment of interest
and principal as the issuer.
(3) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or
more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of
governments are not considered to be securities subject to this
industry concentration restriction) or in any one state (although the
limitation as to investments in a state or its political subdivision
shall not apply to Schwab California Tax-Exempt Money Fund or 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 of 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 Schwab California Tax-Exempt Money Fund
and 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 its Investment Manager
individually own beneficially more than 1/2
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of 1% of the securities of such issuer and together own more than 5% of
the securities of such issuer.
(7) Invest in commodities or commodity futures contracts or in real estate,
except that each Fund may invest in Municipal Securities secured by
real estate or interests therein.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets. 2
(10) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(11) Borrow money, except from banks for temporary purposes (but not for the
purpose of purchasing investments), and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Fund are
permitted within the limitations of this paragraph. No such Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.
(12) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.
(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.
- ---------------------------
2 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
13
<PAGE> 14
(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.
THE U.S. TREASURY MONEY FUND MAY NOT:
(1) Purchase securities other than obligations issued by the U.S.
Treasury and securities backed by the "full faith and credit"
guarantee of the U.S. Government that mature in 397 days or less.3
(2) Make loans to others (except through the purchase of debt obligations).
(3) Issue senior securities as defined in the 1940 Act.
(4) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(5) Invest in commodities or in real estate.
(6) Invest for the purpose of exercising control over management of another
company.
(7) Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the
value of the Fund's total assets in order to meet redemption requests
without immediately selling any portfolio securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 33% of the Fund's net assets to secure
borrowings. The Fund will not borrow for leverage purposes or purchase
securities or make investments while reverse repurchase agreements or
borrowings are outstanding. If for any reason the current value of the
total net assets of the Fund falls below an amount equal to three times
the amount of
- ------------------------------
3 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
14
<PAGE> 15
its indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary.
The following restrictions are non-fundamental, and may be changed by the Board
of Trustees.
The U.S. Treasury Money Fund may not:
(1) Invest more than 10% of its assets in securities which are not readily
marketable, including securities which are restricted as to
disposition; or
(2) Engage in short sales, except for short sales against the box.
Each Schwab Money Fund will only purchase securities that present minimal credit
risks and (except in the case of Schwab U.S. Treasury Money Fund) which are
First Tier or Second Tier Securities (otherwise referred to as "Eligible
Securities").4 An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less (12 months or
less in the case of Schwab Money Market and Schwab Government Money
Funds): (a) that is rated by the requisite nationally recognized
statistical rating organizations ("NRSROs") designated by the
Securities and Exchange Commission (the "SEC") (currently Moody's, S&P,
Duff and Phelps Credit Rating Co., Fitch, Thomson Bankwatch, and, with
respect to debt issued by banks, bank holding companies, United Kingdom
building societies, broker-dealers and broker-dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate,
IBCA, Inc.) in one of the two highest rating categories for short-term
debt obligations (two NRSROs are required but one rating suffices if
only one NRSRO rates the security), or (b) that itself was unrated by
any NRSRO, but was issued by an issuer that has outstanding a class of
short-term debt obligations (or any security within that class) meeting
the requirements of subparagraph 1(a) above that is of comparable
priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less (12 months or less in the
case of Schwab Money Market and Schwab Government Money Funds), and (a)
whose issuer received a rating within one of the two highest rating
categories from the requisite NRSROs for short-term debt obligations
with respect to a class of short-term debt obligations (or any security
within that class) that is now comparable in priority and security with
the
- ------------------------------
4 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
15
<PAGE> 16
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 suffices 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.
Schwab Money Market Fund, Schwab Government Money Fund, Schwab Retirement Money
Fund(R) and Schwab InstitutionaL Advantage Money Fund(R) will limit their
investments in the First Tier Securities of any one issuer to no more thaN 5% of
their assets. (Repurchase agreements collateralized by non-Government securities
will be taken into account when making this calculation.) Moreover, each Fund's
total holdings of Second Tier Securities will not exceed 5% of its assets, with
investment in the Second Tier Securities of any one issuer being limited to the
greater of 1% of the Fund's assets or $1 million. In addition, the underlying
securities involved in repurchase agreements collateralized by non-Government
securities will be First Tier Securities at the time the repurchase agreements
are executed.
16
<PAGE> 17
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/BIRTHDAY THE TRUST PRINCIPAL OCCUPATION
- ------------- ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Founder, Chairman, Chief Executive Officer and Director, The Charles
July 29, 1937 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
(board positions), and Chairman (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 Schwab & Co., Inc.
September 19, 1951 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 & Associates
September 23, 1931 (advertising and marketing/consulting).
</TABLE>
- ---------------------------
*Mr. Schwab is an "interested person" of the Trust.
**Mr. McCarthy is an "interested person" of the Trust.
17
<PAGE> 18
<TABLE>
<CAPTION>
POSITION WITH
NAME/BIRTHDAY THE TRUST PRINCIPAL OCCUPATION
- ------------- ------------- --------------------
<S> <C> <C>
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director, Semloh Financial,
May 15, 1931 Inc. (international financial services); and International Investment
Consultant, Cannon Street, Inc. (private investigative firm).
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (real estate investment).
June 28, 1938 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, Wilsey Bennett,
August 18, 1943 Inc. (truck and air transportation, real estate investment and
management, and investments).
A. JOHN GAMBS Treasurer and Principal Executive Vice President - Finance and Chief Financial Officer, The
November 16, 1945 Financial Officer 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.; President and
December 9, 1955 Chief Operating Officer Chief Operating Officer, Charles Schwab Investment Management, Inc.
and Trustee 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, Charles Schwab
April 5, 1955 Chief Investment Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance Officer and Assistant
September 9, 1955 Corporate Secretary, Charles Schwab Investment Management, Inc.
</TABLE>
- ------------------
*Mr. Klipp is an "interested person" of the Trust.
18
<PAGE> 19
<TABLE>
<CAPTION>
POSITION WITH
NAME/BIRTHDAY THE TRUST PRINCIPAL OCCUPATION
- ------------- ------------- --------------------
<S> <C> <C>
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 Investment
June 16, 1961 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
and Schwab Annuity Portfolios. The address of each individual listed above is
101 Montgomery Street, San Francisco, California 94104.
COMPENSATION TABLE 1
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated
Accrued as Part Annual Benefits
of Fund Upon Total
Aggregate Expenses from Retirement from Compensation
Name of Person, Compensation the Fund the Fund from the Fund
Position from the Trust 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>
19
<PAGE> 20
COMPENSATION TABLE 1
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated
Accrued as Part Annual Benefits
of Fund Upon Total
Aggregate Expenses from Retirement from Compensation
Name of Person, Compensation the Fund the Fund from the Fund
Position from the Trust 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 23 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 SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities").
20
<PAGE> 21
"SchwabFunds" include the series or classes of shares of beneficial interest of
the Trust, Schwab Investments and Schwab Capital Trust.
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., 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 22
mutual fundS with over $35 billion in assets as of April 15, 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, the Investment
Manager is entitled to receive from Schwab Money Market Fund a graduated annual
fee, payable monthly, of 0.46% of such Fund's average daily net assets not in
excess of $2 billion, 0.45% of such net assets over $2 billion but not in excess
of $3 billion, and 0.40% of such net assets over $3 billion; the Investment
Manager is entitled to receive from Schwab Government Money Fund and Schwab
Tax-Exempt Money Fund a graduated annual fee, payable monthly, of 0.46% of the
average daily net assets of each such Fund's average daily net assets not in
excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess
of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1993, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Tax-Exempt Money Fund were
21
<PAGE> 22
$19,368,000 (fees were reduced by $11,025,000); $4,558,000 (fees were reduced by
$2,863,000); and $3,494,000 (fees were reduced by $5,424,000), respectively.
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Tax-Exempt Money Fund were $28,697,000 (fees were reduced by $13,405,000);
$5,434,000 (fees were reduced by $2,922,000); and $5,421,000 (fees were reduced
by $6,646,000), respectively.
For the fiscal year ended December 31, 1995, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Tax-Exempt Money Fund were $36,652,000 (fees were reduced by $15,603,000);
$1,901,000 (fees were reduced by $2,777,000); and $6,465,000 (fees were reduced
by $7,229,000), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of each of Schwab California Tax-Exempt
Money Fund, Schwab New York Tax-Exempt Money Fund and Schwab U.S. Treasury Money
Fund's average daily net assets not in excess of $1 billion, 0.41% of such net
assets over $1 billion but not in excess of $2 billion, and 0.40% of such net
assets over $2 billion. In addition, the Investment Manager is entitled to
receive from Schwab Retirement Money Fund(R) and Schwab Institutional Advantage
Money Fund(R) a graduated annual fee, payaBle monthly, of 0.46% of each such
Fund's average daily net assets not in excess of $2 billion, 0.45% of such net
assets over $2 billion but not in excess of $3 billion, and 0.40% of such net
assets over $3 billion.
For the fiscal year ended December 31, 1993, the investment advisory
fees paid by Schwab California Tax-Exempt Money Fund and Schwab U.S. Treasury
Money Fund were $1,437,000 (fees were reduced by $2,450,000) and $483,000 (fees
were reduced by $687,000), respectively. During the fiscal year ended December
31, 1993, no investment advisory fees were paid by the Schwab Institutional
Advantage Money Fund and Schwab Retirement Money Fund.
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by Schwab California Tax-Exempt Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Institutional Advantage Money Fund(R) and SchwaB Retirement Money
Fund(R) were $2,254,000(fees were reduced by $3,274,000); $1,016,000 (fees were
reduced bY $1,442,000); $124,000 (fees were reduced by $96,000); and $75,000
(fees were reduced by $21,000), respectively.
For the fiscal year ended December 31, 1995, the investment advisory
fees paid by Schwab California Tax-Exempt Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Institutional Advantage Money Fund and Schwab Retirement Money Fund
were $2,748,000 (fees were reduced by $3,697,000); $2,748,000 (fees were
reduced by $2,674,000); $202,000 (fees were
22
<PAGE> 23
reduced by $162,000); and $338,000 (fees were reduced by $16,000),
respectively. For the period February 27, 1995 (commencement of operations) to
December 31, 1995, the investment advisory fee paid by Schwab New York Tax-
Exempt Money Fund 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 and the custodian; the cost of
reports and notices to shareholders; the cost of calculating net asset value;
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 a Fund are charged to that Fund
or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
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.
23
<PAGE> 24
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; invest money obtained from the sale of Fund shares; reinvest proceeds
from maturing portfolio securities; and 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 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
24
<PAGE> 25
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 Fund. However, it is the
opinion of the Board of Trustees that the benefits conferred by the Investment
Manager outweigh any disadvantages that may arise from exposure to simultaneous
transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Schwab Money Fund's
portfolio turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of a Fund is determined
("Business Day"), such Fund's net investment income will be declared as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time) as a daily dividend to shareholders of record as of the last calculation
of net asset value prior to the declaration. In the case of Schwab Institutional
Advantage Money Fund(R), for shareholders satisfyinG certain conditions,
investment income will be declared as a daily dividend to shareholders of record
as of that day's calculation of net asset value. Conditions which must be met in
order to receive a dividend for the day on which the order is received by the
Transfer Agent or its authorized agent are: (1) a minimum investment of
$100,000; (2) receipt by Schwab or the Charles Schwab Trust Company before 1:30
p.m. Eastern time; and (3) payment in immediately available funds. Shareholders
will receive dividends in additional shares unless they elect to receive cash.
For each Fund except Schwab Retirement Money Fund(R) and Schwab Institutional
AdvantagE Money Fund, dividends will normally be reinvested monthly in full
shares of the Fund (for Schwab Tax-Exempt Money Fund, Schwab California
Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund dividends will
normally be reinvested monthly in full Sweep Shares of the Fund) at the net
asset value on the 15th day of each month, if a Business Day, otherwise on the
next Business Day. For Schwab Retirement Money Fund(R) and Schwab InstitutionaL
Advantage Money Fund(R), dividends will normally be reinvested monthly in full
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
25
<PAGE> 26
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 income of a Fund (other than Schwab
Tax-Exempt Money Fund, Schwab California Tax-Exempt Money Fund and Schwab New
York Tax-Exempt Money Fund) consists of: (1) accrued interest income, plus or
minus amortized discount or premium, minus (2) accrued expenses allocated to
that Fund. For this purpose, for Schwab Tax-Exempt Money Fund, Schwab California
Tax-Exempt Money Fund and Schwab New York Tax Exempt Money Fund, the net
investment income of the Sweep Shares of each Fund consists of: (1) accrued
interest income plus or minus amortized discount or premium, allocated to the
Sweep Shares of that Fund minus (2) accrued expenses allocated to the Sweep
Shares of that Fund. If a 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 a Fund will
realize any long-term capital gains. Expenses of the Trust are accrued each day.
Should the net asset value 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.
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, U.S. 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
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U.S. Government securities or securities of any other regulated investment
company) or of two or more issuers that the Fund controls, within the meaning of
the Code, and that are engaged in the same, similar or related trades or
businesses. These requirements may restrict the degree to which a Fund may
engage in short-term trading and certain hedging transactions and may limit the
range of the Fund's investments. If a Fund qualifies as a regulated investment
company, it will not be subject to federal income tax on the part of its net
investment income and net realized capital gains, if any, which it distributes
to shareholders, provided that the Fund meets certain minimum distribution
requirements. To comply with these requirements, a Fund must distribute at least
(a) 90% of its "investment company taxable income" (as that term is defined in
the Code) and (b) 90% of the excess of its (i) tax-exempt interest income over
(ii) certain deductions attributable to that income (with certain exceptions),
for its taxable year. Each Fund intends to make sufficient distributions to
shareholders to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net 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
U.S. 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
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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 Funds
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 U.S. In addition, the tax consequences to a foreign
shareholder entitled to claim the benefits of a tax treaty may be different than
those described above. Distributions by a Fund may also be subject to state,
local and foreign taxes, and their treatment under applicable tax laws may
differ from the federal income tax treatment.
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT
MONEY FUND AND SCHWAB NEW YORK
TAX-EXEMPT MONEY FUND
The Code permits a regulated investment company that invests at least
50% of its assets at 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 Schwab Tax-Exempt Money Fund,
Schwab California Tax-Exempt Money Fund or Schwab New York Tax-Exempt Money Fund
and designated as an exempt-interest dividend in a written notice mailed to
shareholders after the close of such Fund's taxable year, but not to exceed in
the aggregate the net Municipal Securities interest income received by each such
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year that qualified as exempt-interest dividends will be the same for
all shareholders receiving dividends from each Fund during such year, regardless
of the period for which the Shares were held. If for any taxable year Schwab
Tax-Exempt Money Fund, Schwab California Tax-Exempt Money Fund or Schwab New
York Tax-Exempt Money Fund does not qualify for the special federal tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to federal tax at regular corporate rates (without any deduction
for distributions to its shareholders) when distributed, and Municipal
Securities interest income,
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although not taxed to the Funds, would be taxable to shareholders.
A shareholder should consult his or her own tax adviser with respect to
whether exempt-interest dividends would be excludable from gross income if the
shareholder were treated as a "substantial user" of facilities financed by an
obligation held by a Fund or a "related person" to such user under the Code. Any
loss on the sale or exchange of any share held for 6 months or less will be
disallowed to the extent of the amount of the exempt-interest dividend received
with respect to such share. The U.S. Treasury Department is authorized to issue
regulations reducing the period to not less than 31 days for certain regulated
investment companies, but no such regulations have been issued as of the date of
this Statement of Additional Information.
All or part of interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund will not be deductible by the
shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of that Fund's total distributions (excluding distributions of the excess of net
long-term capital gains over net short-term capital losses) paid to the
shareholder that are exempt-interest dividends. Under rules used by the Internal
Revenue Service, the purchase of shares of a Fund may be considered to have been
made with borrowed funds even though such funds are not directly traceable to
the purchase of the shares.
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 U.S.) should consult their own tax advisers regarding the consequences of
investing in a Fund.
STATE TAXES
With respect to 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 U.S. 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"). Schwab
California Tax-Exempt Money Fund intends to qualify under the above requirement
so that it can pay California exempt-interest dividends. If Schwab California
Tax-Exempt Money Fund fails to so qualify, no part of its dividends will be
exempt from State of California personal income tax.
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With respect to 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 State and municipal 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, 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 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 Schwab California Tax-Exempt Money Fund) that are allocable from
such interest. Dividends paid by 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 allocable with funds attributable to interest received by the Fund from
California Exempt Obligations for such year in the same ratio as such interest
from California Exempt Obligations for such year bears to the total gross income
earned by the Fund for the year. The effect of this accounting convention is
that amounts of interest from California Exempt Obligations received by 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 be allocable from such amounts.
To the extent, if any, dividends paid to shareholders by 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 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 Schwab California Tax-Exempt and
New York Tax-Exempt Money Funds
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<PAGE> 31
and their shareholders. No attempt is made to present a detailed explanation of
the state personal income tax treatment of 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 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 Schwab Money Fund values its portfolio instruments at amortized cost,
which means they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of a Fund's investments at amortized
cost with market values. Market valuations are obtained by using actual
quotations provided by market makers, estimates of market value or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and a Schwab Money Fund's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees of the Trust believed would result in
a material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If a Schwab Money
Fund's net asset value per share (computed using market values) declined,
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<PAGE> 32
or were expected to decline, below $1.00 (computed using amortized cost), the
Board of Trustees might temporarily reduce or suspend dividend payments in an
effort to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Schwab Money Fund's net asset value per share
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share.
YIELD
The historical performance of a Fund may be shown in the form of
yield, effective yield and, for the Sweep Shares of Schwab Tax-Exempt Money
Fund, Schwab California Tax-Exempt Money Fund and Schwab New York Tax-Exempt
Money Fund, taxable equivalent yield and taxable equivalent effective yield.
These measures of performance are described below.
YIELD
Yield refers to the net investment income generated by a hypothetical
investment in the Fund (or, in the case of Schwab Tax-Exempt Money Fund, Schwab
California Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund, the
Sweep Shares of the Fund) over a specific 7-day period. This net investment
income is then annualized, which means that the net investment income generated
during the 7-day period is assumed to be generated in each 7-day period over an
annual period, and is shown as a percentage of the investment.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Sweep Shares of Schwab Tax-Exempt
Fund is computed by dividing that portion of the yield of the class (computed as
described above) that is tax-exempt by an amount equal to one minus the stated
federal income tax rate (normally assumed to be the maximum applicable marginal
tax bracket rate) and adding the
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<PAGE> 33
result to that portion, if any, of the yield of the class that is not
tax-exempt. The taxable equivalent yield of the Sweep Shares of Schwab
California Tax-Exempt Money Fund is calculated by dividing that portion of the
yield of the class (computed as described above) which is tax-exempt by an
amount equal to one minus the stated combined State of California and federal
income tax rate (normally assumed to be the maximum federal marginal rate of
39.6% and the California marginal rate of 9.3%, although other rates may be used
at times), and adding the result to that portion, if any, of the yield of the
class that is not tax-exempt. The taxable equivalent yield of the Sweep Shares
of Schwab New York Tax-Exempt Money Fund is calculated by dividing that portion
of the yield of the class (computed as described above) which is tax-exempt by
an amount equal to one minus the stated combined New York municipal, State of
New York and federal income tax rate (normally assumed to be the maximum federal
marginal rate of 39.6%, the State of New York marginal rate of 7.125% 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 yield of the class
that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, Schwab Tax-Exempt Money Fund generally assumes an effective tax rate of
39.6%, Schwab California Tax-Exempt Money Fund generally assumes an effective
tax rate (combining the federal 39.6% rate and the California 9.30% rate, and
assuming the taxpayer deducts California state taxes paid) of 45.22%, and 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 Schwab New York Tax-Exempt Money
Fund should understand that, under legislation enacted in New York State and New
York City, the maximum effective tax rates for 1997 will be 45.79%. 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 or ($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 Sweep Shares of Schwab Tax-Exempt
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Money Fund, Schwab California Tax-Exempt Money Fund or Schwab New York
Tax-Exempt Money Fund by (1) minus your marginal federal tax rate (or combined
state and federal tax rate in the case of Schwab California Tax-Exempt Money
Fund, or combined municipal, state, and federal tax rate in the case of Schwab
New York Tax-Exempt Money Fund). Note, however, that as discussed above full or
partial loss by certain investors of the described federal tax benefits could
cause the resulting figure to understate the after-tax return produced by the
Sweep Shares of the Fund in question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1995 is presented below. The taxable equivalent yield and
taxable equivalent effective yield figures are based, in the case of Schwab
Tax-Exempt Money Fund, upon an assumed 1995 effective tax rate of 39.6%; in the
case of Schwab California Tax-Exempt Money Fund, upon an assumed effective tax
rate of 45.22%; in the case of Schwab New York Tax-Exempt Money Fund, upon an
assumed effective tax rate of 46.27%. (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 Money Market Fund 5.11% 5.24% -- --
Schwab Government Money Fund 4.99% 5.11% -- --
Schwab U.S. Treasury Money Fund 4.89% 5.01% -- --
Schwab Tax-Exempt 3.96% 4.04% 6.56% 6.69%
Money Fund-Sweep Shares
Schwab California Tax-Exempt 3.78% 3.85% 7.03% 7.16%
Money Fund-Sweep Shares
Schwab New York Tax-Exempt 3.83% 3.90% 7.21% 7.35%
Money Fund-Sweep Shares
</TABLE>
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GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of Trust
(other than amendments changing the name of the Trust or any of its investment
portfolios, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5)
determining whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) such additional matters as may be required by law,
the Declaration of Trust, the Bylaws or any registration of the Trust with the
SEC or any state or as the Board of Trustees may consider desirable. The
shareholders also would vote upon changes to a Fund's fundamental investment
objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that 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;
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<PAGE> 36
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 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 March 31, 1996, The Charles Schwab Trust Company FBO Mutual Fund
FSI2 Trading, One Montgomery Street, 7th Floor, San Francisco, California 94104
directly or beneficially owned 77.35% of Schwab Retirement Money Fund(R).
As March 31, 1996, The Charles Schwab Trust Company TTEE Technology
Financial Assoc. Inc., Retirement Savings Plan, FBO Henry H. Hoffman, One
Montgomery Street, 7th Floor, San Francisco, California 94104 directly or
beneficially owned 77.35% and Queens-Long Island Medical Group-401K Plan, 106
EAB Plaza, 12th Floor, Uniondale, New York 11556 directly or beneficially owned
11.06% of Schwab Institutional Advantage Money Fund(R).
In addition, as of April 16, 1996 the officers and trustees of the
Trust, as a group, owned less than 1% of each Fund's outstanding voting
securities.
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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 Fund(R) 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.
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PURCHASE AND REDEMPTION OF SHARES
With the exception of Schwab Retirement Money Fund(R) and Schwab
Institutional Advantage Money Fund(R), each Fund's minimum initial investment is
$1,000 and subsequent investments of $100 or more may be made. For Schwab
Retirement Money Fund and Schwab Institutional Advantage Money Fund the minimum
initial investment is $1 and $25,000 for each Fund, respectively, and subsequent
investments of $1 or more may be made. These minimum requirements may be changed
at any time and are not applicable to certain types of investors. For all
retirement plan, Schwab One(R) and certain other types of accounts, any account
credit balance in excess of $1.00 and subsequent amounts of $1.00 on any
Business Day will be automatically invested on a daily basis in the Schwab Money
Fund selected (except that this feature is not available for Schwab Retirement
Money Fund or Schwab Institutional Advantage Money Fund). The Trust may waive
the minimums for purchases by trustees, directors, officers or employees of the
Trust, Schwab or the Investment Manager. The Trust has made an election with the
SEC to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
its net assets at the beginning of such period. This election is irrevocable
without the SEC's prior approval. Redemption requests in excess of the stated
limits may be paid, in whole or in part, in investment securities or in cash, as
the Trust's Board of Trustees may deem advisable; however, payment will be made
wholly in cash unless the Board of Trustees believes that economic or market
conditions exist that would make such a practice detrimental to the best
interests of the Fund. If redemption proceeds are paid in investment securities,
such securities will be valued as set forth in the Prospectus of the Fund
affected under "Share Price Calculation" and a redeeming shareholder would
normally incur brokerage expenses if he or she converted the securities to cash.
The Schwab Institutional Advantage Money Fund and Schwab Retirement Money Fund
may also elect to invoke a 7-day period for cash settlement of individual
redemption requests in excess of $250,000 or 1% of each Fund's net assets,
whichever is less.
OTHER INFORMATION
The Prospectuses of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectuses.
Certain portions of the Registration Statement have been omitted from
the Prospectuses and this Statement of
38
<PAGE> 39
Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
Statements contained in the Prospectuses or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectuses and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
39
<PAGE> 40
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 U.S. 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-two 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.
40
<PAGE> 41
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
41
<PAGE> 42
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 U.S. 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.
42
<PAGE> 43
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
CORPORATE
OBLIGATIONS--55.9%(a)
ASSET BACKED SECURITIES--9.2%
Apreco, Inc.
5.67%, 03/07/96 $20,000 $19,795
Asset Securitization
Cooperative Corp.
5.83%, 02/01/96 25,000 24,875
Beta Finance, Inc.
5.78%, 02/05/96 26,500 26,355
5.60%, 05/24/96 25,000 24,455
Broadway Capital Corp.
5.86%, 01/08/96 80,000 79,910
5.92%, 01/12/96 30,179 30,125
5.97%, 02/20/96 10,000 9,918
CXC Inc.
5.71%, 02/29/96 61,000 60,435
Corporate Asset Funding Corp.
5.77%, 02/05/96 17,000 16,906
Corporate Receivables Corp.
5.74%, 02/23/96 28,100 27,866
ESC Securitization, Inc.
5.79%, 01/24/96 25,000 24,909
5.79%, 01/25/96 15,000 14,943
5.79%, 01/26/96 15,000 14,941
5.77%, 02/08/96 25,000 24,850
5.76%, 02/21/96 16,000 15,871
5.58%, 03/21/96 44,000 43,462
Enterprise Funding Corp.
5.81%, 01/09/96 49,041 48,979
5.83%, 01/22/96 26,067 25,980
5.82%, 01/24/96 18,251 18,184
5.84%, 02/02/96 23,804 23,682
5.78%, 02/14/96 12,681 12,593
5.78%, 02/15/96 20,289 20,144
5.75%, 02/23/96 18,649 18,493
5.70%, 03/14/96 21,518 21,273
5.70%, 03/19/96 25,072 24,767
5.58%, 03/20/96 19,705 19,467
5.74%, 05/16/96 10,295 10,078
Eureka Securitization, Inc.
5.78%, 02/15/96 17,000 16,879
5.62%, 03/13/96 50,000 49,445
5.71%, 03/18/96 25,000 24,699
Falcon Asset
Securitization Corp.
5.77%, 02/06/96 25,750 25,604
First Deposit Master Trust
Series 1993-3
5.71%, 03/06/96 30,000 29,695
5.58%, 03/21/96 10,118 9,994
Preferred Receivables Corp.
5.84%, 02/08/96 36,825 36,600
5.76%, 02/12/96 34,375 34,148
Ranger Funding Corp.
5.84%, 01/08/96 21,000 20,977
5.81%, 01/09/96 20,000 19,975
5.81%, 01/10/96 11,000 10,984
5.78%, 02/13/96 10,000 9,932
5.76%, 02/22/96 15,000 14,877
5.62%, 03/04/96 14,500 14,359
5.62%, 03/15/96 10,000 9,886
5.58%, 03/19/96 10,000 9,881
Receivables Capital Corp.
5.84%, 01/10/96 42,886 42,824
5.81%, 01/26/96 38,463 38,310
5.81%, 02/01/96 40,097 39,899
5.79%, 02/21/96 31,677 31,421
Sheffield Receivables Corp.
5.81%, 01/08/96 16,000 15,982
Special Purpose Accounts
Receivable Cooperative Corp.
5.78%, 02/13/96 18,000 17,877
WCP Funding, Inc.
5.79%, 01/22/96 15,000 14,950
5.76%, 02/16/96 25,000 24,819
5.75%, 02/16/96 10,000 9,928
5.70%, 03/18/96 15,800 15,610
---------
1,292,811
---------
AUTOMOTIVE--3.5%
Ford Credit Europe PLC
5.81%, 02/05/96 25,000 24,861
5.79%, 02/05/96 25,000 24,861
5.76%, 02/14/96 50,000 49,654
5.76%, 02/15/96 41,200 40,908
General Motors
Acceptance Corp.
5.82%, 02/09/96 100,000 99,381
5.82%, 02/14/96 30,000 29,790
5.62%, 03/19/96 9,000 8,892
5.72%, 04/22/96 99,000 97,284
5.72%, 05/01/96 70,000 68,691
Renault Credit International SA
Banque
5.83%, 02/15/96 49,600 49,244
--------
493,566
--------
BANKING--AUSTRALIA--1.2%
ANZ (Delaware), Inc.
5.79%, 02/05/96 28,350 28,193
5.55%, 05/10/96 25,000 24,511
5.56%, 05/13/96 25,000 24,498
Westpac Capital Corp.
5.79%, 05/01/96 50,000 49,054
5.54%, 06/12/96 50,000 48,780
--------
175,036
--------
BANKING--BELGIUM--1.2%
Generale Bank, Inc.
5.67%, 01/10/96 129,000 128,822
5.74%, 03/12/96 20,000 19,780
5.80%, 04/03/96 25,000 24,636
--------
173,238
--------
BANKING--CANADA--4.1%
Bank of Montreal
5.79%, 01/11/96 53,000 52,916
5.81%, 01/29/96 132,000 131,413
Bank of Nova Scotia
5.75%, 01/19/96 65,000 64,817
5.75%, 01/24/96 50,000 49,820
5.81%, 02/01/96 50,000 49,754
5.82%, 02/02/96 90,000 89,542
5.81%, 02/02/96 84,000 83,573
Toronto-Dominion Holdings
5.51%, 07/10/96 60,000 58,303
--------
580,138
--------
</TABLE>
F-1
<PAGE> 44
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--DENMARK--0.2%
Den Danske Corp.
5.80%, 04/10/96 $ 30,000 $ 29,530
-------
BANKING--DOMESTIC BANK
HOLDING COMPANY--2.2%
Bankers Trust New York Corp.
5.77%, 02/12/96 25,000 24,834
NationsBank Corp.
5.80%, 01/22/96 67,000 66,777
5.69%, 01/23/96 75,000 74,744
5.80%, 02/08/96 100,000 99,400
5.80%, 02/09/96 20,000 19,877
5.55%, 05/21/96 30,000 29,364
-------
314,996
-------
BANKING--GERMANY--0.4%
Banco Boavista S.A./
(Bayerische Vereinsbank
AG LOC)
5.81%, 01/19/96 10,000 9,971
Kredietbank N.A.
Finance Corp.
5.78%, 01/08/96 18,500 18,480
5.78%, 01/17/96 30,000 29,925
-------
58,376
-------
BANKING--ITALY--0.5%
Cariplo Finance, Inc.
5.76%, 02/15/96 25,000 24,823
5.77%, 02/20/96 40,000 39,684
-------
64,507
-------
BANKING--JAPAN--0.9%
Bancal Tri-State Corp./
(Mitsubishi Bank
Keepwell Agreement)
5.86%, 02/22/96 25,000 24,792
5.81%, 03/15/96 40,000 39,531
Deerfield Capital Corp./
(Sumitomo Bank Ltd. LOC)
6.15%, 01/05/96 38,800 38,774
Ridge Capital II/(Dai-Ichi
Kangyo Bank Ltd. LOC)
6.15%, 01/05/96 14,550 14,540
Stellar Capital Corp./
(Bank of Tokyo
Liquidity Agreement)
6.01%, 02/26/96 12,873 12,754
-------
130,391
-------
BANKING--UNITED KINGDOM--2.0%
Bank of Scotland
Treasury Services
5.53%, 06/11/96 55,000 53,668
Cheltenham & Gloucester PLC
5.80%, 01/29/96 50,000 49,778
5.79%, 02/01/96 30,000 29,852
5.77%, 02/07/96 40,000 39,766
Yorkshire Building Society
5.81%, 02/05/96 25,000 24,861
5.77%, 02/13/96 30,000 29,796
5.69%, 03/13/96 25,000 24,720
5.60%, 05/29/96 25,000 24,436
-------
276,877
-------
COMPUTER AND OFFICE EQUIPMENT--0.2%
CSC Enterprises
5.80%, 01/19/96 29,000 28,917
-------
FINANCE (COMMERCIAL)--8.8%
CIT Group Holdings, Inc.
5.76%, 02/14/96 63,000 62,563
5.77%, 02/16/96 50,000 49,637
General Electric
Capital Corp.
5.76%, 02/13/96 100,000 99,322
5.69%, 03/28/96 63,000 62,150
5.70%, 04/03/96 43,000 42,379
5.55%, 05/02/96 25,000 24,540
5.59%, 05/06/96 156,000 153,019
5.62%, 05/07/96 64,000 62,763
5.51%, 06/12/96 36,000 35,126
5.52%, 06/14/96 60,000 58,526
5.53%, 07/26/96 50,000 48,465
General Electric
Capital Services
5.76%, 02/12/96 50,000 49,669
5.76%, 02/13/96 50,000 49,661
5.76%, 02/15/96 54,000 53,617
5.74%, 03/06/96 64,000 63,355
5.70%, 04/03/96 50,000 49,278
5.61%, 05/03/96 25,000 24,532
5.59%, 05/07/96 50,000 49,037
5.58%, 05/08/96 23,000 22,554
5.52%, 06/13/96 75,000 73,169
Transamerica Finance Corp.
5.74%, 02/22/96 50,000 49,591
5.74%, 02/23/96 50,000 49,583
---------
1,232,536
---------
FINANCE (CONSUMER)--4.0%
American Express Credit Corp.
5.81%, 03/01/96 47,000 46,556
5.75%, 03/08/96 45,000 44,532
5.60%, 05/09/96 43,000 42,157
5.58%, 05/15/96 28,000 27,428
5.57%, 05/15/96 50,000 48,978
5.50%, 06/06/96 39,000 38,090
5.50%, 06/10/96 40,000 39,043
Associates Corp. of
North America
5.65%, 05/09/96 122,000 119,587
Household Finance Corp.
5.80%, 01/25/96 17,000 16,935
Sears Roebuck
Acceptance Corp.
5.82%, 01/10/96 50,000 49,928
5.82%, 01/11/96 34,000 33,946
5.79%, 02/14/96 30,000 29,791
5.79%, 02/16/96 30,000 29,781
--------
566,752
--------
GOVERNMENT LOCALITY--FOREIGN--0.7%
New South Wales
Treasury Corp.
5.81%, 01/10/96 19,000 18,973
5.80%, 01/30/96 76,000 75,650
--------
94,623
--------
</TABLE>
F-2
<PAGE> 45
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
MINING AND MINERAL RESOURCES--0.2%
BHP Finance (U.S.A.), Inc.
5.79%, 02/22/96 $ 15,000 $ 14,877
5.76%, 02/23/96 10,000 9,917
-------
24,794
-------
MISCELLANEOUS MANUFACTURING--2.4%
Hanson Finance (U.K.) PLC
5.82%, 01/12/96 32,000 31,944
5.80%, 01/12/96 60,500 60,394
5.81%, 01/19/96 60,000 59,829
5.80%, 01/19/96 32,000 31,909
5.84%, 02/01/96 115,000 114,434
5.75%, 02/29/96 35,000 34,675
5.58%, 03/21/96 10,000 9,878
-------
343,063
-------
MORTGAGE BANKING--0.5%
Fleet Mortgage Group, Inc.
5.86%, 01/26/96 25,000 24,900
5.81%, 02/22/96 23,000 22,810
5.66%, 03/06/96 25,000 24,747
-------
72,457
-------
PERSONAL CARE PRODUCTS--0.4%
Colgate-Palmolive Co.
5.80%, 01/22/96 52,000 51,827
-------
PHARMACEUTICALS--0.5%
Glaxo Wellcome PLC
5.79%, 01/17/96 50,000 49,873
5.79%, 01/18/96 22,000 21,941
-------
71,814
-------
SECURITIES BROKERAGE-DEALER--12.3%
BT Securities Corp.
5.84%, 01/25/96 18,000 17,931
5.77%, 02/16/96 20,000 19,855
Bear Stearns
Companies, Inc.
5.79%, 02/07/96 65,000 64,619
CS First Boston, Inc.
5.79%, 01/08/96 30,000 29,967
5.82%, 02/05/96 30,000 29,833
Dean Witter Discover
5.79%, 01/19/96 30,000 29,915
5.79%, 02/08/96 23,000 22,862
5.79%, 02/16/96 25,000 24,818
Goldman Sachs Group, LP
5.82%, 01/11/96 100,000 99,841
5.83%, 01/17/96 120,000 119,694
5.83%, 01/18/96 50,000 49,865
5.75%, 01/24/96 50,000 49,820
5.80%, 03/08/96 123,000 121,704
5.77%, 03/21/96 24,000 23,700
5.77%, 03/22/96 44,000 43,443
5.72%, 04/08/96 50,000 49,238
5.72%, 04/09/96 100,000 98,460
Lehman Brothers
Holdings, Inc.
5.74%, 03/15/96 25,000 24,710
5.64%, 03/27/96 16,000 15,787
Morgan Stanley Group,
Inc.
5.83%, 01/08/96 30,000 29,966
5.83%, 01/09/96 42,000 41,946
5.83%, 01/10/96 50,000 49,928
5.78%, 02/06/96 183,000 181,957
5.78%, 02/07/96 50,000 49,707
5.79%, 02/08/96 70,000 69,579
5.79%, 02/09/96 15,000 14,907
5.79%, 02/12/96 75,000 74,501
5.89%, 02/13/96 35,000 34,761
Nomura Holdings
America, Inc.
5.92%, 01/03/96 13,000 12,996
5.92%, 01/04/96 39,000 38,981
5.85%, 01/11/96 15,000 14,976
5.88%, 01/12/96 5,000 4,991
5.86%, 01/18/96 20,000 19,946
5.86%, 01/22/96 9,000 8,970
Paine Webber Group, Inc.
5.95%, 01/03/96 15,000 14,995
5.95%, 01/05/96 35,000 34,977
Salomon, Inc.
6.15%, 01/02/96 16,902 16,899
6.02%, 02/14/96 40,000 39,710
6.02%, 02/15/96 40,000 39,704
---------
1,730,459
---------
STUDENT LOANS--0.5%
Student Loan Corp.
5.77%, 02/16/96 25,000 24,819
5.76%, 02/16/96 25,000 24,819
--------
49,638
--------
TOTAL CORPORATE OBLIGATIONS (Cost
$7,856,346) 7,856,346
---------
VARIABLE RATE OBLIGATIONS--6.8%(b)
ASSET BACKED SECURITIES--0.2%
Advanta Credit Card
Master Trust
5.87%, 01/07/96 24,000 24,000
--------
BANKING--DOMESTIC BANK
HOLDING COMPANY--0.5%
Bankers Trust New York Corp.
6.13%, 01/02/96 75,000 75,000
--------
BANKING--DOMESTIC--0.1%
6700 Cherry Avenue
Partners Variable Rate
Demand Bonds Series
1993/
(Wells Fargo Bank LOC)
6.35%, 01/07/96 10,500 10,500
--------
BANKING--FRANCE--1.0%
New Jersey Economic
Development Authority
Taxable Adjustable Rate
Money Market Securities
(GE Aerospace Camden
Development Project)
Series A/(Banque
Nationale de Paris LOC)
5.86%, 01/07/96 28,700 28,700
</TABLE>
F-3
<PAGE> 46
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Jersey Economic
Development Authority
Taxable Adjustable Rate
Money Market Securities
(GE Aerospace Camden
Development Project)
Series B/(Banque
Nationale de Paris LOC)
5.86%, 01/07/96 $10,000 $ 10,000
The City of New York,
General Obligation
Bonds, Fiscal 1995
Series F-8/
(Societe Generale LOC)
6.00%, 01/07/96 51,000 51,000
The City of New York,
General Obligation
Bonds, Fiscal 1996
Series A-2/
(Societe Generale LOC)
6.00%, 01/07/96 52,500 52,500
-------
142,200
-------
BANKING--GERMANY--0.2%
General Obligation
Refunding Bonds of the
County of Hudson
Variable Rate Demand
Obligations Taxable
Series 1995/ (Landesbank
Hessen-Thuringen
Girozentrale LOC)
6.05%, 01/07/96 22,540 22,540
-------
BANKING--JAPAN--0.1%
Baldwin Park
Redevelopment Agency
1993 Refunding Revenue
Bonds (Baldwin Park
Hotel Project)/
(Sumitomo Bank LOC)
6.07%, 01/09/96 14,700 14,700
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 6,275 6,275
-------
20,975
-------
BANKING--NETHERLANDS--0.2%
New Jersey Economic
Development Authority
Adjustable Rate Lease
Revenue Taxable Bonds
(Barnes & Noble, Inc.
Distribution and Freight
Consolidation Center
Project) Series 1995A/
(Rabobank Nederland N.V.
LOC)
5.86%, 01/07/96 21,700 21,700
New Jersey Economic
Development Authority
Adjustable Rate Lease
Revenue Taxable Bonds
(Barnes & Noble, Inc.
Distribution and Freight
Consolidation Center
Project) Series 1995B/
(Rabobank Nederland N.V.
LOC)
5.86%, 01/07/96 10,000 10,000
-------
31,700
-------
CITY OR COUNTY
GENERAL OBLIGATIONS--0.3%
Orange County, California
Taxable Notes Series
1994-1995 (d)
5.97%, 06/30/96 41,500 41,500
-------
EDUCATION--0.3%
Development Authority of
Dekalb County Taxable
Variable Rate Revenue
Bonds (Emory University
Project) Series 1995B
6.05%, 01/07/96 36,415 36,415
-------
INSURANCE--0.7%
Commonwealth Life
Insurance Co.
6.03%, 01/01/96 100,000 100,000
-------
MONOLINE INSURANCE--0.3%
Baptist Health Systems of
South Florida, Inc. Taxable
Variable Rate Direct Note
Obligations Series 1995A/
(MBIA Insurance)
6.05%, 01/07/96 13,000 13,000
Baptist Health Systems of
South Florida, Inc. Taxable
Variable Rate Direct Note
Obligations Series 1995B/
(MBIA Insurance)
6.05%, 01/07/96 19,000 19,000
</TABLE>
F-4
<PAGE> 47
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Orleans Aviation
Board Taxable Refunding
Bonds Series 1993A/
(MBIA Insurance)
6.01%, 01/07/96 $ 3,800 $ 3,800
-------
35,800
-------
SECURITIES BROKERAGE-DEALER--2.9%
Bear Stearns
Companies, Inc.
6.03%, 01/04/96 125,000 125,000
5.99%, 01/08/96 50,000 50,000
5.99%, 02/01/96 100,000 100,000
5.91%, 03/21/96 30,000 30,000
Lehman Brothers
Holdings, Inc.
5.90%, 01/30/96 100,000 100,000
-------
405,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $945,630) 945,630
-------
AGENCY OBLIGATIONS--1.6%
COUPON NOTES--1.6%
Federal National
Mortgage Assoc.
5.50%, 06/12/96 56,000 55,959
5.62%, 07/02/96 72,000 71,956
5.91%, 08/19/96 100,000 100,156
-------
TOTAL AGENCY OBLIGATIONS
(Cost $228,071) 228,071
-------
BANK NOTES--4.0%
BANKING--DOMESTIC--4.0%
Bank of America Illinois
5.80%, 01/09/96 95,000 95,000
FCC National Bank
5.52%, 06/06/96 50,000 50,000
5.52%, 06/07/96 50,000 50,000
First of America--Indiana
5.80%, 01/09/96 21,000 21,000
Mellon Bank N.A.
5.80%, 04/02/96 100,000 100,000
5.80%, 10/17/96 30,000 29,987
NationsBank, N.A.
(Carolinas)
5.54%, 06/04/96 50,000 50,000
5.54%, 06/06/96 50,000 50,000
PNC Bank, N.A.
5.58%, 05/24/96 15,000 15,016
Sea First--Seattle
5.80%, 01/11/96 50,000 50,000
5.80%, 01/12/96 50,000 50,000
-------
TOTAL BANK NOTES
(Cost $561,003) 561,003
-------
CERTIFICATES OF DEPOSIT--29.8%
BANKING--CANADA--3.0%
Bank of Montreal
5.84%, 01/05/96 25,000 25,000
5.79%, 01/11/96 25,000 25,000
5.80%, 01/31/96 50,000 50,000
Canadian Imperial Bank
of Commerce
5.81%, 01/24/96 57,000 57,000
5.81%, 01/26/96 125,000 125,000
5.81%, 01/31/96 140,000 140,000
-------
422,000
-------
BANKING--DOMESTIC--0.5%
MBNA America Bank N.A.
5.75%, 04/10/96 33,000 33,000
5.63%, 04/16/96 10,000 10,000
5.62%, 04/19/96 25,000 25,000
-------
68,000
-------
BANKING--FRANCE--4.5%
Banque Nationale de Paris
5.80%, 02/08/96 10,000 10,010
5.58%, 05/07/96 10,000 10,002
5.55%, 05/10/96 18,750 18,749
5.54%, 06/13/96 20,000 20,001
5.47%, 09/16/96 90,000 90,116
Societe Generale
5.84%, 01/18/96 137,000 137,001
5.80%, 01/25/96 145,000 145,000
5.84%, 03/05/96 60,000 60,004
5.74%, 03/07/96 60,000 60,014
5.84%, 03/14/96 25,000 25,002
5.85%, 03/20/96 20,000 20,000
5.78%, 04/17/96 35,000 35,060
-------
630,959
-------
BANKING--GERMANY--2.3%
Commerzbank AG
5.79%, 01/16/96 25,000 25,000
5.79%, 01/17/96 50,000 50,000
Deutsche Bank
5.79%, 01/23/96 125,000 125,000
5.79%, 01/30/96 125,000 125,000
-------
325,000
-------
BANKING--JAPAN--13.6%
Dai-Ichi Kangyo Bank,
Ltd.
6.12%, 01/12/96 30,000 30,000
6.10%, 01/12/96 40,000 40,000
6.22%, 01/18/96 22,000 22,000
6.22%, 01/19/96 25,000 25,000
6.30%, 01/22/96 18,000 18,000
6.42%, 01/23/96 50,000 49,996
6.42%, 01/24/96 25,000 25,000
6.42%, 01/25/96 25,000 25,000
6.42%, 01/26/96 25,000 25,000
6.02%, 02/09/96 27,000 27,004
6.02%, 02/12/96 20,000 20,003
5.88%, 02/21/96 50,000 49,996
5.86%, 03/20/96 32,000 31,997
</TABLE>
F-5
<PAGE> 48
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Industrial Bank of
Japan, Ltd.
6.25%, 01/02/96 $ 69,000 $ 69,000
6.23%, 01/03/96 70,000 70,000
6.25%, 01/04/96 75,000 75,000
6.15%, 01/04/96 52,000 52,000
6.14%, 01/05/96 33,000 33,000
Mitsubishi Bank, Ltd.
6.15%, 01/02/96 50,000 50,000
6.14%, 01/02/96 25,000 25,000
6.14%, 01/03/96 25,000 25,000
5.82%, 03/01/96 49,000 49,013
5.84%, 03/05/96 25,000 25,001
5.82%, 03/06/96 12,000 12,001
5.88%, 03/08/96 40,000 39,994
5.83%, 03/12/96 39,000 38,998
5.80%, 03/12/96 50,000 50,001
5.83%, 03/14/96 60,000 60,001
5.83%, 03/19/96 60,000 60,000
5.83%, 03/20/96 55,000 55,000
Sanwa Bank, Ltd.
6.02%, 02/05/96 10,000 10,001
6.17%, 02/20/96 39,000 39,000
6.15%, 02/20/96 94,000 94,003
6.22%, 02/21/96 72,000 72,001
5.92%, 02/29/96 50,000 50,004
5.82%, 04/15/96 20,000 19,999
5.81%, 04/23/96 50,000 50,002
Sumitomo Bank, Ltd.
6.26%, 01/02/96 35,000 35,000
6.18%, 01/03/96 25,000 25,000
6.38%, 01/05/96 48,000 48,000
6.18%, 01/09/96 25,000 25,000
6.25%, 01/30/96 50,000 50,000
6.25%, 01/31/96 50,000 50,000
5.80%, 02/27/96 50,000 50,001
5.70%, 03/19/96 55,000 55,001
5.70%, 03/20/96 60,000 60,001
---------
1,911,018
---------
BANKING--NETHERLANDS--1.9%
ABN-AMRO Bank N.V.
5.83%, 02/21/96 37,000 36,995
5.57%, 05/08/96 15,000 14,998
5.75%, 06/04/96 25,000 24,978
5.78%, 06/05/96 17,000 16,983
5.75%, 06/05/96 120,000 119,892
5.58%, 06/05/96 58,000 57,988
--------
271,834
--------
BANKING--SWITZERLAND--0.7%
Union Bank of Switzerland
5.55%, 05/03/96 100,000 100,003
--------
BANKING--UNITED KINGDOM--3.3%
Abbey National PLC
5.80%, 01/16/96 146,000 145,996
5.56%, 05/13/96 25,000 24,997
5.53%, 06/14/96 100,000 100,004
5.58%, 06/21/96 70,000 70,020
Bank of Scotland
5.54%, 06/10/96 25,000 24,996
5.51%, 06/11/96 50,000 50,002
National Westminster Bank
PLC
5.72%, 02/06/96 16,000 16,000
5.70%, 04/09/96 25,000 25,001
--------
457,016
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $4,185,830) 4,185,830
---------
REMARKETED CERTIFICATES--0.6%
ASSET BACKED SECURITIES--0.6%
Black & Decker
RECOP Trust
5.73%, 03/13/96 36,592 36,591
5.62%, 03/26/96 15,000 15,000
Circuit City RECOP Trust
5.75%, 03/04/96 27,000 27,000
--------
TOTAL REMARKETED CERTIFICATES
(Cost $78,591) 78,591
--------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENT--1.3%(c)
Salomon Brothers, Inc. 5.92%
Issue Date 12/29/95
Due 01/02/96
Collateralized By:
FHLMC: $47,069 Par;
6.00% Due 11/01/98
FNMA: $42,421 Par;
7.00% Due 05/01/08
FNMA: $42,404 Par;
9.00% Due 04/01/25
FNMA: $42,917 Par;
9.00% Due 03/01/25
FHLMC: $11,137 Par;
6.00% Due 09/01/23
FHLMC: $1,280 Par;
11.25% Due 02/15/15
FHLMC: $35,066 Par;
9.00% Due 03/01/25 185,122 185,000
--------
TOTAL REPURCHASE AGREEMENT
(Cost $185,000) 185,000
--------
TOTAL INVESTMENTS--100.0%
(Cost $14,040,471) $14,040,471
===========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-6
<PAGE> 49
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--17.6%(b)
Federal Home Loan Bank
5.75%, 02/14/96 $ 20,000 $ 20,000
5.51%, 03/08/96 10,000 9,996
5.47%, 03/08/96 20,000 19,994
Student Loan Marketing
Assoc.
5.50%, 01/02/96 29,010 29,038
5.45%, 01/02/96 9,165 9,185
5.43%, 01/02/96 21,675 21,702
5.40%, 01/02/96 125,330 125,299
5.27%, 01/02/96 25,000 25,002
5.26%, 01/02/96 40,000 40,000
5.23%, 01/02/96 30,000 30,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $330,216) 330,216
-------
AGENCY OBLIGATIONS--33.1%
COUPON NOTES--21.5%
Federal Farm Credit Bank
5.88%, 09/03/96 25,000 25,004
Federal Home Loan Bank
7.15%, 01/26/96 28,950 28,955
6.91%, 02/21/96 26,000 26,035
6.11%, 05/17/96 25,000 25,027
8.25%, 05/27/96 9,040 9,125
7.81%, 07/17/96 11,240 11,353
Federal National Mortgage
Assoc.
9.20%, 01/10/96 16,155 16,165
6.46%, 03/27/96 45,000 45,071
6.27%, 04/03/96 15,000 15,010
5.59%, 07/01/96 13,085 13,066
5.62%, 07/02/96 25,000 24,984
8.00%, 07/10/96 19,980 20,191
5.91%, 08/19/96 25,000 25,039
5.64%, 09/09/96 30,000 29,980
5.60%, 09/20/96 20,000 19,981
5.50%, 09/23/96 10,000 9,981
5.68%, 10/07/96 40,000 39,988
5.37%, 12/18/96 20,000 19,990
-------
404,945
-------
DISCOUNT NOTES--11.6%
Federal Farm Credit Bank
5.49%, 02/05/96 15,000 14,920
5.75%, 02/06/96 17,425 17,328
Federal Home Loan Bank
5.74%, 02/05/96 12,000 11,935
5.39%, 03/22/96 11,000 10,868
5.39%, 03/27/96 9,600 9,478
Federal Home Loan Mortgage
Corp.
5.56%, 01/05/96 930 929
5.70%, 01/16/96 45,025 44,919
5.89%, 02/01/96 15,000 14,927
5.42%, 03/07/96 15,000 14,853
5.41%, 03/18/96 34,575 34,180
Federal National Mortgage
Assoc.
5.34%, 09/24/96 20,000 19,239
5.38%, 10/30/96 25,000 23,918
-------
217,494
-------
TOTAL AGENCY OBLIGATIONS
(Cost $622,439) 622,439
-------
U.S. TREASURY OBLIGATIONS--1.0%
U.S. Treasury Notes
4.25%, 05/15/96 $20,000 $ 19,888
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $19,888) 19,888
-------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENTS--48.3%(c)
CS First Boston Corp.
5.72%
Issue Date 12/05/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $40,765 Par;
6.50% Due 04/15/08
FHLMC: $12,000 Par;
6.50% Due 02/15/24
FNMA: $1,195 Par;
6.00% Due 11/25/97 35,790 35,603
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.70%
Issue Date 12/14/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $29,580 Par;
6.07% Due 10/25/17 26,478 26,378
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/02/95
Last Put Date 12/27/95
Due 01/03/96
Collateralized By:
FHLMC: $32,345 Par;
6.58% Due 12/15/23
FHLMC: $24,740 Par;
6.10% Due 12/15/23 50,743 50,000
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/04/95
Last Put Date 12/28/95
Due 01/04/96
Collateralized By:
FNMA: $23,795 Par;
6.25% Due 06/25/20
FNMA: $16,600 Par; 6.10%
Due 12/25/13
FHLMC: $22,000 Par; 9.50%
Due 04/15/20
FNMA: $10,000 Par;
6.53% Due 03/25/24 55,000 54,204
</TABLE>
F-7
<PAGE> 50
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/12/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $46,270 Par;
6.50% Due 11/25/17
FNMA: $6,425 Par;
6.50% Due 05/25/21 $41,011 $40,449
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/17/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $21,865 Par;
5.75% Due 07/25/20
FNMA: $14,725 Par;
6.52% Due 03/25/24
FNMA: $390 Par;
6.50% Due 09/25/20 31,018 30,617
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/18/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $23,975 Par;
5.75% Due 09/25/16 21,976 21,695
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/23/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $23,395 Par;
7.18% Due 02/25/22 22,595 22,324
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 12/15/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $27,500 Par;
6.50% Due 07/25/18
FNMA: $8,885 Par;
6.50% Due 07/25/23 34,725 34,598
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.76%
Issue Date 10/25/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $21,555 Par;
5.75% Due 07/25/20
FHLMC: $31,425 Par;
7.00% Due 02/15/22 30,043 29,691
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.78%
Issue Date 11/22/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $22,945 Par;
6.83% Due 02/15/21 22,708 22,542
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.81%
Issue Date 11/16/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $30,000 Par;
6.50% Due 08/15/08
FNMA: $14,365 Par;
5.00% Due 12/25/12 36,627 36,322
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.81%
Issue Date 12/04/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $68,455 Par;
6.49% Due 03/15/24 64,258 63,907
Fuji Securities, Inc.
5.75%
Issue Date 11/01/95
Due 01/08/96
Collateralized By:
U.S. Treasury Notes:
$27,370 Par;
9.13% Due 05/15/99
U.S. Treasury Notes: $200
Par;
6.00% Due 06/30/96 30,326 30,000
Lehman Government
Securities, Inc. 5.75%
Issue Date 10/03/95
Last Put Date 12/26/95
Due 01/02/96
Collateralized By:
FHLMC: $29,600 Par;
5.85% Due 10/15/02
FNMA: $24,057 Par;
8.00% Due 06/01/07
FHLMC: $22,200 Par;
5.50% Due 11/01/00
FHLMC: $769 Par;
6.00% Due 05/15/08 57,350 56,528
Lehman Government
Securities, Inc. 5.75%
Issue Date 12/11/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $13,763 Par;
6.00% Due 08/15/07
FHLMC: $14,794 Par;
5.82% Due 08/15/23
FNMA: $16,570 Par;
6.00% Due 11/25/19
FNMA: $10,000 Par;
6.50% Due 04/25/23
FHLMC: $505 Par;
6.00% Due 05/15/08 44,264 44,074
</TABLE>
F-8
<PAGE> 51
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
Lehman Government
Securities, Inc. 5.76%
Issue Date 10/24/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $18,753 Par;
6.46% Due 09/15/07
FNMA: $9,358 Par;
7.09% Due 10/25/23
FNMA: $18,270 Par;
6.24% Due 08/25/19
FHLMC: $20 Par;
6.50% Due 10/15/08
FHLMC: $938 Par;
6.00% Due 05/15/08 $35,436 $35,016
Lehman Government
Securities, Inc. 5.76%
Issue Date 10/26/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $12,139 Par;
6.25% Due 11/15/08
FHLMC: $9,033 Par;
6.50% Due 01/15/02
FNMA: $13,187 Par;
7.00% Due 11/01/08
FHLMC: $600 Par;
6.00% Due 05/15/08 27,368 27,052
Lehman Government
Securities, Inc. 5.80%
Issue Date 12/08/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $8,777 Par;
7.50% Due 11/15/21
FNMA: $13,332 Par;
6.30% Due 04/25/17
FHLMC: $12,321 Par;
7.50% Due 05/01/09
FNMA: $15,000 Par;
8.50% Due 01/01/08
FHLMC: $9,919 Par;
6.50% Due 10/01/99 44,743 44,528
Lehman Government
Securities, Inc. 5.81%
Issue Date 12/06/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FNMA: $10,341 Par; 6.47%
Due 03/25/24
FHLMC: $4,664 Par;
6.53% Due 11/15/21
FNMA: $21,000 Par;
7.00% Due 08/25/23
FHLMC: $500 Par;
6.00% Due 05/15/08 34,305 34,129
Lehman Government
Securities, Inc. 5.82%
Issue Date 12/13/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $45,760 Par;
6.70% Due 01/15/22
FHLMC: $19,450 Par;
7.00% Due 01/15/23
FNMA: $10,750 Par;
6.24% Due 01/25/24 33,809 33,673
Salomon Brothers, Inc.
5.75%
Issue Date 11/27/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $34,664 Par;
7.00% Due 12/01/99
FHLMC: $4,142 Par;
6.00% Due 11/15/07
U.S. Treasury Notes:
$144 Par;
11.25% Due 02/15/15 22,976 22,827
Salomon Brothers, Inc.
5.80%
Issue Date 11/17/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $17,100 Par;
5.00% Due 09/15/20
FNMA: $32,900 Par;
7.50% Due 06/01/09
FNMA: $38,485 Par;
8.00% Due 06/01/07 61,075 60,577
Salomon Brothers, Inc.
5.84%
Issue Date 11/30/95
Last Put Date 12/29/95
Due 01/05/96
Collateralized By:
FHLMC: $25,201 Par;
8.00% Due 08/01/25
FNMA: $50,000 Par;
8.00% Due 06/01/07
FNMA: $3,921 Par;
7.00% Due 12/01/99 U.S.
Treasury Notes:
$210 Par;
11.25% Due 02/15/15 50,776 50,481
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $907,215) 907,215
--------
TOTAL INVESTMENTS--100.0%
(Cost $1,879,758) $1,879,758
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-9
<PAGE> 52
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--100.0%
U.S. Treasury Bills
5.37%-5.51%, 01/11/96 $ 18,275 $ 18,248
5.34%-5.60%, 01/18/96 12,115 12,084
5.46%, 01/25/96 20,000 19,928
5.58%, 02/01/96 15,000 14,930
5.39%-5.50%, 02/08/96 119,465 118,786
5.38%-5.43%, 02/15/96 5,355 5,319
5.39%-5.42%, 02/22/96 33,670 33,410
5.02%-5.52%, 03/07/96 119,935 118,764
5.49%, 03/14/96 1,525 1,508
5.02%, 03/28/96 11,960 11,817
U.S. Treasury Notes
9.25%, 01/15/96 100,000 100,129
4.00%-7.50%, 01/31/96 78,505 78,462
4.63%-8.88%, 02/15/96 174,250 174,369
4.63%, 02/29/96 108,705 108,543
7.75%, 03/31/96 40,000 40,198
9.38%, 04/15/96 20,000 20,198
5.50%-7.63%, 04/30/96 100,000 100,296
7.38%, 05/15/96 50,000 50,341
5.88%, 05/31/96 54,290 54,385
7.88%, 07/15/96 25,000 25,313
6.13%, 07/31/96 25,000 25,097
6.50%, 09/30/96 23,775 23,980
6.88%, 10/31/96 28,000 28,351
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,184,456) 1,184,456
---------
TOTAL INVESTMENTS--100.0%
(Cost $1,184,456) $1,184,456
==========
</TABLE>
NOTES TO SCHEDULES OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below and Treasury and Agency
notes which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income
tax purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Money Market Fund are
private placement securities exempt from registration by Section 4(2) of
the Securities Act of 1933. These securities generally are issued to
institutional investors, such as the Schwab Money Market Fund. Any
resale by the 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 Schwab Money Market Fund was
$2,002,545,000 which represented 14.29% of net assets. Of this total,
$1,723,954,000 or 12.30% 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.
(Continued on next page)
F-10
<PAGE> 53
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS. (CONTINUED)
(c) Due dates shown for repurchase agreements represent either the final
maturity date or put date, which is considered the maturity date for
financial reporting purposes.
(d) With respect to this security, as of December 31, 1995, the Schwab
Money Market Fund was the beneficiary under a $10,375,000 irrevocable
letter of credit issued by Bank of America National Trust and Savings
Association which allows the Fund to make a demand for partial payment
of the security's principal amount under certain conditions upon
maturity or disposition of the security by the Fund. The letter of
credit, which expires on August 1, 1996, does not provide complete
credit support, and therefore, the Fund continues to be exposed to some
risk of loss of principal of the security. The Charles Schwab
Corporation has agreed to reimburse the bank for any payments made by
the bank to the Fund under this letter of credit. See Note 7 to the
Financial Statements for further discussion.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
F-11
<PAGE> 54
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
----------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $14,040,471, $1,879,758
and $1,184,456, respectively) $14,040,471 $1,879,758 $ 1,184,456
Cash -- 24 2
Interest receivable 67,867 18,397 17,149
Deferred organization costs -- -- 11
Prepaid expenses 2,426 80 39
----------- ---------- ----------
Total assets 14,110,764 1,898,259 1,201,657
----------- ---------- ----------
LIABILITIES
Payable for:
Dividends 90,867 12,349 7,248
Investment advisory and
administration fee 3,450 471 188
Transfer agency and shareholder
service fees 4,962 693 387
Other 1,098 177 145
----------- ---------- ----------
Total liabilities 100,377 13,690 7,968
----------- ---------- ----------
Net assets applicable to
outstanding shares $14,010,387 $1,884,569 $ 1,193,689
=========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in $14,010,737 $1,884,838 $ 1,193,821
Accumulated net realized loss
on investments sold (350) (269) (132)
----------- ---------- ----------
$14,010,387 $1,884,569 $ 1,193,689
=========== ========== ==========
THE PRICING OF SHARES
Outstanding shares,
$0.00001 par value
(unlimited shares
authorized) 14,010,737 1,884,838 1,193,821
Net asset value, offering and
redemption price per share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-12
<PAGE> 55
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- -------------
<S> <C> <C> <C>
Interest income $760,926 $113,106 $57,635
-------- -------- -------
Expenses:
Investment advisory and
administration fee 52,254 8,280 4,575
Transfer agency and
shareholder service fees 56,873 8,540 4,502
Custodian fees 886 262 206
Registration fees 1,185 88 221
Professional fees 359 52 26
Shareholder reports 1,275 205 82
Trustees' fees 78 12 5
Amortization of deferred
organization
costs and other prepaid
expenses 120 3 14
Insurance and other expenses 390 59 22
-------- -------- -------
113,420 17,501 9,653
Less expenses reduced (18,632) (3,268) (3,150)
-------- -------- -------
Total expenses incurred by Fund 94,788 14,233 6,503
-------- -------- -------
Net investment income 666,138 98,873 51,132
Net realized gain (loss) on
investments sold 4 (162) (60)
-------- -------- -------
Increase in net assets resulting
from operations $666,142 $ 98,711 $51,072
======== ======== =======
</TABLE>
See accompanying Notes to Financial Statements.
F-13
<PAGE> 56
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Money Schwab Government Schwab U.S. Treasury
Market Fund Money Fund Money Fund
--------------------------- ------------------------- -------------------------
\------------------------- For the year ended December 31, -----------------------\
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 666,138 $ 371,652 $ 98,873 $ 68,248 $ 51,132 $ 19,233
Net realized gain
(loss)
on investments sold 4 (124) (162) (23) (60) (45)
------------ ------------ ----------- ----------- ----------- -----------
Increase in net assets
resulting from
operations 666,142 371,528 98,711 68,225 51,072 19,188
------------ ------------ ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income (666,138) (371,652) (98,873) (68,248) (51,132) (19,233)
------------ ------------ ----------- ----------- ----------- -----------
Capital share
transactions (dollar
amounts and
number of shares
are the same):
Proceeds from shares
sold 35,277,474 27,194,342 4,120,476 4,092,811 2,979,266 1,791,760
Net asset value of
shares issued in
reinvestment of
dividends 630,347 323,920 95,940 61,588 46,352 15,433
Less payments for
shares redeemed (33,124,743) (24,455,432) (4,229,013) (4,001,651) (2,635,740) (1,381,420)
------------ ------------ ----------- ----------- ----------- -----------
Increase (decrease)
in net assets from
capital share
transactions 2,783,078 3,062,830 (12,597) 152,748 389,878 425,773
------------ ------------ ----------- ----------- ----------- -----------
Total increase (decrease)
in net assets 2,783,082 3,062,706 (12,759) 152,725 389,818 425,728
------------ ------------ ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 11,227,305 8,164,599 1,897,328 1,744,603 803,871 378,143
------------ ------------ ----------- ----------- ----------- -----------
End of period $ 14,010,387 $ 11,227,305 $ 1,884,569 $ 1,897,328 $ 1,193,689 $ 803,871
============ ============ =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-14
<PAGE> 57
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab
U.S. Treasury Money Fund (the "Funds") are series of The Charles Schwab Family
of Funds (the "Trust"), an open-end, management investment company organized as
a Massachusetts business trust on October 20, 1989 and registered under the
Investment Company Act of 1940, as amended.
In addition to the three funds described above, the Trust also offers -- the
Schwab Tax-Exempt Money Fund (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
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 Money Market Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations. The Schwab Government
Money Fund invests exclusively in a diversified portfolio of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements thereon. The Schwab U.S. Treasury Money Fund invests
solely in United States Treasury notes, bills and other direct obligations of
the United States Treasury, backed by the full faith and credit of the United
States Government.
2. SIGNIFICANT ACCOUNTING POLICIES
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 Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds 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.
F-15
<PAGE> 58
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Schwab Money Market Fund pays an annual fee, payable
monthly, of .46% of the first $2 billion of average daily net assets, .45% of
such assets over $2 billion, and .40% of such assets in excess of $3 billion.
For advisory services and facilities furnished, the Schwab Government Money Fund
and the Schwab U.S. Treasury Money Fund each pay an annual fee, payable monthly,
of .46% of the first $1 billion of each Fund's average daily net assets, .41% of
such assets over $1 billion, and .40% of such assets in excess of $2 billion.
Under these agreements, the Schwab Money Market Fund, the Schwab Government
Money Fund and the Schwab U.S. Treasury Money Fund incurred investment advisory
and administration fees of $52,254,000, $8,280,000 and $4,575,000, respectively,
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 .45% of each Fund's average daily net assets.
For the year ended December 31, 1995, the Schwab Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred transfer
agency and shareholder service fees of $56,873,000, $8,540,000 and $4,502,000,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 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 Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred fees of
$78,000, $12,000 and $5,000, respectively, related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the ratio of operating expenses to average net assets for each Fund. For
the year ended December 31, 1995, the total of such fees reduced by the
Investment Manager was $15,603,000, $2,777,000 and $2,674,000 for the Schwab
Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury
Money Fund, respectively, and the total of such fees reduced by Schwab was
$3,029,000, $491,000 and $476,000 for the Schwab Money Market Fund, the
F-16
<PAGE> 59
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund,
respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab
Schwab Money Schwab Government U.S. Treasury
Market Fund Money Fund Money Fund
------------ ----------------- -------------
<S> <C> <C> <C>
Purchases $54,457,921 $10,324,703 $ 4,666,466
Proceeds of sales and maturities $51,703,327 $10,338,043 $ 4,283,007
</TABLE>
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Money Market Fund
----------------------------------------------------------------
\--------------- For the year ended December 31, --------------\
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .06
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
----------- ----------- ---------- ---------- ----------
Total from investment operations .05 .04 .03 .03 .06
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.06)
Distributions from realized gain on
investments -- -- -- -- --
----------- ----------- ---------- ---------- ----------
Total distributions (.05) (.04) (.03) (.03) (.06)
----------- ----------- ---------- ---------- ----------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== ========== ========== ==========
Total return (%) 5.41 3.68 2.67 3.48 5.70
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $14,010,387 $11,227,305 $8,164,599 $6,134,167 $4,866,584
Ratio of expenses to
average net assets (%) .75 .74 .73 .70 .78
Ratio of net investment income to
average net assets (%) 5.27 3.68 2.64 3.40 5.52
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Money
Market Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991
would have been .90%, .90%, .91%, .92% and .94%, respectively, and the ratio of
net investment income to average net assets would have been 5.12%, 3.52%, 2.46%,
3.18% and 5.36%, respectively.
F-17
<PAGE> 60
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Government Money Fund
--------------------------------------------------------------
\-------------- For the year ended December 31, -------------\
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .05
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from investment operations .05 .04 .03 .03 .05
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.05)
Distributions from realized gain
on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (.05) (.04) (.03) (.03) (.05)
---------- ---------- ---------- ---------- ----------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total return (%) 5.34 3.62 2.66 3.42 5.53
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,884,569 $1,897,328 $1,744,603 $1,592,793 $1,458,705
Ratio of expenses to
average net assets (%) .75 .74 .73 .72 .70
Ratio of net investment income to
average net assets (%) 5.21 3.56 2.63 3.36 5.38
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Government
Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991
would have been .92%, .92%, .93%, .94% and .95%, respectively, and the ratio of
net investment income to average net assets would have been 5.04%, 3.38%, 2.43%,
3.14% and 5.13%, respectively.
F-18
<PAGE> 61
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
------------------------------------------------------------------
For the period
\------ For the year ended December 31, ------\ ended
December 31,
1995 1994 1993 1992 1991 1
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .01
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
---------- -------- -------- -------- -------
Total from investment operations .05 .04 .03 .03 .01
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.01)
Distributions from realized gain on
investments -- -- -- -- --
---------- -------- -------- -------- -------
Total distributions (.05) (.04) (.03) (.03) (.01)
---------- -------- -------- -------- -------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ======== ======== ======== =======
Total return (%) 5.25 3.52 2.54 3.26 .68
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,193,689 $803,871 $378,143 $178,895 $16,906'
Ratio of expenses to
average net assets (%) .65 .65 .65 .59 .24*
Ratio of net investment income to
average net assets (%) 5.11 3.60 2.50 2.91 4.11*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab U.S.
Treasury Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992
and 1991 would have been .96%, 1.00%, 1.05%, 1.15% and 4.11%*, respectively, and
the ratio of net investment income to average net assets would have been 4.80%,
3.25%, 2.10%, 2.35% and .24%*, respectively.
1 For the period November 6, 1991 (commencement of operations) to December 31,
1991.
* Annualized
F-19
<PAGE> 62
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
On December 6, 1994, Orange County, California and the investment pool
maintained by Orange County filed for protection under Chapter 9 of the federal
Bankruptcy Code. At December 31, 1995, the Schwab Money Market Fund had 0.30% of
its net assets, or $41,500,000, in a security issued directly by Orange County.
Prior to this security's original maturity date, the terms of this security were
revised to extend the maturity to June 30, 1996, increase the security's
interest rate and revise the interest payment schedule to require partial
payments of interest prior to June 30, 1996 with a final payment of interest
together with principal on June 30, 1996.
As of December 31, 1995, the Schwab Money Market Fund was the beneficiary under
a $10,375,000 irrevocable letter of credit issued by Bank of America National
Trust and Savings Association which permits the Fund to make a demand for
partial payment under certain conditions upon maturity or disposition of the
Orange County security. This letter of credit does not provide complete credit
support, and therefore, the Fund continues to be exposed to some risk of loss of
principal of the Orange County security. The Charles Schwab Corporation has
agreed to reimburse the bank for any payments made by the bank to the Fund under
this letter of credit. The letter of credit has not been needed to maintain the
Fund's net asset value of $1.00 per share.
F-20
<PAGE> 63
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Money Market Fund,
the Schwab Government Money Fund and
the Schwab U.S. Treasury Money Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and 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 Money Market Fund, the
Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund (three
series constituting part of The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of 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, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-21
<PAGE> 64
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-22
<PAGE> 65
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-23
<PAGE> 66
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
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 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-24
<PAGE> 67
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-25
<PAGE> 68
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-26
<PAGE> 69
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-27
<PAGE> 70
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-28
<PAGE> 71
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-29
<PAGE> 72
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-30
<PAGE> 73
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-31
<PAGE> 74
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-32
<PAGE> 75
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-33
<PAGE> 76
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-34
<PAGE> 77
SchwabFunds(R) 14
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- --------------------------------------------------------------------------------
<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-35
<PAGE> 78
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-36
<PAGE> 79
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-37
<PAGE> 80
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-38
<PAGE> 81
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-39
<PAGE> 82
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-40
<PAGE> 83
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-41
<PAGE> 84
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-42
<PAGE> 85
SchwabFunds(R) 22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-43
<PAGE> 86
SchwabFunds(R) 23
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-44
<PAGE> 87
SchwabFunds(R) 24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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--6.00%(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-45
<PAGE> 88
SchwabFunds(R) 25
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-46
<PAGE> 89
SchwabFunds(R) 26
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-47
<PAGE> 90
SchwabFunds(R) 27
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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>
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 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 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 Tax-Exempt 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 $139,017,000 which
represented 3.90% of net assets. 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.
F-48
<PAGE> 91
SchwabFunds(R) 28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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.
<TABLE>
<CAPTION>
Abbreviations
---------------
<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-49
<PAGE> 92
SchwabFunds(R) 29
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $3,586,104) $3,586,104
Cash 166
Interest receivable 30,491
Receivable for fund shares sold 2,940
Prepaid expenses 551
----------
Total assets 3,620,252
----------
LIABILITIES
Payable for:
Dividends 15,284
Fund shares redeemed 670
Investments purchased 37,735
Investment advisory and administration fee 603
Transfer agency and shareholder service fees 1,157
Other 284
----------
Total liabilities 55,733
----------
Net assets applicable to outstanding shares $3,564,519
==========
NET ASSETS CONSIST OF:
Capital paid in $3,566,367
Accumulated net realized loss on investments sold (1,848)
----------
$3,564,519
==========
THE PRICING OF SHARES
3,405,684 outstanding Sweep Shares and
160,683 outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares authorized) 3,566,367
Net asset value, offering and redemption price per each
Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-50
<PAGE> 93
SchwabFunds(R) 30
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $127,090
--------
Expenses:
Investment advisory and administration fee 13,694
Transfer agency and shareholder service fees:
Sweep Shares 14,432
Value Advantage Shares 103
Custodian fees 380
Registration fees 400
Professional fees 187
Shareholder reports 296
Trustees' fees 21
Amortization of deferred organization costs and
other prepaid expenses 76
Insurance and other expenses 139
--------
29,728
Less expenses reduced and absorbed (8,375)
--------
Total expenses incurred by Fund 21,353
--------
Net investment income 105,737
Net realized loss on investments sold (21)
--------
Increase in net assets resulting from operations $105,716
========
</TABLE>
See accompanying Notes to Financial Statements.
F-51
<PAGE> 94
SchwabFunds(R) 31
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
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 $ 105,737 $ 65,678
Net realized loss on investments sold (21) (1,586)
----------- -----------
Increase in net assets resulting
from operations 105,716 64,092
----------- -----------
Dividends to shareholders from
net investment income:
Sweep Shares (104,288) (65,678)
Value Advantage Shares (1,449) --
----------- -----------
Total dividends to shareholders (105,737) (65,678)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 10,148,323 8,184,151
Net asset value of shares issued in
reinvestment of dividends 100,567 57,664
Less payments for shares redeemed (9,700,301) (7,647,595)
----------- -----------
Increase in net assets from capital
share transactions 548,589 594,220
----------- -----------
Total increase in net assets 548,568 592,634
Net Assets:
Beginning of period 3,015,951 2,423,317
----------- -----------
End of period $ 3,564,519 $ 3,015,951
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-52
<PAGE> 95
SchwabFunds(R) 32
- --------------------------------------------------------------------------------
SCHWAB 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 "Fund") is a series of The Charles Schwab
Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
The Board of Trustees of the Trust adopted a multiple class plan for the Fund on
May 9, 1995. Commencing July 7, 1995, the Fund began offering more than one
class of shares. Pursuant to the plan, the existing shares were redesignated as
Sweep Shares ("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 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 Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the
Schwab New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), 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.
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 -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the 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.
F-53
<PAGE> 96
SchwabFunds(R) 33
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
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.
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. Expenses attributable to both
classes of shares are allocated daily to each class 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 based on the value of settled shares outstanding of each respective
class.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$13,694,000 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 .45% and .25% of average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the year ended
December 31, 1995, the Fund incurred transfer agency and shareholder service
fees of $14,432,000 and $103,000 for the Sweep Shares and Value Advantage
Shares, respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 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 $21,000 related to
the Trust's unaffiliated trustees.
F-54
<PAGE> 97
SchwabFunds(R) 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Fund's ratio of operating expenses to
average net assets. For the year ended December 31, 1995, the total of such fees
and expenses reduced and absorbed by the Investment Manager were $7,229,000 and
the total of such fees reduced by Schwab was $1,146,000.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, aggregated (in thousands) $6,419,657 and $5,869,911,
respectively.
6. CAPITAL SHARE TRANSACTIONS
The 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 Fund. Transactions in capital shares were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1995* 1994
----------- -----------
<S> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 9,911,852 $ 8,184,151
Value Advantage Shares 236,471 --
----------- -----------
Total proceeds from shares sold 10,148,323 8,184,151
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 99,813 57,664
Value Advantage Shares 754 --
----------- -----------
Total net asset value of shares issued in
reinvestment of dividends 100,567 57,664
Less payments for shares redeemed:
Sweep Shares (9,623,759) (7,647,595)
Value Advantage Shares (76,542) --
----------- -----------
Total payments for shares redeemed (9,700,301) (7,647,595)
Total increase in net assets from
capital share transactions $ 548,589 $ 594,220
=========== ===========
</TABLE>
* The Value Advantage Shares commenced operations on July 7, 1995.
F-55
<PAGE> 98
SchwabFunds(R) 35
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Value
Advantage
Shares Sweep Shares
-------------- ----------------------------------------------------------
For the period
ended For the year ended December 31,
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 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-56
<PAGE> 99
SchwabFunds(R) 36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 (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
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-57
<PAGE> 100
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
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-58
<PAGE> 101
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-59
<PAGE> 102
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-60
<PAGE> 103
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-61
<PAGE> 104
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-62
<PAGE> 105
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-63
<PAGE> 106
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-64
<PAGE> 107
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-65
<PAGE> 108
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-66
<PAGE> 109
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<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-67
<PAGE> 110
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 Schedule of Investments.
F-68
<PAGE> 111
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 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 Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab California Tax-Exempt Money Fund. Any
resale by the Fund must be in an exempt transaction, normally to a
qualified institutional buyer. At December 31, 1995, the aggregate
value of private placement securities held by the Fund was $91,038,000
which represented 5.40% of net assets. 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.
<TABLE>
<CAPTION>
Abbreviations
- --------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-69
<PAGE> 112
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $1,674,011) $1,674,011
Cash 38
Interest receivable 14,817
Receivable for fund shares sold 4,914
Prepaid expenses 162
----------
Total assets 1,693,942
----------
LIABILITIES
Payable for:
Dividends 6,832
Fund shares redeemed 485
Investment advisory and administration fee 267
Transfer agency and shareholder service fees 536
Other 119
----------
Total liabilities 8,239
----------
Net assets applicable to outstanding shares $1,685,703
==========
NET ASSETS CONSIST OF:
Capital paid in $1,686,367
Accumulated net realized loss on investments sold (664)
----------
$1,685,703
==========
THE PRICING OF SHARES
1,578,359 outstanding Sweep Shares and
108,008 outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares authorized) 1,686,367
Net asset value, offering and redemption price per each
Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-70
<PAGE> 113
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $55,134
-------
Expenses:
Investment advisory and administration fee 6,445
Transfer agency and shareholder service fees:
Sweep Shares 6,469
Value Advantage Shares 31
Custodian fees 244
Registration fees 207
Professional fees 103
Shareholder reports 64
Trustees' fees 9
Amortization of deferred organization costs and
other prepaid expenses 50
Insurance and other expenses 75
-------
13,697
Less expenses reduced and absorbed (4,297)
-------
Total expenses incurred by Fund 9,400
-------
Net investment income 45,734
Net realized gain on investments sold 8
-------
Increase in net assets resulting from operations $45,742
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-71
<PAGE> 114
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
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 $ 45,734 $ 27,608
Net realized gain (loss) on
investments sold 8 (600)
----------- -----------
Increase in net assets resulting
from operations 45,742 27,008
----------- -----------
Dividends to shareholders from
net investment income:
Sweep Shares (45,302) (27,608)
Value Advantage Shares (432) --
----------- -----------
Total dividends to shareholders (45,734) (27,608)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 4,383,313 3,435,641
Net asset value of shares issued in
reinvestment of dividends 43,226 24,116
Less payments for shares redeemed (4,034,727) (3,227,316)
----------- -----------
Increase in net assets from capital
share transactions 391,812 232,441
----------- -----------
Total increase in net assets 391,820 231,841
Net Assets:
Beginning of period 1,293,883 1,062,042
----------- -----------
End of period $ 1,685,703 $ 1,293,883
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-72
<PAGE> 115
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab California Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
The Board of Trustees of the Trust adopted a multiple class plan for the Fund on
May 9, 1995. Commencing October 3, 1995, the Fund 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 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 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 New
York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), 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 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.
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 -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the 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.
F-73
<PAGE> 116
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
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. Expenses attributable to both
classes of shares are allocated daily to each class 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 based on the value of settled shares outstanding of each respective
class.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$6,445,000 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 .45% and .25% of average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the year ended
December 31, 1995, the Fund incurred transfer agency and shareholder service
fees of $6,469,000 and $31,000 for the Sweep Shares and Value Advantage Shares,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 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 $9,000 related to the
Trust's unaffiliated trustees.
F-74
<PAGE> 117
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
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 Fund's ratio of operating expenses to
average net assets. For the year ended December 31, 1995, the total of such fees
and expenses reduced and absorbed by the Investment Manager were $3,707,000 and
the total of such fees reduced by Schwab was $590,000.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, aggregated (in thousands) $3,297,957 and $2,925,680,
respectively.
6. CAPITAL SHARE TRANSACTIONS
The 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 Fund. Transactions in capital shares were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1995* 1994
----------- -----------
<S> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 4,257,465 $ 3,435,641
Value Advantage Shares 125,848 --
----------- -----------
Total proceeds from shares sold 4,383,313 3,435,641
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 43,152 24,116
Value Advantage Shares 74 --
----------- -----------
Total net assets of shares issued in
reinvestment of dividends 43,226 24,116
Less payments for shares redeemed:
Sweep Shares (4,016,813) (3,227,316)
Value Advantage Shares (17,914) --
----------- -----------
Total payments for shares redeemed (4,034,727) (3,227,316)
Total increase in net assets from
capital share transactions $ 391,812 $ 232,441
=========== ===========
</TABLE>
* The Value Advantage Shares commenced operations on October 3, 1995.
F-75
<PAGE> 118
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Value
Advantage
Shares
------------- Sweep Shares
For the --------------------------------------------------------------
period
ended \-------------- For the year ended December 31, -------------\
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 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-76
<PAGE> 119
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab California Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 California Tax-Exempt Money Fund
(one of the series constituting The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 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
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, provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-77
<PAGE> 120
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
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-78
<PAGE> 121
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
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-79
<PAGE> 122
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-80
<PAGE> 123
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
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>
F-81
<PAGE> 124
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 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 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 New York Tax-Exempt 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 $5,375,000
which represented 2.44% of net assets. 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.
<TABLE>
<CAPTION>
Abbreviations
-------------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-82
<PAGE> 125
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $218,648) $218,648
Cash 39
Interest receivable 2,232
Receivable for fund shares sold 250
Receivable from adviser 4
Deferred organization costs 23
Prepaid expenses 3
--------
Total assets 221,199
--------
LIABILITIES
Payable for:
Dividends 899
Fund shares redeemed 120
Investment advisory and administration fee 37
Transfer agency and shareholder service fees 68
Other 69
--------
Total liabilities 1,193
--------
Net assets applicable to outstanding shares $220,006
========
NET ASSETS CONSIST OF:
Capital paid in $220,012
Accumulated net realized loss on investments sold (6)
--------
$220,006
========
THE PRICING OF SHARES
204,869 outstanding Sweep Shares and
15,143 outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares authorized) 220,012
Net asset value, offering and redemption price per each
Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-83
<PAGE> 126
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the period February 27, 1995 (commencement of operations) to
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $6,178
------
Expenses:
Investment advisory and administration fee 741
Transfer agency and shareholder service fees:
Sweep Shares 708
Value Advantage Shares 9
Custodian fees 60
Registration fees 120
Professional fees 26
Shareholder reports 28
Trustees' fees 1
Amortization of deferred organization costs 4
Insurance and other expenses 4
------
1,701
Less expenses reduced and absorbed (690)
------
Total expenses incurred by Fund 1,011
------
Net investment income 5,167
Net realized loss on investments sold (6)
------
Increase in net assets resulting from operations $5,161
======
</TABLE>
See accompanying Notes to Financial Statements.
F-84
<PAGE> 127
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
For the period February 27, 1995 (commencement of operations) to
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Operations:
Net investment income $ 5,167
Net realized loss on investments sold (6)
---------
Increase in net assets resulting from operations 5,161
---------
Dividends to shareholders from net investment income:
Sweep Shares (5,046)
Value Advantage Shares (121)
---------
Total dividends to shareholders (5,167)
---------
Capital share transactions (dollar amounts and
number of shares are the same):
Proceeds from shares sold 692,976
Net asset value of shares issued in reinvestment of
dividends 4,181
Less payments for shares redeemed (477,145)
---------
Increase in net assets from capital share transactions 220,012
---------
Total increase in net assets 220,006
Net Assets:
Beginning of period --
---------
End of period $ 220,006
=========
</TABLE>
See accompanying Notes to Financial Statements.
F-85
<PAGE> 128
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab New York Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended. The Fund
commenced operations on February 27, 1995.
The Board of Trustees of the Trust adopted a multiple class plan for the Fund on
May 9, 1995. Commencing July 7, 1995, the Fund began offering more than one
class of shares. Pursuant to the plan, the existing shares were redesignated as
Sweep Shares ("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 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 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
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 New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
2. SIGNIFICANT ACCOUNTING POLICIES
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).
F-86
<PAGE> 129
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
December 31, 1995
- --------------------------------------------------------------------------------
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the 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 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.
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. Expenses attributable to both
classes of shares are allocated daily to each class 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 based on the value of settled shares outstanding of each respective
class.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$741,000 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 average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the period ended
December 31, 1995, the Fund incurred transfer agency and shareholder service
fees of $708,000 and $9,000 for the Sweep Shares and Value Advantage Shares,
respectively, before Schwab reduced its fees (see Note 4).
F-87
<PAGE> 130
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Fund incurred fees of $1,000 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 Fund's ratio of operating expenses to
average net assets. For the period ended December 31, 1995, the total of such
fees and expenses reduced and absorbed by the Investment Manager were $302,000
and the total of such fees reduced by Schwab was $388,000.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period from
February 27, 1995 to December 31, 1995, aggregated (in thousands) $527,752 and
$308,751, respectively.
6. CAPITAL SHARE TRANSACTIONS
The 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 Fund. Transactions in capital shares for the period from February 27,
1995 (commencement of operations) to December 31, 1995*, were as follows (in
thousands):
<TABLE>
<S> <C>
Proceeds from shares sold:
Sweep Shares $ 671,692
Value Advantage Shares 21,284
---------
Total proceeds from shares sold 692,976
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 4,126
Value Advantage Shares 55
---------
Total net asset value of shares issued in
reinvestment of dividends 4,181
Less payments for shares redeemed:
Sweep Shares (470,949)
Value Advantage Shares (6,196)
---------
Total payments for shares redeemed (477,145)
Total increase in net assets from
capital share transactions $ 220,012
=========
</TABLE>
* The Value Advantage Shares commenced operations on July 7, 1995.
F-88
<PAGE> 131
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
December 31, 1995
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Value Advantage
Shares Sweep Shares
------------------- -------------------
For the period For the period
ended ended
December 31, December 31,
1995(1) 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 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-89
<PAGE> 132
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab New York Tax-Exempt Money Fund
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 New York Tax-Exempt Money Fund
(one of the series constituting The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, and the results of its
operations, the changes in its net assets and the financial highlights for the
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 audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at December
31, 1995 by correspondence with the custodian, provides a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-90
<PAGE> 133
SchwabFunds(R) 1
- -------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--81.8%(a)
ASSET BACKED SECURITIES--5.6%
Alamo Funding, LP
5.86%, 01/19/96 $3,500 $3,490
Apreco, Inc.
5.80%, 01/22/96 1,000 997
------
4,487
------
AUTOMOTIVE--3.7%
General Motors Acceptance Corp.
5.82%, 02/14/96 3,000 2,979
------
BANKING--AUSTRALIA--9.7%
ANZ (Delaware), Inc.
5.58%, 05/14/96 3,000 2,939
Westpac Capital Corp.
5.79%, 05/01/96 5,000 4,905
------
7,844
------
BANKING--DOMESTIC BANK HOLDING COMPANY--4.9%
Bankers Trust New York Corp.
5.81%, 01/29/96 3,000 2,987
NationsBank Corp.
5.61%, O5/28/96 1,000 978
------
3,965
------
BANKING--FRANCE--1.9%
Societe Generale, N.A.
5.80%, 03/08/96 1,574 1,557
------
BANKING--GERMANY--4.8%
Commerzbank, U.S. Finance Inc.
5.65%, 02/21/96 377 374
Kredietbank N.A. Finance Corp.
5.80%, 02/13/96 1,000 993
</TABLE>
F-91
<PAGE> 134
SchwabFunds(R) 2
- ------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
KREDIETBANK N.A. FINANCE CORP.
5.83%, 03/01/96 $2,550 $2,526
------
3,893
------
BANKING--ITALY--2.5%
Cariplo Finance, Inc.
5.77%, 02/20/96 2,000 1,984
------
BANKING--JAPAN--2.2%
Bridgestone/Firestone, Inc. / (Dai-Ichi Kangyo
Bank Ltd. LOC)
6.05%, 02/01/96 1,746 1,737
------
BANKING--UNITED KINGDOM--6.2%
Abbey National N.A. Corp.
5.80%, 01/31/96 5,000 4,976
------
FINANCE (COMMERCIAL)--3.9%
General Electric Capital Corp.
5.74%, 03/06/96 1,000 990
USL Capital Corp.
5.81%, 01/09/96 2,130 2,127
------
3,117
------
FINANCE (CONSUMER)--4.9%
American Express Credit Corp.
5.81%, 03/01/96 3,000 2,972
Sears Roebuck Acceptance Corp.
5.82%, 01/11/96 1,000 998
------
3,970
------
MINING AND MINERAL RESOURCES--1.8%
BHP Finance (U.S.A.), Inc.
5.79%, 01/11/96 1,465 1,463
------
</TABLE>
F-92
<PAGE> 135
SchwabFunds(R) 3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
MORTGAGE BANKING-3.7%
Fleet Mortgage Group, Inc.
5.82%, 02/22/96 $3,000 $ 2,975
-------
SECURITIES BROKERAGE-DEALER--26.0%
BT Securities Corp.
5.84%, 01/25/96 2,000 1,992
5.83%, 01/30/96 2,000 1,991
5.80%, 02/05/96 1,000 994
CS First Boston, Inc.
5.81%, 01/11/96 4,000 3,994
Dean Witter Discover
5.79%, 02/08/96 2,000 1,988
Lehman Brothers Holdings, Inc.
5.85%, 01/25/96 2,000 1,992
5.83%, 01/26/96 2,000 1,992
Morgan Stanley Group, Inc.
5.83%, 01/08/96 3,000 2,997
5.80%, 01/23/96 1,000 997
Nomura Holdings America, Inc.
5.86%, 01/22/96 1,000 997
Salomon, Inc.
6.02%, 02/15/96 1,000 991
-------
20,925
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $65,872) 65,872
-------
AGENCY OBLIGATIONS--3.7%
COUPON NOTES--3.7%
Federal National Mortgage Assoc.
5.91%, 08/19/96 3,000 3,005
-------
TOTAL AGENCY OBLIGATIONS
(Cost $3,005) 3,005
-------
</TABLE>
F-93
<PAGE> 136
SchwabFunds(R) 4
- ------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT--11.2%
BANKING--JAPAN--7.5%
Dai-Ichi Kangyo Bank, Ltd.
6.14%, 01/12/96 $2,000 $ 2,000
Mitsubishi Bank, Ltd.
5.83%, 03/19/96 1,000 1,000
Sanwa Bank, Ltd.
6.17%, 02/20/96 1,000 1,000
Sumitomo Bank, Ltd.
6.38%, 01/05/96 2,000 2,000
-------
6,000
-------
BANKING--NETHERLANDS--3.7%
ABN-AMRO Bank N.V.
5.83%, 02/21/96 3,000 3,000
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $9,000) 9,000
-------
Maturity
--------
REPURCHASE AGREEMENT--3.3%
Donaldson, Lufkin & Jenrette
Securities Corp. 5.80%.
Issue Date 12/29/9S
Due 01/02/96
Collateralized By:
FHLMC: $2,675 Par;
7.00% Due 06/15/19 2,643 2,641
-------
TOTAL REPURCHASE AGREEMENT
(Cost $2,641) 2,641
-------
TOTAL INVESTMENTS--100.0%
(Cost $80,518) $80,518
=======
</TABLE>
F-94
<PAGE> 137
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase except for agency
obligations which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market conventions 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 Institutional 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 $3,490,000 which represented 4.32% of net
assets. All of these private placement securities were determined by the
Investment Manager to be liquid in accordance with a resolution adopted
by the Board of Trustees relating to Rule 144A, promulgated under the
Securities Act of 1933.
ABBREVIATIONS
FHLMC Federal Home Loan Mortgage Corporation
LOC Letter of Credit
See accompanying Notes to Financial Statements.
F-95
<PAGE> 138
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Assets and Liabilities (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $80,518) $ 80,518
Cash 1
Interest receivable 187
Receivable for fund shares sold 677
Deferred organization costs 34
Prepaid expenses 32
--------
Total assets 81,449
--------
LIABILITIES
Payable for:
Dividends 634
Fund shares redeemed 23
Investment advisory and administration fee 15
Transfer agency and shareholder service fees 0
Total liabilities 703
--------
Net assets applicable to outstanding shares $ 80,746
========
NET ASSETS CONSIST OF:
Capital paid in $ 80,747
Accumulated net realized loss on investments sold (1)
--------
$ 80,746
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 80,747
Net asset value, offering and redemption price per share $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-96
<PAGE> 139
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Operations (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $ 4,774
-------
Expenses:
Investment advisory and administration fee 364
Transfer agency and shareholder service fees 198
Custodian fees 61
Registration fees 33
Professional fees 13
Shareholder reports 23
Amortization of deferred organization costs 12
Insurance and other expenses 6
-------
710
Less expenses reduced (290)
-------
Total expenses incurred by Fund 420
-------
Net investment income 4,354
Net realized loss on investments sold (1)
-------
Increase in net assets resulting from operations $ 4,353
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-97
<PAGE> 140
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994 *
------------ --------------
<S> <C> <C>
Operations:
Net investment income $ 4,354 $ 1,928
Net realized loss on investments sold (1) --
--------- ---------
Increase in net assets resulting
from operations 4,353 1,928
--------- ---------
Dividends to shareholders from
net investment income (4,354) (1,928)
--------- ---------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 281,164 240,455
Net asset value of shares issued in
reinvestment of dividends 1,784 397
Less payments for shares redeemed (262,289) (180,764)
--------- ---------
Increase in net assets from
capital share transactions 20,659 60,088
--------- ---------
Total increase in net assets 20,658 60,088
Net Assets:
Beginning of period 60,088 --
--------- ---------
End of period $ 80,746 $ 60,088
========= =========
</TABLE>
* For the period January 4, 1994 (commencement of operations) to December 31,
1994.
See accompanying Notes to Financial Statements.
F-98
<PAGE> 141
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Institutional Advantage Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
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
Value Advantage Money Fund(R) and the Schwab Retirement Money Fund(R). The
assets of each series are segregated and accounted for separately.
The Schwab Institutional Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
F-99
<PAGE> 142
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
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.
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
$364,000 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. For the year
ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $198,000, before Schwab reduced its fees (see Note 4).
F-100
<PAGE> 143
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
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 did not incur fees related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $162,000 and $128,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $1,777,962 and $1,758,519,
respectively.
F-101
<PAGE> 144
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
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 year For the period
ended ended
December 31, December 31,
1995 1994(1)
------------ --------------
<S> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income .06 .04
Net realized and unrealized gain (loss) investments -- --
-------- -------
Total from investment operations .06 .04
Less distributions
Dividends from net investment income (.06) (.04)
Distributions from realized gain on investments -- --
-------- -------
Total distributions (.06) (.04)
-------- -------
Net asset value at end of period $ 1.00 $ 1.00
======== =======
Total return(%) 5.65 3.86
Ratios/Supplemental data
Net assets, end of period (000s) $ 80,746 $60,088
Ratio of expenses to average net assets(%) .53 .55*
Ratio of net investment income to average net assets(%) 5.50 4.04*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced, the ratio of expenses to average net assets for the
periods ended December 31, 1995 and 1994 would have been .90% and .92%*,
respectively, and the ratio of net investment income to average net assets would
have been 5.13% and 3.67%*, respectively.
(1) For the period January 4, 1994 (commencement of operations) to December 31,
1994.
* Annualized
F-102
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SchwabFunds(R) 13
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- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Institutional Advantage Money Fund(TM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 Institutional 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, and the changes in its 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, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-103
<PAGE> 146
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--69.4%(a)
ASSET BACKED SECURITIES--11.5%
Alamo Funding, LP
5.86%, 01/19/96 $1,000 $ 997
Apreco, Inc.
5.80%, 01/22/96 4,000 3,987
Asset Securitization Cooperative Corp.
5.83%, 02/01/96 2,000 1,990
Broadway Capital Corp.
5.95%, 01/03/96 1,523 1,523
Preferred Receivables Funding Corp.
5.79%, 01/11/96 2,000 1,997
Sheffield Receivables Corp.
5.80%, 01/30/96 1,000 995
-------
11,489
-------
AUTOMOTIVE--5.5%
General Motors Acceptance Corp.
5.79%, 02/05/96 1,500 1,492
5.82%, 02/14/96 3,000 2,979
Renault Credit International SA Banque
5.88%, 01/25/96 1,000 996
-------
5,467
-------
BANKING--AUSTRALIA-1.0%
National Australia Funding (Delaware), Inc.
5.53%, 06/12/96 1,000 976
-------
BANKING--BELGIUM--2.9%
Generale Bank, Inc.
5.81%, 04/04/96 3,000 2,956
-------
BANKING--CANADA--1.0%
Toronto-Dominion Holdings
5.51%, 07/10/96 1,000 972
-------
BANKING--DOMESTIC BANK HOLDING COMPANY--3.9%
Bankers Trust New York Corp.
5.81%, 01/29/96 2,000 1,991
</TABLE>
F-104
<PAGE> 147
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
NationsBank Corp.
5.55%, 05/21/96 $1,000 $ 979
5.61%, 05/28/96 1,000 978
-------
3,948
-------
BANKING--FRANCE--1.0%
Societe Generale, N.A.
5.80%, 03/08/96 1,000 989
-------
BANKING--GERMANY--4.3%
Kredietbank N.A. Finance Corp.
5.78%, 01/11/96 3,000 2,995
5.83%, 03/01/96 1,300 1,288
-------
4,283
-------
BANKING--ITALY--1.0%
Cariplo Finance, Inc.
5.76%, 02/22/96 1,000 992
-------
FINANCE (COMMERCIAL)--2.9%
General Electric Capital Corp.
5.74%, 03/06/96 1,000 990
5.63%, 03/25/96 1,000 987
5.62%, 05/07/96 1,000 981
-------
2,958
-------
FINANCE (CONSUMER)--2.0%
Associates Corp. of North America
5.65%, 05/09/96 2,000 1,960
-------
GOVERNMENT LOCALITY--FOREIGN--4.0%
New South Wales Treasury Corp.
5.81%, 01/10/96 4,000 3,994
-------
MINING AND MINERAL RESOURCES--2.0%
BHP Finance (U.S.A.), Inc.
5.70%, 02/21/96 1,000 992
</TABLE>
F-105
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SchwabFunds(R) 3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
BHP Finance (U.S.A.), Inc.
5.76%, 03/05/96 $ 1,000 $ 990
-------
1,982
-------
MORTGAGE BANKING--4.0%
Fleet Mortgage Group, Inc.
5.85%, 01/26/96 3,000 2,988
5.80%, 02/23/96 1,000 992
-------
3,980
-------
SECURITIES BROKERAGE-DEALER--19.4%
BT Securities Corp.
5.80%, 01/03/96 3,000 2,999
5.83%, 01/30/96 1,000 995
Bear Stearns Companies, Inc.
5.80%, 01/12/96 2,500 2,496
Goldman Sachs Group, LP
5.82%, 01/12/96 1,000 998
5.77%, 03/22/96 3,000 2,962
Lehman Brothers Holdings, Inc.
5.85%, 01/23/96 4,000 3,986
Morgan Stanley Group, Inc.
5.83%, 01/08/96 1,000 999
5.78%, 02/08/96 1,000 994
Nomura Holdings America, Inc.
5.92%, 01/04/96 1,000 1,000
5.83%, 03/13/96 1,000 989
Paine Webber Group, Inc.
5.96%, 01/09/96 1,000 999
-------
19,417
-------
</TABLE>
F-106
<PAGE> 149
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
STUDENT LOANS--3.0%
Student Loan Corp.
5.80%, 01/12/96 $ 3,000 $ 2,995
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $69,358) 69,358
-------
AGENCY OBLIGATIONS--3.0%
COUPON NOTES--3.0%
Federal National Mortgage Assoc.
5.91%, 08/19/96 3,000 3,005
-------
TOTAL AGENCY OBLIGATIONS
(Cost $3,005) 3,005
-------
CERTIFICATES OF DEPOSIT--24.0%
BANKING--CANADA--4.0%
Canadian Imperial Bank of Commerce
5.81%, 01/24/96 4,000 4,000
-------
BANKING--DOMESTIC--4.0%
MBNA America Bank N.A.
5.63%, 04/16/96 4,000 4,000
-------
BANKING--FRANCE--2.0%
Societe Generale
5.80%, 01/25/96 2,000 2,000
-------
BANKING--JAPAN--8.0%
Dai-Ichi Kangyo Bank, Ltd.
6.20%, 01/12/96 1,000 1,000
6.14%, 01/12/96 1,000 1,000
6.09%, 01/12/96 1,000 1,000
Industrial Bank of Japan, Ltd.
6.25%, 01/02/96 2,000 2,000
Mitsubishi Bank, Ltd.
5.83%, 03/19/96 1,000 1,000
Sanwa Bank, Ltd.
6.22%, 02/21/96 1,000 1,000
</TABLE>
F-107
<PAGE> 150
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT (CONTINUED)
Sumitomo Bank, Ltd.
6.15%, 01/17/96 $ 1,000 $ 1,000
-------
8,000
-------
BANKING--NETHERLANDS--2.0%
ABN-AMRO Bank N.V.
5.58%, 06/05/96 2,000 2,000
-------
BANKING--UNITED KINGDOM--4.0%
Abbey National PLC
5.80%, 01/16/96 4,000 3,996
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $23,996) 23,996
-------
MATURITY
--------
REPURCHASE AGREEMENT--3.6%
Donaldson, Lufkin & Jenrette
Securities Corp. 5.80%
Issue Date 12/29/95
Due 01/02/96
Collateralized By:
FNMA: $13,435 Par;
7.04% Due 04/25/23 3,554 3,552
-------
TOTAL REPURCHASE AGREEMENT
(Cost $3,552) 3,552
-------
TOTAL INVESTMENTS--100.0%
(cost $99,911) $99,911
=======
</TABLE>
See accompanying Notes to Schedule of Investments.
F-108
<PAGE> 151
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase except for agency
obligations which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Fund are private placement securities
exempt from registration by Section 4(2) of the Securities Act of 1933.
These securities generally are issued to institutional investors, such as
the Schwab Retirement Money Fund. Any resale by the 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 Fund was $4,508,000 which represented 4.6% of net assets. All of
these private placement securities were determined by the Investment
Manager to be liquid in accordance with a resolution adopted by the Board
of Trustees relating to Rule 144A, promulgated under the Securities Act of
1933.
Abbreviations
FNMA Federal National Mortgage Association
See accompanying Notes to Financial Statements.
F-109
<PAGE> 152
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Assets and Liabilities (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
<S> <C>
Investments, at value (Cost: $99,911) $ 99,911
Interest receivable 396
Receivable for fund shares sold 177
Deferred organization costs 36
Prepaid expenses 23
--------
Total assets 100,543
--------
LIABILITIES
Payable for:
Dividends 639
Fund shares redeemed 829
Investment advisory and administration fee 37
Transfer agency and shareholder service fees 13
Other 33
--------
Total liabilities 1,551
--------
Net assets applicable to outstanding shares $ 98,992
========
NET ASSETS CONSIST OF:
Capital paid in $ 98,992
Accumulated net realized gain (loss)
on investments sold ---
--------
$ 98,992
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 98,992
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-110
<PAGE> 153
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Operations (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $4,616
------
Expenses:
Investment advisory and administration fee 354
Transfer agency and shareholder service fees 192
Custodian fees 60
Registration fees 50
Professional fees 13
Shareholder reports 18
Amortization of deferred organization costs 12
Insurance and other expenses 6
------
705
Less expenses reduced (144)
------
Total expenses incurred by Fund 561
------
Net investment income 4,055
Net realized gain (loss) on investments sold ---
------
Increase in net assets resulting from operations $4,055
======
</TABLE>
See accompanying Notes to Financial Statements.
F-111
<PAGE> 154
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994 *
------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 4,055 $ 842
Net realized gain (loss) on investments sold --- ---
--------- --------
Increase in net assets resulting
from operations 4,055 842
--------- --------
Dividends to shareholders from
net investment income (4,055) (842)
--------- --------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 173,890 84,340
Net asset value of shares issued in
reinvestment of dividends 3,564 661
Less payments for shares redeemed (109,877) (53,586)
--------- --------
Increase in net assets from
capital share transactions 67,577 31,415
--------- --------
Total increase in net assets 67,577 31,415
Net Assets:
Beginning of period 31,415 ---
--------- --------
End of period $ 98,992 $ 31,415
========= ========
</TABLE>
* For the period March 2, 1994 (commencement of operations)
to December 31, 1994.
See accompanying Notes to Financial Statements.
F-112
<PAGE> 155
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Notes to Financial Statements
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Retirement Money Fund (the "Fund") is a series of The Charles Schwab
Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
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
Value Advantage Money Fund(R) and the Schwab Institutional Advantage Money
Fund(TM). The assets of each series are segregated and accounted for separately.
The Schwab Retirement Money Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
F-113
<PAGE> 156
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
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
$354,000 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. For the year
ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $192,000, 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 did not incur fees related to the
Trust's unaffiliated trustees.
F-114
<PAGE> 157
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Notes to Financial Statements
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
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 $16,000 and $128,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $1,753,661 and $1,685,786,
respectively.
F-115
<PAGE> 158
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994(1)
------------ --------------
<S> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income .05 .03
Net realized and unrealized gain (loss)
on investments --- ---
------- -------
Total from investment operations .05 .03
Less distributions
Dividends from net investment income (.05) (.03)
Distributions from realized gain
on investments --- ---
------- -------
Total distributions (.05) (.03)
------- -------
Net asset value at end of period $ 1.00 $ 1.00
======= =======
Total return (%) 5.43 3.29
Ratios/Supplemental data
Net assets, end of period(000s) $98,992 $31,415
Ratio of expenses to average net assets(%) .73 .73*
Ratio of net investment income to
average net assets (%) 5.28 4.04*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced the ratio of expenses to average net assets for the
periods ended December 31, 1995 and 1994 would have been .92%, and 1.05%*,
respectively, and the ratio of net investment income to average net assets would
have been 5.09% and 3.72%*, respectively.
(1) For the period March 2, 1994 (commencement of operations) to
December 31, 1994.
* Annualized
F-116
<PAGE> 159
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Retirement 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 Retirement 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, and the changes in its 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, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-117
