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STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
APRIL 1, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus dated April 1, 1996 (as amended from
time to time) for the Schwab Value Advantage Money Fund (the "Fund"), a
separately managed investment portfolio of The Charles Schwab Family of Funds
(the "Schwab Fund Family" or the "Trust"). To obtain a copy of the Prospectus,
please contact Charles Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours
a day, or 101 Montgomery Street, San Francisco, CA 94104. TDD users may contact
Schwab at 800-345-2550, 24 hours a day. The Prospectus may be available
electronically by using our Internet address: http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
(800-266-5623)
TABLE OF CONTENTS
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INVESTMENT RESTRICTIONS................................................... 2
INVESTMENT SECURITIES..................................................... 3
MANAGEMENT OF THE TRUST................................................... 6
PORTFOLIO TRANSACTIONS AND TURNOVER....................................... 12
DISTRIBUTIONS AND TAXES................................................... 13
SHARE PRICE CALCULATION................................................... 16
YIELD..................................................................... 17
GENERAL INFORMATION....................................................... 17
PURCHASE AND REDEMPTION OF SHARES......................................... 21
OTHER INFORMATION......................................................... 21
APPENDIX - RATINGS OF INVESTMENT SECURITIES............................... 23
FINANCIAL STATEMENTS...................................................... F-1
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INVESTMENT RESTRICTIONS
The restrictions set forth below are fundamental and cannot be changed
without approval of the holders of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940, as amended,
hereinafter the "1940 Act") of the Fund.
THE FUND MAY NOT:
(1) Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter under the federal securities laws in
connection with the disposition of securities from its investment
portfolio.
(2) Invest in commodities or commodity contracts, including futures
contracts, or in real estate, although it may invest in securities
which are secured by real estate and securities of issuers which invest
or deal in real estate.
(3) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that the Fund reserves freedom of action to invest
up to 100% of its assets in certificates of deposit or bankers'
acceptances issued by U.S. banks and U.S. branches of those foreign
banks which the Investment Manager has determined to be subject to the
same regulation as U. S. banks, or obligations of or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(4) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(5) Issue senior securities as defined in the 1940 Act.
The following restrictions are non-fundamental and may be changed by
the Board of Trustees.
THE FUND MAY NOT:
(6) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of its
assets would be invested in securities of that issuer.
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(7) Invest more than 10% of its net assets in illiquid securities,
including repurchase agreements maturing in more than 7 days.
(8) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one
class.
(9) Invest more than 5% of its total net assets in securities of issuers
(other than obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities) which with their
predecessors have a record of less than three years continuous
operation.
(10) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Schwab Fund Family or the Investment
Manager beneficially own more than 1/2 of 1% of the securities of such
issuer, and together beneficially own more than 5% of the securities of
such issuer.
(11) Invest for the purpose of exercising control or management of another
issuer.
(12) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets(1)
(13) Write, purchase or sell puts, calls or combinations thereof.
(14) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(15) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of
issuers which invest in or sponsor such programs. Except as otherwise
noted, if a percentage restriction is adhered to at the time of
investment, a later increase in percentage beyond the specified limit
resulting from a change in values or net assets will not be considered
a violation.
INVESTMENT SECURITIES
The Fund will only purchase securities that present minimal credit
risks and which are First Tier or Second Tier Securities (otherwise referred to
"Eligible Securities"). An Eligible Security is:
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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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(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's Investors Service, Standard &
Poor's Corporation, Duff and Phelps Credit Inc., Fitch Investors
Services, Inc., Thomson Bankwatch; and, IBCA Limited and its affiliate,
IBCA, Inc. with respect to debt issued by banks, bank holding
companies, United Kingdom building societies, broker-dealers and
broker-dealers' parent companies, and bank-supported debt) in one of
the two highest rating categories for short-term debt obligations (the
requisite NRSROs being any two or, if rated by one, that one NRSRO), or
(b) that itself was unrated by an NRSRO, but was issued by an issuer
that has outstanding a class of short-term debt obligations (or any
security within that class) meeting the requirements of subparagraph
1(a) above that is of comparable priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less and (a) whose issuer
received a rating within one of the two highest rating categories from
the requisite NRSROs for short-term debt obligations with respect to a
class of short-term debt obligations (or any security within that
class) that is now comparable in priority and security with the subject
security; or (b) that has long-term ratings from the requisite NRSROs
that are in one of the two highest categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
</ R>
A First Tier Security is any Eligible Security which carries (or other
relevant securities issued by its issuer carry) top NRSRO ratings from at least
two NRSROs (a single top rating is sufficient if only one NRSRO rates the
security), or has been determined by the Investment Manager, pursuant to
guidelines adopted by the Board of Trustees, to be of comparable quality to such
a security. A Second Tier Security is any other Eligible Security.
The Fund will limit its investments in the First Tier Securities of any
one issuer to no more than five percent of its assets. (Repurchase agreements
collateralized by non-Government securities will be taken into account when
making this calculation.) Moreover, the Fund's total holdings of Second Tier
Securities will not exceed 5% of its assets, with investment in the Second Tier
Securities of any one issuer being limited to the greater of 1% of the Fund's
assets or $1 million. In addition, the underlying securities involved in
repurchase agreements collateralized by non-Government securities will be First
Tier Securities at the time the repurchase agreements are executed.
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ASSET-BACKED COMMERCIAL PAPER AND OTHER SECURITIES
The Schwab Value Advantage Money Fund(R) can invest a portion of its
assets in asset-backed commercial paper and other money market fund Eligible
Securities (as that term is hereinafter defined). The credit quality of most
asset-backed commercial paper depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two classes: liquidity protection and protection against ultimate default
on the underlying assets. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that scheduled payments on the underlying pool are made in a timely fashion.
Protection against ultimate default ensures payment on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained from third parties, through
various means of structuring the transaction, or through a combination of such
approaches. The degree of credit support provided on each issue is based
generally on historical information respecting the level of credit risk
associated with such payments. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-backed security.
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MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and trustees of the Trust, their
principal occupations over the past five years and their affiliations, if any,
with The Charles Schwab Corporation, Charles Schwab & Co., Inc. ("Schwab"), and
Charles Schwab Investment Management, Inc., are as follows:
<TABLE>
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POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
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CHARLES R. SCHWAB* Chairman and Trustee Founder, Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation; Founder,
Chairman and Director, Charles Schwab & Co., Inc.
and Charles Schwab Investment Management, Inc.;
Chairman and Director, The Charles Schwab Trust
Company; Chairman and Director, and Director
(officer position) until December 1995, Mayer &
Schweitzer, Inc. (a securities brokerage subsidiary
of The Charles Schwab Corporation); Director, The
Gap, Inc. (a clothing retailer), Transamerica
Corporation (a financial services organization),
AirTouch Communications (a telecommunications
company) and Siebel Systems (a software company).
TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles
September 19, 1951 Schwab & Co., Inc. and The Charles Schwab
Corporation; Chief Executive Officer, Charles Schwab
Investment Management, Inc. From 1994 to 1995, Mr.
McCarthy was Chief Executive Officer, Jardine
Fleming Unit Trusts Ltd.; Executive Director,
Jardine Fleming Holdings Ltd.; Chairman, Jardine
Fleming Taiwan Securities Ltd.; and Director of JF
India and Fleming Flagship, Europe. Prior to 1994,
he was President of Fidelity Investments Advisor
Group, a division of Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
</TABLE>
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*Mr. Schwab is an "interested person" of the Trust.
**Mr. McCarthy is an "interested person" of the Trust.
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<TABLE>
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POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
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ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. (international financial
services).
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (real estate
June 28, 1938 investment). Prior to 1993, Mr. Stephens was
Chairman and Chief Executive Officer of the Bank of
San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment and management, and
investments).
A. JOHN GAMBS Treasurer and Principal Executive Vice President - Finance and Chief
November 16, 1945 Financial Officer Financial Officer, The Charles Schwab Corporation;
Executive Vice President, Chief Financial Officer
and Director, Charles Schwab & Co., Inc.; Chief
Financial Officer and Director, Charles Schwab
Investment Management, Inc.; and Chief Financial
Officer, The Charles Schwab Trust Company.
WILLIAM J. KLIPP* Senior Vice President, Senior Vice President, Charles Schwab & Co., Inc.;
December 9, 1955 Chief Operating Officer President and Chief Operating Officer, Charles
and Trustee Schwab Investment Management, Inc. Prior to 1993,
Mr. Klipp was Treasurer of Charles Schwab & Co.,
Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President & Senior Vice President and Chief Investment Officer,
April 5, 1955 Chief Investment Charles Schwab Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance
September 9, 1955 Officer and Assistant Corporate Secretary, Charles
Schwab Investment Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel - Charles Schwab
October 14, 1960 Investment Management, Inc. From 1991 to 1992, he
was Assistant Secretary and Assistant Corporate
Counsel for the Franklin Group of Mutual Funds.
</TABLE>
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*Mr. Klipp is an "interested person" of the Trust.
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<TABLE>
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POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
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CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel - Charles Schwab
June 16, 1961 Investment Management, Inc. Prior to 1994, she was
Counsel and Assistant Secretary for North American
Security Life Insurance Company and Secretary for
North American Funds.
</TABLE>
Each of the above-referenced individuals also serves in the same
capacity as described for the Trust, Schwab Investments, Schwab Capital Trust,
Schwab Annuity Portfolios, and Schwab Advantage Trust (which has not commenced
operations). The address of each individual listed above is 101 Montgomery
Street, San Francisco, California 94104.
COMPENSATION TABLE(1)
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Pension or Estimated Annual
Retirement Benefits Benefits Upon
Aggregate Accrued as Part of Retirement from the Total Compensation
Name of Person, Compensation from Fund Expenses from Fund from the Fund
Position the Trust the Fund Complex(2) Complex(2) Complex(2)
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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
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COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or Estimated Annual
Retirement Benefits Benefits Upon
Aggregate Accrued as Part of Retirement from the Total Compensation
Name of Person, Compensation from Fund Expenses from Fund from the Fund
Position the Trust the Fund Complex(2) Complex(2) Complex(2)
- -------------------- ----------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Donald F. Dorward, 38,500 N/A N/A 73,000
Trustee
Robert G. Holmes, 38,500 N/A N/A 73,000
Trustee
Donald R. Stephens, 38,500 N/A N/A 73,000
Trustee
Michael W. Wilsey, 38,500 N/A N/A 73,000
Trustee
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(1) Figures are for the Trust's fiscal year ended December 31, 1995.
(2) "Fund Complex" comprises all 22 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
-------------------------
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to participate in the Fee Deferral Plan. In the
event an Independent Trustee does elect to participate in the Plan, the Plan
would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or
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SchwabFunds(R) selected by the participating Trustee (the "Selected
SchwabFund Securities"). "SchwabFunds" include the series or classes of shares
of beneficial interest of the Trust, Schwab Investments, Schwab Capital Trust,
and Schwab Advantage Trust (which has not commenced operations).
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. These transactions would otherwise be limited or
prohibited by the investment policies and/or restrictions of the Funds. See
"Investment Restrictions."
INVESTMENT MANAGER
Charles Schwab Investment Management, Inc. (the "Investment Manager"),
a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the
Fund's investment adviser and administrator pursuant to an Investment Advisory
and Administration Agreement (the "Advisory Agreement") between it and the
Trust. The Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended and currently provides investment
management services to the SchwabFunds(R), a family of 21 mutual funds with over
$35 billion in assets as of March 18, 1996. The Investment Manager is an
affiliate of Schwab, the Trust's distributor and shareholder services and
transfer agent.
The Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of the majority (as defined in the 1940 Act) of
the outstanding voting securities of each Fund subject thereto. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement, or interested persons (as defined
in the 1940 Act) of any such party, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Fund subject thereto, and will terminate
automatically upon assignment.
Pursuant to the Advisory Agreement, the Investment Manager is
entitled to receive a graduated annual fee, payable monthly, of 0.46% of the
Fund's average daily net assets not in excess of $2 billion, 0.45% of such net
assets over $2 billion but not in excess of $3 billion, and 0.40% of such net
assets over $3 billion.
For the fiscal years ended December 31, 1993, 1994, and 1995, the
investment advisory and administration fees paid by the Fund were $592,000 (fees
were reduced by $1,882,000), $2,144,000 (fees were reduced by $6,741,000), and
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515,877,000 (fees were reduced by $7,922,000), respectively.
Expenses. The Trust pays the expenses of its operations, including
the fees and expenses of independent accountants, counsel, custodian and the
cost of reports and notices to shareholders, costs of calculating net asset
value, brokerage commissions or transaction costs, taxes, registration fees, the
fees and expenses of qualifying the Trust and its shares for distribution under
federal and state securities laws and membership dues in the Investment Company
Institute or any similar organization. The Trust's expenses generally are
allocated among the Funds on the basis of relative net assets at the time the
expense is incurred, except that expenses directly attributable to a particular
Fund or class of shares are charged to that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for its
prospectus and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when engaged to do so by the Trust. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, 1301 K Street, N.W., Suite 800 East, Washington, D.C.
20005, is counsel to the Trust.
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PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of the Fund in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. Portfolio transactions may increase or decrease the yield of the Fund,
depending upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of the Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager generally selects broker-dealers primarily on the basis of the quality
and reliability of services provided, including execution capability and
financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for the Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as the
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
the Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, the Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
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DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of the Fund is
determined ("Business Day"), the Fund's net investment income will be declared
as of the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) as a daily dividend to shareholders of record as of the last
calculation of net asset value prior to the declaration. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will normally be reinvested monthly in full and fractional shares of
the Fund at the net asset value on the 15th day of each month if a Business Day,
otherwise on the next Business Day. If cash payment is requested, checks will
normally be mailed on the Business Day following the reinvestment date. The Fund
will pay shareholders who redeem all of their shares all dividends accrued to
the time of the redemption within 7 days.
The Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Fund consists of: (1)
accrued interest income, plus or minus amortized discount or premium, minus (2)
accrued expenses allocated to the Fund. If the Fund realizes any capital gains,
they will be distributed at least once during the year as determined by the
Board of Trustees. Any realized capital losses to the extent not offset by
realized capital gains will be carried forward. It is not anticipated that the
Fund will realize any long-term capital gains. Expenses of the Trust are accrued
each day. Should the net asset value of the Fund deviate significantly from
market value, the Board of Trustees could decide to value the investments at
market value and any unrealized gains and losses could affect the amount of
distributions.
FEDERAL INCOME TAXES
It is the policy of the Fund to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, the
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, the Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stocks, securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
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<PAGE> 14
total assets is represented by cash or cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to a value not greater than 5%
of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or securities of any other regulated investment company)
or of two or more issuers that the Fund controls, within the meaning of the
Code, and that are engaged in the same, similar or related trades or businesses.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range of
the Fund's investments. If the Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its net investment
income and net realized capital gains, if any, which it distributes to
shareholders, provided that the Fund distributes during its taxable year at
least 90% of its "investment company taxable income" (as defined in the Code).
The Fund intends to make sufficient distributions to shareholders to meet this
requirement.
If the Fund fails to distribute in a calendar year (regardless of
whether it has a non-calendar taxable year) substantially all of its (i)
ordinary income for such year and (ii) capital gain net income for the year
ending October 31 (or later if the Fund is permitted so to elect and so elects),
plus any retained amount from the prior year, the Fund will be subject to a
nondeductible 4% excise tax on the undistributed amounts. The Fund intends
generally to make distributions sufficient to avoid imposition of this excise
tax.
Any distribution declared in October, November or December to
shareholders of record during those months and paid during the following January
is treated, for tax purposes, as if it were received by each shareholder on
December 31 of the year declared . The Fund may adjust its schedule for the
reinvestment of distributions for the month of December to assist in complying
with the reporting and minimum distribution requirements of the Code.
The Fund does not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder (1) who
fails to provide a correct taxpayer identification number certified under
penalty of perjury; (2) who provides an incorrect taxpayer identification
number; (3) who is subject to withholding by the Internal Revenue
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<PAGE> 15
Service for failure to properly report all payments of interest or dividends; or
(4) who fails to provide a certified statement that he or she is not subject to
"backup withholding." This "backup withholding" is not an additional tax and any
amounts withheld may be credited against the shareholder's ultimate U.S. tax
liability.
The Fund may engage in investment techniques that may alter the timing
and character of the Fund's income. The Fund may be restricted in its use of
these techniques by rules relating to its qualification as a regulated
investment company.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) generally are subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or disposition of shares of the Fund
generally are not subject to U.S. taxation, unless the recipient is an
individual who meets the Code's definition of "resident alien." Different tax
consequences may result if the foreign shareholder is engaged in a trade or
business within the United States. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by the Fund may also be
subject to state, local and foreign taxes, and their treatment under applicable
tax laws may differ from the federal income tax treatment.
The discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of shares of the Fund. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Fund and its
shareholders, and the discussion is not intended as a substitute for careful tax
planning. Accordingly, prospective investors (particularly those not residing or
domiciled in the United States) should consult their own tax advisers regarding
the consequences of investing in the Fund.
15
<PAGE> 16
SHARE PRICE CALCULATION
The Fund values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of the Fund's investments at
amortized cost with market values. Market valuations are obtained by using
actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and the Fund's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees of the Trust believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If the Fund's net
asset value per share (computed using market values) declined, or were expected
to decline, below $1.00 (computed using amortized cost), the Board of Trustees
might temporarily reduce or suspend dividend payments in an effort to maintain
the net asset value at $1.00 per share. As a result of such reduction or
suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the other
hand, if the Fund's net asset value per share (computed using market values)
were to increase, or were anticipated to increase above $1.00 (computed using
amortized cost), the Board of Trustees might supplement dividends in an effort
to maintain the net asset value at $1.00 per share.
16
<PAGE> 17
YIELD
The historical performance of the Fund may be shown in the form of
yield and effective yield. These measures of performance are described below.
YIELD
Yield refers to the net investment income generated by a hypothetical investment
in the Fund over a specific 7-day period. This net investment income is then
annualized, which means that the net investment income generated during the
7-day period is assumed to be generated in each 7-day period over an annual
period, and is shown as a percentage of the investment. The Fund's 7-day yield
for the period ended December 31, 1995 was 5.47%.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect. The Fund's 7-day effective yield for the period ended December 31, 1995
was 5.62%.
GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of Trust
(other than amendments changing the name of the Trust or any of its investment
portfolios, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5)
determining whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) such additional matters as may be required by law,
the Declaration of Trust, the Bylaws or any registration of the Trust with the
SEC or any state or as the Board of Trustees may consider desirable. The
shareholders also would vote upon changes to the Fund's fundamental investment
objective, policies or restrictions.
17
<PAGE> 18
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of these Bylaws
permits or requires that (i) holders of any series shall vote as a series, then
a majority of the aggregate number of shares of that series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series; or (ii) holders of any class shall vote as a class, then a majority
of the aggregate number of shares of that class entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class.
Any lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. The Declaration of
Trust specifically authorizes the Board of Trustees to terminate the Trust (or
any of its investment portfolios) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of
18
<PAGE> 19
a shareholder incurring financial loss on account of shareholder liability is
considered remote, because it is limited to circumstances in which a disclaimer
is inoperative and the Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of March 22, 1996, the officers and trustees of the Trust, as a
group, owned of record or beneficially less than 1% of the outstanding voting
securities of the remaining series of the Trust.
ACCESS TO SCHWAB'S MUTUAL FUND ONESOURCE SERVICE(TM)
With Schwab's Mutual Fund OneSource Service(TM) ("OneSource"), a
shareholder can invest in over 200 mutual funds from many fund companies,
subject to the following. If a shareholder makes five or more short-term
redemptions of OneSource mutual funds (other than the SchwabFunds) within any
12-month period, a fee will be charged on all future trades. A short-term
redemption in this context refers to the sale of mutual fund shares held for six
months or less. Some mutual funds available through OneSource may charge fees
permitted under Rule 12b-1 in excess of one quarter of one percent per year.
Schwab reserves the right to modify OneSource's terms and conditions at any
time. For more information, a shareholder should contact their Schwab office
during its regular business hours or 800-2 NO-LOAD, 24 hours a day.
19
<PAGE> 20
SchwabFunds(R). SchwabFunds offers a variety of series and classes of shares of
beneficial interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(TM)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(3)
Schwab California Long-Term Tax-Free Bond Fund(3)
MONEY MARKET FUNDS(4)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares(3)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)(3)
Schwab Retirement Money Fund(R)(5)
Schwab Institutional Advantage Money Fund(TM)(5)
Schwab New York Tax-Exempt Money Fund-Sweep Shares(6)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)(6)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios of Schwab Capital Trust.
(3) Designed for California taxpayers.
(4) All listed money market funds are separate investment portfolios of the
Trust.
(5) Designed for institutional investors only.
(6) Designed for New York taxpayers.
20
<PAGE> 21
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment for the Schwab Value Advantage Money
Fund(R) is $25,000 ($15,000 for IRAs and other retirement plans) and subsequent
investments of $5,000 ($2,000 for IRAs and other retirement plans) or more may
be made. These minimum requirements may be changed at any time.
A Fund shareholder may request that the Trust waive the minimum initial
and subsequent investment requirements, as well as the minimum balance
requirement and the minimum redemption amount described in the Fund's
Prospectus, if (a) that shareholder owns Fund shares equaling an aggregate of $5
million or more; or (b) that shareholder is the customer of a financial adviser
whose assets under management include a current aggregate balance of $5 million
or more invested in Fund shares and an average balance of at least $20,000 per
customer account. In addition, the Trust may waive the minimums for purchases by
trustees, directors, officers or employees of the Trust, Schwab or the
Investment Manager.
The Trust has made an election with the SEC to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90 day period to the lesser of $250,000 or 1% of its net assets at the beginning
of such period. This election is irrevocable without the SEC's prior approval.
Redemption requests in excess of the stated limits may be paid, in whole or in
part, in investment securities or in cash, as the Trust's Board of Trustees may
deem advisable; however, payment will be made wholly in cash unless the Board of
Trustees believes that economic or market conditions exist that would make such
a practice detrimental to the best interests of the Fund. If redemption proceeds
are paid in investment securities, such securities will be valued as set forth
in the Prospectus of the Fund affected under "Share Price Calculation" and a
redeeming shareholder would normally incur brokerage expenses if he or she
converted the securities to cash.
OTHER INFORMATION
The Prospectus of the Fund and this Statement of Additional Information
do not contain all the information included in the Registration Statement filed
with the SEC under the Securities Act of 1933, as amended, with respect to the
securities offered by the Prospectus. Certain portions of the Registration
Statement have been omitted from the Prospectus and this Statement of
Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
21
<PAGE> 22
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR, IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
22
<PAGE> 23
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's
Investors Service ("Moody's"). Issuers (or related supporting institutions) of
commercial paper with this rating are considered to have a superior ability to
repay short-term promissory obligations. Issuers (or related supporting
institutions) of securities rated Prime-2 are viewed as having a strong capacity
to repay short-term promissory obligations. This capacity will normally be
evidenced by many of the characteristics of issuers whose commercial paper is
rated Prime-1 but to a lesser degree.
STANDARD & POOR'S CORPORATION
A Standard & Poor's Corporation ("S&P") A-1 commercial paper rating
indicates either an overwhelming or very strong degree of safety regarding
timely payment of principal and interest. Issues determined to possess
overwhelming safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is strong, but the relative degree of
safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term United States Treasury obligations), a Duff-1
rating signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
Fitch Investors Service, Inc.'s ("Fitch") F-1+ is the highest category,
and indicates the strongest degree of assurance for timely payment. Issues rated
F-1 reflect an assurance of timely payment only slightly less than issues rated
F-1+. Issues assigned an F-2 rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues in the
first two rating categories.
23
<PAGE> 24
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
strong capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protections, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal
24
<PAGE> 25
and differs from an AAA rating only in small degree.
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free United States Treasury debt. AA
rated bonds are of high credit quality and have strong protection factors. The
risks associated with them are modest but may vary slightly from time to time
because of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS
ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very strong. TBW-2 is
the second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
25
<PAGE> 26
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
CORPORATE
OBLIGATIONS--62.4%(a)
ASSET BACKED SECURITIES--13.2%
Alpha Finance Corp.
5.57%, 03/15/96 $ 5,000 $ 4,943
Alpine Securitization Corp.
5.83%, 01/09/96 15,224 15,205
Apreco, Inc.
5.80%, 01/29/96 32,200 32,057
5.75%, 02/23/96 7,000 6,942
Beta Finance, Inc.
5.71%, 01/22/96 12,000 11,961
5.87%, 02/16/96 13,000 12,905
5.79%, 03/25/96 12,000 11,842
5.65%, 04/10/96 5,000 4,923
Briarcliff Capital Corp.
5.78%, 02/05/96 20,000 19,889
Broadway Capital Corp.
5.91%, 01/03/96 7,616 7,614
5.91%, 01/05/96 25,000 24,984
5.87%, 01/05/96 10,000 9,994
5.86%, 01/09/96 40,941 40,888
5.86%, 01/10/96 40,000 39,942
5.86%, 01/11/96 15,748 15,723
5.99%, 01/16/96 25,365 25,303
5.88%, 01/19/96 18,000 17,948
5.99%, 01/22/96 50,753 50,578
6.05%, 02/05/96 5,000 4,971
6.05%, 02/12/96 18,000 17,875
Corporate Asset Funding Corp.
5.77%, 02/05/96 45,600 45,348
Corporate Receivables Corp.
5.80%, 01/25/96 20,000 19,924
5.76%, 02/02/96 21,375 21,267
5.76%, 02/16/96 31,400 31,172
ESC Securitization, Inc.
5.81%, 01/11/96 30,000 29,952
5.79%, 01/26/96 22,000 21,913
5.76%, 02/01/96 10,000 9,951
5.58%, 03/21/96 26,000 25,682
Enterprise Funding Corp.
5.82%, 01/09/96 5,073 5,067
5.80%, 01/10/96 8,111 8,099
5.83%, 01/18/96 5,886 5,870
5.83%, 01/19/96 5,074 5,059
5.83%, 01/23/96 4,384 4,369
5.78%, 02/02/96 11,155 11,098
5.77%, 02/23/96 7,986 7,919
5.76%, 03/08/96 6,096 6,032
5.58%, 03/20/96 6,083 6,010
5.54%, 06/12/96 10,281 10,030
Eureka Securitization, Inc.
5.78%, 02/12/96 16,000 15,894
5.79%, 02/13/96 53,000 52,639
First Deposit Master Trust
Series 1993-3
5.81%, 02/27/96 28,349 28,091
Ranger Funding Corp.
5.84%, 01/08/96 6,000 5,993
5.82%, 01/11/96 15,206 15,182
5.83%, 01/24/96 8,000 7,971
5.83%, 01/25/96 10,000 9,962
5.83%, 02/13/96 5,075 5,040
5.76%, 02/20/96 6,000 5,953
5.76%, 02/21/96 8,000 7,936
5.71%, 03/18/96 20,000 19,759
Riverwoods Funding Corp.
5.79%, 02/15/96 40,000 39,715
Special Purpose Accounts
Receivable Cooperative Corp.
5.76%, 02/07/96 7,000 6,959
5.78%, 02/14/96 20,000 19,861
WCP Funding, Inc.
5.74%, 02/23/96 25,000 24,792
-------
916,996
-------
AUTOMOTIVE--5.0%
Ford Credit Europe PLC
5.76%, 02/14/96 20,000 19,861
5.77%, 02/16/96 50,000 49,637
General Motors
Acceptance Corp.
5.81%, 02/01/96 4,000 3,980
5.76%, 02/02/96 25,000 24,873
5.81%, 02/13/96 24,000 23,836
5.82%, 02/14/96 50,000 49,650
5.62%, 03/19/96 13,000 12,844
5.72%, 04/26/96 50,000 49,103
5.72%, 05/01/96 30,000 29,439
Renault Credit
International SA Banque
5.84%, 01/08/96 52,300 52,242
5.87%, 01/24/96 18,700 18,631
5.88%, 01/25/96 15,000 14,942
-------
349,038
-------
BANKING--AUSTRALIA--1.7%
ANZ (Delaware), Inc.
5.80%, 02/01/96 40,000 39,803
5.58%, 05/14/96 22,000 21,554
National Australia Funding
(Delaware), Inc.
5.55%, 05/29/96 10,000 9,777
5.53%, 06/12/96 29,000 28,294
Westpac Capital Corp.
5.80%, 05/02/96 20,000 19,618
-------
119,046
-------
BANKING--BELGIUM--0.4%
Generale Bank, Inc.
5.74%, 03/12/96 5,000 4,945
5.81%, 04/04/96 22,000 21,676
-------
26,621
-------
BANKING--CANADA--2.0%
Bank of Montreal
5.81%, 01/29/96 23,000 22,898
</TABLE>
F-1
<PAGE> 27
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
Bank of Nova Scotia
5.75%, 01/19/96 $10,000 $ 9,972
5.75%, 01/24/96 50,000 49,820
5.81%, 02/02/96 16,000 15,919
Toronto-Dominion Holdings
5.51%, 07/10/96 39,000 37,897
-------
136,506
-------
BANKING--DENMARK--0.5%
Den Danske Corp.
5.80%, 04/10/96 37,000 36,421
-------
BANKING--DOMESTIC BANK HOLDING COMPANY--2.0%
Bankers Trust New York Corp.
5.77%, 02/12/96 57,000 56,622
5.77%, 02/20/96 47,000 46,629
NationsBank Corp.
5.55%, 05/21/96 10,000 9,788
5.61%, 05/28/96 25,000 24,439
-------
137,478
-------
BANKING--DOMESTIC--0.2%
Vehicle Services of
America/
(NationsBank of Texas
LOC)
5.80%, 02/08/96 16,700 16,599
-------
BANKING--GERMANY--0.6%
Banco Boavista S.A./
(Bayerische Vereinsbank
AG LOC)
5.80%, 03/11/96 9,000 8,901
5.80%, 04/08/96 10,000 9,846
Kredietbank N.A. Finance
Corp.
5.78%, 01/11/96 20,500 20,468
-------
39,215
-------
BANKING--ITALY--0.8%
Cariplo Finance, Inc.
5.76%, 02/20/96 10,000 9,921
5.76%, 02/22/96 40,000 39,672
5.74%, 02/22/96 9,000 8,926
-------
58,519
-------
BANKING--JAPAN--0.5%
Bancal Tri-State Corp./
(Mitsubishi Bank Keepwell
Agreement)
5.81%, 03/15/96 10,000 9,883
Ridge Capital II/(Dai-Ichi
Kangyo Bank Ltd. LOC)
6.26%, 01/04/96 6,000 5,997
Stellar Capital Corp./
(Bank of Tokyo
Liquidity Agreement)
6.00%, 02/20/96 15,155 15,031
-------
30,911
-------
BANKING--SPAIN--0.6%
BEX America Finance, Inc.
5.79%, 01/16/96 10,000 9,976
5.76%, 02/26/96 30,000 29,735
-------
39,711
-------
BANKING--UNITED KINGDOM--2.1%
Abbey National N.A. Corp.
5.79%, 01/17/96 75,000 74,810
Cheltenham & Gloucester PLC
5.80%, 02/02/96 50,000 49,746
Yorkshire Building Society
5.53%, 06/07/96 25,000 24,410
-------
148,966
-------
COMPUTER AND OFFICE EQUIPMENT--0.2%
CSC Enterprises
5.74%, 02/12/96 15,000 14,900
-------
ELECTRICAL AND ELECTRONICS--0.1%
Panasonic Finance, Inc.
5.75%, 02/09/96 5,000 4,969
-------
FINANCE (COMMERCIAL)--7.1%
CIT Group Holdings, Inc.
5.76%, 02/15/96 30,000 29,787
General Electric
Capital Corp.
5.80%, 03/01/96 25,000 24,764
5.74%, 03/06/96 31,000 30,688
5.70%, 04/03/96 42,000 41,393
5.55%, 05/02/96 13,338 13,093
5.62%, 05/08/96 9,000 8,825
5.61%, 05/08/96 30,000 29,415
5.52%, 06/13/96 60,000 58,535
5.52%, 06/14/96 41,000 39,993
General Electric Capital
Services
5.76%, 02/14/96 46,000 45,681
5.74%, 03/07/96 36,000 35,632
5.59%, 05/06/96 50,000 49,045
5.62%, 05/07/96 40,000 39,227
5.58%, 05/10/96 50,000 49,016
-------
495,094
-------
FINANCE (CONSUMER)--2.3%
American Express Credit Corp.
5.50%, 06/05/96 30,000 29,305
5.50%, 06/06/96 35,000 34,183
Associates Corp. of North
America
5.65%, 05/09/96 53,000 51,952
Sears Roebuck Acceptance
Corp.
5.82%, 01/11/96 15,000 14,976
5.79%, 02/15/96 28,000 27,800
-------
158,216
-------
</TABLE>
F-2
<PAGE> 28
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
GOVERNMENT LOCALITY--FOREIGN--0.3%
New South Wales Treasury
Corp.
5.80%, 01/30/96 $23,000 $ 22,894
-------
MINING AND MINERAL RESOURCES--0.5%
BHP Finance (U.S.A.), Inc.
5.75%, 02/22/96 15,000 14,877
5.76%, 03/05/96 17,000 16,829
-------
31,706
-------
MISCELLANEOUS MANUFACTURING--3.7%
Hanson Finance (U.K.) PLC
5.75%, 01/12/96 20,000 19,965
5.80%, 01/18/96 10,000 9,973
5.80%, 01/19/96 72,500 72,293
5.79%, 01/23/96 30,000 29,896
5.80%, 01/31/96 30,000 29,858
5.80%, 02/07/96 50,000 49,708
5.82%, 02/09/96 39,000 38,759
5.75%, 02/29/96 5,000 4,954
-------
255,406
-------
MORTGAGE BANKING--1.6%
Fleet Mortgage Group, Inc.
5.83%, 01/26/96 22,000 21,912
5.82%, 02/21/96 54,000 53,560
5.79%, 02/22/96 9,000 8,926
5.80%, 02/23/96 27,000 26,772
-------
111,170
-------
PERSONAL CARE PRODUCTS--0.9%
Colgate-Palmolive Company
5.79%, 01/22/96 31,000 30,897
5.79%, 01/24/96 31,200 31,086
-------
61,983
-------
PHARMACEUTICALS--0.1%
Glaxo Wellcome PLC
5.79%, 01/18/96 8,000 7,978
-------
SECURITIES BROKERAGE-DEALER--15.7%
BT Securities Corp.
5.85%, 01/18/96 15,000 14,959
5.84%, 01/25/96 30,000 29,885
5.82%, 01/29/96 18,000 17,920
5.83%, 01/30/96 29,000 28,866
5.77%, 02/16/96 10,000 9,927
Bear Stearns
Companies, Inc.
5.80%, 01/29/96 13,000 12,942
5.78%, 02/05/96 25,000 24,861
5.79%, 02/08/96 35,000 34,789
5.72%, 02/29/96 35,000 34,676
CS First Boston, Inc.
5.82%, 02/01/96 45,000 44,778
Goldman Sachs Group, LP
5.83%, 01/17/96 30,000 29,924
5.80%, 03/07/96 77,000 76,201
5.77%, 03/19/96 55,000 54,329
5.77%, 03/21/96 56,000 55,299
5.77%, 03/22/96 53,000 52,329
5.72%, 04/09/96 58,000 57,107
Lehman Brothers
Holdings, Inc.
5.83%, 01/26/96 10,000 9,960
5.94%, 02/01/96 10,000 9,949
5.82%, 02/06/96 33,000 32,811
5.80%, 02/12/96 32,000 31,787
5.81%, 02/13/96 35,000 34,760
Morgan Stanley Group, Inc.
5.83%, 01/08/96 40,000 39,955
5.83%, 01/09/96 8,000 7,990
5.78%, 02/06/96 36,000 35,795
5.78%, 02/07/96 20,000 19,883
5.82%, 02/08/96 20,000 19,879
5.79%, 02/08/96 42,000 41,747
5.79%, 02/09/96 55,000 54,660
5.79%, 02/12/96 17,000 16,887
5.89%, 02/13/96 10,000 9,932
Nomura Holdings
America, Inc.
5.92%, 01/03/96 8,000 7,997
5.91%, 01/09/96 10,000 9,987
5.88%, 01/12/96 15,000 14,973
5.86%, 01/18/96 5,000 4,986
Paine Webber Group, Inc.
5.86%, 01/02/96 20,000 19,997
5.89%, 01/04/96 24,000 23,988
5.84%, 02/01/96 18,000 17,910
Salomon, Inc.
6.15%, 01/02/96 454 454
6.02%, 02/15/96 20,000 19,852
6.02%, 02/16/96 30,000 29,773
---------
1,094,704
---------
STUDENT LOANS--0.3%
Student Loan Corp.
5.80%, 01/12/96 22,000 21,962
---------
TOTAL CORPORATE OBLIGATIONS (Cost
$4,337,009) 4,337,009
---------
VARIABLE RATE OBLIGATIONS--8.6%(b)
ASSET BACKED SECURITIES--1.6%
Advanta Credit Card
Master Trust
5.87%, 01/07/96 21,200 21,200
Beta Finance, Inc.
5.91%, 01/16/96 50,000 49,989
Corporate Asset
Funding Corp.
5.84%, 01/29/96 40,000 39,988
--------
111,177
--------
BANKING--DOMESTIC BANK HOLDING COMPANY--1.1%
Bankers Trust New York
Corp.
6.14%, 01/02/96 50,000 50,000
6.13%, 01/02/96 25,000 25,000
--------
75,000
--------
</TABLE>
F-3
<PAGE> 29
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
BANKING--DOMESTIC--0.3%
Huntington National Bank
5.87%, 01/02/96 $20,000 $20,000
Keystone Health Resources
Corp. Variable Rate
Taxable Demand Notes
Series 1993/ (PNC Bank
LOC)
6.00%, 01/07/96 3,400 3,400
------
23,400
------
BANKING--FRANCE--0.8%
New York City, General
Obligation Bonds
Fiscal 1995 Series F-8/
(Societe Generale LOC)
6.00%, 01/07/96 19,500 19,500
New York City, General
Obligation Bonds
Fiscal 1996 Series A-2/
(Societe Generale LOC)
6.00%, 01/07/96 36,000 36,000
------
55,500
------
BANKING--GERMANY--0.1%
Hudson County, New Jersey
General Obligation
Refunding Bonds
Variable Rate Demand
Obligations Taxable
Series 1995/
(Landesbank
Hessen-Thuringen
Girozentrale LOC)
6.05%, 01/07/96 10,000 10,000
------
BANKING--JAPAN--0.5%
Missouri Economic
Development Export &
Infrastructure Board
Adjustable Rate Taxable
Securities (Biocraft
Laboratories, Inc.
Project) Series 1989/
(Bank of Tokyo LOC)
6.30%, 01/07/96 22,000 22,000
New York City Industrial
Development Agency
Industrial Development
Revenue Bonds (G.A.F.
Seelig Inc. Project)
Series 1993/ (IBJ
Schroder Bank & Trust
LOC)
6.25%, 01/07/96 2,225 2,225
Riverside County,
California 1990 Taxable
Variable Rate
Certificates of
Participation (Monterey
Avenue Project)/ (Sanwa
Bank Ltd. LOC)
6.15%, 01/07/96 8,100 8,100
Town of Islip Industrial
Development Agency 1992
Taxable Adjustable Rate
Industrial Development
Revenue Bonds (Nussdorf
Associates/Quality King
Distributors, Inc.
Facility)/
(Bank of Tokyo LOC)
5.84%, 01/07/96 1,560 1,560
-------
33,885
-------
BANKING--UNITED KINGDOM--0.4%
New Jersey Economic
Development Authority
Variable Rate Title IX Loan
Portfolio Securitization
Bonds/(National
Westminister Bank LOC)
5.86%, 01/01/96 28,300 28,300
-------
INSURANCE--0.1%
Commonwealth Life
Insurance Co.
6.03%, 01/01/96 10,000 10,000
-------
MONOLINE INSURANCE--0.2%
Baptist Health Systems of
South Florida, Inc.
Taxable Variable Rate
Direct Note Obligations
Series 1995A/
(MBIA Insurance)
6.05%, 01/07/96 6,600 6,600
Baptist Health Systems of
South Florida, Inc.
Taxable Variable Rate
Direct Note Obligations
Series 1995B/
(MBIA Insurance)
6.05%, 01/07/96 4,500 4,500
New Orleans Aviation Board
Taxable Refunding Bonds
Series 1993A/ (MBIA
Insurance)
6.01%, 01/07/96 700 700
-------
11,800
-------
SECURITIES BROKERAGE-DEALER--3.5%
Bear Stearns Companies,
Inc.
6.03%, 01/04/96 75,000 75,000
5.99%, 01/08/96 50,000 50,000
5.99%, 02/01/96 50,000 50,000
5.91%, 03/21/96 45,000 45,000
Lehman Brothers Holdings,
Inc.
5.90%, 01/30/96 20,000 20,000
-------
240,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $599,062) 599,062
-------
</TABLE>
F-4
<PAGE> 30
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
AGENCY OBLIGATIONS--1.1%
COUPON NOTES--1.1%
Federal National Mortgage
Assoc.
5.50%, 06/12/96 $24,000 $ 23,983
5.62%, 07/02/96 24,000 23,985
5.91%, 08/19/96 30,000 30,047
-------
TOTAL AGENCY OBLIGATIONS (Cost
$78,015) 78,015
-------
BANKER'S
ACCEPTANCES--0.4%
BANKING--DOMESTIC--0.4%
Mellon Bank N.A.
5.86%, 02/26/96 9,000 8,920
5.58%, 05/06/96 5,000 4,904
5.55%, 06/07/96 15,000 14,645
-------
TOTAL BANKER'S ACCEPTANCES (Cost
$28,469) 28,469
-------
BANK NOTES--2.1%
BANKING--DOMESTIC--2.1%
NationsBank of Texas, N.A.
5.74%, 03/08/96 50,000 50,000
NationsBank, N.A.
(Carolinas)
5.54%, 06/04/96 30,000 30,000
PNC Bank, N.A.
5.62%, 05/24/96 15,000 15,014
Sea First--Seattle
5.80%, 01/12/96 50,000 50,000
-------
TOTAL BANK NOTES
(Cost $145,014) 145,014
-------
CERTIFICATES OF DEPOSIT--24.5%
BANKING--CANADA--2.2%
Bank of Montreal
5.84%, 01/05/96 25,000 25,000
5.80%, 01/30/96 40,000 40,000
Canadian Imperial Bank of
Commerce
5.81%, 01/26/96 25,000 25,000
5.81%, 01/31/96 60,000 60,000
-------
150,000
-------
BANKING--DOMESTIC--1.1%
MBNA America Bank N.A.
5.75%, 04/10/96 42,000 42,000
5.63%, 04/16/96 36,000 36,000
-------
78,000
-------
BANKING--FRANCE--2.9%
Banque Nationale de Paris
5.80%, 04/03/96 17,000 17,001
Societe Generale
5.84%, 01/18/96 33,000 33,000
5.80%, 01/25/96 54,000 54,000
5.84%, 03/14/96 25,000 25,002
5.85%, 03/20/96 58,000 58,001
5.61%, 04/12/96 13,000 13,032
-------
200,036
-------
BANKING--GERMANY--3.4%
Bayerische Vereinsbank AG
5.80%, 01/10/96 34,000 34,000
Deutsche Bank
5.79%, 01/23/96 75,000 75,000
5.79%, 01/29/96 30,000 30,000
5.79%, 01/30/96 45,000 45,000
Dresdner Bank AG
5.58%, 06/07/96 10,000 10,010
5.75%, 07/05/96 15,000 15,002
Westdeutsche Landesbank
5.71%, 01/16/96 30,000 29,998
-------
239,010
-------
BANKING--ITALY--0.2%
Cariplo SPA
5.70%, 03/04/96 10,000 10,001
-------
BANKING--JAPAN--10.2%
Dai-Ichi Kangyo Bank, Ltd.
6.10%, 01/12/96 30,000 30,000
6.13%, 01/16/96 19,000 19,000
6.12%, 01/16/96 6,000 6,000
6.22%, 01/18/96 28,000 28,000
6.42%, 01/26/96 42,000 42,000
6.14%, 02/02/96 17,000 17,002
5.88%, 02/21/96 12,000 11,999
5.86%, 03/20/96 18,000 17,998
Industrial Bank of Japan,
Ltd.
6.25%, 01/02/96 6,000 6,000
6.25%, 01/03/96 25,000 25,000
6.23%, 01/04/96 29,000 29,000
6.14%, 01/05/96 17,000 17,000
5.94%, 02/07/96 19,000 19,000
Mitsubishi Bank, Ltd.
6.14%, 01/02/96 50,000 50,000
6.06%, 01/04/96 25,000 25,000
5.82%, 03/08/96 30,000 30,000
5.83%, 03/12/96 31,000 30,999
5.83%, 03/14/96 40,000 40,000
5.83%, 03/19/96 30,000 30,000
Sanwa Bank, Ltd.
6.12%, 01/17/96 8,000 7,998
5.95%, 01/22/96 6,000 6,000
6.02%, 02/09/96 11,000 11,000
6.15%, 02/20/96 31,000 31,001
5.81%, 04/23/96 35,000 35,001
Sumitomo Bank, Ltd.
6.18%, 01/03/96 25,000 25,000
6.05%, 01/05/96 18,000 18,000
6.18%, 01/09/96 18,000 18,000
6.15%, 01/17/96 29,000 29,000
6.25%, 01/31/96 31,000 31,000
5.98%, 02/20/96 25,000 25,001
-------
710,999
-------
BANKING--NETHERLANDS--1.1%
ABN-AMRO Bank N.V.
5.80%, 01/16/96 40,000 39,998
5.58%, 06/05/96 10,000 9,998
Rabobank Nederland N.V.
5.95%, 07/25/96 25,000 25,001
-------
74,997
-------
</TABLE>
F-5
<PAGE> 31
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
BANKING--SWITZERLAND--1.4%
Union Bank of Switzerland
5.55%, 05/03/96 $100,000 $ 100,003
--------
BANKING--UNITED KINGDOM--2.0%
Abbey National PLC
5.61%, 04/01/96 20,000 20,042
5.53%, 06/14/96 50,000 50,002
5.58%, 06/21/96 30,000 30,009
Lloyds Bank PLC
5.80%, 04/22/96 10,000 10,013
National Westminster Bank
PLC
5.79%, 02/06/96 14,000 13,999
5.72%, 02/06/96 7,000 7,000
5.75%, 06/10/96 10,000 9,996
--------
141,061
--------
TOTAL CERTIFICATES OF DEPOSIT (Cost
$1,704,107) 1,704,107
---------
REMARKETED CERTIFICATES--0.8%
ASSET BACKED SECURITIES--0.8%
Black & Decker
RECOP Trust
5.80%, 02/06/96 17,000 17,000
5.80%, 02/15/96 18,311 18,311
Circuit City RECOP Trust
5.75%, 03/04/96 23,000 23,000
--------
TOTAL REMARKETED CERTIFICATES (Cost
$58,311) 58,311
--------
TAXABLE BONDS--0.1%
BANKING--JAPAN--0.1%
Oklahoma Industrial
Finance Authority Taxable
General Obligation
Industrial Finance Bonds
Series P/ (Mitsubishi
Bank LOC)
6.00%, 02/01/96 6,250 6,251
---------
TOTAL TAXABLE BONDS
(Cost $6,251) 6,251
---------
TOTAL INVESTMENTS--100.0%
(Cost $6,956,238) $6,956,238
=========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below. Yields for each type of
security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income
tax purposes) and carrying value are the same.
(a) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab Value Advantage Money Fund. Any resale by
the Fund must be in an exempt transaction, normally to a qualified
institutional buyer. At December 31, 1995, the aggregate value of
private placement securities held by the Fund was $1,106,106,000 which
represented 15.98% of net assets. Of this total, $1,017,795,000 or
14.70% of net assets, was determined by the Investment Manager to be
liquid in accordance with a resolution adopted by the Board of Trustees
relating to Rule 144A, promulgated under the Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE> 32
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $6,956,238) $6,956,238
Interest receivable 28,312
Receivable for fund shares sold 37,105
Deferred organization costs 29
Prepaid expenses 771
----------
Total assets 7,022,455
----------
LIABILITIES
Payable for:
Dividends 48,255
Fund shares redeemed 47,728
Investment advisory and administration fee 2,084
Transfer agency and shareholder service fees 133
Other 365
----------
Total liabilities 98,565
----------
Net assets applicable to outstanding shares $6,923,890
==========
NET ASSETS CONSIST OF:
Capital paid in $6,924,021
Accumulated net realized loss on investments sold (131)
----------
$6,923,890
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 6,924,021
Net asset value, offering and redemption price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-7
<PAGE> 33
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $333,064
--------
Expenses:
Investment advisory and administration fee 23,799
Transfer agency and shareholder service fees 13,812
Custodian fees 483
Registration fees 1,251
Professional fees 130
Shareholder reports 262
Trustees' fees 27
Amortization of deferred organization costs 22
Insurance and other expenses 67
--------
39,853
Less expenses reduced (17,754)
--------
Total expenses incurred by Fund 22,099
--------
Net investment income 310,965
Net realized loss on investments sold (5)
--------
Increase in net assets resulting from operations $310,960
========
</TABLE>
See accompanying Notes to Financial Statements.
F-8
<PAGE> 34
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 310,965 $ 85,792
Net realized loss on investments sold (5) (124)
----------- -----------
Increase in net assets resulting
from operations 310,960 85,668
----------- -----------
Dividends to shareholders from
net investment income (310,965) (85,792)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 10,404,416 6,042,841
Net asset value of shares issued in
reinvestment of dividends 262,426 63,079
Less payments for shares redeemed (7,474,576) (3,103,523)
----------- -----------
Increase in net assets from capital
share transactions 3,192,266 3,002,397
----------- -----------
Total increase in net assets 3,192,261 3,002,273
Net Assets:
Beginning of period 3,731,629 729,356
----------- -----------
End of period $ 6,923,890 $ 3,731,629
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-9
<PAGE> 35
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Value Advantage Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
Institutional Advantage Money FundTM and the Schwab Retirement Money Fund(R).
The assets of each series are segregated and accounted for separately.
The Schwab Value Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
F-10
<PAGE> 36
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$23,799,000 for the year ended December 31, 1995, before the Investment Manager
reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. In addition,
Schwab receives a fee of $5.00 for redemptions in amounts less than $5,000 and
may impose a $5.00 fee for monthly balances below the minimum required. For the
year ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $13,812,000 before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $27,000 related to
the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $7,922,000 and $9,832,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $24,387,423 and $21,192,127,
respectively.
F-11
<PAGE> 37
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
ended
\----For the year ended December 31,-----\ December 31,
1995 1994 1993 1992 1
<S> <C> <C> <C> <C>
-----------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .06 .04 .03 .02
Net realized and unrealized gain
(loss) on investments -- -- -- --
---------- ---------- -------- --------
Total from investment operations .06 .04 .03 .02
Less distributions
- ------------------
Dividends from net investment income (.06) (.04) (.03) (.02)
Distributions from realized gains
on investments -- -- -- --
---------- ---------- -------- --------
Total distributions (.06) (.04) (.03) (.02)
---------- ---------- -------- --------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00
========== ========== ======== ========
Total return (%) 5.80 4.09 3.02 2.33
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $6,923,890 $3,731,629 $729,356 $319,024
Ratio of expenses to
average net assets (%) .40 .40 .39 .29*
Ratio of net investment income to
average net assets (%) 5.63 4.40 2.97 3.27*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended
December 31, 1995, 1994, 1993 and 1992 would have been .72%, .79%, .82% and
.94%*, respectively, and the ratio of net investment income to average net
assets would have been 5.31%, 4.01%, 2.54% and 2.62%*, respectively.
1 For the period April 30, 1992 (commencement of operations) to December 31,
1992.
* Annualized
F-12
<PAGE> 38
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Value Advantage Money Fund(R)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab Value Advantage Money Fund (one
of the series constituting The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each period presented,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
withfp
generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-13
<PAGE> 39
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
THE SCHWAB MONEY FUNDS: VALUE ADVANTAGE SHARES
SCHWAB TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND-VALUE ADVANTAGE SHARES(TM)
APRIL 1, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus dated April 1, 1996, which may be
amended from time to time, for the Value Advantage Shares of the Schwab
Tax-Exempt Money Fund, Schwab California Tax-Exempt Money Fund, and Schwab New
York Tax-Exempt Money Fund (each a "Fund" and collectively, the "Funds"), three
separately managed investment portfolios of The Charles Schwab Family of Funds
(the "Trust").
This Statement of Additional Information relates to the Value Advantage
Shares of the Funds. To obtain a copy of the Prospectus, please contact Charles
Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours a day, or 101
Montgomery Street, San Francisco, CA 94104. TDD users may contact Schwab at
800-345-2550, 24 hours a day. The Prospectus may be available electronically by
using our Internet address: http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
(800-266-5623)
TABLE OF CONTENTS
Page
----
MUNICIPAL SECURITIES...................................................... 2
INVESTMENT RESTRICTIONS................................................... 8
MANAGEMENT OF THE TRUST................................................... 11
PORTFOLIO TRANSACTIONS AND TURNOVER....................................... 17
DISTRIBUTIONS AND TAXES................................................... 18
SHARE PRICE CALCULATION................................................... 23
YIELD..................................................................... 24
GENERAL INFORMATION....................................................... 26
PURCHASE AND REDEMPTION OF SHARES......................................... 31
OTHER INFORMATION......................................................... 31
APPENDIX - RATINGS OF INVESTMENT SECURITIES............................... 32
FINANCIAL STATEMENTS...................................................... F-1
<PAGE> 40
MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that the Funds may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. The Funds may not be desirable
investments for "substantial users" of facilities financed by private activity
bonds or industrial development bonds or for "related persons" of substantial
users for whom dividends attributable to interest on such bonds may not be
tax-exempt. Shareholders should consult their own tax advisers regarding the
potential effect on them (if any) of any investment in these Funds.
Municipal Securities generally are classified as "general obligation"
or "revenue." General obligation bonds are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
bonds are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Private activity bonds and industrial development
bonds that are Municipal Securities are in most cases revenue bonds and
generally do not constitute the pledge of the credit of the issuer of such
bonds.
Examples of Municipal Securities that are issued with original
maturities of one year or less are short-term tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes,
pre-refunded municipal bonds and tax-free commercial paper. Tax anticipation
notes typically are sold to finance working capital needs of municipalities in
anticipation of receiving property taxes on a future date. Bond anticipation
notes are sold on an interim basis in anticipation of a municipality issuing a
longer term bond in the future. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue such as those available under
the Federal Revenue Sharing Program. Construction loan
2
<PAGE> 41
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds that are not
yet refundable, but for which securities have been placed in escrow to refund an
original municipal bond issue when it becomes refundable. Tax-free commercial
paper is an unsecured promissory obligation issued or guaranteed by a municipal
issuer. The Funds may purchase other Municipal Securities similar to the
foregoing, which are or may become available, including securities issued to
pre-refund other outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
RISK FACTORS
The Schwab California Tax-Exempt Money Fund and the Schwab New York
Tax-Exempt Money Fund's concentration in securities issued by a single state
and its political subdivisions provides a greater level of risk than does a
fund that is diversified across numerous states and municipal entities. The
ability of a single state and its municipalities to meet their obligations will
depend on the availability of tax and other revenues, economic, political, and
demographic conditions within the state, and the underlying fiscal condition of
the state and its municipalities.
CALIFORNIA MUNICIPAL SECURITIES
In addition to general economic pressures which affect the State of
California's ability to raise revenues to meet its financial obligations,
certain California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could also result in
the adverse effects described below. The following information is only a brief
summary, is not a complete description, and is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State of California that have come to the attention of the Trust and were
available before the date of this Statement of Additional Information. The Trust
has not independently verified the accuracy and completeness of the information
contained in those statements and prospectuses.
As used in this section, "California Municipal Securities" includes
issues that are secured by a direct payment obligation of the State and
obligations of issuers that rely in whole or in part on State revenues for
payment of their obligations. Property tax revenues and part of the State's
General Fund surplus are distributed to counties, cities and their various
taxing entities; whether and to what extent a portion of the State's General
Fund will be distributed in the future to them is unclear.
Overview. From mid-1990 to late 1993, the State suffered a recession
with the worst economic, fiscal and budget
3
<PAGE> 42
conditions since the 1930's. Construction, manufacturing (especially aerospace),
exports and financial services, among others, all have been severely affected.
Job losses were the worst of any post-war recession.
The recession seriously affected State tax revenues and caused an
increase in expenditures for health and welfare programs. As a result, the State
has experienced recurring budget deficits. The State Controller reports that
expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93. The State
General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit
of about $1.8 billion. A further consequence of the large budget imbalances has
been that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs.
As a result of the deterioration in the State's budget and cash
situation, the State's credit ratings were reduced. Since October, 1992, all
three major nationally recognized statistical rating organizations have lowered
the State's general obligation bond rating from the highest ranking of "AAA" to
"A" by S&P, "A1" by Moody's Investors Service ("Moody's") and "A+" by Fitch
Investors Service, Inc. ("Fitch").
Since the start of 1994, California's economy has been on a steady
recovery. Employment grew significantly in 1994 and 1995, especially in
export-related industries, business services, electronics, entertainment, and
tourism.
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit imposed by its Constitution on
"proceeds of taxes." Various expenditures, including but not limited to debt
service on certain bonds and appropriations for qualified capital outlay
projects, are not included in the appropriations limit.
1994-95 FISCAL YEAR
Revenues. The 1994-95 Budget Act projected General Fund revenues and
transfers in 1994-95 of $41.9 billion, or about $2.1 billion more than 1993-94,
as revised. This projection includes the receipt of approximately $760 million
in new federal aid to reimburse the State for certain costs related to refugee
assistance and undocumented foreign immigrants. Only about $33 million of this
amount was received, with about another $98 million scheduled to be received in
the 1995-96 fiscal year. The 1994-95 Budget Act also projected Special Fund
revenues of $12.1 billion, a decrease of 2.4 percent from 1993-94.
Expenditures. The 1994-95 Budget Act projected General Fund
expenditures of $40.9 billion (a $1.6 billion increase from projected 1993-94
expenditures), in order to keep a balanced budget which pays off the accumulated
deficit, within available revenues. The 1994-95 Budget Act also projected
Special Fund expenditures of $12.3 billion, a 4.7 percent decrease from 1993-94.
The 1994-95 Budget Act balanced the budget with a number of major adjustments,
including the receipt of about $1.1 billion in health and welfare costs, and an
increase of about $526 million in Proposition 98 General Fund support for K-14
schools.
Cash resources at the beginning of the 1994-95 fiscal year were
insufficient
4
<PAGE> 43
to meet all obligations without external borrowing, such as occurred in 1992.
The 1994-95 Budget Act assumed that the State would use a cash flow borrowing
program in 1994-95 which combined one-year notes and two-year warrants, which
have now been issued. Issuance of the warrants allows the State to defer
repayment of about $1 billion of its accumulated budget deficit into the 1995-96
fiscal year. Additional legislation was passed with the 1994-95 Budget Act
designed to ensure that the warrants will be repaid in the 1995-96 fiscal year.
As a result of the improving economy, the California Department of
Finance's final estimates for the fiscal year showed revenues and transfers of
$42.7 billion and expenditures of $42 billion.
1995-96 FISCAL YEAR
Revenues. Notwithstanding the improved economy, serious policy
differences between the Governor and the Legislature delayed passage of the
1995-96 Budget Act until August 3, 1995, 34 days after the start of the fiscal
year. The 1995-96 Budget Act projected General Fund revenues and transfers of
$44.1 billion, a 3.5 percent increase from the prior year, and Special Fund
revenues of $12.7 billion.
Expenditures. The 1995-96 Budget Act included General Fund expenditures
of $43.4 billion, and Special Fund expenditures of $13.0 billion. The California
Department of Finance projected that, after repaying the last of the budget
deficit carried over from prior fiscal years, there would be a positive balance
of $28 million in the budget reserve at June 30, 1996.
The Governor's proposed budget for the 1996-97 fiscal year, released on
January 10, 1996, updated the projections for the 1995-96 fiscal year; revenues
and transfers are estimated to be $45 billion and expenditures to be $44.2
billion. As a result, the budget reserve was projected to have a positive
balance of about $50 million on June 30, 1996, with available cash (after
payment of all obligations due) of about $2.2 billion.
1996-97 FISCAL YEAR
The Governor's proposed budget for 1996-97 projected General Fund
revenues and transfers of about $45.6 billion and requested total General Fund
appropriations of about $45.2 billion, which would leave a budget reserve of
about $400 million on June 30, 1997. The Governor's proposed budget renewed a
proposal, which had been rejected by the Legislature in 1995, for a 15 percent
cut in personal and corporate tax rates, phased in over a three-year period. On
the assumption that the proposed tax rate cut would be enacted, the Governor's
proposed budget shows a reduction in revenues of about $600 million for 1996-97.
The Governor's proposed budget also projects external cash flow borrowing of up
to $3.2 billion to mature by June 30, 1997.
The foregoing discussions of the 1994-95 Budget, the 1995-96 Budget,
and the proposed 1996-97 Budget are based upon the Budget Acts for 1994-95 and
1995-96 and the Governor's proposed 1996-97 Budget, respectively, and should not
be construed as a statement of fact. The assumptions used to construct a budget,
which include estimates and projections of revenues and expenditures, may be
affected by numerous factors, including future economic conditions in
5
<PAGE> 44
the State and the nation. There can be no assurances that any estimates will be
achieved.
ISSUES AFFECTING LOCAL
GOVERNMENTS AND SPECIAL DISTRICTS
Proposition 13. Certain California Municipal Securities may be
obligations of issuers that rely in whole or in part on ad valorem real property
taxes as a source of revenue. In 1978, California voters approved Proposition
13, which limits ad valorem taxes on real property and restricts the ability of
taxing entities to increase property tax and other revenues.
With certain exceptions, the maximum ad valorem tax on real property is
limited to 1% of the property's full cash value to be collected by the counties
and apportioned according to law. One exception is for debt service on bonded
indebtedness if approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by substantial damage, destruction or other factors or adjusted when
there is a "change in ownership" or "new construction."
The State, in response to the significant reduction in local property
tax revenues as a result of the passage of Proposition 13, enacted legislation
to provide local government with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.
Proposition 62. This initiative, approved by voters in 1986, placed
further restrictions on the ability of local governments to raise taxes and
allocate approved tax receipts. Although some of the California Courts of Appeal
held that parts of Proposition 62 were unconstitutional, the California Supreme
Court recently issued a decision that upheld Proposition 62's requirement that
special taxes be approved by a two-thirds vote of the voters voting in an
election on the issue. This recent decision may invalidate other taxes that have
been imposed by local governments in California and make it more difficult for
local governments to raise taxes.
Propositions 98 and 111. These initiatives changed the State
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues. The
initiatives require that the State establish a prudent state reserve fund for
public education.
Appropriations Limit. Local governmental bodies are also subject to
annual appropriations limits. If a local government's revenues in any year
exceed the amount permitted to be spent, the excess must be returned to the
public through a revision of tax rates or fee schedules over the subsequent two
years.
Conclusion. The effect of these constitutional and statutory changes
and of budget developments on the ability of California issuers to pay interest
and principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent.
6
<PAGE> 45
For example, in December 1994, Orange County filed for bankruptcy. The
California Tax-Exempt Money Fund's concentration in California Municipal
Securities provides a greater level of risk than a fund that is diversified
across numerous states and municipal entities.
ADDITIONAL ISSUES
Mortgages and Deeds of Trust. The California Tax-Exempt Money Fund may
invest in issues which are secured in whole or in part by a mortgage or deed of
trust on real property. California law limits the remedies of a creditor secured
by a mortgage or deed of trust, which may result in delays in the flow of
revenues to an issuer.
Lease Financings. Some local governments and districts finance certain
activities through lease arrangements. It is uncertain whether such lease
financings are debt that require voter approval.
Seismic Risk. It is impossible to predict the time, magnitude or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck Los Angeles, causing significant damage
to structures and facilities in a four county area. The possibility exists that
another such earthquake could create a major dislocation of the California
economy.
NEW YORK MUNICIPAL SECURITIES
The State of New York has experienced fiscal problems for several years
as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Though the State
enjoyed good growth throughout the early to mid-1980's, unemployment has risen
drastically and over 250,000 jobs have been lost in the past four years. The
State's economy is highly developed with a large emphasis in service, trade,
financial services, and real estate. While very diverse, extensive job losses in
each of these areas has placed a burden on the State to maintain employment,
company development and a stable tax base.
As reflected in its financial results, the State has a large
accumulated deficit. The overall wealth of the State's population as reflected
by the per capita income offers a positive credit enhancement and is among the
highest in the nation. The debt per capita, though, is also among the highest
and poses a large burden on its residents.
The importance of New York City to the State's economy is also an
important consideration since it represents a significant portion of the overall
economy of the State. The City has struggled to maintain fiscal stability and
has performed adequately in contrast to the difficult economic conditions in the
New York/New Jersey metropolitan area. Any major changes to the financial
condition of the City would ultimately have an effect on the State. The overall
financial condition of the State can also be illustrated by the changes of its
debt ratings. During the last several years during which the State experienced
its financial difficulties, its general obligation long-term debt ratings as
determined by Moody's declined from A1 to A in 1990 while S&P downgraded the
State's debt from A to A- in early 1992. The State has the second lowest long-
term debt rating among those states with outstanding general obligation ratings.
The short-term debt ratings are within the top two rating categories: MIG-2 for
Moody's and
7
<PAGE> 46
SP-1 for S&P. In February 1991, Moody's lowered its rating on New York City
general obligation bonds from A to Baa1.
The Schwab New York Tax-Exempt Money Fund's concentration in securities
issued by the State of New York and its political subdivisions provides a
greater level of risk than a fund which is diversified across numerous states
and municipal entities. The ability of the State of New York or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political, and demographic conditions within the
State; and the underlying fiscal condition of the State and its municipalities.
OTHER ISSUES
Repurchase Agreements. If the seller of a repurchase agreement becomes
bankrupt or otherwise defaults, a Fund might incur expenses in enforcing its
rights and could experience losses, including a decline in the value of the
underlying securities and a loss of income. Therefore, a Fund will enter in
repurchase agreements only with banks and other recognized financial
institutions that the Investment Manager deems creditworthy.
INVESTMENT RESTRICTIONS
EXCEPT AS OTHERWISE NOTED, THE RESTRICTIONS BELOW ARE FUNDAMENTAL AND CANNOT BE
CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
HEREINAFTER THE "1940 ACT") OF THE FUND TO WHICH THEY APPLY. THE FUNDS MAY NOT:
(1) Purchase securities or make investments other than in accordance with
its investment objectives and policies.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
the Schwab California Tax-Exempt Money Fund and the Schwab New York
Tax-Exempt Money Fund, provided no more than 25% of the Fund's total
assets would be invested in the securities of a single issuer, up to
50% of the value of the Fund's assets may be invested without regard to
this 5% limitation. For purposes of this limitation, the Fund will
regard the entity which has the primary responsibility for the payment
of interest and principal as the issuer.
(3) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or
more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of
governments are not considered to be securities subject to this
industry concentration restriction) or in any one state (although the
limitation
8
<PAGE> 47
as to investments in a state or its political subdivisions shall not
apply to the Schwab California Tax-Exempt Money Fund or the Schwab New
York Tax-Exempt Money Fund), nor may it enter into a repurchase
agreement if more than 10% of its net assets would be subject to
repurchase agreements maturing in more than 7 days.
(4) Invest more than 5% of its total assets in industrial development bonds
sponsored by companies which with their predecessors have less than
three years continuous operation, although each Fund may invest more
than 25% of its total net assets in industrial development bonds.
(5) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to the Schwab California Tax-Exempt Money
Fund and the Schwab New York Tax-Exempt Money Fund.
(6) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or of its Investment Manager
individually owns beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.
(7) Invest in commodities or commodity futures contracts or in real estate
except that each Fund may invest in Municipal Securities secured by
real estate or interests therein.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.*
(10) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(11) Borrow money except from banks for temporary purposes (but not for the
purpose of purchase of investments) and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Funds
are permitted within the limitations of this paragraph. No Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.
* See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
9
<PAGE> 48
(12) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.
(13) Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance
of transactions.
(14) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.
(15) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(16) Issue senior securities as defined in the 1940 Act.
Except for restrictions (6) and (11), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation. None of the
Funds has a present intention of borrowing during the coming year and, in any
event, each Fund would limit borrowings as required by the restrictions
previously stated.
Each Fund will only purchase securities that present minimal credit risks and
which are First Tier or Second Tier Securities (otherwise referred to as
"Eligible Securities")*. An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's, S&P, Duff and Phelps Credit
Rating Co., Inc., Fitch, Thomson Bankwatch, and, with respect to debt
issued by banks, bank holding companies, United Kingdom building
societies, broker-dealers and broker-dealers' parent companies, and
bank-supported debt, IBCA Limited and its affiliate, IBCA, Inc.) in one
of the two highest rating categories for short-term debt obligations
(the requisite NRSROs being any two or, if rated by one, that one
NRSRO), or (b) that itself was unrated by any NRSRO, but was issued by
an issuer that has outstanding a class of short-term debt obligations
(or any security within that class) meeting the requirements of
subparagraph 1(a) above that is of comparable priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less and (a) whose issuer
received a rating within one of the
- ------------------------
* See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
10
<PAGE> 49
two highest rating categories from the requisite NRSROs for short-term
debt obligations with respect to a class of short-term debt obligations
(or any security within that class) that is now comparable in priority
and security with the subject security; or (b) that has long-term
ratings from the requisite NRSROs that are in one of the two highest
categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating is sufficient if only one NRSRO rates the security),
or has been determined by the Investment Manager, pursuant to guidelines adopted
by the Board of Trustees, to be of comparable quality to such a security. A
Second Tier Security is any other Eligible Security.
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and trustees of the Trust, their principal
occupations over the past five years and their affiliations, if any, with The
Charles Schwab Corporation, Schwab, and Charles Schwab Investment Management,
Inc., are as follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Founder, Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation; Founder, Chairman and
Director, Charles Schwab & Co., Inc. and Charles Schwab Investment
Management, Inc.; Chairman and Director, The Charles Schwab
Trust Company; Chairman and Director, and Director (officer
position) until December 1995, Mayer & Schweitzer, Inc. (a securities
brokerage subsidiary of The Charles Schwab Corporation); Director,
The Gap, Inc. (a clothing retailer), Transamerica Corporation (a
financial services organization), AirTouch Communications (a
telecommunications company) and Siebel Systems (a software company).
</TABLE>
- --------------------
*Mr. Schwab is an "interested person" of the Trust.
11
<PAGE> 50
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles
September 19, 1951 Schwab & Co., Inc. and The Charles Schwab
Corporation; Chief Executive Officer, Charles Schwab Investment
Management, Inc. From 1994 to 1995, Mr. McCarthy was Chief Executive
Officer, Jardine Fleming Unit Trusts Ltd.; Executive Director,
Jardine Fleming Holdings Ltd.; Chairman, Jardine Fleming Taiwan
Securities Ltd.; and Director of JF India and Fleming Flagship,
Europe. Prior to 1994, he was President of Fidelity Investments
Advisor Group, a division of Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. (international financial
services).
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (real estate
June 28, 1938 investment). Prior to 1993, Mr. Stephens was
Chairman and Chief Executive Officer of the Bank of
San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment and management, and
investments).
A. JOHN GAMBS Treasurer and Principal Executive Vice President - Finance and Chief
November 16, 1945 Financial Officer Financial Officer, The Charles Schwab Corporation;
Executive Vice President, Chief Financial Officer and Director,
Charles Schwab & Co., Inc.; Chief Financial Officer and Director,
Charles Schwab Investment Management, Inc.; and Chief Financial
Officer, The Charles Schwab Trust Company.
</TABLE>
**Mr. McCarthy is an "interested person" of the Trust.
12
<PAGE> 51
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ ------------- --------------------
<S> <C> <C>
WILLIAM J. KLIPP* Senior Vice President, Senior Vice President, Charles Schwab & Co., Inc.;
December 9, 1955 Chief Operating Officer President and Chief Operating Officer, Charles
and Trustee Schwab Investment Management, Inc. Prior to 1993,
Mr. Klipp was Treasurer of Charles Schwab & Co.,
Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President & Senior Vice President and Chief Investment Officer,
April 5, 1955 Chief Investment Charles Schwab Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance
September 9, 1955 Officer and Assistant Corporate Secretary, Charles
Schwab Investment Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel - Charles Schwab
October 14, 1960 Investment Management, Inc. From 1991 to 1992, he
was Assistant Secretary and Assistant Corporate
Counsel for the Franklin Group of Mutual Funds.
CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel - Charles Schwab
June 16, 1961 Investment Management, Inc. Prior to 1994, she was
Counsel and Assistant Secretary for North American
Security Life Insurance Company and Secretary for
North American Funds.
</TABLE>
Each of the above-referenced individuals also serves in the same
capacity as described for the Trust, Schwab Investments, Schwab Capital Trust,
Schwab Annuity Portfolios, and Schwab Advantage Trust (which has not commenced
operations). The address of each individual listed above is 101 Montgomery
Street, San Francisco, California 94104.
- ----------------------------
*Mr. Klipp is an "interested person" of the Trust.
13
<PAGE> 52
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Annual
Benefits Accrued Benefits Upon Total
Aggregate as Part of Fund Retirement from Compensation
Name of Person, Compensation from Expenses from the the Fund from the Fund
Position the Trust Fund Complex(2) Complex(2) Complex(2)
- --------------- ----------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
Elizabeth G. Sawi(3), 0 N/A N/A 0
President and Trustee
Timothy F. McCarthy(4), 0 N/A N/A 0
President and Trustee
William J. Klipp, 0 N/A N/A 0
Sr. Vice President,
Chief Operating Officer
and Trustee
Donald F. Dorward, 38,500 N/A N/A 73,000
Trustee
Robert G. Holmes, 38,500 N/A N/A 73,000
Trustee
Donald R. Stephens, 38,500 N/A N/A 73,000
Trustee
Michael W. Wilsey, 38,500 N/A N/A 73,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended December 31, 1995.
(2) "Fund Complex" comprises all 22 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
----------------------------------------------------
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to
14
<PAGE> 53
participate in the Fee Deferral Plan. In the event an Independent Trustee does
elect to participate in the Plan, the Plan would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities"). "SchwabFunds"
include the series or classes of shares of beneficial interest of the Trust,
Schwab Investments, Schwab Capital Trust, and Schwab Advantage Trust (which has
not commenced operations).
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. These transactions would otherwise be limited or
prohibited by the investment policies and/or restrictions of the Funds. See
"Investment Restrictions."
INVESTMENT MANAGER
Charles Schwab Investment Management, Inc. (the "Investment Manager"),
a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the
Funds' investment adviser and administrator pursuant to two separate yet
otherwise substantially similar Investment Advisory and Administration
Agreements (the "Advisory Agreements") between it and the Trust. The Investment
Manager is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended, and currently provides investment management services to
the SchwabFunds(R), a family of 21 mutual funds with over $35 billion in assets
as of March 18, 1996. The Investment Manager is an affiliate of Schwab, the
Trust's distributor and shareholder services and transfer agent.
Each Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of the majority (as defined in the 1940 Act) of
the outstanding voting securities of each Fund subject thereto. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement, or interested persons (as defined
in the 1940 Act) of any such party, by vote cast in person at a meeting called
for the purpose of voting on such approval. Each Advisory Agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Fund subject thereto, and will terminate
automatically upon assignment.
Pursuant to an Advisory Agreement dated June 15, 1994, as may be
amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of the Schwab Tax-Exempt Fund's
15
<PAGE> 54
average daily net assets not in excess of $1 billion, 0.41% of such net assets
over $1 billion but not in excess of $2 billion, and 0.40% of such net assets
over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995 the
investment advisory fees paid by the Schwab Tax-Exempt Money Fund were
$3,494,000 (fees were reduced by $5,424,000), $5,421,000 (fees were reduced by
$6,646,000), and $6,482,000 (fees were reduced by $7,237,000), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to an annual
fee, payable monthly from the Schwab California Tax-Exempt Money Fund and the
Schwab New York Tax-Exempt Money Fund of 0.46% of each Fund's average daily net
assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but
not in excess of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995 the
investment advisory fees paid by the Schwab California Tax-Exempt Money Fund
were $1,437,000 (fees were reduced by $2,450,000), $2,254,000 (fees were reduced
by $3,274,000), and $2,748,000 (fees were reduced by $3,703,000), respectively.
For the Schwab New York Tax-Exempt Money Fund for the period from
February 27, 1995 (commencement of operations) to the period ended December 31,
1995, the investment advisory fees paid was $464,000 (fees were reduced by
$277,000).
EXPENSES
The Trust pays the expenses of its operations, including the fees and
expenses of independent accountants, counsel, custodian and the cost of reports
and notices to shareholders, costs of calculating net asset value, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Trust and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. The Trust's expenses generally are
allocated among the Funds on the basis of relative net assets at the time the
expense is incurred, except that expenses directly attributable to a particular
Fund or class of shares are charged to that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost for the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution
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<PAGE> 55
Agreement are identical to those described above with respect to the Advisory
Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS
TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when engaged to do so by the Trust. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, D.C. 20005, is counsel to the Trust.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of each Fund in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. Portfolio transactions may increase or decrease the yield of a Fund
depending upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of each Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager generally selects broker-dealers for the Funds primarily on the basis of
the quality and reliability of services provided, including execution capability
and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other
17
<PAGE> 56
investment advisory clients, including mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for each Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as a
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
a Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of the Value Advantage
Shares of a Fund is determined ("Business Day"), such Shares' net investment
income will be declared as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) as a daily dividend to shareholders
of record as of the last calculation of net asset value prior to the
declaration. For the Value Advantage Shares of each Fund, Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will normally be reinvested monthly in full and fractional Value
Advantage Shares of the Fund at the net asset value on the 15th day of each
month, if a Business Day, otherwise on the next Business Day. If cash payment is
requested, checks will normally be mailed on the Business Day following the
reinvestment date. Each Fund will pay shareholders, who redeem all of their
shares, all dividends accrued to the time of the redemption within 7 days.
Each Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment
18
<PAGE> 57
income of the Value Advantage Shares of a Fund consists of: (1) accrued interest
income, plus or minus amortized discount or premium, allocated to the Value
Advantage Shares of that Fund minus (2) accrued expenses allocated to the Value
Advantage Shares of that Fund. If a Fund realizes any capital gains, such gains
will be distributed at least once during the year as determined by the Board of
Trustees. Any realized capital losses to the extent not offset by realized
capital gains will be carried forward. It is not anticipated that a Fund will
realize any long-term capital gains. Expenses of the Trust are accrued each day.
Should the net asset value of the Value Advantage Share of a Fund deviate
significantly from market value, the Board of Trustees could decide to value the
investments at market value and any unrealized gains and losses could affect the
amount of the Fund's distributions to holders of Value Advantage Shares.
FEDERAL INCOME TAXES
It is the policy of each Fund to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, each of the
Funds must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash or cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to a value not greater than 5%
of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or securities of any other regulated investment company)
or of two or more issuers that the Fund controls, within the meaning of the
Code, and that are engaged in the same, similar or related trades or businesses.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range of
the Fund's investments. If a Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its net investment
income and net realized capital gains, if any, which it distributes to
shareholders, provided that the Fund meets certain minimum distribution
requirements. To comply with these requirements, a Fund must distribute at least
(a) 90% of its "investment company taxable income" (as that term is defined in
the Code) and (b)
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<PAGE> 58
90% of the excess of its (i) tax-exempt interest income over (ii) certain
deductions attributable to that income (with certain exceptions), for its
taxable year. Each Fund intends to make sufficient distributions to shareholders
to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net income for the year ending October 31
(or later if the Fund is permitted so to elect and so elects), plus any retained
amount from the prior year, the Fund will be subject to a nondeductible 4%
excise tax on the undistributed amounts. Each Fund intends generally to make
distributions sufficient to avoid imposition of this excise tax.
Any distributions declared by the Funds in October, November or
December to shareholders of record during those months and paid during the
following January are treated, for tax purposes, as if they were received by
each shareholder on December 31 of the year declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.
The Funds do not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder (1) who
fails to provide a correct taxpayer identification number certified under
penalty of perjury; (2) who provides an incorrect taxpayer identification
number; (3) who is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (4) who
fails to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The Funds may engage in investment techniques that may alter the timing
and character of the Funds' income. The Funds may be restricted in their use of
these techniques by rules relating to their qualification as regulated
investment companies.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) generally are subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or disposition of shares of the Fund
generally are not
20
<PAGE> 59
subject to U.S. taxation, unless the recipient is an individual who meets the
Code's definition of "resident alien." Different tax consequences may result if
the foreign shareholder is engaged in a trade or business within the United
States. In addition, the tax consequences to a foreign shareholder entitled to
claim the benefits of a tax treaty may be different than those described above.
Distributions by a Fund may also be subject to state, local and foreign taxes,
and their treatment under applicable tax laws may differ from the federal income
tax treatment.
The Code permits a regulated investment company that invests at least
50% of its assets at the close of each quarter in Municipal Securities to pass
through to its investors, on a tax-exempt basis, net Municipal Securities
interest income. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by any Fund and designated as an
exempt-interest dividend in a written notice mailed to shareholders after the
close of such Fund's taxable year, but not to exceed in the aggregate the net
Municipal Securities interest income received by each such Fund during the
taxable year. The percentage of the total dividends paid for any taxable year
that qualified as exempt-interest dividends will be the same for all
shareholders receiving dividends from each Fund during such year, regardless of
the period for which the Shares were held. If for any taxable year any Fund does
not qualify for the special federal tax treatment afforded regulated investment
companies, all of its taxable income will be subject to federal tax at regular
corporate rates (without any deduction for distributions to its shareholders)
when distributed, and Municipal Securities interest income, although not taxed
to the Funds, would be taxable to shareholders.
This discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of Fund shares. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund and its shareholders,
and the discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a Fund.
STATE TAXES
With respect to the Schwab California Tax-Exempt Money Fund, if, at the
close of each quarter of its taxable year, at least 50% of the value of the
total assets of the Fund consists of obligations the interest on which is exempt
from California personal income taxation under the Constitution or laws of
California or of the United States when held by an individual ("California
Exempt Obligations"), then the Fund will be qualified to pay dividends exempt
from State of California personal income tax to its non-corporate shareholders
(hereinafter referred to as "California exempt-interest dividends"). The Schwab
California Tax-Exempt Money Fund intends to qualify under the above requirement
so that it can pay California exempt-interest dividends. If the Schwab
California Tax-Exempt Money Fund fails to so qualify, no part of its dividends
will
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<PAGE> 60
be exempt from State of California personal income tax.
With respect to the Schwab New York Tax-Exempt Money Fund, there is no
analogous requirement, so all dividends representing interest on New York
Municipal Securities that is exempt from New York personal income taxation will
be exempt from New York personal income taxes in the hands of non-corporate
shareholders ("New York exempt-interest dividends"). Not later than 60 days
after the close of its taxable year, the Schwab California and New York
Tax-Exempt Money Funds will notify each shareholder of the portion of the
dividends paid by it to the shareholder with respect to such taxable year which
is exempt from State of California personal income tax or New York personal
income tax, respectively.
The total amount of California exempt-interest dividends paid by the
Schwab California Tax-Exempt Money Fund to all of its shareholders with respect
to any taxable year cannot exceed the amount of interest received by the Fund
during such year on California Exempt Obligations, less any expenses or
expenditures (including any expenditures attributable to the acquisition of
additional securities for the Schwab California Tax-Exempt Money Fund) that are
allocable to such interest. Dividends paid by the Schwab California Tax-Exempt
Money Fund in excess of this limitation will be treated as ordinary dividends
subject to State of California personal income tax at ordinary rates. For
purposes of this limitation, expenses or other expenditures paid during any year
generally will be deemed to be allocable to interest received by the Fund from
California Exempt Obligations for such year in the same ratio as such interest
from California Exempt Obligations for such year bears to the total gross income
earned by the Fund for the year. The effect of this accounting convention is
that amounts of interest from California Exempt Obligations received by the
Schwab California Tax-Exempt Money Fund that would otherwise be available for
distribution as California exempt-interest dividends will be reduced by the
expenses and expenditures deemed to be allocable to such amounts.
To the extent, if any, dividends paid to shareholders by the Schwab
California Tax-Exempt Money Fund or New York Tax-Exempt Money Fund are derived
from long-term and short-term capital gains, such dividends will not constitute
California or New York exempt-interest dividends. Rules similar to those
regarding the treatment of such dividends for federal income tax purposes are
also applicable for State of California and New York personal income tax
purposes. Moreover, interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Schwab California Tax-Exempt Money Fund or New
York Tax-Exempt Money Fund is not deductible for state personal income tax
purposes if the Fund distributes California or New York exempt-interest
dividends to the shareholder during his or her taxable year.
The foregoing is only a summary of some of the important state personal
income tax considerations generally affecting the Schwab California Tax-Exempt
and New York Tax-Exempt Money Funds and their shareholders. No attempt is made
to present a detailed
22
<PAGE> 61
explanation of the state personal income tax treatment of the Schwab California
Tax-Exempt and New York Tax-Exempt Money Funds or their shareholders, and this
discussion is not intended as a substitute for careful planning. Further, it
should be noted that the portion of the Schwab California Tax-Exempt and New
York Tax-Exempt Money Funds' dividends constituting California or New York
exempt-interest dividends, respectively, is excludable from income for State of
California or State of New York personal income tax purposes only.
Any dividends paid to shareholders of the Funds subject to state
franchise or corporate income tax will be taxed as ordinary dividends to such
shareholders, notwithstanding that all or a portion of such dividends is exempt
from state personal income tax. Accordingly, potential investors in the Schwab
California Tax-Exempt or New York Tax-Exempt Money Funds, including, in
particular, corporate investors which may be subject to California or New York
franchise or corporate income tax, should consult their tax advisers with
respect to the application of such tax to the receipt of dividends from the
Funds and as to their own state tax situation, in general.
SHARE PRICE CALCULATION
Each Fund values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of a Fund's investments at amortized
cost with market values. Market valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value even where there are fluctuations in
interest rates that affect the value of portfolio instruments. Accordingly, this
method of valuation can in certain circumstances lead to a dilution of a
shareholder's interest. If a deviation of 1/2 of 1% or more were to occur
between the net asset value per share calculated by reference to market values
and a Fund's $1.00 per share net asset value for its Value Advantage Shares, or
if there were any other deviation that the Board of Trustees of the Trust
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If the net asset value per share for a Fund's Value Advantage Shares
(computed using market values) declined, or were expected to decline, below
$1.00 (computed using amortized cost), the Board of Trustees might temporarily
reduce or suspend dividend payments in an effort to maintain the net asset value
at $1.00 per
23
<PAGE> 62
share for a Fund's Value Advantage Shares. As a result of such reduction or
suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the other
hand, if a Fund's net asset value per share for its Value Advantage Shares
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share for its Value Advantage Shares.
YIELD
The historical performance of the Value Advantage Shares of each Fund
may be shown in the form of yield, effective yield, taxable equivalent yield and
taxable equivalent effective yield. These measures of performance are described
below.
YIELD
Yield refers to the net investment income generated by a hypothetical
investment in the Value Advantage Shares of a Fund over a specific 7-day period.
This net investment income is then annualized, which means that the net
investment income generated during the 7-day period is assumed to be generated
in each 7-day period over an annual period, and is shown as a percentage of the
investment.
EFFECTIVE YIELD
Effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Value Advantage Share of the Schwab
Tax-Exempt Money Fund is computed by dividing that portion of the Value
Advantage Shares' yield (computed as described above) that is tax-exempt by an
amount equal to one minus the stated federal income tax rate (normally assumed
to be the maximum applicable marginal tax bracket rate) and adding the result
to that portion, if any, of the yield of the Value Advantage Shares that is not
tax-exempt. The taxable equivalent yield of the Value Advantage Shares of the
Schwab California Tax-Exempt Money Fund is calculated by dividing that portion
of the Value Advantage Shares' yield (computed as described above) which is
tax-exempt by an amount equal to one minus the stated combined State of
California and federal income tax rate (normally assumed to be the maximum
federal marginal rate of 39.6% and the
24
<PAGE> 63
California marginal rate of 9.3%, although other rates may be used at times),
and adding the result to that portion, if any, of the Value Advantage Shares'
yield that is not tax-exempt. The taxable equivalent yield of the Value
Advantage Shares of the Schwab New York Tax-Exempt Money Fund is calculated by
dividing that portion of the Value Advantage Shares' yield (computed as
described above) which is tax-exempt by an amount equal to one minus the stated
combined New York municipal, State of New York and federal income tax rate
(normally assumed to be the maximum federal marginal rate of 39.6%, the State of
New York marginal rate of 7.125% and the New York municipal marginal rate of
3.91%, although other rates may be used at times), and adding the result to that
portion, if any, of the Value Advantage Shares' yield that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, the Schwab Tax-Exempt Money Fund generally assumes an effective tax rate
of 39.6%, the Schwab California Tax-Exempt Money Fund generally assumes an
effective tax rate (combining the federal 39.6% rate and the California 9.3%
rate, and assuming the taxpayer deducts California state taxes paid) of 45.22%,
and the Schwab New York Tax-Exempt Money Fund generally assumes an effective tax
rate (combining the federal 39.6% rate, the New York state 7.125% rate, and the
New York municipal 3.91% rate, and assuming the taxpayer deducts New York state
and municipal taxes paid) of 46.27%. Investors in the Schwab New York Tax-Exempt
Money Fund should understand that, under legislation enacted in New York State
and New York City, the maximum effective tax rate for 1997 will be 45.79%. The
tax rate cut reflected herein is subject to postponement or elimination. The
effective tax rates used in determining such yields do not reflect the tax costs
resulting from the full or partial loss of the benefits of personal exemptions,
itemized deductions and California exemption credits that may result from the
receipt of additional taxable income by taxpayers with adjusted gross incomes
exceeding $117,950 ($58,975 for married filing separate returns) in 1996. Actual
taxable equivalent yields and taxable equivalent effective yields may be higher
for taxpayers subject to the loss of these benefits than the rates reported by
the Funds.
TAX-EXEMPT VERSUS TAXABLE YIELD
Investors may want to determine which investment, tax-exempt or
taxable, will provide a higher after-tax return. To determine the taxable
equivalent yield, or taxable equivalent effective yield, simply divide the yield
or effective yield of the Value Advantage Shares of the Fund by 1 minus your
marginal federal tax rate (or combined state and federal tax rate in the case of
the Schwab California Tax-Exempt Money Fund, or combined municipal, state, and
federal tax rate in the case of the Schwab New York Tax-Exempt Money Fund).
Note, however, that as discussed above full or partial loss
25
<PAGE> 64
by certain investors of the described federal tax benefits could cause the
resulting figure to understate the after-tax return produced by the Value
Advantage Shares of the Fund in question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1995 is presented below. The taxable equivalent yield and
taxable equivalent effective yield figures are based, in the case of the Schwab
Tax- Exempt Money Fund, upon an assumed 1995 effective tax rate of 39.6%; in the
case of the Schwab California Tax-Exempt Money Fund, upon an assumed effective
tax rate of 46.24%; and in the case of the Schwab New York Tax-Exempt Money
Fund, upon an assumed effective tax rate of 46.88%. (Based on the maximum rates
in effect for 1995. See the discussion above relating to federal, State of
California, and State of New York tax rates.)
<TABLE>
<CAPTION>
Taxable
Taxable Equivalent
Yield Effective Yield Equivalent Yield Effective Yield
----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Schwab Tax-Exempt Money 4.17% 4.26% 6.90% 7.05%
Fund-Value Advantage Shares
Schwab California Tax-Exempt 3.99% 4.06% 7.42% 7.55%
Money Fund-Value Advantage
Shares
Schwab New York Tax-Exempt 4.07% 4.16% 7.66% 7.83%
Money Fund-Value Advantage
Shares
</TABLE>
GENERAL INFORMATION
The Trust is generally not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of
26
<PAGE> 65
Trust (other than amendments changing the name of the Trust or any of its
investment portfolios, supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision thereof);
(5) determining whether a court action, proceeding or claim should or should not
be brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of these Bylaws
permits or requires that (i) holders of any series shall vote as a series, then
a majority of the aggregate number of shares of that series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series; or (ii) holders of any class shall vote as a class, then a majority
of the aggregate number of shares of that class entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class.
Any lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. The Declaration of
Trust specifically authorizes the Board of Trustees to terminate the Trust (or
any of its investment portfolios) by notice to the shareholders without
shareholder approval.
27
<PAGE> 66
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.
As of March 15, 1996, the following persons directly or beneficially
owned 5% or more of each Fund's Value Advantage Shares:
Walter R. Koepp (EX), EST E. H. Shumway, 15717 Larch Way, Lynnwood,
WA 98037 at 5.98% for Schwab Tax-Exempt Money Fund - Value Advantage
Shares(TM); Louis A. Simpson, P.O. Box 1487, Rancho Santa Fe, CA 92067 at 7.68%
for Schwab California Tax-Exempt Money Fund - Value Advantage Shares(TM);
Victoria Shaw, 14 East 90th Street, New York, NY 10128, at 10.49%, PEI
Partnership Architects, 257 Park Avenue South, New York, NY 10010 at 6.43% and
Patricia Meehan, 18 Heather Lane, Miller Place, NY 11764 at 12.29% for
Schwab New York Tax-Exempt Money Fund - Value Advantage Shares(TM).
As of March 22, 1996, the officers and trustees of the Trust, as a
group, owned of record or beneficially less than 1% of the outstanding voting
securities of the remaining series of the Trust.
28
<PAGE> 67
ACCESS TO SCHWAB'S FUND ONESOURCE SERVICE(TM)
With Schwab's Mutual Fund OneSource Service(TM) ("OneSource"), a
shareholder can invest in over 200 mutual funds from many fund companies,
subject to the following. If a shareholder makes five or more short-term
redemptions of OneSource mutual funds (other than the SchwabFunds) within any
12-month period, a fee will be charged on all future trades. A short-term
redemption in this context refers to the sale of mutual fund shares held for six
months or less. Some mutual funds available through OneSource may charge fees
permitted under Rule 12b-1 in excess of one quarter of one percent per year.
Schwab reserves the right to modify OneSource's terms and conditions at any
time. For more information, a shareholder should contact their Schwab office
during its regular business hours or 800-2 NO-LOAD, 24 hours a day.
29
<PAGE> 68
SchwabFunds(R). SchwabFunds offers a variety of series and classes of shares of
beneficial interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(TM)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(3)
Schwab California Long-Term Tax-Free Bond Fund(3)
MONEY MARKET FUNDS(4)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares(3)
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)(3)
Schwab Retirement Money Fund(R)(5)
Schwab Institutional Advantage Money Fund(TM)(5)
Schwab New York Tax-Exempt Money Fund-Sweep Shares(6)
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)(6)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios of Schwab Capital Trust.
(3) Designed for California taxpayers.
(4) All listed money market funds are separate investment portfolios of the
Trust.
(5) Designed for institutional investors only.
(6) Designed for New York taxpayers.
30
<PAGE> 69
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment for the Value Advantage Shares of each
Fund is $25,000 and subsequent investments of $5,000 or more may be made. These
minimum requirements may be changed at any time and are not applicable to
certain types of investors. The Trust may waive the minimums for purchases by
trustees, directors, officers or employees of the Trust, Schwab or the
Investment Manager. The Trust has made an election with the SEC to pay in cash
all redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of its net assets at the
beginning of such period. This election is irrevocable without the SEC's prior
approval. Redemption requests in excess of the stated limits may be paid, in
whole or in part, in investment securities or in cash, as the Trust's Board of
Trustees may deem advisable; however, payment will be made wholly in cash unless
the Board of Trustees believes that economic or market conditions exist that
would make such a practice detrimental to the best interests of the Fund. If
redemption proceeds are paid in investment securities, such securities will be
valued as set forth in the Prospectus of the Fund affected under "Share Price
Calculation" and a redeeming shareholder would normally incur brokerage expenses
if he or she converted the securities to cash.
OTHER INFORMATION
The Prospectus of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
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<PAGE> 70
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.
STANDARD & POOR'S CORPORATION
A S&P A-1 commercial paper rating indicates either an overwhelming or
very strong degree of safety regarding timely payment of principal and interest.
Issues determined to possess overwhelming safety characteristics are denoted
A-1+. Capacity for timely payment on commercial paper rated A-2 is strong, but
the relative degree of safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term United States Treasury obligations), a Duff-1
rating signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
F-1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F-1 reflect an assurance of timely
payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.
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<PAGE> 71
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
strong capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protection, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
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<PAGE> 72
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree.
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free United States Treasury debt. AA
rated bonds are of high credit quality and have strong protection factors. The
risks associated with them are modest but may vary slightly from time to time
because of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT
OBLIGATIONS ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very strong. TBW-2 is
the second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
34
<PAGE> 73
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--57.8%(a)
ALABAMA--2.0%
Alabama Housing Finance
Authority Single Family
Housing Revenue Bonds
Collateralized Home
Mortgage Program Series
1995C-1/ (Bayerische
Landesbank Girozentrale
LOC)
5.05%, 01/07/96 $10,400 $10,400
Citronelle, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(AZKO Chemicals, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 1,100 1,100
Jefferson County, Alabama
Sewer Revenue Warrants
Series 1995A/
(Bayerische Landesbank
Girozentrale LOC)
5.20%, 01/07/96 12,500 12,500
Mobile County, Alabama
Industrial Development
Board Revenue Bonds
(Ultraform Co.
Project) Series B/
(Bayerische Landesbank
Girozentrale LOC)
5.00%, 01/07/96 1,000 1,000
Mobile County, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Ultraform Co. Project)
Series A/ (Bayerische
Landesbank Girozentrale
LOC)
5.00%, 01/07/96 7,480 7,480
Mobile, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding
Bonds (Alabama
Power Co. Project)
Series 1993C
5.15%, 01/07/96 12,000 12,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985C/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 2,000 2,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985F/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 9,000 9,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 6,390 6,390
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 5,295 5,295
Opelika, Alabama Industrial
Development Board Revenue
Bonds (Power Guard
Project) Series
1994/(SouthTrust Bank of
Alabama LOC)
5.35%, 01/07/96 3,100 3,100
------
70,265
------
ALASKA--0.0%
Alaska Industrial
Development Authority
Flexible Demand Revenue
Bonds (Advanced Health
Systems)/(Citibank LOC)
5.35%, 01/07/96 600 600
------
ARIZONA--0.5%
Arizona Educational Loan
Marketing Corp.
Revenue Bonds Series A/
(MBIA Insurance &
Fuji Bank SBPA)
5.45%, 01/07/96 10,000 10,000
Yavapai County, Arizona
Industrial Development
Authority Revenue Bonds
(First Health
Care Corp. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,230 4,230
</TABLE>
F-1
<PAGE> 74
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series A/(Citibank LOC)
5.20%, 01/07/96 $3,000 $ 3,000
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series B/(Citibank LOC)
5.50%, 01/07/96 275 275
------
17,505
------
CALIFORNIA--1.4%
California Higher Education
Loan Authority Student
Loan Refunding Bonds
Series E1/(SLMA LOC)
5.25%, 01/07/96 5,000 5,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986B
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 200 200
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Packaging Innovation DZ
Industries, Inc.) Series
1994A-2/ (Bank of Tokyo
LOC)
5.35%, 01/07/96 585 585
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 8,900 8,900
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
A/(Industrial Bank of
Japan LOC)
6.10%, 01/01/96 100 100
Los Angeles County,
California Metropolitan
Transportation Authority
Sales Tax Revenue
Refunding Bonds
Proposition C Second
Senior Series A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.00%, 01/07/96 300 300
Orange County, California
Various Sanitation
Districts Certificates of
Participation Capital
Improvement Programs
Series 1990-92C/ (FGIC
Insurance)
6.00%, 01/01/96 200 200
Orange County, California
Water District
Certificates of
Participation (Sanitation
Districts #1,2,3)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 19,500 19,500
Simi Valley, California
Multi Family Housing
Certificates of
Participation (Lincoln
Wood Ranch Project)/
(Sumitomo Bank LOC)
5.05%, 01/07/96 5,600 5,600
Southern California Public
Power Authority
Transmission Project
Revenue Bonds (Southern
Transmission Project)
Series 1991/ (AMBAC
Insurance & Swiss Bank
LOC)
4.75%, 01/07/96 9,700 9,700
------
50,185
------
COLORADO--4.2%
Colorado Health Facilities
Authority Revenue Bonds
(Sisters of Charity
Health) Series B/(Multiple
Credit Enhancements)
5.05%, 01/07/96 23,300 23,300
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1990A/ (SLMA LOC)
5.20%, 01/07/96 10,790 10,790
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993B/ (SLMA LOC)
5.20%, 01/07/96 2,100 2,100
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993C-2/ (SLMA LOC)
5.05%, 01/07/96 2,200 2,200
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992D/(Morgan Guaranty
Trust LOC)
5.30%, 01/07/96 48,400 48,400
</TABLE>
F-2
<PAGE> 75
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992E/ (Bank of Tokyo LOC)
5.50%, 01/07/96 $30,000 $ 30,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992F/
(Bank of Montreal LOC)
5.30%, 01/07/96 16,000 16,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992G/(Credit Local de
France LOC)
5.30%, 01/07/96 8,500 8,500
Douglas County, Colorado
Multi Family Housing
Revenue Bonds (Autumn
Chase Project)/ (Citibank
LOC)
5.25%, 01/07/96 9,300 9,300
-------
150,590
-------
CONNECTICUT--1.0%
Connecticut State General
Obligation Economic
Recovery Bonds Series
1991B/(Multiple Credit
Enhancements)
5.10%, 01/07/96 11,700 11,700
Connecticut State Special
Assessment Unemployment
Compensation Advance
Fund Revenue Bonds
Series 1993B/(Multiple
Credit Enhancements)
5.40%, 01/07/96 15,900 15,900
Connecticut State Special Tax
Obligation Bonds (Second
Lien Transportation
Information) Series 1990-1/
(Industrial Bank of Japan LOC)
5.10%, 01/07/96 5,800 5,800
-------
33,400
-------
DISTRICT OF COLUMBIA--0.1%
District of Columbia
Revenue Bonds Adjustable
Convertible Extendable
Securities (Georgetown
University) Series 1988D/
(Sanwa Bank LOC)
5.65%, 01/07/96 4,200 4,200
-------
FLORIDA--1.1%
Brevard County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Palm Place Project)/
(Chemical Bank LOC)
5.05%, 01/07/96 5,000 5,000
Dade County, Florida
Solid Waste Industrial
Development Revenue Bonds
(Montenay-Dade, Ltd.
Project)/
(Banque Paribas LOC)
5.10%, 01/07/96 1,280 1,280
Hillsborough County,
Florida Industrial
Development Authority
Revenue Bonds (Seaboard
Tampa Terminals) Series
1986A/ (Barclays Bank LOC)
5.00%, 01/07/96 5,500 5,500
Indian Trace, Florida
Community Development
District (Water & Sewer
Special Assessment
Basin 1 Water)/
(MBIA Insurance &
Swiss Bank SBPA)
4.90%, 01/07/96 2,500 2,500
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Rio Vista Project)/
(First Union Bank of
North Carolina LOC)
5.20%, 01/07/96 3,865 3,865
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds (Smokewood
Project)/ (Citibank LOC)
5.25%, 01/07/96 10,000 10,000
Palm Beach County, Florida
Health Facilities
Authority Revenue
Refunding Bonds
(Joseph L. Morse
Geriatric Center)/
(Sun Bank LOC)
5.20%, 01/07/96 9,800 9,800
Palm Beach County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Crystal II Project)/
(Citibank LOC)
5.15%, 01/07/96 2,850 2,850
------
40,795
------
GEORGIA--3.1%
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 15,300 15,300
</TABLE>
F-3
<PAGE> 76
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1994A/
(FGIC Insurance &
Credit Local de
France SBPA)
5.15%, 01/07/96 $24,000 $24,000
Cobb County, Georgia
Housing Authority
Multi Family Housing
Revenue Bonds
(Walton Green Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 14,000 14,000
Cobb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Williamstown
Apartment Project)/
(Wachovia Bank LOC)
5.20%, 01/07/96 2,000 2,000
Dekalb County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Siemens
Energy, Inc. Project)/
(Siemens AG Guaranty)
5.20%, 01/07/96 3,750 3,750
Dekalb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Wood Hills
Apartment Project)/ (Bank
of Montreal LOC)
5.15%, 01/07/96 5,250 5,250
Douglas County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Mima Inc.
Project)/ (Wachovia Bank
LOC)
5.10%, 01/07/96 4,300 4,300
Laurens County, Georgia
Development Authority
Solid Waste Disposal
Revenue Bonds (Southeast
Paper Co. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 25,000 25,000
Richmond County, Georgia
Industrial Development
Authority Revenue Bonds
(Bok Group Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Rockmart, Georgia
Development Authority
Industrial Development
Revenue Bonds (CW Matthews
Contracting)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 2,500 2,500
Smyrna, Georgia Housing
Authority Multi Family
Housing Revenue Bonds
(Walton Park LP)/
(Wachovia Bank LOC)
5.25%, 01/07/96 8,000 8,000
Villa Rica, Georgia
Industrial Development
Revenue Bonds (Lowes Home
Centers, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,200 1,200
-------
110,300
-------
HAWAII--1.6%
Hawaii State Department of
Budget and Finance Special
Purpose Mortgage Revenue
Bonds (Adventist Health
System West)/ (Bank of
California LOC)
5.15%, 01/07/96 3,100 3,100
Hawaii State Housing
Finance & Development
Corp. Multi-Family Housing
Revenue Bonds (Nani Mauna
Loa Project) Series 1995A/
(Citibank LOC)
4.00%, 01/07/96 4,350 4,350
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 17,100 17,100
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990B/(Industrial
Bank of Japan LOC)
5.20%, 01/07/96 19,600 19,600
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(HaleKa Gardens Project)
Series A/ (Bank of Tokyo
LOC)
5.70%, 01/07/96 5,256 5,256
</TABLE>
F-4
<PAGE> 77
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(Lolani Regents Project)
Series 1990A/
(Bank of Hawaii LOC)
5.55%, 01/07/96 $ 9,300 $ 9,300
------
58,706
------
ILLINOIS--10.2%
Centralia, Illinois
Industrial Development
Authority Revenue Bonds
(Consolidated Foods
Corp./Hollywood
Brands, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,500 4,500
Chicago, Illinois
General Obligation
Bonds Series 1985/
(Sanwa Bank LOC)
5.45%, 01/07/96 14,440 14,440
Chicago, Illinois
General Obligation
Bonds Series 1992B/
(Canadian Imperial Bank of
Commerce LOC)
5.10%, 01/07/96 10,400 10,400
Chicago, Illinois
Industrial Development
Revenue Bonds (Morse
Automotive)/ Series 1995
(American National Bank &
Trust Co. LOC)
5.25%, 01/07/96 3,000 3,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (Adjustable
Convertible Extendable
Securities General Airport
Second Lien) Series B-1/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(Adjustable Convertible
Extendable Securities
General Airport Second
Lien) Series B-2/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series 1994C/
(Societe Generale LOC)
5.15%, 01/07/96 16,100 16,100
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (General
Airport Second Lien)
Series A/(Westpac Banking
Corp. LOC)
5.10%, 01/07/96 13,100 13,100
Illinois Development
Finance Authority Hospital
Revenue Bonds (Palos
Community Hospital) Series
1994/ (Credit Suisse SBPA)
5.20%, 01/07/96 37,700 37,700
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Knead Dough
Baking Co.)/
(Bank of America LOC)
5.35%, 01/07/96 8,870 8,870
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Marriott
Corp. Deerfield Project)/
(National Westminster Bank
LOC)
5.15%, 01/07/96 1,300 1,300
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Rerkin
Paperboard Co. LP) Series
1994/ (Northern Trust LOC)
5.40%, 01/07/96 5,500 5,500
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (F.C. Harris
Pavillion Project) Series
1994/(FNMA LOC)
5.15%, 01/07/96 3,000 3,000
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (River Oak)/ (Swiss
Bank LOC)
5.20%, 01/07/96 3,790 3,790
Illinois Educational
Facility Authority Revenue
Bonds (Chicago Zoological
Society Brookfield Zoo)
Series B/
(Chemical Bank LOC)
5.25%, 01/07/96 2,000 2,000
Illinois Educational
Facility Authority Revenue
Bonds (Chicago
Historical Society)/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 8,300 8,300
</TABLE>
F-5
<PAGE> 78
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Illinois Educational
Facility Authority
Revenue Bonds
(Illinois Institute of
Technology) Series 1990A/
(Northern Trust LOC)
5.05%, 01/07/96 $11,300 $11,300
Illinois Educational
Facility Authority Revenue
Bonds (Northwestern
University)/ (FNB Chicago
LOC)
5.15%, 01/07/96 22,200 22,200
Illinois Educational
Facility Authority Revenue
Bonds (University Pooled
Financing Program)
Series 1985/
(FGIC Insurance &
Sakura Bank SBPA)
5.95%, 01/07/96 17,325 17,325
Illinois Health Facility
Authority Revenue Bonds
(Franciscan Village
Project) Series 1989A/
(Commonwealth Bank of
Australia LOC)
5.20%, 01/07/96 2,000 2,000
Illinois Health Facility
Authority Revenue Bonds
(Hospital Sisters
Services) Series E/(MBIA
Insurance &
Morgan Guaranty SBPA)
5.00%, 01/07/96 4,300 4,300
Illinois Health Facility
Authority Revenue Bonds
(Ingalls Memorial
Hospital) Series
1985C/(LaSalle National
Bank LOC)
5.60%, 01/07/96 1,100 1,100
Illinois Health Facility
Authority Revenue Bonds
(Streeterville Corp.)
Series A/
(FNB Chicago LOC)
5.10%, 01/07/96 14,400 14,400
Illinois Health Facility
Authority Revenue Bonds
(Washington & Jane Smith
Home) Series 1991/
(Comerica Bank LOC)
5.20%, 01/07/96 2,800 2,800
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985C/ (FNB Chicago
LOC)
5.20%, 01/07/96 6,000 6,000
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985D/ (FNB Chicago
LOC)
5.20%, 01/07/96 20,000 20,000
Illinois State Toll Highway
Authority Revenue Bonds
Series B/(MBIA Insurance &
Societe Generale SBPA)
5.05%, 01/07/96 63,400 63,400
Kane County, Illinois
Revenue Bonds (Glenwood
School for Boys)/(Harris
Trust & Savings Bank LOC)
5.10%, 01/07/96 9,000 9,000
Lombard, Illinois
Industrial Development
Revenue Refunding Bonds (B
& H Partnership Project)/
(Comerica Bank LOC)
5.38%, 01/07/96 1,500 1,500
McHenry County, Illinois
Industrial Development
Authority Revenue
Refunding Bonds (Dean
Foods Co. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 2,675 2,675
Oak Forest, Illinois
Revenue Bonds (Homewood
Pool) Series 1989/
(FNB Chicago LOC)
5.15%, 01/07/96 37,000 37,000
-------
367,000
-------
INDIANA--0.4%
Crawfordsville, Indiana
Industrial Development
Revenue Bonds (National
Service Industries, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 2,000 2,000
Hammond, Indiana Adjustable
Rate Economic Development
Revenue Bonds (Lear
Seating Corp. Project)
Series 1994/ (Chemical
Bank LOC)
4.25%, 01/07/96 5,750 5,750
Indiana Health Facility
Financing Authority
Hospital Adjustable
Convertible Extentable
Securities Revenue Bonds
(Methodist Hospital)
Series C/
(Credit Suisse SBPA)
5.15%, 01/07/96 4,100 4,100
Indianapolis, Indiana
Economic Development
Authority Revenue Bonds
(Herff-Jones, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 4,100 4,100
-------
15,950
-------
</TABLE>
F-6
<PAGE> 79
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
IOWA--0.2%
Iowa Higher Education Loan
Authority Revenue Bonds
Adjustable Convertible
Extendable Securities
Education Loan (Private
College Facility)/
(MBIA Insurance &
Dai-Ichi Kangyo
Bank SBPA)
5.50%, 01/07/96 $ 4,100 $ 4,100
Iowa Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Small Business Loan
Project) Series 1985A/
(FHLB of Des Moines LOC)
5.30%, 01/07/96 2,100 2,100
Iowa State Financing
Authority Solid Waste
Disposal Revenue Bonds
(Cedar River Paper
Project) Series 1995A/
(Swiss Bank LOC)
6.10%, 01/01/96 1,000 1,000
------
7,200
------
KANSAS--0.2%
Kansas City, Kansas
Industrial Revenue Bonds
(Owen Industries, Inc.
Project) Series 1987/
(Sanwa Bank LOC)
5.45%, 01/07/96 2,400 2,400
Wichita, Kansas Airport
Facilities Revenue Bonds
(Flightsafety
International, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,000 3,000
Wichita, Kansas Health
Facilities Revenue
Authority (CSJ Health
System) Series XXV/
(Sumitomo Bank LOC)
5.30%, 01/07/96 1,900 1,900
------
7,300
------
KENTUCKY--0.7%
Lebanon, Kentucky
Industrial Development
Revenue Bonds (Wallace
Computer Services, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 5,000 5,000
Mason County, Kentucky
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (East Kentucky Power
Corp.) Series 1984B-1/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 10,600 10,600
Murray, Kentucky Industrial
Development Authority
Revenue Bonds
(Dean Foods Co.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Owensboro, Kentucky Limited
Obligation Revenue Bonds
(Dart Polymers, Inc.
Project) Series 1985A/
(National Westminster Bank
LOC)
4.05%, 01/07/96 1,900 1,900
Wilson County, Kentucky
Industrial Development
Board Revenue Bonds
(Perma Pipe I North
Carolina Project)/ (Harris
Trust & Savings Bank LOC)
5.50%, 01/07/96 3,150 3,150
------
25,650
------
LOUISIANA--3.5%
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991A/
(Swiss Bank LOC)
5.05%, 01/07/96 400 400
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991B/
(Swiss Bank LOC)
5.05%, 01/07/96 15,000 15,000
East Baton Rouge Parish,
Louisiana Pollution
Control Revenue Refunding
Bonds (Exxon Corp.) Series
1989
5.90%, 01/01/96 1,900 1,900
Louisiana Public Facilities
Authority Hospital Revenue
Bonds (Willis Knighton
Medical Project)/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 15,300 15,300
New Orleans, Louisiana
Aviation Board Revenue
Bonds (Passenger Facility
Charge Projects)/ (Banque
Paribas & Canadian
Imperial Bank of Commerce
LOC)
5.50%, 01/07/96 7,000 7,000
</TABLE>
F-7
<PAGE> 80
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New Orleans, Louisiana
Aviation Board Revenue
Bonds Series B/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
4.95%, 01/07/96 $73,020 $ 73,020
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
(Hotel Occupancy Project)
Series B/ (Sanwa Bank LOC)
5.50%, 01/07/96 1,300 1,300
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
Series 1989B/ (Sanwa Bank
LOC)
5.50%, 01/07/96 3,800 3,800
Rapides Parish, Louisiana
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Central Louisiana
Electric Co.)
Series 1991/
(Swiss Bank LOC)
5.05%, 01/07/96 8,150 8,150
-------
125,870
-------
MARYLAND--2.5%
Baltimore, Maryland
Industrial Development
Authority Revenue Bonds
(City of Baltimore Capital
Acquisition Program)
Series 1986/(Dai-Ichi
Kangyo Bank LOC)
5.35%, 01/07/96 52,400 52,400
Maryland State Health and
Higher Educational
Facility Authority Pooled
Revenue Bonds (Kennedy
Kreiger) Series 1993D/
(FNB Maryland LOC)
5.10%, 01/07/96 2,000 2,000
Maryland State Health and
Higher Educational Facility
Authority Pooled Revenue
Bonds (Pooled Loan
Program) Series A/
(Dai-Ichi Kangyo Bank LOC &
FNB Chicago SBPA)
5.00%, 01/07/96 9,700 9,700
Montgomery County, Maryland
Housing Opportunity
Commission Housing Revenue
Bonds (Draper Lane)
Series 1991I/
(FGIC Insurance &
Sumitomo Bank SBPA)
5.30%, 01/07/96 16,500 16,500
Northeast Maryland Waste
Disposal Authority
Resource Recovery Bonds
(Hartford County)/ (AMBAC
Insurance &
Credit Local de France
LOC)
5.05%, 01/07/96 9,600 9,600
------
90,200
------
MICHIGAN--0.1%
Grand Rapids, Michigan
Water Supply Variable Rate
Revenue Bonds/
(FGIC Insurance &
Societe Generale SBPA)
5.90%, 01/07/96 1,000 1,000
Michigan State Strategic
Fund Limited Obligation
Revenue Bonds (Dean Foods
Co. Project)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 3,500 3,500
------
4,500
------
MINNESOTA--0.9%
Bloomington, Minnesota Port
Authority Tax Increment
Revenue Refunding Bonds
(Mall of America)
Series 1995A/
(Credit Local de
France SBPA &
FSA Insurance)
5.20%, 01/07/96 7,000 7,000
St. Paul, Minnesota Housing
Redevelopment Authority
Rental Multi Family
Housing Development Bonds
Multi City Series 1985A/
(FHLB Des Moines LOC)
5.30%, 01/07/96 19,900 19,900
------
26,900
------
MISSISSIPPI--0.4%
Jackson County, Mississippi
Pollution Control Revenue
Bonds (Chevron U.S.A. Inc.
Project)
5.90%, 01/07/96 14,700 14,700
------
MISSOURI--1.0%
Independence, Missouri
Industrial Development
Authority Revenue Bonds
(Resthaven Project)/
(Credit Local de France
LOC)
5.20%, 01/07/96 9,640 9,640
</TABLE>
F-8
<PAGE> 81
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Industrial Development
Authority of Mexico,
Missouri Revenue Bonds
(ABP Midwest
Manufacturing Co.
Project) Series 1995/
(Royal Bank of Scotland
LOC)
5.25%, 01/07/96 $7,600 $ 7,600
Missouri State Development
Finance Board Industrial
Development Revenue Bonds
(H.R. Williams Mill Supply
Project) Series 1995/
(Union Bank of
Switzerland LOC)
5.30%, 01/07/96 3,100 3,100
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy)
Series 1988A/(Multiple
Credit Enhancements)
5.10%, 01/07/96 3,200 3,200
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy) Series
1992B/ (Toronto-Dominion
Bank SBPA)
5.10%, 01/07/96 3,400 3,400
Missouri State Health and
Educational Facilities
Authority Health
Facilities
Revenue Bonds (St. Anthony
Medical Center)/
(Mitsubishi Bank SBPA)
5.60%, 01/07/96 900 900
St. Charles, Missouri
Industrial Development
Authority Variable Rate
Demand Revenue Refunding
Bonds (Casalon Apartments
Project)/ (Citibank LOC)
5.25%, 01/07/96 3,100 3,100
Washington, Missouri
Industrial Development
Authority Revenue
Bonds (Pauwels
Transformer Project)/
(Generale Bank LOC)
5.40%, 01/07/96 4,000 4,000
------
34,940
------
MONTANA--0.4%
Forsyth, Montana Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Portland General Electric
Coal Stripping Project)
Series 1983B/ (Swiss Bank
LOC)
5.00%, 01/07/96 6,500 6,500
Montana State Health
Facility Authority Revenue
Bonds (Health Care Pooled
Loan Program) Series
1985A/ (FGIC Insurance &
Norwest Bank of
Minnesota SBPA)
5.15%, 01/07/96 7,195 7,195
------
13,695
------
NEVADA--1.6%
Clark County, Nevada Airport
Improvement Revenue
Refunding Bonds
Series 1993A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 55,350 55,350
Clark County, Nevada
Industrial Development
Revenue Bonds
(Cogeneration Project No.
2)/(Swiss Bank LOC)
6.15%, 01/07/96 2,700 2,700
------
58,050
------
NEW HAMPSHIRE--0.2%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (VHA New
England, Inc.) Series
1985B/ (AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 1,000 1,000
New Hampshire State Housing
Finance Authority Multi
Family Housing Revenue
Bonds (Fairways Project)
Series 1994-1/ (General
Electric Capital Corp.
LOC)
5.20%, 01/07/96 7,000 7,000
------
8,000
------
NEW JERSEY--0.1%
New Jersey Turnpike
Authority Revenue Bonds
Series 1991D/
(FGIC Insurance &
Societe General LOC)
4.80%, 01/07/96 3,000 3,000
------
</TABLE>
F-9
<PAGE> 82
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW MEXICO--0.1%
Albuquerque, New Mexico
Gross Receipts Lodgers Tax
Revenue Adjustable Rate
Tender Revenue Bonds
Series 1994/ (Canadian
Imperial Bank of Commerce
LOC)
5.15%, 01/07/96 $ 1,300 $ 1,300
Belen, New Mexico
Industrial Development
Revenue Bonds
(Solo Cup, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,250 3,250
------
4,550
------
NEW YORK--3.2%
Babylon, New York Variable
Rate General Obligation
Bonds Series B/(Bank of
Nova Scotia SBPA & AMBAC
Insurance)
4.90%, 01/07/96 3,500 3,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries
A-8B/ (Sanwa Bank LOC)
5.95%, 01/07/96 715 715
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-2/
(MBIA Insurance &
Bank Austria AG SBPA)
5.90%, 01/01/96 400 400
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-3/
(MBIA Insurance &
Bank of Nova Scotia SBPA)
5.90%, 01/01/96 1,000 1,000
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 11,900 11,900
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC Insurance &
FGIC SPA)
5.90%, 01/07/96 9,000 9,000
New York City, New York
Trust for Cultural
Resources Revenue Bonds
(Solomon R. Guggenheim
Project) Series 1990B/
(Swiss Bank LOC)
5.90%, 01/01/96 100 100
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B Subseries
B-10/(Union Bank of
Switzerland LOC)
5.00%, 01/07/96 7,500 7,500
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 2,000 2,000
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1993A/ (Multiple
Credit Enhancements)
4.95%, 01/07/96 9,500 9,500
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1994B/ (Credit
Suisse & Swiss Bank LOC)
4.95%, 01/07/96 1,000 1,000
New York Local Government
Assistance Corp. Public
Improvement Revenue
Bonds Series 1995F/
(Toronto-Dominion Bank LOC)
5.05%, 01/07/96 12,700 12,700
New York Municipal Water
Finance Authority Water &
Sewer System Revenue Bonds
Series 1994C/ (FGIC
Insurance & FGIC SPA)
5.90%, 01/01/96 5,500 5,500
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/
(AMBAC Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 3,100 3,100
New York State Energy
Research & Development
Authority Electric Facilities
Revenue Bonds (Long
Island Lighting Co.
Project) Series 1993A/
(Toronto-Dominion Bank LOC)
5.00%, 01/07/96 1,000 1,000
</TABLE>
F-10
<PAGE> 83
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New York State Energy
Research & Development
Authority Pollution
Control Refunding Revenue
Bonds (Orange & Rockland
Utilities, Inc. Project)
Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 $10,700 $ 10,700
New York State Energy
Research & Development
Authority Pollution Control
Revenue Bonds (Central
Hudson Gas & Electric
Corp. Project) Series 1985A/
(Morgan Guaranty Trust LOC)
5.00%, 01/07/96 5,700 5,700
New York State Energy
Research & Development
Authority Pollution
Control Revenue Refunding
Bonds Series B/(Union Bank
of Switzerland LOC)
6.00%, 01/01/96 1,400 1,400
New York State Local
Government Assistance
Corp. Variable Rate
Revenue Bonds Series
1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 14,000 14,000
Triborough Bridge and
Tunnel Authority, New York
Special Obligation Bridge
Revenue Bonds Series 1994/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 11,000 11,000
Yonkers, New York Industrial
Development Authority
Revenue Bonds
Consumers Union Facility/
(AMBAC Insurance &
Credit Local de France SBPA)
4.95%, 01/07/96 1,400 1,400
-------
113,115
-------
NORTH CAROLINA--1.7%
Charlotte, North Carolina
Airport Revenue Refunding
Bonds Series 1993A/ (MBIA
Insurance & Industrial
Bank of Japan SBPA)
5.15%, 01/07/96 6,400 6,400
Haywood County, North
Carolina Industrial
Development Facilities and
Pollution Control
Financing Authority
Revenue Bonds (Solid
Waste--Champion
International Corp.)/
(Bank Austria AG LOC)
4.95%, 01/07/96 2,200 2,200
North Carolina Medical Care
Community Hospital Revenue
Bonds (Pooled Equipment
Finance Project)/(MBIA
Insurance &
Banque Paribas SBPA)
5.05%, 01/07/96 11,300 11,300
North Carolina Medical Care
Community Hospital Revenue
Bonds Adjustable
Convertible Extendable
Securities (Pooled
Financial Project)/ (MBIA
Insurance & Sakura Bank
SPA)
5.05%, 01/07/96 1,810 1,810
North Carolina Medical Care
Community Hospital Revenue
Pooled Finance
Bonds/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/07/96 5,800 5,800
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985B/
(Sumitomo Bank LOC)
5.50%, 01/07/96 2,900 2,900
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985C/
(Sumitomo Bank LOC)
5.50%, 01/07/96 29,400 29,400
------
59,810
------
NORTH DAKOTA--0.2%
Mercer County, North Dakota
National Rural Utility
Pollution Control Revenue
Bonds (Basin Electric
Power Cooperative Antelope
Project) Series 1984C/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 7,150 7,150
------
OHIO--1.0%
Columbus, Ohio Electric
System Revenue Bonds
Series 1984/(Dai-Ichi
Kangyo Bank LOC)
3.90%, 01/07/96 6,880 6,880
</TABLE>
F-11
<PAGE> 84
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Columbus, Ohio General
Obligation Bonds Series
1995-1/ (Westdeutsche
Landesbank LOC)
4.90%, 01/07/96 $ 6,000 $ 6,000
Dayton, Ohio Special
Facilities Revenue
Refunding Bonds (Emery Air
Freight) Series 1993F/
(ABN-AMRO Bank LOC)
5.31%, 01/07/96 8,000 8,000
Ohio Air Quality
Development Authority
Revenue Bonds (JMG
Funding, LP) Series 1994A/
(Societe Generale LOC)
5.00%, 01/07/96 12,000 12,000
Ohio Housing Finance Agency
Multi Family Housing
Revenue Bonds (Kenwood
Congregate Retirement
Community) Series
1985/(Morgan Guaranty
Trust LOC)
3.90%, 01/07/96 2,000 2,000
------
34,880
------
OKLAHOMA--0.0%
Tulsa, Oklahoma Industrial
Development Authority
Hospital Revenue Bonds
(Hillcrest Medical Center)
Series 1988/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 685 685
Tulsa, Oklahoma Industrial
Development Authority
Revenue Bonds
(Thomas & Betts Project)
Series 1991/ (Wachovia
Bank LOC)
5.25%, 01/07/96 300 300
------
985
------
OREGON--1.3%
Medford, Oregon Hospital
Facility Authority (Rogue
Valley Manor Project)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 7,700 7,700
Oregon State Economic
Development Commission
Economic and Industrial
Development Revenue
Bonds/(Wachovia Bank LOC)
5.15%, 01/07/96 4,100 4,100
Oregon State General
Obligation Notes Series
1973F/ (Mitsubishi Bank
LOC)
5.15%, 01/07/96 11,185 11,185
Oregon State General
Obligation Notes Series
1973H/ (Bank of Tokyo LOC)
5.25%, 01/07/96 18,100 18,100
Port of Portland, Oregon
Industrial Development
Revenue Bonds (Schnitzer
Steel Project)/ (Comerica
Bank LOC)
5.30%, 01/07/96 5,000 5,000
------
46,085
------
PENNSYLVANIA--1.4%
Montgomery County,
Pennsylvania Industrial
Development Authority
Revenue Bonds (Seton
Medical Supply Co. Project)/
(Banque Paribas LOC)
5.25%, 01/07/96 5,500 5,500
Pennsylvania Higher
Education Assistance
Agency Student Loan
Revenue Bonds Series
1995A/ (SLMA LOC)
5.25%, 01/07/96 17,000 17,000
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985B/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,365 4,365
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985F/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,100 4,100
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985J/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 9,800 9,800
Washington County,
Pennsylvania Authority
Revenue Bonds Higher
Education Pooled Equipment
Lease/ (Sanwa Bank LOC)
5.35%, 01/07/96 9,400 9,400
------
50,165
------
RHODE ISLAND--0.1%
Rhode Island State Student
Loan Authority Higher
Education Revenue Bonds
Series 1995-1/(National
Westminster Bank LOC)
5.30%, 01/07/96 2,000 2,000
------
</TABLE>
F-12
<PAGE> 85
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.4%
Greenville County, South
Carolina Industrial
Development Revenue Bonds
(Quality Thermoforming
Project)/ (South Carolina
National Bank LOC)
5.25%, 01/07/96 $1,200 $ 1,200
South Carolina Jobs
Economic Development
Authority Hospital
Facilities Revenue Bonds
(Baptist Health Care
System)/ (Credit Local de
France LOC)
5.05%, 01/07/96 6,900 6,900
South Carolina Jobs
Economic Development
Authority Industrial
Development Revenue Bonds
(Ado Corp. Project)/(South
Carolina National Bank
LOC)
5.25%, 01/07/96 800 800
Spartanburg County, South
Carolina Industrial
Development Authority
Revenue Bonds
(Bemis, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,750 4,750
------
13,650
------
SOUTH DAKOTA--0.3%
Rapid City, South Dakota
Industrial Development
Revenue Corp. (Property
Associates Project)/
(Lloyds Bank LOC)
5.15%, 01/07/96 6,025 6,025
South Dakota State Health &
Educational Facilities
Authority Revenue Bonds
(McKenna Hospital)
Series 1994/
(MBIA Insurance &
Banque Paribas SBPA)
5.20%, 01/07/96 5,000 5,000
------
11,025
------
TENNESSEE--0.2%
Metropolitan Nashville and
Davidson County, Tennessee
Health and Education
Facility Board Revenue
Bonds Series A/
(FGIC Insurance &
Barclays Bank LOC)
5.00%, 01/07/96 1,300 1,300
Metropolitan Nashville and
Davidson County, Tennessee
Industrial Development
Revenue Bonds
(Multi-Family
Housing--Western)/
(Sumitomo Bank LOC)
5.60%, 01/07/96 7,035 7,035
------
8,335
------
TEXAS--7.9%
Amarillo, Texas Health
Facilities Corp. Hospital
Revenue Bonds (High Plains
Baptist Hospital)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 9,300 9,300
Bexar County, Texas Health
Facilities Development
Corp. Revenue Bonds
(Chandler Memorial Home
Project) Series 1995/
(Bank One LOC)
5.20%, 01/07/96 5,170 5,170
Capital Industrial
Development Corp., Texas
Industrial Development
Revenue Refunding Bonds
(National Service
Industries, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 3,950 3,950
Euless, Texas Industrial
Development Authority
Revenue Bonds (Ferguson
Enterprises, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,850 4,850
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1988A/ (AMBAC
Insurance & Citibank SBPA)
5.25%, 01/07/96 18,300 18,300
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1992A/ (SLMA LOC)
5.10%, 01/07/96 16,000 16,000
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993A/ (SLMA LOC)
5.25%, 01/07/96 48,150 48,150
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993B-1/ (SLMA LOC)
5.25%, 01/07/96 11,000 11,000
</TABLE>
F-13
<PAGE> 86
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1995B/ (SLMA LOC)
5.00%, 01/07/96 $30,000 $30,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990A/
(Swiss Bank LOC)
5.10%, 01/07/96 9,000 9,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990B/
(Swiss Bank LOC)
5.10%, 01/07/96 16,300 16,300
Lavaca-Navidad River
Authority, Texas Water
Supply System Contract
Revenue Bonds (Formosa
Plastics Corp. Project)/
(Canadian Imperial Bank of
Commerce LOC)
5.30%, 01/07/96 9,900 9,900
Lower Neches Valley
Authority, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Mobil Corp.
Neches River Treatment
Project) Series 1994
5.00%, 01/07/96 12,000 12,000
Midlothian, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Box-Crow
Co. Project)/(Union Bank
of Switzerland LOC)
5.80%, 01/07/96 1,400 1,400
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1992A/ (SLMA LOC)
5.20%, 01/07/96 2,300 2,300
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1995A/ (SLMA LOC)
5.20%, 01/07/96 10,400 10,400
Port Authority of Corpus
Christi, Texas Nueces
County Marine Terminal
Revenue Bonds (Reynolds
Metals Co.)/ (Barclays
Bank LOC)
5.25%, 01/07/96 3,100 3,100
Robertson County, Texas
Industrial Development
Corp. Variable Rate
Revenue Bonds (Sanderson
Farms Project) Series
1995/ (Harris Trust &
Savings Bank LOC)
5.20%, 01/07/96 4,300 4,300
Texas Health Facilities
Development Corp.
Adjustable Convertible
Extendable Securities
Revenue Bonds (North Texas
Pooled Health) Series
1985B/ (Banque Paribas
LOC)
5.05%, 01/07/96 11,000 11,000
Texas Small Business
Industrial Development
Corp. Revenue Bonds
(Texas Public
Facility Capital Access)/
(Multiple Credit
Enhancements)
5.20%, 01/07/96 41,795 41,795
Texas State Revenue
Refunding Bonds (Veterans
Housing Assistance Fund)
Series 1995
5.05%, 01/07/96 13,000 13,000
Trinity River Authority,
Texas Pollution Control
Revenue Bonds (Lafarge
Corp. Project)/(Banque
Nationale de Paris LOC)
5.20%, 01/07/96 3,100 3,100
-------
284,315
-------
VERMONT--0.1%
Vermont Education and
Health Buildings Financing
Agency Revenue Bonds (VHA
New England) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 4,240 4,240
-------
</TABLE>
F-14
<PAGE> 87
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VIRGINIA--0.4%
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985A/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 $ 500 $ 500
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985B/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 400 400
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985C/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 600 600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985F/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 5,600 5,600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985G/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 8,100 8,100
------
15,200
------
WASHINGTON--1.0%
Snohomish County,
Washington Public
Utilities District #1
Electric Revenue Bonds
(Generation Systems)/
(MBIA Insurance &
Industrial Bank of Japan
SBPA)
5.15%, 01/07/96 20,000 20,000
Washington State Health
Care Facilities Authority
Revenue Refunding Bonds
(Sisters of St. Joseph of
Peace) Series 1993/ (MBIA
Insurance & U.S. Bank of
Washington SBPA)
5.20%, 01/07/96 12,700 12,700
Washington State Housing
Finance Commission Multi
Family Mortgage Revenue
Bonds (Canyon Lake) Series
1993A/
(U.S. Bank of
Washington LOC)
5.40%, 01/07/96 4,565 4,565
------
37,265
------
WEST VIRGINIA--0.3%
West Virginia State
Hospital Finance Authority
Hospital Revenue Bonds
(St. Joseph's Hospital
Project) Series 1987/
(Mitsubishi Bank LOC)
5.20%, 01/07/96 2,200 2,200
West Virginia State
Hospital Finance Authority
Hospital Revenue
Bonds (VHA
Mid Atlantic States, Inc.)
Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 8,600 8,600
------
10,800
------
WISCONSIN--0.8%
Chilton, Wisconsin
Industrial Development
Revenue Refunding Bonds
(Kaytee Products, Inc.
Project) Series 1995/(Bank
One Milwaukee LOC)
5.35%, 01/07/96 1,865 1,865
Fairwater, Wisconsin
Industrial Development
Revenue Bonds (Dean Foods
Co. Project) Series 1990/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,450 1,450
Lac Du Flambeau Band of
Lake Superior Chippewa
Indians, Wisconsin Special
Obligation Bonds (Simpson
Electric) Series 1985/
(Barclays Bank LOC)
5.25%, 01/07/96 6,300 6,300
</TABLE>
F-15
<PAGE> 88
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Milwaukee, Wisconsin
Redevelopment Authority
Industrial Development
Revenue Bonds (Field
Container Corp. LP) Series
1994/
(Northern Trust LOC)
5.40%, 01/07/96 $ 5,000 $ 5,000
Sheboygan, Wisconsin
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Wisconsin Power &
Light Co.)
5.25%, 01/07/96 1,000 1,000
Wisconsin State Health and
Education Facilities
Authority Revenue Bonds
(Sinai Samaritan) Series
1994A/(Marshall & Ilsley
Bank LOC)
5.20%, 01/07/96 13,755 13,755
---------
29,370
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $2,072,441) 2,072,441
---------
VARIABLE RATE TENDER
OPTION BONDS--2.5%(a)
GEORGIA--0.6%
Georgia State Public
Improvement General
Obligation Tender Option
Bonds Series 1995B
(Citi-157)/
(Citibank Tender Option)
5.25%, 01/07/96 16,000 16,000
Metropolitan Atlanta Rapid
Transit Authority, Georgia
Sales Tax Revenue
Tender Option Bonds
Series M (BT-69)/
(AMBAC Insurance & Bankers
Trust
Tender Option)
4.44%, 01/07/96 5,280 5,280
--------
21,280
--------
NEVADA--0.7%
Nevada State General
Obligation Tender Option
Bonds (Colorado River
Community) Series 1994
(Citi-143)/
(Citibank Tender Option)
5.30%, 01/07/96 25,000 25,000
--------
TEXAS--0.3%
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-138)/
(Citibank Tender Option)
5.30%, 01/07/96 7,000 7,000
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-139)/
(Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
12,000
------
WASHINGTON--0.9%
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-136)/
(Citibank Tender Option)
5.30%, 01/07/96 15,570 15,570
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-137)/
(Citibank Tender Option)
5.30%, 01/07/96 10,000 10,000
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Tender Option
Bonds Series 1990C
(Citi-145)/
(FGIC Insurance, Escrowed
to Maturity with
Government Securities &
Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
30,570
------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $88,850) 88,850
------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--3.9%(a)(c)
CONNECTICUT--0.2%
Connecticut State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1991A (BTP-151)/
(Bankers Trust Tender
Option)
5.20%, 01/07/96 7,365 7,365
------
GEORGIA--0.4%
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-135)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 3,865 3,865
</TABLE>
F-16
<PAGE> 89
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-140)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 $4,575 $ 4,575
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1994B (BTP-148)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,100 7,100
------
15,540
------
ILLINOIS--0.4%
Chicago, Illinois
Metropolitan Water
Reclamation District
Greater Chicago General
Obligation Tender Option
Bond Partnership
(Cook County) (BTP-71)/
(Automated Data
Processing, Inc. Tender
Option)
4.99%, 01/07/96 9,870 9,870
Chicago, Illinois School
Finance Authority General
Obligation School Finance
Tender Option Bond
Partnership (BTP-70)/
(MBIA Insurance &
Automated Data Processing,
Inc. Tender Option)
4.66%, 01/07/96 5,365 5,365
------
15,235
------
MARYLAND--0.1%
Baltimore County, Maryland
General Obligation
Consolidated Public
Improvement Tender Option
Bond Partnership Series
1991 (BTP-132)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 3,621 3,621
------
MINNESOTA--0.1%
Minnesota State Various
Purpose Sports Health Club
Tax Tender Option
Bond Partnership
(BTP-65)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.28%, 01/07/96 4,455 4,455
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
Revenue Refunding Tender
Option Bond Partnership
(BTP-147)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 5,370 5,370
------
TEXAS--1.0%
Regents of the University
of Texas Permanent
University Fund Revenue
Tender Option Bond
Partnership Series 1992A
(BTP-143)/ (Permanent
University
Fund Guaranty,
Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 10,685 10,685
Texas State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1993B/(BTP-116)
(Bankers Trust Tender
Option)
4.69%, 01/07/96 10,170 10,170
Texas State Public Finance
Authority General
Obligation Tender Option
Bond Partnership Series
1994 (BTP-127)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 14,980 14,980
------
35,835
------
VIRGINIA--0.4%
Chesterfield County,
Virginia General
Obligation Public
Improvement and Refunding
Tender Option Bond
Partnership Series 1991
(BTP-136)/ (Bankers Trust
Tender Option)
5.20%, 01/07/96 6,025 6,025
Fairfax County, Virginia
Public Improvement General
Obligation Tender Option
Bond Partnership Series
1991A (BTP-131)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,146 7,146
------
13,171
------
</TABLE>
F-17
<PAGE> 90
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
WASHINGTON--0.7%
King County, Washington
Unlimited Tax General
Obligation Tender Option
Bond Partnership Series
1993C (BTP-56)/ (Automated
Data Processing, Inc.
Tender Option)
4.15%, 01/07/96 $6,365 $ 6,365
Washington State General
Obligation Tender Option
Bond Partnership Series
1990 (BTP-152)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 5,655 5,655
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1990C (BTP-130)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 5,740 5,740
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1993B (BTP-137)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 6,685 6,685
-------
24,445
-------
WISCONSIN--0.4%
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership
(BTP-62)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.25%, 01/07/96 4,500 4,500
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1992A (BTP-142)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 9,480 9,480
-------
13,980
-------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS (Cost $139,017) 139,017
-------
CERTIFICATES OF PARTICIPATION--2.1%(b)
CALIFORNIA--2.1%
San Jose, California
Certificates of Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 72,315 75,662
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $75,662) 75,662
------
GENERAL OBLIGATIONS--4.5%(b)
ALASKA--0.3%
Anchorage, Alaska Unlimited
General Obligation Bonds
Series 1986/
(FGIC Insurance &
Escrowed to Maturity with
Government Securities)
3.72%, 06/01/96 8,600 8,924
Valdez, Alaska Unlimited
General Obligation Bonds
Series 1990/ (MBIA
Insurance)
3.70%, 01/01/97 1,000 1,028
------
9,952
------
ARKANSAS--0.1%
Arkansas State Unlimited
General Obligation Bonds
(College Savings)
3.32%, 06/01/96 1,975 1,977
------
CONNECTICUT--0.0%
Connecticut State General
Obligation Bonds Series
1992B
5.20%, 05/15/96 1,000 1,004
------
DELAWARE--0.1%
Delaware State General
Obligation
Bonds Series 1994A
3.47%, 03/01/96 2,240 2,243
Delaware State General
Obligation Bonds Series B/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 3,000 3,108
------
5,351
------
FLORIDA--0.2%
Dade County, Florida School
District General
Obligation Bonds/(MBIA
Insurance)
3.70%, 08/01/96 5,450 5,548
Florida State Board of
Education Capital Outlay
General Obligation Bonds
3.65%, 06/01/96 2,000 2,012
------
7,560
------
</TABLE>
F-18
<PAGE> 91
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
GEORGIA--0.3%
Chatham County, Georgia
School District Unlimited
General Obligation Bonds
Series 1995B/ (FGIC
Insurance)
3.65%, 08/01/96 $ 1,160 $ 1,170
Clayton County, Georgia
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 10/01/96 1,335 1,370
Gwinnett County, Georgia
School District General
Obligation Bonds Series
1995A
3.78%, 02/01/96 7,035 7,043
------
9,583
------
HAWAII--0.1%
Honolulu, Hawaii City and
County Refunding and
Improvement General
Obligation Bonds Series
1993B
3.65%, 10/01/96 2,000 2,004
------
ILLINOIS--0.0%
Du Page, Illinois Water
Commission General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 03/01/96 1,000 1,026
------
KANSAS--0.7%
Wichita, Kansas General
Obligation Bonds Renewal
and Improvement Temporary
Notes Series 186
3.65%, 02/29/96 24,600 24,614
------
MASSACHUSETTS--0.3%
Massachusetts State
Dedicated Income Tax
Unlimited Tax General
Obligation Bonds Series
1990A/ (FGIC Insurance)
4.30%, 06/01/96 5,000 5,059
Massachusetts State General
Obligation Bonds Series
1986/
(Escrowed to Maturity with
Government Securities)
3.72%, 10/01/96 3,170 3,310
Massachusetts State General
Obligation Bonds Series
1990A/ (MBIA Insurance)
3.63%, 06/01/96 3,000 3,044
------
11,413
------
MINNESOTA--0.6%
Minneapolis, Minnesota
Special School District
General Obligation Bonds
3.73%, 02/01/96 5,500 5,506
Minnesota State General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.89%, 08/01/96 9,500 9,668
Minnesota State General
Obligation Bonds
Series 1995
3.70%, 08/01/96 5,400 5,455
Minnesota State Unlimited
General Obligation Bonds
Series 1993
3.70%, 08/01/96 1,000 1,007
------
21,636
------
NEW MEXICO--0.1%
Albuquerque, New Mexico
Municipal School District
Number 12 General
Obligation Bonds
3.60%, 08/01/96 1,700 1,705
New Mexico State Capital
Projects General
Obligation Bonds
3.75%, 08/01/96 2,000 2,000
------
3,705
------
OHIO--0.1%
Columbus, Ohio Limited Tax
General Obligation Bonds
Series 1993A
3.40%, 07/01/96 4,945 4,951
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
General Obligation Bonds
Series 1995B-1
3.70%, 08/01/96 6,400 6,474
------
TENNESSEE--0.0%
Tennessee State General
Obligation Bonds Series
1995A
4.25%, 03/01/96 1,000 1,001
------
TEXAS--0.3%
Amarillo, Texas Independent
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.72%, 08/01/96 1,000 1,027
Dallas County, Texas
Hospital District
Refunding General
Obligation Bonds
4.05%, 02/15/96 1,500 1,502
</TABLE>
F-19
<PAGE> 92
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Dallas, Texas Equipment
Acquisition Contractual
Obligation General
Obligation Bonds
3.73%, 02/15/96 $ 3,405 $ 3,407
Dallas, Texas Limited
General Obligation Bonds
Series 1995
3.75%, 02/15/96 2,750 2,757
Houston, Texas General
Obligation Bonds Series C
3.73%, 04/01/96 1,430 1,436
Tarrant County, Texas
Limited General Obligation
Bonds
3.68%, 07/15/96 1,000 1,029
------
11,158
------
VIRGINIA--0.1%
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989A/
(Escrowed to Maturity with
Government Securities)
3.50%, 06/01/96 1,000 1,028
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989B/
(Escrowed to Maturity with
Government Securities)
3.75%, 11/01/96 1,320 1,359
------
2,387
------
WASHINGTON--0.8%
Washington State
General Obligation Bonds
Series 1986D/
(Escrowed to Maturity with
Government Securities)
3.85%, 09/01/96 13,200 13,554
Washington State
General Obligation Bonds
Series 1990A
3.60%, 02/01/96 2,000 2,004
Washington State
General Obligation Bonds
Series R-1992-C
3.70%, 09/01/96 1,850 1,863
Washington State
Motor Vehicles Fuel Tax
Series 1995B
3.68%, 06/01/96 1,495 1,503
Washington State
Motor Vehicles Fuel Tax
Unlimited General
Obligation Bonds
Series 1986E/
(Escrowed to Maturity with
Government Securities)
3.65%, 09/01/96 1,000 1,028
Washington State
Unlimited General
Obligation Bonds Series
R-1994-A
3.60%, 08/01/96 4,000 4,002
Washington State
Unlimited General
Obligation Bonds Series
R-1996-B
3.62%, 04/01/96 4,005 4,008
-------
27,962
-------
WISCONSIN--0.2%
Milwaukee, Wisconsin
Metropolitan Sewer
District Unlimited Tax
General Obligation Bonds
Series 1987A
3.70%, 09/01/96 1,000 1,011
Milwaukee, Wisconsin
Public Improvement
Unlimited General
Obligation Bonds Series
1995CA
3.28%, 06/15/96 1,000 1,004
Wisconsin State
General Obligation Bonds
Series 1995A
3.65%, 05/01/96 2,410 2,432
Wisconsin State
Unlimited General
Obligation Bonds Series
1992
3.70%, 05/01/96 3,000 3,012
-------
7,459
-------
TOTAL GENERAL OBLIGATIONS
(Cost $161,217) 161,217
-------
MANDATORY PUT BONDS--3.1%(b)
CALIFORNIA--0.5%
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 5,000 5,000
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1995E-5/ (SLMA LOC)
4.25%, 06/01/96 11,700 11,700
-------
16,700
-------
FLORIDA--0.1%
Orange County, Florida
Industrial Development
Authority Revenue Bonds
(General Accident
Insurance Co.
of America Project)
4.28%, 06/01/96 3,500 3,500
-------
</TABLE>
F-20
<PAGE> 93
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.6%
Chicago, Illinois
General Obligation Tender
Notes
3.65%, 05/01/96 $22,600 $22,600
------
INDIANA--0.2%
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994C
4.00%, 07/01/96 3,500 3,500
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994D
3.90%, 07/01/96 4,700 4,700
------
8,200
------
KENTUCKY--0.1%
Calvert City, Kentucky
Industrial Development
Revenue Refunding Bonds
(SKW Alloys, Inc. Lease
Rent) Series 87/
(Bayerische Vereinsbank
LOC)
4.00%, 04/01/96 2,220 2,220
------
OREGON--0.3%
Klamath Falls, Oregon
Electric Revenue Bonds
(Salt Caves Hydro
Electric) Series 1986E/
(Escrowed to Maturity with
Government Securities)
4.40%, 05/01/96 10,000 10,000
------
TEXAS--0.8%
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 14,000 14,000
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1993B-2/ (SLMA LOC)
4.10%, 06/01/96 6,500 6,500
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1995B/ (SLMA LOC)
3.90%, 07/01/96 10,000 10,000
------
30,500
------
VIRGINIA--0.3%
Harrisonburg, Virginia
Redevelopment and Housing
Authority
Multi Family Housing
Revenue Bonds
(Rolling Brook
Village Apts.)
Series 1985A/
(Guardian Savings &
Loan Assoc. LOC)
5.10%, 02/01/96 10,000 10,000
-------
WASHINGTON--0.2%
Washington State Housing
Finance Committee
Adjustable Single Family
Mandatory Put Bonds Series
1995-1A-S
4.10%, 06/01/96 5,785 5,785
-------
TOTAL MANDATORY PUT BONDS (Cost
$109,505) 109,505
-------
OPTIONAL PUT BONDS--2.3%(b)
IDAHO--0.3%
Custer County, Idaho
Pollution Control
Revenue Bonds
(Amoco Project)
Series 1983
3.80%, 04/01/96 11,500 11,500
-------
MISSOURI--1.7%
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985A/ (Swiss Bank
LOC)
4.00%, 06/01/96 31,000 31,000
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985B/
(Union Bank of
Switzerland LOC)
4.00%, 06/01/96 28,500 28,500
-------
59,500
-------
NEW HAMPSHIRE--0.1%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (Dartmouth
College) Series 1985A-G
4.10%, 06/01/96 3,000 3,000
-------
</TABLE>
F-21
<PAGE> 94
SchwabFunds(R) 22
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TEXAS--0.1%
Yoakum County, Texas
Industrial Development
Authority Pollution
Control Revenue Bonds
(Amoco Project)
3.75%, 05/01/96 $ 5,265 $ 5,265
------
WYOMING--0.1%
Carbon County, Wyoming
Pollution Control Revenue
Bonds (Amoco Project)
Series 1985
3.75%, 05/01/96 4,800 4,800
------
TOTAL OPTIONAL PUT BONDS (Cost
$84,065) 84,065
------
REVENUE ANTICIPATION NOTES--0.6%(b)
ILLINOIS--0.4%
Illinois State Revenue
Anticipation Notes Series
1995-April, 1996
3.70%, 04/12/96 15,000 15,033
------
OHIO--0.1%
Cleveland, Ohio City
School District Special
Obligation Revenue
Anticipation Notes/ (AMBAC
Insurance)
3.60%, 06/01/96 3,000 3,007
------
WISCONSIN--0.1%
Milwaukee, Wisconsin
Revenue Anticipation
Notes Series A
4.20%, 02/22/96 5,000 5,009
------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $23,049) 23,049
------
REVENUE BONDS--4.0%(b)
ALASKA--0.3%
Anchorage, Alaska Electric
Utilities Revenue Bonds
(Secondary Lien) Series
1986A/ (MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.70%, 06/01/96 8,770 9,083
------
ARIZONA--0.5%
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series A/
(AMBAC Insurance)
3.80%, 07/01/96 12,910 12,953
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series B/
(AMBAC Insurance)
3.80%, 07/01/96 2,470 2,478
Arizona State University
Revenue Bonds Series 1988/
(AMBAC Insurance &
Escrowed to Maturity with
Government Securities)
3.80%, 07/01/96 1,795 1,860
------
17,291
------
CALIFORNIA--0.2%
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series A/(Escrowed
to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,039
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project)/ (Escrowed to
Maturity with Government
Securities)
3.80%, 07/01/96 5,015 5,262
------
6,301
------
FLORIDA--0.1%
Florida State Municipal
Power Agency Revenue
Refunding Bonds (St. Lucie
Project)/ (Escrowed to
Maturity with Government
Securities)
3.65%, 10/01/96 1,000 1,044
Jacksonville, Florida
Electric Authority Revenue
Bonds Series 1988-3A/
(Escrowed to Maturity with
Government Securities)
3.73%, 10/01/96 2,030 2,118
------
3,162
------
HAWAII--0.1%
Hawaii State Department
of Budget and Finance
Special Purpose Mortgage
Revenue Bonds (Kapiolani
Medical Center for
Women and Children)/
(Escrowed to Maturity with
Government Securities)
3.73%, 07/01/96 3,900 4,051
------
</TABLE>
F-22
<PAGE> 95
SchwabFunds(R) 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.2%
Chicago, Illinois
Waterworks Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.65%, 11/01/96 $1,000 $ 1,037
Illinois State Sales
Tax Revenue Bonds
Series 1986B/
(Escrowed to Maturity with
Government Securities)
4.00%, 06/15/96 5,500 5,698
Illinois State Toll
Highway Authority
Priority Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.00%, 01/01/96 1,000 1,020
------
7,755
------
INDIANA--0.1%
Purdue University,
Indiana University Student
Fee Revenue Bonds Series
1993J
3.65%, 07/01/96 4,800 4,812
------
KENTUCKY--0.3%
Kentucky State Turnpike
Authority Economic
Development Road Revenue
Bonds Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,040
3.70%, 07/01/96 1,350 1,402
3.80%, 07/01/96 8,600 8,923
------
11,365
------
MARYLAND--0.1%
Maryland Department
of Transportation
Consolidated
Transportation Revenue
Refunding Bonds Series
1991
3.80%, 09/01/96 1,200 1,215
Washington, Maryland
Suburban Sanitation
District (Maryland Sewer
Disposal) Revenue Bonds
3.65%, 06/01/96 600 609
------
1,824
------
MINNESOTA--0.1%
Southern Minnesota
Municipal Power Agency
Power Supply System
Revenue Bonds/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.44%, 01/01/96 1,000 1,020
University of Minnesota
Refunding Revenue Bonds
Series A/
(Escrowed to Maturity with
Government Securities)
3.50%, 02/01/96 3,925 4,017
-----
5,037
-----
NEW MEXICO--0.2%
New Mexico State
Severence Tax Revenue
Bonds Series 1995B
3.80%, 07/01/96 3,110 3,136
New Mexico State
Severence Tax Revenue
Refunding Bonds Series
1992B (d)
3.50%, 07/01/96 1,000 1,008
Santa Fe, New Mexico
Single Family Mortgage
Revenue Bonds (FNMA/GNMA
Mortgage Backed Securities
Project) Series 1995B/
(FGIC Insurance)
4.00%, 11/15/96 3,000 3,000
-----
7,144
-----
NEW YORK--0.2%
Metropolitan Transportation
Authority, New York
Revenue Bonds Series
1986F/(Escrowed
to Maturity with
Government Securities)
3.70%, 07/01/96 8,445 8,799
-----
NORTH DAKOTA--0.0%
Fargo, North Dakota
Sales Tax Revenue
Refunding Bonds/ (AMBAC
Insurance)
3.85%, 07/01/96 710 714
-----
PENNSYLVANIA--0.2%
Pennsylvania State Turnpike
Commission Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.67%, 12/01/96 6,865 7,254
-----
RHODE ISLAND--0.0%
Rhode Island Depositors
Economic Protection Corp.
Special Obligation Revenue
Bonds Series A/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.90%, 08/01/96 1,400 1,454
-----
</TABLE>
F-23
<PAGE> 96
SchwabFunds(R) 24
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.1%
South Carolina State
Public Service Authority
Expansion Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.80%, 07/01/96 $ 2,695 $ 2,829
------
TEXAS--1.2%
Harris County, Texas
Hospital District Mortgage
Revenue Bonds/ (Escrowed
to Maturity with
Government Securities)
3.52%, 04/01/96 23,000 23,734
Houston, Texas
Water & Sewer System
Revenue Exchange Prior
Lien Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 12/01/96 300 315
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
4.25%, 02/01/96 2,150 2,190
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1985B/
(Escrowed to Maturity with
Government Securities)
3.70%, 02/01/96 10,000 10,198
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1991A
4.25%, 02/01/96 3,000 3,004
Trinity River Authority,
Texas Regional
Wastewater System
Revenue Refunding Bonds
Series A/ (AMBAC
Insurance)
3.80%, 08/01/96 1,500 1,504
University of Texas
Constitutional
Appropriation Revenue
Bonds Series 1995(d)
3.50%, 08/15/96 1,115 1,118
------
42,063
------
VIRGINIA--0.0%
Henrico County, Virginia
Water & Sewer Revenue
Refunding Bonds
Series 1986/
(Escrowed to Maturity with
Government Securities)
3.70%, 05/01/96 1,055 1,090
------
WASHINGTON--0.0%
Seattle, Washington
Municipal Metropolitan
Seattle Sewer Revenue
Bonds Series 1988R2/
(Escrowed to Maturity with
Government Securities)
3.70%, 01/01/96 750 765
-------
WISCONSIN--0.1%
Wisconsin State
Clean Water Revenue Bonds
Series 1991-1
3.70%, 06/01/96 1,690 1,704
-------
TOTAL REVENUE BONDS (Cost $144,497)
144,497
-------
TAX ANTICIPATION NOTES--0.8%(b)
NEW YORK--0.2%
New York City, New York
Tax Anticipation Notes
Series 1995-1996A
3.60%, 02/15/96 4,500 4,505
South Huntington, New York
Unified School District
Tax Anticipation Notes
Series 1995-1996
3.64%, 06/28/96 3,850 3,861
-------
8,366
-------
OREGON--0.4%
Lane County, Oregon Tax
Anticipation Notes Series
1995-1996
3.88%, 06/28/96 3,500 3,510
Multnomah County, Oregon
School District Number 1J
Portland Tax Anticipation
Notes
3.65%, 05/30/96 10,500 10,546
-------
14,056
-------
SOUTH CAROLINA--0.2%
Charleston County, South
Carolina School District
Tax Anticipation Notes
Series 1995-1996
3.75%, 04/15/96 8,300 8,317
-------
TOTAL TAX ANTICIPATION NOTES (Cost
$30,739) 30,739
-------
TAX AND REVENUE ANTICIPATION NOTES--6.0%(b)
CALIFORNIA--3.6%
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes Series
1995A/ (MBIA Insurance)
3.75%, 07/03/96 56,500 56,774
</TABLE>
F-24
<PAGE> 97
SchwabFunds(R) 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Fullerton, California
Joint Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.80%, 11/14/96 $ 3,725 $ 3,747
Kern County, California
High School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.05%, 09/19/96 20,000 20,096
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.83%, 07/01/96 1,500 1,505
3.68%, 07/01/96 1,200 1,204
Pleasanton, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.00%, 07/05/96 4,030 4,045
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-96
3.89%, 07/25/96 10,000 10,033
San Joaquin County,
California Tax and Revenue
Anticipation Notes Series
1995-1996
3.97%, 10/15/96 30,000 30,121
-------
127,525
-------
IOWA--0.7%
Iowa School Corp.
Warrant Certificates
Iowa School Cash
Anticipation Program
Series 1995A/(Capital
Guaranty Insurance)
3.85%, 06/28/96 25,000 25,106
-------
TEXAS--1.4%
Texas State Tax and Revenue
Anticipation Notes Series
1995-1996A
4.05%, 08/30/96 24,000 24,107
3.95%, 08/30/96 8,190 8,232
3.94%, 08/30/96 1,000 1,005
3.90%, 08/30/96 3,000 3,016
3.73%, 08/30/96 13,000 13,080
-------
49,440
-------
WISCONSIN--0.3%
Kenosha, Wisconsin
Tax and Revenue
Anticipation Notes
3.78%, 06/28/96 4,500 4,510
Wisconsin State Operating
Tax and Revenue
Anticipation Notes
3.50%, 06/17/96 5,000 5,021
-------
9,531
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $211,602) 211,602
-------
TAX-EXEMPT COMMERCIAL PAPER--12.4%(b)
ARIZONA--1.5%
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985B
3.80%, 02/12/96 6,450 6,450
3.85%, 02/26/96 5,000 5,000
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985C
3.85%, 02/08/96 6,250 6,250
3.50%, 02/08/96 5,500 5,500
3.80%, 02/12/96 3,100 3,100
3.75%, 02/14/96 6,450 6,450
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985G
3.85%, 02/26/96 4,000 4,000
Salt River, Arizona
Agricultural Improvement
Program/(Multiple Credit
Enhancements)
3.75%, 01/12/96 15,200 15,200
-------
51,950
-------
COLORADO--1.1%
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990B/ (Sumitomo
Bank LOC)
4.05%, 02/15/96 7,520 7,520
</TABLE>
F-25
<PAGE> 98
SchwabFunds(R) 26
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990C/ (Sumitomo
Bank LOC)
4.00%, 02/08/96 $15,000 $15,000
Platte River, Colorado
Power Authority
Adjustable Tender
Electric Secondary
Lien Bonds Series S-1/
(Morgan Guaranty
Trust LOC)
3.75%, 02/07/96 1,800 1,800
3.75%, 02/08/96 15,000 15,000
------
39,320
------
GEORGIA--1.5%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) 1st Series 1989/
(Credit Suisse LOC)
3.85%, 02/08/96 4,300 4,300
3.80%, 02/08/96 2,700 2,700
3.45%, 02/08/96 1,400 1,400
3.75%, 02/15/96 7,500 7,500
3.75%, 02/26/96 2,000 2,000
3.75%, 02/27/96 11,500 11,500
3.70%, 02/27/96 22,700 22,700
------
52,100
------
KANSAS--0.4%
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987A/
(Toronto-Dominion Bank LOC)
3.75%, 02/15/96 12,150 12,150
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987B/
(Deutsche Bank LOC)
3.80%, 02/07/96 2,200 2,200
------
14,350
------
KENTUCKY--0.1%
Pendleton County, Kentucky
Multiple County Lease
Revenue Bonds (Kentucky
Association of Counties
Lease Program) Series
1989/ (Commonwealth Bank
of Australia LOC)
3.70%, 02/08/96 2,300 2,300
------
LOUISIANA--2.0%
Louisiana State Adjustable
Tender General Obligation
Refunding Bonds Series
1991A/(Credit Local de
France & Fuji Bank LOC)
3.85%, 02/08/96 4,275 4,275
3.80%, 02/13/96 2,500 2,500
3.75%, 02/14/96 4,745 4,745
3.80%, 02/26/96 11,000 11,000
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988B
3.65%, 02/09/96 48,900 48,900
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988C
3.65%, 02/09/96 1,000 1,000
------
72,420
------
MASSACHUSETTS--0.3%
Massachusetts Water
Resource Authority
Commercial Paper Series
1995/(Morgan Guaranty
Trust LOC)
3.75%, 02/22/96 9,400 9,400
------
MICHIGAN--0.9%
Michigan State Building
Authority Commercial Paper
Notes Series 1/ (Canadian
Imperial Bank of Commerce
LOC)
4.10%, 01/16/96 33,600 33,600
------
MINNESOTA--0.2%
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1988E/
(Credit Suisse SBPA)
3.70%, 02/14/96 3,100 3,100
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992A
3.75%, 02/15/96 3,000 3,000
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992C
3.45%, 03/07/96 1,550 1,550
------
7,650
------
</TABLE>
F-26
<PAGE> 99
SchwabFunds(R) 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW YORK--0.1%
New York City, New York
Municipal Water Finance
Authority Tax-Exempt
Commercial Paper/ (Credit
Suisse LOC)
3.75%, 02/08/96 $ 5,000 $ 5,000
------
NORTH CAROLINA--1.7%
North Carolina Eastern
Municipal Power Agency
Power System Revenue Bonds
Series 1988B/ (Union Bank
of Switzerland & Morgan
Guaranty Trust LOC)
3.70%, 02/07/96 20,500 20,500
3.75%, 02/26/96 5,400 5,400
North Carolina Eastern
Municipal Power Agency
Tax-Exempt Commercial
Paper/(Industrial Bank of
Japan LOC)
3.80%, 02/07/96 24,321 24,321
3.60%, 02/08/96 9,824 9,824
3.55%, 02/08/96 2,500 2,500
------
62,545
------
TEXAS--2.6%
Lower Colorado River
Authority Tax-Exempt
Commercial Paper Series
B/(Morgan Guaranty Trust
Revolving Credit Agreement
3.80%, 02/14/96 15,800 15,800
Texas Municipal Power
Agency Commercial
Paper/(Bank of America,
Canadian Imperial Bank of
Commerce & Morgan Guaranty
Trust Revolving Credit
Agreement)
3.80%, 01/11/96 49,025 49,025
Texas State Tax-Exempt
Commercial Paper Series
1995
3.35%, 08/12/96 30,000 30,000
----------
94,825
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $445,460) 445,460
----------
TOTAL INVESTMENTS--100.0%
(Cost $3,586,104) $3,586,104
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-27
<PAGE> 100
SchwabFunds(R) 28
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--52.2%(a)
ABAG Finance Authority for
Nonprofit Organizations
Certificates of
Participation
(Lucile Salter Packard
Project)/(AMBAC Insurance
& Industrial
Bank of Japan LOC)
5.00%, 01/07/96 $ 4,000 $ 4,000
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Aitchison
Family Project)
Series 1993A/
(Wells Fargo Bank LOC)
5.45%, 01/07/96 2,920 2,920
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Scientific
Technology Project) Series
1994A/(Banque Nationale de
Paris LOC)
5.45%, 01/07/96 3,000 3,000
Anaheim, California
Certificates of
Participation (Anaheim
Memorial Hospital Assoc.
Project)/ (AMBAC Insurance
& Industrial Bank of
Japan SBPA)
5.30%, 01/07/96 26,820 26,820
Anaheim, California
Certificates of
Participation (Police
Facility Financing
Project)/(AMBAC Insurance
& Industrial
Bank of Japan SBPA)
5.25%, 01/07/96 1,550 1,550
Anaheim, California Housing
Authority Multi Family
Housing Revenue Bonds
(Heritage Village
Apartments Project) Series
1992A/(Multiple Credit
Enhancements)
4.70%, 01/07/96 3,385 3,385
Big Bear Lake, California
Industrial Development
Revenue Certificates of
Participation (Southwest
Gas Corp. Project) Series
A/(Union Bank of
Switzerland LOC)
5.05%, 01/07/96 12,500 12,500
California Educational
Facilities Authority
Revenue Bonds
(California Institute of
Technology) Series 1994
4.60%, 01/07/96 16,300 16,300
California Health
Facilities Financing
Authority
Revenue Bonds
(Adventist Health System--
Sutter Health)
Series 1991A/
(Toronto-Dominion Bank LOC)
4.85%, 01/07/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Childrens Hospital
Project) Series 1991/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 9,900 9,900
California Health
Facilities Financing
Authority Revenue Bonds
(Huntington Memorial
Hospital) Series 1985/
(Morgan Guaranty
Trust LOC)
4.90%, 01/07/96 9,600 9,600
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993A
4.90%, 01/07/96 8,200 8,200
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993B
4.90%, 01/07/96 1,600 1,600
California Health
Facilities Financing
Authority Revenue Bonds
(Saint Joseph's Hospital)
Series 1985B
5.90%, 01/01/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1985B/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 15,120 15,120
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991A/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 1,100 1,100
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991B/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 13,900 13,900
</TABLE>
F-28
<PAGE> 101
SchwabFunds(R) 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Health
Facilities Financing
Authority Revenue Bonds
(St. Francis Hospital)
Series 1995F/
(MBIA Insurance &
Rabobank Nederland N.V.
SBPA)
4.85%, 01/07/96 $30,000 $30,000
California Health
Facilities Financing
Authority Revenue Bonds
Pooled Loan Program
Series 1985B/
(FGIC Insurance &
FGIC SPA)
4.95%, 01/07/96 2,000 2,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1988A/(National
Westminster Bank LOC)
5.95%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1989A/(National
Westminster Bank LOC)
5.95%, 01/01/96 200 200
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Reynolds Metals Co.
Project) Series 1985/
(National Westminster Bank
LOC)
5.10%, 01/07/96 1,300 1,300
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southdown, Inc. Project)
Series B/(Societe
Generale LOC)
4.20%, 01/08/96 3,900 3,900
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986A
5.40%, 01/01/96 6,700 6,700
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986D
5.40%, 01/01/96 1,300 1,300
California Pollution
Control Financing
Authority Resource
Recovery Revenue Bonds
(Sanger Project) Series
1990A/ (Credit Suisse LOC)
5.05%, 01/07/96 9,200 9,200
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Athens Disposal Company
Project) Series 1995A/
(Wells Fargo Bank LOC)
5.20%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Burrtec Waste Industries
Project) Series 1995A/
(Union Bank LOC)
5.25%, 01/07/96 4,000 4,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990A/ (Swiss Bank
LOC)
5.05%, 01/07/96 12,900 12,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990B/ (Swiss Bank
LOC)
5.05%, 01/07/96 8,900 8,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990C/ (Swiss Bank
LOC)
5.05%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Contra Costa Services)
Series 1995A/ (Bank of
America LOC)
5.15%, 01/07/96 4,500 4,500
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Shell Oil Co. Martinez
Project) Series 1994A
6.05%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Taormina Industries
Project) Series
1994B/(Sanwa
Bank LOC)
5.40%, 01/07/96 11,000 11,000
</TABLE>
F-29
<PAGE> 102
SchwabFunds(R) 30
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Statewide
Community Development
Authority Apartment
Development Revenue Bonds
Series 1995-A3/ (FNMA LOC)
4.90%, 01/07/96 $10,000 $10,000
California Statewide
Community Development
Authority Hospital Revenue
Bonds Certificates of
Participation (Sutter
Health Obligation Group)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.90%, 01/01/96 1,100 1,100
California Statewide
Community Development
Authority Revenue
Bonds Certificates of
Participation (Kaiser
Foundation Hospitals)
4.90%, 01/07/96 10,000 10,000
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (13th I
Associates Project)/
(Union Bank LOC)
5.30%, 01/07/96 5,540 5,540
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (ARM Inc. Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 675 675
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Aerostar
Properties Project)/
(Union Bank LOC)
5.40%, 01/07/96 5,095 5,095
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Agricultural Products
Inc. Project)/ (Union Bank
LOC)
5.55%, 01/07/96 1,440 1,440
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Development Industries)
Series 1994A/ (Bank of
Tokyo LOC)
5.35%, 01/07/96 1,640 1,640
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Industrial Dynamics Co.
Project)/ (Union Bank LOC)
5.55%, 01/07/96 5,190 5,190
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Lorber Industries
of California Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,050 1,050
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific
Handy Cutter
Products Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,210 1,210
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific Scientific
Project) Series 1989/
(Bank of California LOC)
5.25%, 01/07/96 5,125 5,125
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Packaging
Innovation Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 2,440 2,440
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (The Diamond
Foods Project)
Series 1991/
(Union Bank LOC)
5.55%, 01/07/96 1,465 1,465
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Z-Nix Co., Inc.
Project)/(Union Bank LOC)
5.55%, 01/07/96 920 920
California Statewide
Community Development
Corp. Revenue
Bonds (ORA
Real Estate Project)
Series 1995D/
(Union Bank LOC)
5.35%, 01/07/96 3,000 3,000
</TABLE>
F-30
<PAGE> 103
SchwabFunds(R) 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Carlsbad, California Multi
Family Housing Revenue
Refunding Bonds
Certificates of
Participation (La Costa
Apartment Project) Series
1993A/ (Bank of America
LOC)
4.80%, 01/07/96 $ 4,920 $ 4,920
Concord, California Multi
Family Housing Mortgage
Revenue Bonds (Bel Air
Apartments Project)
Series 1986A/
(Bank of America LOC)
5.00%, 01/07/96 3,000 3,000
Contra Costa, California
Multi Family Housing
Mortgage Revenue Bonds (El
Cerrito Project) Series A/
(Bank of America LOC)
5.00%, 01/07/96 980 980
Contra Costa, California
Transportation Authority
Sales Tax Revenue Bonds
Series 1993A/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 30,300 30,300
Duarte, California
Redevelopment Agency
Certificates of
Participation (Johnson
Duarte Partners Project)
Series 1984B/ (Bank of
America LOC)
4.90%, 01/07/96 1,600 1,600
Duarte, California
Redevelopment Agency
Certificates of
Participation (Piken
Duarte Partners Project)
Series 1984A/ (Bank of
America LOC)
4.90%, 01/07/96 4,250 4,250
Emeryville, California
Redevelopment Agency Multi
Family Housing Revenue
Bonds (Emery Bay
Apartments II Project)
Series 1991A/
(Bank of America LOC)
4.90%, 01/07/96 6,000 6,000
Encinitas, California Multi
Family Housing Revenue
Refunding Bonds
(Torrey Pines Project)
Series A/
(Bank of America LOC)
4.80%, 01/07/96 8,100 8,100
Foothill Eastern
Transportation Corridor
Agency, California Toll
Road Revenue Bonds
Series 1995D/
(Industrial Bank of
Japan LOC)
5.00%, 01/07/96 1,000 1,000
Fremont, California Multi
Family Housing Revenue
Refunding Certificates of
Participation (Amber Court
Apartments Project)
Series 1990A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 10,380 10,380
Fresno, California Multi
Family Mortgage Revenue
Bonds (Oak Cornelia
Apartments Project) Series
1985A/(First Interstate
Bank of California LOC)
5.10%, 01/07/96 25,265 25,265
Glenn, California
Industrial Development
Authority Revenue Bonds
(Land 'O Lakes Project)/
(Sanwa Bank LOC)
5.60%, 01/07/96 1,900 1,900
Grand Terrace, California
Community Redevelopment
Agency Multi Family
Housing Revenue Bonds
(Mount Vernon Villas
Project) Series 1985A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 1,865 1,865
Irvine Ranch, California
Water District
Consolidated District
Numbers 102,103,105,106
Revenue Refunding Bonds/
(Commerzbank AG LOC)
5.90%, 01/01/96 4,300 4,300
Irvine Ranch, California
Water District
Consolidated District
Numbers 105,250,290
Revenue Refunding Bonds
Series 1991/(National
Westminster Bank LOC)
5.90%, 01/01/96 1,200 1,200
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 100 100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-3/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 1,400 1,400
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985B-1/ (Sumitomo Bank
LOC)
6.10%, 01/01/96 100 100
</TABLE>
F-31
<PAGE> 104
SchwabFunds(R) 32
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding
Bonds Series 1993A/
(Bank of America LOC)
6.00%, 01/01/96 $1,200 $1,200
Irvine, California
Improvement Bond Act 1915
Revenue Bonds (Special
Assessment District
No. 94-15)/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/01/96 500 500
Kern County, California
Certificates of
Participation (Kern Public
Facilities Project)
Series A/
(Sanwa Bank LOC)
4.85%, 01/07/96 200 200
Lancaster, California
Redevelopment Agency Multi
Family Revenue Bonds
(Woodcreek Garden
Apartments Project) Series
1985J/ (Bank of Tokyo LOC)
5.10%, 01/07/96 8,400 8,400
Livermore, California Multi
Family Housing Revenue
Refunding Bonds (Arbors
Apartment Project)
Series 1991A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 9,255 9,255
Livermore, California Multi
Family Housing Revenue
Refunding Bonds
(Diablo Vista
Apartments Project)
Series 1990A/
(Union Bank LOC)
5.30%, 01/07/96 6,950 6,950
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985A/
(Bank of America LOC)
4.85%, 01/07/96 3,800 3,800
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985B/
(Bank of America LOC)
4.85%, 01/07/96 3,500 3,500
Los Angeles County,
California Metropolitan
Transportation Authority
General Revenue Bonds
(Union Station Project)
Series 1985A/
(FSA Insurance &
Societe Generale SBPA)
4.75%, 01/07/96 33,100 33,100
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Casden Community
Complex) Series 1991C/
(FHLB LOC)
4.80%, 01/07/96 3,200 3,200
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Valencia Village
Project) Series 1984C/
(Industrial Bank of Japan
LOC)
5.35%, 01/07/96 900 900
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series 1992A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 9,700 9,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Baldwin
Hills Public Parking
Project) Series B/
(Wells Fargo Bank LOC)
4.85%, 01/07/96 10,700 10,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Broadway
Springs Center Project)
Series 1987/
(Bank of America LOC)
4.90%, 01/07/96 10,900 10,900
Los Angeles, California
Multi Family Housing
Revenue Bonds (Poinsettia
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.35%, 01/07/96 9,600 9,600
Marin County, California
Housing Authority
Multi Family Housing
Revenue Bonds
(Crest Marin II
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.45%, 01/07/96 7,200 7,200
</TABLE>
F-32
<PAGE> 105
SchwabFunds(R) 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Modesto, California
High School District and
Modesto City School
District Certificates of
Participation (Capital
Facilities Project)
Series 1991/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 $3,700 $3,700
Monterey County, California
Financing Authority
Revenue Bonds (Reclamation
& Distribution Projects)/
(Dai-Ichi Kangyo
Bank LOC)
5.30%, 01/07/96 5,000 5,000
Moorpark, California Multi
Family Housing Revenue
Refunding Bonds (Le Club
Apartments Project) Series
A/(Citibank LOC)
4.80%, 01/07/96 6,000 6,000
Oakland, California
Economic Development
Revenue Refunding Bonds
(Leamington Hotel Project)
Series 1994A/ (First
Interstate Bank of
California LOC)
4.90%, 01/07/96 4,250 4,250
Oakland, California Health
Facilities Revenue Bonds
Certificates of
Participation (Children's
Hospital Project) Series
1988A/ (Banque Nationale
de Paris LOC)
4.95%, 01/07/96 3,300 3,300
Ontario, California
Redevelopment Agency Multi
Family Housing Revenue
Refunding Bonds
Series 1991A/
(FHLB LOC)
4.80%, 01/07/96 4,492 4,492
Orange County, California
Apartment Development
Revenue Refunding Bonds
(Jess L. Frost Project)
Series 1985B/
(Wells Fargo Bank LOC)
5.40%, 01/07/96 8,200 8,200
Orange County, California
Certificates of
Participation (Florence
Crittenton Services
Project) Series 1990/
(Swiss Bank LOC)
5.00%, 01/07/96 6,900 6,900
Orange County, California
Municipal Water District
Water Facilities Corp.
Certificates of
Participation/
(Barclays Bank &
National Westminster
Bank LOC)
5.20%, 01/07/96 31,225 31,225
Orange County, California
Various Sanitation
Districts Certificates of
Participation (Capital
Improvement Programs)
Series 1990-92C/
(FGIC Insurance &
FGIC SPA)
6.00%, 01/01/96 7,800 7,800
Orange County, California
Various Sanitation
Districts Certificates of
Participation Series
1990-92A/
(National Westminster
Bank LOC)
5.90%, 01/01/96 12,500 12,500
Orange County, California
Water District
Certificates of
Participation Sanitation
Districts #1,2,3/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 11,600 11,600
Panama Buena Vista,
California Unified School
District Certificates of
Participation (1994
Capital Improvement
Financing Project)/(Bank
of California LOC)
5.45%, 01/07/96 4,000 4,000
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985A/
(Sanwa Bank LOC)
4.80%, 01/07/96 8,800 8,800
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985B/
(Sanwa Bank LOC)
5.00%, 01/07/96 100 100
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985C/
(Sanwa Bank LOC)
5.00%, 01/07/96 5,600 5,600
</TABLE>
F-33
<PAGE> 106
SchwabFunds(R) 34
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Riverside County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Briarwood Apartment
Project) Series 1985C/
(FHLB LOC)
5.15%, 01/07/96 $ 4,500 $ 4,500
Riverside County,
California
Industrial Development
Authority Revenue Bonds
(Cryogenic Project) Series
1989B-1/ (Rabobank
Nederland N.V. LOC)
5.05%, 01/07/96 4,100 4,100
Sacramento County,
California Certificates of
Participation
(Administration
Center & Court House
Project)/(Union Bank of
Switzerland LOC)
4.75%, 01/07/96 28,200 28,200
Salinas, California
Apartment Development
Multi Family Housing
Revenue Bonds (Mariner
Villa Project)
Series 1985B/
(Bank of America LOC)
4.80%, 01/07/96 2,725 2,725
San Bernardino County,
California Certificates of
Participation (Glen Helen
Blockbuster Project)
Series 1994C/
(Mitsubishi Bank LOC)
5.50%, 01/07/96 7,255 7,255
San Bernardino County,
California Multi Family
Housing Revenue Bonds
(Western Properties
Project IV) Series 1985/
(Bank of America LOC)
4.55%, 01/07/96 1,100 1,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-1/ (Citibank LOC)
5.30%, 01/07/96 26,500 26,500
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-2/ (Citibank LOC)
5.30%, 01/07/96 3,750 3,750
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series B-2/
(Bank of Nova Scotia LOC)
5.15%, 01/07/96 13,100 13,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue
Bonds (Rincon
Center Apartments)
Series 1985B/
(Citibank LOC)
5.30%, 01/07/96 5,705 5,705
San Francisco, California
Housing Authority Multi
Family Housing Revenue
Bonds (737 Post Project)
Series 1985D/
(Banque Nationale de
Paris LOC)
4.95%, 01/07/96 16,800 16,800
San Jose/Santa Clara,
California Water Financing
Authority Sewer Revenue
Bonds Series B/
(AMBAC Insurance &
Bank of Nova Scotia LOC)
4.75%, 01/07/96 7,600 7,600
San Mateo County,
California Certificates of
Participation (Capital
Projects) Series 1985B/
(Swiss Bank LOC)
4.75%, 01/07/96 3,145 3,145
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985A/(National
Westminster Bank LOC)
4.85%, 01/07/96 7,900 7,900
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985B/(National
Westminster Bank LOC)
4.85%, 01/07/96 8,100 8,100
Santa Clara, California
Electric Revenue Bonds
Series 1985A/(National
Westminster Bank LOC)
4.90%, 01/07/96 13,300 13,300
Santa Clara, California
Electric Revenue Bonds
Series 1985B/(National
Westminster Bank LOC)
4.90%, 01/07/96 12,100 12,100
Santa Clara, California
Electric Revenue Bonds
Series 1985C/(National
Westminster Bank LOC)
4.90%, 01/07/96 8,800 8,800
</TABLE>
F-34
<PAGE> 107
SchwabFunds(R) 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Santa Cruz County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Paloma del Mar Apartments
Project) Series 1992A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 $ 7,700 $ 7,700
Simi Valley, California
Multi Family Housing
Certificates of
Participation
(Lincoln Wood
Ranch Project)/ (Sumitomo
Bank LOC)
5.30%, 01/07/96 5,600 5,600
South San Francisco,
California Multi Family
Revenue Bonds
(Magnolia Plaza Apartments
Project) Series A/
(Wells Fargo Bank LOC)
5.35%, 01/07/96 4,500 4,500
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project) Series 1991/
(AMBAC Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 21,000 21,000
Vallejo, California
Commercial Development
Revenue Bonds
(Vallejo Center
Association Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 900 900
Victor, California
Elementary School District
Certificates of
Participation
(School Construction
Financing
Project)/(National
Westminster Bank LOC)
5.30%, 01/07/96 4,000 4,000
Visalia, California
Public Building Authority
Certificates of
Participation
(Convention Center
Expansion
Project) Series 1991/
(Bank of California LOC)
5.35%, 01/07/96 1,000 1,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $874,397) 874,397
-------
VARIABLE RATE TENDER
OPTION BONDS--0.2%(A)
Southern California Rapid
Transit District,
California Certificates of
Participation Short Mode
Tender Option
Bonds (BT-9)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 4,200 4,200
------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $4,200) 4,200
------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS--5.4%(a)(c)
California State
Department of
Water Resources Revenue
Bonds (Central Valley
Project) Series J3
Tender Option Bond
Partnership (BTP-141)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 5,155 5,155
California State Revenue
Anticipation Warrants
Series 1994C Tender
Option Bond Partnership
(BTP-150)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 10,000 10,000
California State Revenue
Anticipation Warrants
Series C Tender Option
Bond Partnership
(BTP-96)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 18,465 18,465
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Tender Option
Bond Partnership
(BTP-146)/(Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.15%, 01/07/96 23,078 23,078
Los Angeles, California
Department of Water &
Power Electric Plant
Revenue Refunding Bonds
Series 1994 Tender Option
Bond Partnership
(BTP-68)/(Automatic
Data Processing, Inc.
Tender Option)
4.37%, 01/07/96 5,195 5,195
</TABLE>
F-35
<PAGE> 108
SchwabFunds(R) 36
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Metropolitan Water District
of Southern California
Waterworks General
Obligation Revenue
Refunding Bonds Series
1993A1 and
1993A2 Tender Option
Bond Partnership
(BTP-115)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 $10,145 $10,145
San Diego County,
California Regional
Transportation Commission
Sales Tax Tender Option
Bonds Partnership
(BTP-135)/
(FGIC Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 2,000 2,000
Southern California Public
Power Authority Power
Project Class A
Tender Option
Bond Partnership (BTP-90)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,290 8,290
Southern California Rapid
Transit District
Certificates of
Participation (Workers
Compensation Funding
Program) Tender Option
Bond Partnership
(BTP-163)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,710 8,710
------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS
(Cost $91,038) 91,038
------
CERTIFICATES OF PARTICIPATION--2.0%(b)
Desert Sands, California
Unified School District
Certificates of
Participation (Measure O
Project) Series B/
(Escrowed to Maturity with
Government Securities)
2.60%, 03/01/96 10,000 10,257
San Jose, California
Certificates of
Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 12,500 13,080
San Mateo, California
Redevelopment Agency
Certificates of
Participation Revenue
Refunding Bonds (Bridge
and Water
Pumping Station)/
(Escrowed to Maturity with
Government Securities)
3.67%, 08/01/96 9,305 9,721
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $33,058) 33,058
------
REVENUE ANTICIPATION WARRANTS--2.2%(b)
California State Revenue
Anticipation Warrants
Series C/(FGIC Insurance)
4.61%, 04/25/96 35,900 36,099
------
TOTAL REVENUE ANTICIPATION WARRANTS
(Cost $36,099) 36,099
------
REVENUE BONDS--0.3%(b)
Santa Clara Valley Water
District, California
Revenue Refunding Bonds/
(Escrowed to Maturity with
Government Securities)
3.55%, 06/01/96 1,000 1,009
Southern California Public
Power Authority Revenue
Bonds (Southern California
Public Power
Transmission Project)/
(Escrowed to Maturity with
Government Securities)
3.50%, 07/01/96 3,575 3,756
------
TOTAL REVENUE BONDS
(Cost $4,765) 4,765
------
SPECIAL TAX BONDS--0.1%(b)
South Poway, California
Community Facility
District No. 1 Special Tax
(Pomerado Business Park)
Series 1985A/
(Escrowed to Maturity with
Government Securities)
3.80%, 03/02/96 1,000 1,039
------
TOTAL SPECIAL TAX BONDS
(Cost $1,039) 1,039
------
</TABLE>
F-36
<PAGE> 109
SchwabFunds(R) 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TAX AND REVENUE
ANTICIPATION
NOTES--17.3%(b)
Berkeley, California
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.95%, 07/17/96 $10,500 $10,543
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes
Series 1995A/
(MBIA Insurance)
3.95%, 07/03/96 2,800 2,811
3.86%, 07/03/96 25,000 25,102
3.85%, 07/03/96 225 226
3.75%, 07/03/96 40,000 40,194
Desert Sands, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 10,000 10,024
East Side Unified High
School District
Santa Clara County
California Tax and Revenue
Anticipation Notes
4.00%, 10/10/96 8,000 8,030
Elk Grove, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/31/96 10,400 10,429
Fremont, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 07/11/96 13,000 13,034
Fresno, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 06/28/96 19,900 19,947
Livermore, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/10/96 4,600 4,612
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.87%, 07/01/96 7,260 7,281
3.82%, 07/01/96 10,000 10,031
3.80%, 07/01/96 1,000 1,003
3.70%, 07/01/96 5,000 5,018
3.68%, 07/01/96 10,000 10,037
Marin County, California
Tax and Revenue
Anticipation Notes
Series 1995-96
3.85%, 07/03/96 37,000 37,161
Mountain View, California
School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 2,000 2,005
Mountain View/Los Altos,
California Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 4,200 4,210
Oxnard, California Unified
High School District
(Ventura County)
Tax and Revenue
Anticipation Notes
Series 1995-96
3.90%, 10/11/96 5,500 5,535
San Diego County,
California Tax and Revenue
Anticipation Notes
3.76%, 09/30/96 2,000 2,011
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.89%, 07/25/96 40,000 40,131
Santa Rosa, California
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 09/27/96 10,000 10,057
Sutter County, California
Office of Education
Tax and Revenue
Anticipation Notes
Series 1995-96
4.05%, 09/14/96 10,000 10,030
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $289,462) 289,462
-------
TAX-EXEMPT COMMERCIAL PAPER--20.3%(b)
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A/
(Swiss Bank LOC)
3.75%, 01/11/96 6,200 6,200
3.75%, 02/07/96 5,000 5,000
3.65%, 02/08/96 3,975 3,975
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988B/
(Sumitomo Bank LOC)
3.65%, 02/08/96 58,700 58,700
3.60%, 03/07/96 17,600 17,600
</TABLE>
F-37
<PAGE> 110
SchwabFunds(R) 38
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988C/
(Credit Suisse LOC)
3.70%, 01/10/96 $ 5,500 $ 5,500
3.75%, 02/07/96 1,000 1,000
3.70%, 02/07/96 6,800 6,800
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988D/
(Bank of Tokyo LOC)
3.95%, 01/10/96 4,350 4,350
3.60%, 02/08/96 3,495 3,495
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988F/
(Banque Nationale de Paris
LOC)
4.25%, 01/09/96 10,000 10,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985A
3.65%, 02/07/96 900 900
3.65%, 02/08/96 12,000 12,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985B
3.65%, 02/07/96 800 800
3.65%, 02/08/96 14,000 14,000
California Pollution
Control Financing
Authority
Solid Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP) Series
1988A/(National
Westminster Bank LOC)
3.55%, 02/08/96 35,000 35,000
East Bay Municipal Utility
District, California
(Wastewater Systems)
Tax-Exempt Commercial
Paper/(National
Westminster Bank LOC)
3.65%, 01/12/96 10,700 10,700
Long Beach, California
Harbor Revenue Commercial
Paper Notes Series
1994A/(Multiple Credit
Enhancements)
3.50%, 02/06/96 20,000 20,000
3.45%, 02/09/96 4,000 4,000
Los Angeles County,
California Department of
Water and Power Electric
Plant Short Term
Revenue Bonds
3.65%, 01/12/96 7,000 7,000
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds
Series A/(Multiple
Credit Enhancements)
3.75%, 01/11/96 6,100 6,100
Los Angeles, California
Wastewater System Tax-
Exempt Commercial Paper
3.65%, 01/12/96 10,000 10,000
Metropolitan Water District
of Southern California
Tax-Exempt Commercial
Paper
3.75%, 02/21/96 10,000 10,000
Orange County, California
Local Transportation
Authority Sales Tax
Revenue Commercial
Paper Notes/
(Industrial Bank of
Japan LOC)
3.75%, 01/11/96 8,000 8,000
3.70%, 01/11/96 3,000 3,000
3.65%, 02/08/96 52,200 52,200
Sacramento, California
Municipal Utility District
Tax-Exempt Commercial
Paper Series I/
(Bank of America &
Morgan Guaranty
Trust LOC)
3.75%, 02/08/96 2,133 2,133
West and Central Basin
Financing Authority
West Basin
Municipal Water District
Tax-Exempt Commercial
Paper Notes/
(Toronto-Dominion Bank
LOC)
3.75%, 01/24/96 7,500 7,500
3.50%, 02/09/96 14,000 14,000
--------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $339,953) 339,953
-------
TOTAL INVESTMENTS--100.0%
(Cost $1,674,011) $1,674,011
=========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-38
<PAGE> 111
SchwabFunds(R) 39
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--59.9%(a)
Albany, New York Industrial
Development Agency
Adjustable Revenue Bonds
(Newkirk Products, Inc.)
Series 1995A/
(Fleet Bank of
New York LOC)
5.15%, 01/04/96 $1,000 $1,000
Babylon, New York Variable
Rate General Obligation Bonds
Series B/(Bank of Nova
Scotia SBPA &
AMBAC Insurance)
4.90%, 01/07/96 2,000 2,000
Cortland County, New York
Industrial Development Agency
Revenue Bonds (General Signal
Corp. Project) Series 1983/
(Wachovia Bank LOC)
4.85%, 01/07/96 1,750 1,750
Erie County, New York Water
Authority Revenue Bonds
Series 1993B/
Industrial Bank of
Japan SBPA &
AMBAC Insurance)
5.10%, 01/07/96 1,400 1,400
Franklin County, New York
Industrial Development Agency
Revenue Bonds
(Kes Chateaugay LP
Project) Series A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 3,000 3,000
Geneva, New York
Industrial Development
Agency Civic Facility
Revenue Bonds
(Colleges of The Seneca)
Series 1993A/
(Sumitomo Bank LOC)
5.10%, 01/07/96 2,500 2,500
Monroe County, New York
Industrial Development Agency
Revenue Bonds (ENBI Corp.
Lease Rent Project)
Series 1988/
(ABN-AMRO Bank LOC)
4.95%, 01/07/96 2,000 2,000
New Rochelle, New York
Industrial Development
Authority Revenue Bonds (Chas
Sadek Import Corp.)/ (Bank of
New York LOC)
5.15%, 01/07/96 5,500 5,500
New York City, New York
General Obligation
Bonds Series 1992B/
(FGIC Insurance)
5.00%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1993
Subseries A-8B/
(Sanwa Bank LOC)
5.95%, 01/01/96 385 385
New York City, New York
General Obligation
Bonds Series 1993
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/01/96 1,000 1,000
New York City, New York
General Obligation
Bonds Series 1994
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/07/96 700 700
New York City, New York
General Obligation
Bonds Series 1994B
Subseries B-4/
(MBIA Insurance &
National Westminster
Bank SBPA)
5.90%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1995B
Subseries B-2/
(Bank Austria AG SBPA &
MBIA Insurance)
5.90%, 01/01/96 1,900 1,900
New York City, New York
Housing Development Corp.
Mortgage Revenue Multi Family
Housing Revenue Bonds
(Columbus Gardens Project)
Series 1993A/ (Citibank LOC)
4.75%, 01/07/96 3,500 3,500
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 9,700 9,700
New York City, New York
Industrial Development Agency
Floating Rate
Revenue Bonds
(White Plains Auto)/
(Societe Generale LOC)
5.15%, 01/07/96 300 300
</TABLE>
F-39
<PAGE> 112
SchwabFunds(R) 40
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994C/
(FGIC Insurance)
5.90%, 01/01/96 $1,200 $1,200
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC SPA &
FGIC Insurance)
5.90%, 01/01/96 2,100 2,100
New York City, New York
Municipal Water Finance
Authority Water and Sewer
System Revenue Bonds
Series 1995A/
(FGIC Insurance)
5.50%, 01/01/96 2,000 2,000
New York City, New York
Various Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 700 700
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 7,000 7,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993A/
(Toronto-Dominion
Bank LOC)
5.00%, 01/07/96 2,000 2,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993B/
(Toronto-Dominion
Bank LOC)
5.05%, 01/07/96 6,000 6,000
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds (Orange &
Rockland Utilities, Inc.
Project) Series 1994A/ (FGIC
Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 9,100 9,100
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds/ (Union Bank of
Switzerland LOC)
5.30%, 01/07/96 1,900 1,900
New York State Energy Research
& Development Authority
Pollution Control Revenue
Bonds (Central Hudson Gas &
Electric Corp. Project)
Series 1985A/
(J. P. Morgan Delaware LOC)
5.00%, 01/07/96 4,300 4,300
New York State Housing Finance
Agency Revenue Bonds (East
84th Street Project)
Series 1995A/
(Fleet Bank of
New York LOC)
5.10%, 01/07/96 5,000 5,000
New York State Housing Finance
Agency Variable Rate Housing
Revenue Bonds (Hospital
Special Surgery Staff)
Series 1985A/
(Sakura Bank LOC)
4.70%, 01/07/96 6,700 6,700
New York State Housing Finance
Agency Variable Rate Multi
Family Housing Revenue Bonds
(Normandie Court II)
Series 1987A/
(Bankers Trust Co. LOC)
4.95%, 01/07/96 2,900 2,900
New York State Housing Finance
Agency Variable
Rate Revenue Bonds
(Mount Sinai School of
Medicine) Series 1984A/
(Sanwa Bank LOC)
4.70%, 01/07/96 5,900 5,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1994B/
(Credit Suisse &
Swiss Bank LOC)
4.95%, 01/07/96 6,900 6,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995F/(Toronto-
Dominion Bank LOC)
5.05%, 01/07/96 1,900 1,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 1,100 1,100
</TABLE>
F-40
<PAGE> 113
SchwabFunds(R) 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
Niagara County, New York
Industrial Development Agency
Revenue Bonds (Allegheny
Ludlum Steel Company)
Series 1984/
(PNC Bank LOC)
5.00%, 01/07/96 $3,500 $3,500
Niagara Falls, New York Bridge
Commission Revenue Bonds
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 3,400 3,400
Port Authority, New York and
New Jersey Special Obligation
Revenue Bonds Series 1993/
(Deutsche Bank LOC)
5.10%, 01/07/96 4,000 4,000
Puerto Rico--Puerto Rico
Government Development
Bank Revenue
Refunding Bonds
Series 1985/
(Credit Suisse LOC)
4.50%, 01/07/96 5,000 5,000
Schenectady, New York
Industrial Development Agency
Industrial Development
Revenue Bonds (Fortitech
Holding Corp. Project)
Series A/
(Fleet Bank of
New York LOC)
5.15%, 01/07/96 1,500 1,500
St. Lawrence County, New York
Industrial Development Agency
Environmental Improvement
Revenue
Bonds (Reynolds Metals
Project) Series 1995/
(Royal Bank of Canada LOC)
5.00%, 01/07/96 4,000 4,000
Triborough Bridge and Tunnel
Authority, New York Special
Obligation Bridge Revenue
Bonds Series 1994/
(FGIC SPA &
FGIC Insurance)
4.90%, 01/07/96 2,700 2,700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1989/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 1,500 1,500
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1991/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 700 700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1994/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.95%, 01/07/96 1,100 1,100
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $130,935) 130,935
-------
VARIABLE RATE TENDER
OPTION BONDS--1.9%(a)
New York City, New York
General Obligation Bonds
(Citi-1I)/(AMBAC Insurance,
Escrowed to Maturity with
Government Securities &
Citibank Tender Option)
5.29%, 01/07/96 4,100 4,100
-------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $4,100) 4,100
-------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--2.5%(a)(c)
New York State Dormitory
Authority, New York
University Insured
Revenue Bonds
(BTP-26)/(Automatic
Data Processing, Inc.
Tender Option &
MBIA Insurance)
4.11%, 01/07/96 5,375 5,375
-------
TOTAL VARIABLE RATE TENDER OPTION BOND
PARTNERSHIPS
(Cost $5,375) 5,375
-------
BOND ANTICIPATION
NOTES--8.1%(b)
Broome County, New York
Bond Anticipation Notes
Series 1995-96
4.33%, 04/19/96 3,812 3,819
3.77%, 04/19/96 3,000 3,010
Dutchess County, New York Bond
Anticipation Notes Series
1995-96
3.75%, 08/02/96 2,825 2,833
Rochester, New York General
Obligation Bond Anticipation
Notes Series 1995I
3.80%, 10/31/96 5,000 5,018
Schenectady, New York General
Obligation Bond Anticipation
Notes Series 1995
4.63%, 02/16/96 3,068 3,070
-------
TOTAL BOND ANTICIPATION NOTES (Cost
$17,750) 17,750
-------
</TABLE>
F-41
<PAGE> 114
SchwabFunds(R) 42
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
GENERAL
OBLIGATIONS--0.8%(b)
Buffalo, New York General
Obligation Revenue Bonds/
(MBIA Insurance)
3.50%, 12/01/96 $1,824 $ 1,832
------
TOTAL GENERAL OBLIGATIONS
(Cost $1,832) 1,832
------
REVENUE BONDS--4.9%(b)
New York State Power Authority
Revenue and General Purpose
Bonds Series 1993C
3.32%, 01/01/97 1,600 1,600
New York State Urban
Development Corp.
Correctional Facilities
Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.80%, 01/01/96 7,000 7,140
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds
Series 1986-1/
(Escrowed to Maturity with
Government Securities)
4.07%, 01/01/96 1,000 1,020
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds Series
I/(Escrowed to Maturity
with Government Securities)
4.45%, 01/01/96 1,000 1,020
------
TOTAL REVENUE BONDS
(Cost $10,780) 10,780
------
TAX ANTICIPATION NOTES--15.3%(b)
East Hampton, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.76%, 06/28/96 5,000 5,004
Half Hollow Hills Huntington-
Babylon, New York Centralized
School District Suffolk
County Tax and Revenue
Anticipation Notes
3.70%, 06/28/96 5,800 5,815
New York City, New York
Tax Anticipation Notes Series
1995-1996A
3.80%, 02/15/96 3,000 3,003
3.70%, 02/15/96 5,000 5,005
South Huntington, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.78%, 06/28/96 5,000 5,010
3.60%, 06/28/96 2,500 2,508
West Islip, New York Unified
Free School District General
Obligation Tax Anticipation
Notes Series 1995
4.00%, 06/27/96 5,000 5,018
3.40%, 06/27/96 2,000 2,013
-------
TOTAL TAX ANTICIPATION NOTES
(Cost $33,376) 33,376
-------
TAX-EXEMPT COMMERCIAL
PAPER--6.6%(b)
New York City, New York
General Obligation Bonds
Fiscal 1994 Series H-4/
(AMBAC Insurance &
Kredietbank, N.V. SBPA)
3.75%, 02/15/96 1,500 1,500
New York City, New York
Municipal Water
Finance Authority/
(Credit Suisse LOC)
3.75%, 02/08/96 7,000 7,000
New York State Dormitory
Authority Revenue Bonds
(Memorial Sloan Kettering
Project) Series 1989C/
(Chemical Bank LOC)
3.75%, 02/08/96 6,000 6,000
-------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $14,500) 14,500
-------
TOTAL INVESTMENTS--100.0%
(Cost $218,648) $218,648
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-42
<PAGE> 115
SchwabFunds(R) 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
(c) Certain securities purchased by the Funds are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund. Any resale by the Funds must be in an exempt transaction,
normally to a qualified institutional buyer. At December 31, 1995, the
aggregate value of private placement securities held by the Schwab
Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund were $139,017,000,
$91,038,000 and $5,375,000, respectively, which represented 3.90%,
5.40% and 2.44%, respectively, of the net assets of each Fund. All of
these private placement securities were determined by the Investment
Manager to be liquid in accordance with procedures adopted by the Board
of Trustees.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering
into the transaction. The transaction is subject to market fluctuation
and to the risk that the value may be more or less than the purchase
price when the transaction was initiated. The Fund has set aside
sufficient investment securities as collateral for securities purchased
on a delayed-delivery basis.
Abbreviations
-------------------
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
N.R.U.-C.F.C. National Rural Utilities Cooperative Financing
Corporation
SBPA Standby Purchase Agreement
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-43
<PAGE> 116
SchwabFunds(R) 44
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost: $3,586,104,
$1,674,011 and $218,648, respectively) $3,586,104 $1,674,011 $ 218,648
Cash 166 38 39
Interest receivable 30,491 14,817 2,232
Receivable for fund shares sold 2,940 4,914 250
Receivable from adviser -- -- 4
Deferred organization costs -- -- 23
Prepaid expenses 551 162 3
---------- ---------- --------
Total assets 3,620,252 1,693,942 221,199
---------- ---------- --------
LIABILITIES
Payable for:
Dividends 15,284 6,832 899
Fund shares redeemed 670 485 120
Investments purchased 37,735 -- --
Investment advisory and administration fee 603 267 37
Transfer agency and shareholder service fees 1,157 536 68
Other 284 119 69
---------- ---------- --------
Total liabilities 55,733 8,239 1,193
---------- ---------- --------
Net assets applicable to outstanding shares $3,564,519 $1,685,703 $ 220,006
========== ========== ========
NET ASSETS CONSIST OF:
Capital paid in $3,566,367 $1,686,367 $ 220,012
Accumulated net realized loss on investments
sold (1,848) (664) (6)
---------- ---------- --------
$3,564,519 $1,685,703 $ 220,006
========== ========== ========
THE PRICING OF SHARES
3,405,684, 1,578,359 and 204,869, respectively,
outstanding Sweep Shares and
160,683, 108,008 and 15,143, respectively,
outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares
authorized) 3,566,367 1,686,367 220,012
Net asset value, offering and redemption price
per each Sweep Share and Value Advantage Share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-44
<PAGE> 117
SchwabFunds(R) 45
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund*
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 127,090 $55,134 $ 6,178
-------- ------- ------
Expenses:
Investment advisory and administration fee 13,694 6,445 741
Transfer agency and shareholder service fees:
Sweep Shares 14,432 6,469 708
Value Advantage Shares 103 31 9
Custodian fees 380 244 60
Registration fees 400 207 120
Professional fees 187 103 26
Shareholder reports 296 64 28
Trustees' fees 21 9 1
Amortization of deferred organization costs and
other prepaid expenses 76 50 4
Insurance and other expenses 139 75 4
-------- ------- ------
29,728 13,697 1,701
Less expenses reduced and absorbed (8,375) (4,297) (690)
-------- ------- ------
Total expenses incurred by Fund 21,353 9,400 1,011
-------- ------- ------
Net investment income 105,737 45,734 5,167
Net realized gain (loss) on
investments sold (21) 8 (6)
-------- ------- ------
Increase in net assets resulting
from operations $ 105,716 $45,742 $ 5,161
======== ======= ======
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-45
<PAGE> 118
SchwabFunds(R) 46
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- ------------
For the
period
ended
\-------------For the year ended December 31,------------\ December 31,
1995 1994 1995 1994 1995*
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 105,737 $ 65,678 $ 45,734 $ 27,608 $ 5,167
Net realized gain (loss)
on investments sold (21) (1,586) 8 (600) (6)
---------- ----------- ----------- ----------- -----------
Increase in net assets
resulting from operations 105,716 64,092 45,742 27,008 5,161
---------- ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income:
Sweep Shares (104,288) (65,678) (45,302) (27,608) (5,046)
Value Advantage Shares (1,449) -- (432) -- (121)
---------- ----------- ----------- ----------- -----------
Total dividends to
shareholders (105,737) (65,678) (45,734) (27,608) (5,167)
---------- ----------- ----------- ----------- -----------
Capital share transactions
(dollar amounts and
number of shares
are the same):
Proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares
issued in reinvestment of
dividends 100,567 57,664 43,226 24,116 4,181
Less payments for
shares redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
---------- ----------- ----------- ----------- -----------
Increase in net assets from
capital share transactions 548,589 594,220 391,812 232,441 220,012
---------- ----------- ----------- ----------- -----------
Total increase in net assets 548,568 592,634 391,820 231,841 220,006
Net Assets:
Beginning of period 3,015,951 2,423,317 1,293,883 1,062,042 --
---------- ----------- ----------- ----------- -----------
End of period $ 3,564,519 $ 3,015,951 $ 1,685,703 $ 1,293,883 $ 220,006
========== =========== =========== =========== ===========
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-46
<PAGE> 119
SchwabFunds(R) 47
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund
and the Schwab New York Tax-Exempt Money Fund (the "Funds") are series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management
investment company organized as a Massachusetts business trust on October 20,
1989 and registered under the Investment Company Act of 1940, as amended. The
Schwab New York Tax-Exempt Money Fund commenced operations on February 27, 1995.
The Board of Trustees of the Trust adopted a multiple class plan for the Funds
on May 9, 1995. Commencing July 7, 1995, with respect to the Schwab Tax-Exempt
Money Fund and Schwab New York Tax-Exempt Money Fund and October 3, 1995, with
respect to the Schwab California Tax-Exempt Money Fund, the Funds began offering
more than one class of shares. Pursuant to the plan, the existing shares were
redesignated as Sweep Shares ("Sweep Shares"), and a new class of shares was
added -- the Value Advantage Shares ("Value Advantage Shares"). Both classes
represent interests in the same portfolio of investments of the respective Fund
and are substantially the same in all respects except that the classes are
subject to different transfer agency and shareholder service fees (see Note 3),
investment minimums and certain other expenses.
In addition to the three Funds described above, the Trust also offers -- the
Schwab Money Market Fund, the Schwab Government Money Fund, the Schwab U.S.
Treasury Money Fund, the Schwab Value Advantage Money Fund(R), the Schwab
Institutional Advantage Money Fund(TM) and the Schwab Retirement Money Fund(R).
The assets of each series are segregated and accounted for separately.
The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of
short-term high quality municipal securities. The Schwab California Tax-Exempt
Money Fund, which is not "diversified" within the meaning of the Investment
Company Act of 1940, as amended, invests in a portfolio of debt obligations
issued by or on behalf of California and other states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities that generate interest
exempt from federal income tax and State of California personal income tax. The
Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
F-47
<PAGE> 120
SchwabFunds(R) 48
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by a Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds and their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from each Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets. Expenses attributable to both
classes of shares of a Fund are allocated daily to each class of that Fund based
on the value of settled shares outstanding of each respective class. Transfer
agency, shareholder service fees and certain other expenses which are class
specific, are calculated daily at the class level.
Interest income and realized gains (losses) -- Interest income is recorded on
the accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis. Income and realized gains (losses) are allocated daily to each class of
shares of a Fund based on the value of settled shares outstanding of each
respective class.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
Each Fund is considered a separate entity for tax purposes.
F-48
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SchwabFunds(R) 49
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- --------------------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, each Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt
Money Fund and the Schwab New York Tax-Exempt Money Fund incurred investment
advisory and administration fees of $13,694,000, $6,445,000, and $741,000,
respectively, for the period ended December 31, 1995, before the Investment
Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% and .25% of each Fund's average daily net
assets of the Sweep Shares and Value Advantage Shares, respectively. For the
period ended December 31, 1995, the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred transfer agency and shareholder service fees of $14,432,000, $6,469,000
and $708,000, respectively, for the Sweep Shares and $103,000, $31,000, and
$9,000, respectively, for the Value Advantage Shares, before Schwab reduced its
fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the period
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred fees of $21,000, $9,000 and $1,000, respectively, related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the ratio of operating expenses to average
net assets for each Fund. For the period ended December 31, 1995, the total of
such fees reduced and absorbed by the Investment Manager was $7,229,000,
$3,707,000 and $302,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively, and the total of such fees reduced by Schwab was $1,146,000,
$590,000 and $388,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively.
F-49
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SchwabFunds(R) 50
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period ended
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
---------- ---------- ----------
<S> <C> <C> <C>
Purchases $6,419,657 $3,297,957 $527,752
Proceeds of sales and maturities $5,869,911 $2,925,680 $308,751
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
Each Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the respective Fund. Transactions in capital shares were as follows (in
thousands):
<TABLE>
<CAPTION>
Schwab Schwab New
Schwab California York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- -------------
Period ended
\----------------Year ended December 31,----------------\ December 31,
1995 1 1994 1995 2 1994 1995 3
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 9,911,852 $ 8,184,151 $ 4,257,465 $ 3,435,641 $ 671,692
Value Advantage Shares 236,471 -- 125,848 -- 21,284
----------- ----------- ----------- ----------- ---------
Total proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares issued
in reinvestment of dividends:
Sweep Shares 99,813 57,664 43,152 24,116 4,126
Value Advantage Shares 754 -- 74 -- 55
----------- ----------- ----------- ----------- ---------
Total net asset value of
shares issued in
reinvestment of dividends 100,567 57,664 43,226 24,116 4,181
Less payments for shares redeemed:
Sweep Shares (9,623,759) (7,647,595) (4,016,813) (3,227,316) (470,949)
Value Advantage Shares (76,542) -- (17,914) -- (6,196)
----------- ----------- ----------- ----------- ---------
Total payments for shares
redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
----------- ----------- ----------- ----------- ---------
Total increase in net assets from
capital share transactions $ 548,589 $ 594,220 $ 391,812 $ 232,441 $ 220,012
----------- ----------- ----------- ----------- ---------
</TABLE>
1 The Value Advantage Shares commenced operations on July 7, 1995.
2 The Value Advantage Shares commenced operations on October 3, 1995.
3 The Value Advantage Shares commenced operations on July 7, 1995 and the
Sweep Shares commenced operations on February 27, 1995.
F-50
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SchwabFunds(R) 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Tax-Exempt Money Fund
---------------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ ------------------------------------------------------------------
For the
period
ended
December 31, \-----------------For the year ended December 31,----------------\
1995(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
---------- ------------------------------------------------------------------
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .02 .03 .02 .02 .03 .04
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .02 .03 .02 .02 .03 .04
Less distributions
- ------------------
Dividends from net investment
income (.02) (.03) (.02) (.02) (.03) (.04)
Distributions from realized
gain on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.03) (.02) (.02) (.03) (.04)
-------- ---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========== ========== ========== ========== ==========
Total return (%) 1.68 3.30 2.32 1.93 2.49 4.01
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of
period (000s) $160,682 $3,403,837 $3,015,951 $2,423,317 $1,744,903 $1,359,121
Ratio of expenses to
average net assets (%) .45* .66 .65 .63 .63 .63
Ratio of net investment
income to average
net assets (%) 3.50* 3.25 2.31 1.92 2.45 3.91
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab Tax-Exempt Money Fund's
ratio of operating expenses to average net assets. Had these fees and expenses
not been reduced and absorbed, with respect to the Value Advantage Shares, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets for the period ended December 31, 1995 would have been
.95%* and 3.00%* respectively. With respect to the Sweep Shares, the ratio of
expenses to average net assets for the periods ended December 31, 1995, 1994,
1993, 1992, and 1991 would have been .91%, .91%, .93%, .94% and .95%,
respectively, and the ratio of net investment income to average net assets would
have been 3.00%, 2.05%, 1.62%, 2.14%, and 3.59%, respectively.
(1) For the period July 7, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-51
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SchwabFunds(R) 52
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SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab California Tax-Exempt Money Fund
-------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ --------------------------------------------------------------
For the
period
ended
December 31, \---------------For the year ended December 31,--------------\
1995 1 1995 1994 1993 1992 1991
---------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .01 .03 .02 .02 .02 .04
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total from investment
operations .01 .03 .02 .02 .02 .04
Less distributions
- ------------------
Dividends from net
investment income (.01) (.03) (.02) (.02) (.02) (.04)
Distributions from realized gain
on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total distributions (.01) (.03) (.02) (.02) (.02) (.04)
-------- ---------- ---------- ---------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ---------- ---------- ---------- -------- --------
Total return (%) .84 3.20 2.26 1.91 2.35 3.77
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $108,008 $1,577,695 $1,293,883 $1,062,042 $691,176 $494,214
Ratio of expenses to
average net assets (%) .45* .65 .64 .63 .63 .61
Ratio of net investment
income to average
net assets (%) 3.48* 3.15 2.25 1.89 2.31 3.70
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab California Tax-Exempt
Money Fund's ratio of operating expenses to average net assets. Had these fees
and expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.89%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets for the periods ended
December 31, 1995, 1994, 1993, 1992, and 1991 would have been .94%, .94%, .96%,
.97%, and .98%, respectively, and the ratio of net investment income to average
net assets would have been 2.86%, 1.95%, 1.56%, 1.97%, and 3.33%, respectively.
1 For the period October 3, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-52
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SchwabFunds(R) 53
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab New York Tax-Exempt Money Fund
---------------------------------------------
Value Advantage
Shares Sweep Shares
-------------------- --------------------
For the period For the period
ended ended
December 31, 1995 1 December 31, 1995 2
-------------------- --------------------
<S> <C> <C>
Net asset value at beginning of period $1.00 $1.00
Income from investment operations
- --------------------------------
Net investment income .02 .03
Net realized and unrealized gain (loss) on investments -- --
------- --------
Total from investment operations .02 .03
Less distributions
- -----------------
Dividends from net investment income (.02) (.03)
Distributions from realized gain on investments -- --
------- --------
Total distributions (.02) (.03)
------- --------
Net asset value at end of period $1.00 $1.00
======= ========
Total return (%) 1.62 2.75
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 15,143 $204,863
Ratio of expenses to average net assets (%) .45* .63*
Ratio of net investment income to average net assets (%) 3.42* 3.20*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab New York Tax-Exempt Money
Fund's ratio of operating expenses to average net assets. Had these fees and
expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.81%* and 2.06%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.79%*, respectively.
1 For the period July 7, 1995 (commencement of operations) to December 31,
1995.
2 For the period February 27, 1995 (commencement of operations) to December
31, 1995.
* Annualized
F-53
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SchwabFunds(R) 54
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- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund (three series constituting part of The Charles Schwab Family of
Funds, hereafter referred to as the "Trust") at December 31, 1995, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-54
