<PAGE> 1
As filed with the Securities and Exchange Commission on February 21, 1997
File Nos. 33-31894 and 811-05954
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 25 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 27 [X]
--------------
THE CHARLES SCHWAB FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(415) 627-7000
Timothy F. McCarthy, President
The Charles Schwab Family of Funds
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)
Copies of communications to:
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management, Inc.
1301 K Street, NW, Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485 if appropriate, check
appropriate box:
/ / This post-effective amendment designates a new effective date for a
previously filed post- effective amendment
DECLARATION PURSUANT TO RULE 24f-2: Pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, Registrant has registered an
indefinite number or amount of its shares of beneficial interest under the
Securities Act of 1933, as amended. The Rule 24f-2 Notice for Registrant's
fiscal year ended December 31, 1996 was filed on February 19, 1997.
<PAGE> 2
PART A
THE CHARLES SCHWAB FAMILY OF FUNDS
The information required by Items 1 through 9 for Schwab Municipal
Money Fund-Value Advantage Shares, Schwab California Municipal Money Fund-
Value Advantage Shares, Schwab New York Municipal Money Fund- Value Advantage
Shares , Schwab California Municipal Money Fund-Sweep Shares, and Schwab New
York Municipal Money Fund-Sweep Shares, separate portfolios of Registrant, are
hereby incorporated by reference to the Prospectuses for these Portfolios filed
with the Securities and Exchange Commission pursuant to Rule 497(e) on January
2, 1997.
The information required by Items 1 through 9 for Schwab Value
Advantage Money Fund(R)-Investor Shares, Schwab Institutional Advantage Money
Fund(R), and Schwab Retirement Money Fund(R), separate portfolios of Registrant,
are hereby incorporated by reference to the Prospectuses for these Portfolios
filed with the Securities and Exchange Commission pursuant to Rule 497(e) on
November 26, 1996.
<PAGE> 3
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund-Sweep Shares
Schwab Value Advantage Money Fund-Sweep Shares
<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
- ----------- ------------------
<S> <C>
Cover Page Cover Page
Synopsis Key Features of the Funds; Summary of Expenses
Condensed Financial Information Financial Highlights
General Description of Registrant Cover Page; Investment Objectives and Policies;
Organization and Management of the Funds; Other
Important Information
Management of the Fund Organization and Management of the Funds
Management's Discussion of Fund Performance How the Funds Report Performance
Capital Stock and Other Securities Cover Page; Investment Objectives and Policies; Municipal
Securities and Municipal Investment Techniques; Distributions
and Taxes
Purchase of Securities Being Offered Share Price Calculation; Investing in Shares of the
Funds
Redemption or Repurchase Investing in Shares of the Funds
Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 4
SCHWAB MONEY MARKET FUND
SCHWAB GOVERNMENT MONEY FUND
SCHWAB U.S. TREASURY MONEY FUND
SCHWAB MUNICIPAL MONEY FUND - SWEEP SHARES
SCHWAB VALUE ADVANTAGE MONEY FUND - SWEEP SHARES
PROSPECTUS April 30 , 1997
To Place Orders and for Account Information: Call Charles Schwab & Co.,
Inc. ("Schwab") at 800-2 NO-LOAD.
The Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Municipal Money Fund and Schwab Value Advantage
Money Fund (the "Funds") are designed for investors who seek current income
consistent with liquidity and stability of capital. Free credit balances in your
Schwab brokerage account (including your Schwab One(R) account) can be
automatically invested or "swept" into one of these five Funds. The Funds are
diversified investment portfolios of The Charles Schwab Family of Funds (the
"Schwab Fund Family"), a no-load, open-end, management investment company. With
respect to the Schwab Municipal Money Fund (known as the Schwab Tax-Exempt Money
Fund prior to January 2, 1997) and the Schwab Value Advantage Money Fund, this
Prospectus describes the Sweep Shares of the Funds (the "Sweep Shares"), one of
the two classes of shares of each Fund offered by Schwab. Information concerning
the other classes of shares of these two Funds can be found under the heading
"Other Important Information" in this Prospectus. The Other Funds are not
offered in multiple classes .
About This Prospectus: This Prospectus concisely presents important
information you should know before investing in the Funds. Please read it
carefully and retain it for future reference. You can find more detailed
information about the Funds in the Statement of Additional Information ("SAI")
dated April 30, 1997 (as amended from time to time). The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. This
Prospectus is available electronically by using our World Wide Web address:
http://www.schwab.com. To get a free paper copy of this Prospectus or the SAI,
call Schwab at 800-2 NO-LOAD, 24 hours a day, or write the Funds at 101
Montgomery Street, San Francisco, California 94104. TDD users may contact Schwab
at 800-345-2550, 24 hours a day.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Key Features of the Funds 2
Summary of Expenses 3
Financial Highlights 5
Investment Objectives and Policies 7
Municipal Securities and Investment Techniques 10
Other Investment Techniques 13
Organization and Management of the Funds 15
Distributions and Taxes 17
Share Price Calculation 19
How the Funds Report Performance 20
Tax-Advantaged Retirement Plans 21
Investing in Shares of the Funds 21
Other Important Information 26
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
-1-
<PAGE> 5
KEY FEATURES OF THE FUNDS
Current Income. Each Fund is designed for investors who seek current
income consistent with liquidity and stability of capital. The Schwab Municipal
Money Fund also seeks to produce income for its shareholders which is exempt
from federal regular income taxes. Federal regular income tax does not include
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations. (See "Investment Objectives and Policies.")
Safety. The Funds invest in High-Quality, Short-Term debt securities. Each
Fund attempts to maintain a stable net asset value of $1.00 per share. (See
"Investment Objectives and Policies.")
Automatic Investment/Redemption Feature. If you elect, free credit balances
in your Schwab brokerage account (including your Schwab One(R) account) will be
automatically invested or "swept" into the Fund you select, subject to the terms
and conditions of your account agreement. Shares will also be sold as necessary
to settle securities transactions, collateralize margin obligations or cover
debit balances. This feature keeps your money working and saves you the time and
trouble of withdrawing and redepositing funds. (See "Investing in Shares of the
Funds - How to Buy Shares" and "Investing in Shares of the Funds - How to Sell
or Exchange Shares.")
Who Should Invest in the Funds. The Funds may be appropriate for a variety
of investment programs which can be long-term or short-term in nature.
Because the Funds are designed to provide convenience, liquidity and
stability of capital, as well as automatic investment of cash and free credit
balances, they may be especially suitable for investors with short-term
investment objectives, including those who are awaiting an opportune time to
invest in the equity and/or bond markets.
The Funds may also be appropriate for long-term investors seeking low-risk
investment alternatives which are designed to provide current, and in the case
of the Schwab Municipal Money Fund, income exempt from federal regular income
tax. (See "Investment Objectives and Policies" and "Municipal Securities and
Municipal Investment Techniques.")
The Schwab Money Market Fund is Schwab's basic sweep money fund. it is
ideally suited for investors who want the advantages of the automatic sweep
feature but do not normally keep large balances in their money fund.
(See "Investment Objectives and Policies.")
The Schwab Government Money Fund was designed for investors who want the
safety of a portfolio consisting exclusively of obligations issued or guaranteed
by the U.S. Government and its agencies and instrumentalities, combined with the
automatic sweep feature. (See "Investment Objectives and Policies.")
The Schwab U.S. Treasury Money Fund is a sweep money fund suited for
investors who want the safety of a portfolio invested only in direct obligations
of the U.S. Treasury. The dividends received by these investors also are exempt
from state and local income taxes in the vast majority of states. (See
"Investment Objectives and Policies.")
The Schwab Municipal Money Fund - Sweep Shares is intended for investors
who want dividends that are exempt from federal regular income taxes and all the
convenience and benefits of an automatic sweep money fund. Federal regular
income tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations. The Schwab Municipal Money
Fund would not be an appropriate investment for retirement plans such as IRAS
and Keogh Plans. (See "Municipal Securities and Municipal Investment
Techniques" And "Tax-Advantaged Retirement Plans.")
-2-
<PAGE> 6
The Schwab Value Advantage Money Fund - Sweep Shares offers investors with
more substantial balances in their money funds (minimum investment $25,000) all
the advantages of the automatic sweep feature plus a higher potential yield due
to the lower overall expense ratio of this Fund. (See "Investing in shares of
the Funds" and "Other Important Information.")
Liquidity. You can conveniently sell your shares of any of the Funds at any
time. (See "Investing in Shares of the Funds - How to Sell or Exchange Shares.")
Low Cost Investing. The Funds impose no sales or transaction fees on
purchases or redemptions of shares of the Funds. In addition, the total fund
operating expenses of the Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund , Sweep Shares of the Schwab Municipal
Money Fund, and Sweep Shares of the Schwab Value Advantage Money Fund will not
exceed 0.75%, 0.75%, 0.65% , 0.66% and 0.50%, respectively, through at least
[April 30, 1997], as guaranteed by Charles Schwab Investment Management, Inc.
(the "Investment Manager") and Schwab. (See "Matching the Funds to Your
Investment Needs" and "Organization and Management of the Funds.")
Minimum Investment. All of the Funds or classes of Shares, except the
Schwab Value Advantage Money Fund - Sweep Shares, require a minimum initial
investment of $1,000. The Schwab Value Advantage Money Fund -Sweep Shares
requires a minimum initial investment of $25,000. In addition, the Sweep Shares
of the Value Advantage Fund are available only to certain Schwab customers who
are included in one of Schwab's preferred customer programs and have at least
$500,000 in account equity at Schwab. The minimum account balance for the Sweep
Shares of the Value Advantage Fund is $20,000. The Transfer Agent reserves the
right to waive these minimums from time to time for clients of Schwab
Institutional, a division of Schwab, The Schwab Trust Company, certain
tax-advantaged retirement plans, and certain customers who participate in one of
Schwab's preferred customer programs. (See "Investing in Shares of the Funds.")
Professional Management. The Investment Manager currently provides
investment management services to the SchwabFunds(R), a family of 30 mutual
funds with over $44 billion in assets as of January 31, 1997. (See "Organization
and Management of the Funds.")
Shareholder Service. Schwab's professional representatives are available
toll-free 24 hours a day AT 800-2 NO-LOAD to service your account. As a
discount broker, Schwab gives you investment choices and lets you make your own
decisions. Schwab has many services that help you make the most informed
investment decisions. (See "Investing in Shares of the Funds - How to Buy
Shares" and "Investing in Shares of the Funds - How to Sell or Exchange
Shares.")
Special Risk Considerations. An investment in the Schwab Municipal Money
Fund is subject to certain risks arising out of the Fund's investment in
municipal securities, municipal leases, participation interests and certain
other securities. (See "Municipal Securities and Investment Techniques.")
Convenient Reporting. Customers receive regular Schwab statements that
combine all their mutual fund investment activity in one report.
Nationwide Network of Schwab Offices. Schwab has over 230 offices
throughout the U.S. where customers can place purchase and redemption orders.
-3-
<PAGE> 7
SUMMARY OF EXPENSES
Shareholder Transaction Expenses: None
<TABLE>
<CAPTION>
SCHWAB SCHWAB
SCHWAB MUNIC- VALUE
SCHWAB U.S. IPAL ADVANTAGE
SCHWAB GOVERN- TREASURY MONEY MONEY
MONEY MENT FUND- FUND-
MARKET MONEY MONEY SWEEP SWEEP
FUND FUND FUND SHARES SHARES
<S> <C> <C> <C> <C> <C>
Annual Fund
Operating Expenses
(as a percentage of average net
assets)
Management fees
(after fee reductions)(1)
0.29% 0.29% 0.19% 0.20% 0.35%
12b-1 Fees......... NONE None None None None
Other Expenses
(after fee reduction
and/or expense
reimbursement)2 .... 0.46% 0.46% 0.46% 0.46% 0.15%
---- ---- ---- ---- -----
Total Fund
Operating
Expenses2,3, 0.75% 0.75% 0.65% 0.66% 0.50%
</TABLE>
1 These amounts have been restated to reflect waivers of a portion of the
management fee by the Investment Manager. If there were no such waivers,
the maximum management fee for the Schwab Money Market Fund, Schwab
Government Money Fund, Schwab U.S. Treasury Money Fund, and Schwab
Municipal Money Fund-Sweep Shares would have been 0.41%, 0.44%, 0.46% and
0.42%, respectively, for the fiscal year ended December 31, 1995. Also, if
there were no such reduction for the Schwab Value Advantage Money Fund-
Sweep Shares, the maximum management fee would be 0.46% of average daily
net assets. The management fee waivers may be discontinued at any time.
(See "Organization and Management of the Funds - Operating Fees and
Expenses.")
2 These amounts reflect the guarantee by the Investment Manager and Schwab
that, through at least April 30, 1997, the total fund operating expenses of
the Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Municipal Money Fund - Sweep Shares, and Schwab
Value Advantage Money Fund - Sweep Shares will not exceed 0.75%, 0.75%,
0.65%, 0.66%, and 0.50% respectively, of each Fund's average daily net
assets. Without the guarantees which were in effect during the fiscal year
ended December 31, 1995, the other expenses of the Schwab Money Market
Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund and
Schwab Municipal Money Fund - Sweep Shares would have been 0.49%, 0.48%,
0.50% and 0.49% and total fund operating expenses would have been 0.90%,
0.92%, 0.96% and 0.91% of the average daily net assets of each such series
or class, respectively. Also without the guarantee, the current estimated
other expenses of Schwab Value Advantage Money Fund - Sweep Shares would be
0.29% and the current total fund operating expenses would be 0.72% of its
average daily net assets.
3 You may be charged a fee if applicable minimum balances are not maintained
in your Schwab brokerage account or Schwab One(R)account. (See "Investing
in Shares of the Funds.") Schwab Individual Retirement Accounts with
balances of $10,000 or more by September 15, 1997 will not be charged
Schwab's $29 annual IRA account fee for the life of the account. Schwab
Keogh plans are currently charged an annual fee of $45.
-4-
<PAGE> 8
4 For information regarding the differing minimum investment requirements,
minimum balance and differing expenses of the multiple classes of shares of
the Schwab Municipal Money Fund and the Schwab Value Advantage Money Fund,
see "Other Important Information."
Example. You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Schwab Money Market
Fund........................ $ 8 $ 24 $ 42 $ 93
Schwab Government Money
Fund........................ $ 8 $ 24 $ 42 $ 93
Schwab U.S. Treasury
Money Fund.................. $ 7 $ 21 $ 36 $ 81
Schwab Municipal Money
Fund - Sweep Shares........ $ 7 $ 21 $ 37 $ 82
Schwab Value Advantage Money Fund-Sweep $ $
Shares
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in any of the Funds will bear
directly or indirectly. This example reflects the guarantee by the Investment
Manager and Schwab that, through at least April 30, 1997, the total fund
operating expenses of the Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund, Sweep Shares of the Schwab Municipal
Money Fund, and Sweep Shares of the Schwab Value Advantage Money Fund will not
exceed 0.75%, 0.75%, 0.65% , 0.66%, and 0.50% respectively. Actual expenses may
be greater or less than those shown. The example assumes a 5% annual rate of
return pursuant to requirements of the SEC. This hypothetical rate of return is
not intended to be representative of past or future performance.
-5-
<PAGE> 9
FINANCIAL HIGHLIGHTS
The following information with respect to each Fund has been audited by
Price Waterhouse LLP, independent accountants, whose unqualified report is
included in the Statement of Additional Information, which contains additional
financial data and related notes. A free copy of this statement may be obtained
by calling the telephone number or writing to the address on the first page of
this Prospectus.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET DISTRIBUTIONS
REALIZED & TOTAL FROM
FISCAL NET ASSET NET UNREALIZED FROM DIVIDENDS REALIZED
PERIOD VALUE INVEST- GAINS INVEST- FROM NET GAIN ON
ENDED BEGINNING MENT (LOSSES) ON MENT INVESTMENT INVEST- TOTAL
DEC. OF YEAR INCOME INVESTMENT OPERATI INCOME MENT DISTRIBUTIONS
31 ON
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
SCHWAB MONEY MARKET FUND
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 1.00 $ 0.05 -- $0.05 $(0.05) -- $(0.05)
1994 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1993 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1992 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1991 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1.00 0.07 -- 0.07 (0.07) -- (0.07)
1990(1)
SCHWAB GOVERNMENT MONEY FUND
1995 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1994 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1993 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1992 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1991 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1.00 0.07 -- 0.07 (0.07) -- (0.07)
1990(1)
SCHWAB U.S. TREASURY MONEY FUND
1995 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1994 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1993 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1992 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1.00 0.01 -- 0.01 (0.01) -- (0.01)
1991(2)
SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES(3)
1995 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1994 1.00 0.02 -- 0.02 (0.02) -- (0.02)
1993 1.00 0.02 -- 0.02 (0.02) -- (0.02)
1992 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1991 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1.00 0.05 -- 0.05 (0.05) -- (0.05)
1990(1)
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA RATIO OF
NET
NET RATIO OF INVESTMENT
FISCAL ASSET EXPENSES INCOME
PERIOD VALUE TOTAL NET ASSETS TO AVERAGE TO AVERAGE
ENDED END OF RETURN END OF YEAR NET ASSETS NET ASSETS
DEC. YEAR (%) (000'S) (%) (%)
31
- ----------- ----------- ----------- ----------- ----------- -----------
SCHWAB MONEY MARKET FUND
<S> <C> <C> <C> <C> <C>
1995 $1.00 5.41 $14,010,387 0.75 5.27
1994 1.00 3.68 11,227,305 0.74 3.68
1993 1.00 2.67 8,164,599 0.73 2.64
1992 1.00 3.48 6,134,167 0.70 3.40
1991 1.00 5.70 4,866,584 0.78 5.52
1.00 7.23 4,058,408 0.82 * 7.51*
1990(1)
SCHWAB GOVERNMENT MONEY FUND
1995 1.00 5.34 1,884,569 0.75 5.21
1994 1.00 3.62 1,897,328 0.74 3.56
1993 1.00 2.66 1,744,603 0.73 2.63
1992 1.00 3.42 1,592,793 0.72 3.36
1991 1.00 5.53 1,458,705 0.70 5.38
1.00 7.23 1,424,377 0.70 * 7.51*
1990(1)
SCHWAB U.S. TREASURY MONEY FUND
1995 1.00 5.25 1,193,689 0.65 5.11
1994 1.00 3.52 803,871 0.65 3.60
1993 1.00 2.54 378,143 0.65 2.50
1992 1.00 3.26 178,895 0.59 2.91
1.00 0.68 16,906 0.24 * 4.11 *
1991(2)
SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES(3)
1995 1.00 3.30 3,403,837 0.66 3.25
1994 1.00 2.32 3,015,951 0.65 2.31
1993 1.00 1.93 2,423,317 0.63 1.92
1992 1.00 2.49 1,744,903 0.63 2.45
1991 1.00 4.01 1,359,121 0.63 3.91
1.00 5.08 1,185,974 0.63* 5.33 *
1990(1)
</TABLE>
-6-
<PAGE> 10
*Annualized
1 For the period January 26, 1990 (commencement of operations) to December
31, 1990.
2 For the period November 6, 1991 (commencement of operations) to December
31, 1991.
3 Prior to June 6, 1995, The Schwab Municipal Money Fund did not offer
multiple classes of shares of beneficial interest. The information
contained in this table regarding the Sweep Shares of the Schwab Municipal
Money Fund relates to shares which were redesignated as Sweep Shares as of
June 6, 1995.
Note: The Investment Manager and Schwab reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. The table below illustrates what the ratio of
expenses to average net assets ("Ratio of Expenses") and the ratio of net
investment income to average net assets ("Ratio of Income") would have been for
the periods indicated below had these fees and expenses not been reduced and
absorbed:
<TABLE>
<CAPTION>
SCHWAB SCHWAB SCHWAB SCHWAB
MONEY GOVERNMENT U.S. TREASURY MUNICIPAL MONEY
MARKET FUND MONEY FUND FUND FUND - SWEEP SHARES
(WITHOUT REDUCTION) (WITHOUT REDUCTION) (WITHOUT REDUCTION) (WITHOUT REDUCTION)
------------------- ------------------- ------------------- -------------------
FISCAL PERIOD RATIO OF RATIO OF RATIO OF RATIO OF RATIO OF RATIO OF RATIO OF RATIO OF
ENDED 12/31 EXPENSES INCOME EXPENSES INCOME EXPENSES INCOME EXPENSES INCOME
----------- -------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 0.90% 5.12% 0.92% 5.04% 0.96% 4.80% 0.91% 3.00%
1994 0.90% 3.52% 0.92% 3.38% 1.00% 3.25% 0.91% 2.05%
1993 0.91% 2.46% 0.93% 2.43% 1.05% 2.10% 0.93% 1.62%
1992 0.92% 3.18% 0.94% 3.14% 1.15% 2.35% 0.94% 2.14%
1991 0.94% 5.36% 0.95% 5.13% 4.11%* 0.24%* 0.95% 3.59%
1990 0.95%* 7.38%* 0.96%* 7.25%* n/a n/a 0.95%* 5.01%*
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
THE SCHWAB MONEY MARKET FUND AND SCHWAB VALUE
ADVANTAGE MONEY FUND - SWEEP SHARES
The Schwab Money Market Fund and the Schwab Value Advantage Money Fund seek
maximum current income consistent with stability of capital. The Funds pursue
their objective by investing exclusively in the following types of U.S.
dollar-denominated money market instruments which the Investment Manager has
determined to present minimal credit risk:
- Certificates of deposit, time deposits, notes and bankers' acceptances
of domestic banks (including their foreign branches), Canadian chartered
banks, U.S. branches of foreign banks and foreign branches of foreign
banks having capital, surplus and undivided profits in excess of $100
million.
- Commercial paper, including asset-backed commercial paper, rated in one
of the two highest rating categories by Moody's Investors Service
("Moody's"), Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc.
("Duff"), Fitch Investors Service, Inc. ("Fitch"), or any other nationally
recognized statistical rating organization ("NRSRO"), or commercial paper
or notes of issuers with an unsecured debt issue outstanding currently
rated in one of the two highest rating categories by any NRSRO where the
obligation is on the same or a higher level of priority and collateralized
to the same extent as the rated issue. Each Fund may also invest in other
corporate obligations such as publicly traded bonds, debentures and notes
rated in one of the two highest rating categories by any NRSRO and other
similar securities which, if unrated by any NRSRO, are determined by the
Investment Manager, using guidelines approved by the Board of Trustees,
to be at least equal in quality to one or more of the above referenced
securities.
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<PAGE> 11
- Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.
- Repurchase agreements involving obligations that are suitable for
investment under the categories listed above.
MATURITY. The Schwab Money Market Fund will only purchase securities which
are deemed to mature in 12 months or less in accordance with federal securities
regulations. The Schwab Value Advantage Money Fund will only purchase securities
that mature in 397 days or less, or securities which have a variable rate of
interest that is readjusted no less frequently than every 397 days.
EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. The Schwab Money
Market Fund and the Schwab Value Advantage Money Fund may purchase Eurodollar
certificates of deposit and other similar obligations. However, when purchasing
such certificates consideration will be given to the fact that these issuers may
not be subject to the same regulatory requirements as U.S. issuers, including
U.S. banks.
Investments in securities of foreign issuers or securities principally
traded overseas may involve certain special risks due to foreign economic,
political and legal developments. Furthermore, issuers of foreign securities are
subject to different, often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers. The securities of some foreign
companies and foreign securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S. securities
markets. Foreign brokerage commissions and other fees are also generally higher
than in the United States. There are also special tax considerations which apply
to securities of foreign issuers and securities principally traded overseas.
CONCENTRATION. Each Fund will not invest 25% or more of the value of its
total assets in the securities of issuers conducting their principal business
activities in the same industry. However, this limitation will not apply to
certificates of deposit or bankers' acceptances issued by domestic branches of
U.S. banks and U.S. branches of certain foreign banks or obligations of or
guaranteed by the U.S. Government or its agencies or instrumentalities. See
"Investment Policies and Restrictions" in the Statement of Additional
Information.
PRIVATE PLACEMENTS. The Schwab Money Market Fund and the Schwab Value
Advantage Money Fund may invest in commercial paper and other securities that
are exempt from registration pursuant to Section 4(2) of the Securities Act of
1933 ("Section 4(2) paper"). Federal securities laws restrict the disposition of
Section 4(2) paper. Neither Fund will invest more than 10% of its assets in
Section 4(2) paper and other illiquid securities unless the Investment Manager
determines, by continuous reference to the appropriate trading markets and
pursuant to guidelines approved by the Board of Trustees, that any Section 4(2)
paper held by the Fund in excess of this level is liquid.
A Fund's ownership of Section 4(2) paper could have the effect of reducing
that Fund's liquidity to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.
ASSET-BACKED COMMERCIAL PAPER. The Funds may invest in asset-backed
commercial paper. Repayment of this type of commercial paper is intended to be
obtained from an identified pool of assets, including automobile receivables,
credit-card receivables and other types of assets. Asset-backed commercial paper
is issued by a special purpose vehicle (usually a corporation) that has been
established for the purpose of issuing the commercial paper and purchasing the
underlying pool of assets. The issuer of commercial paper bears the direct risk
of prepayment on the receivables constituting the underlying pool of assets.
Credit support for asset-backed securities may be based on the underlying assets
or provided by a third party. Credit enhancement techniques include letters of
credit, insurance bonds, limited guarantees and over-collateralization.
For more information regarding a Fund's investments, see "Share Price
Calculation."
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THE SCHWAB GOVERNMENT MONEY FUND
The Schwab Government Money Fund seeks maximum current income consistent
with stability of capital. The Fund pursues its objective by investing
exclusively in: (1) U.S. Treasury bills, notes, bonds and other obligations of
the U.S. Treasury that are backed by the "full faith and credit" of the U.S.
Government; and (2) other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements
covering such obligations. All securities purchased are deemed to mature within
12 months or less under federal securities regulations. Some securities issued
by U.S. Government agencies or instrumentalities are supported only by the
credit of the agency or instrumentality, while others have an additional line of
credit with the U.S. Treasury. Short-term U.S. Government obligations generally
are considered to be among the safest short-term investments. The Government
guarantee of certain securities owned by the Schwab Government Money Fund,
however, does not guarantee the net asset value of the Fund's shares, which the
Fund seeks to maintain at $1.00 per share. (See "Share Price Calculation.") With
respect to securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. Government will provide support to such agencies
or instrumentalities. Accordingly, such securities may involve risk of loss of
principal and interest.
THE SCHWAB U.S. TREASURY MONEY FUND
The investment objective of the Schwab U.S. Treasury Money Fund is high current
income consistent with liquidity and stability of capital. The Fund pursues its
objective by investing solely in U.S. Treasury notes, bills and other direct
obligations of the U.S. Treasury that are backed by the "full faith and credit"
of the U.S. Government. The Fund will only purchase securities that are deemed
to mature in 397 days or less in accordance with federal securities regulations,
or which have a variable rate of interest readjusted no less frequently than
every 397 days. Fund shares themselves are not subject to any U.S. Government
guarantee. The Fund does not enter into repurchase agreements, nor does it
purchase obligations of agencies or instrumentalities of the U.S. Government.
The Fund may hold its investments to maturity and receive the entire face amount
of the security, or the Fund may sell its investments at a gain or loss before
maturity to meet redemptions or for other investment purposes.
THE SCHWAB MUNICIPAL MONEY FUND
The investment objective of the Schwab Municipal Money Fund is maximum
current income that is exempt from federal regular income taxes consistent with
stability of capital. The Fund pursues its objective primarily by investing in
short-term, high-quality municipal obligations the income from which is exempt
from federal regular income taxes. Federal regular income tax does not include
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
MUNICIPAL SECURITIES. Under normal market conditions, the Fund attempts to
invest 100% of its total assets in debt obligations issued by or on behalf of
states, territories and possessions of the United States (including the District
of Columbia) and their political subdivisions, agencies and instrumentalities
that generate interest exempt from federal regular income tax ("Municipal
Securities").
Dividends representing net interest income received by the Schwab Municipal
Money Fund on Municipal Securities generally will be exempt from federal regular
income tax when distributed to the Fund's shareholders. Such dividend income may
be subject to the alternative minimum tax, state and local taxes. (See
"Distributions and Taxes - The Schwab Municipal Money Fund.")
The Schwab Municipal Money Fund will invest only in Municipal Securities
which at the time of purchase: (a) are rated in one of the two highest rating
categories for municipal commercial paper or short-term municipal securities
assigned by any NRSRO; (b) are guaranteed or insured by the U.S. Government as
to the payment of principal and
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interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Fund's Investment Manager; or (d) are unrated by
any NRSRO, if they are determined by the Investment Manager, using guidelines
approved by the Board of Trustees, to be at least equal in quality to one or
more of the above referenced securities.
The Fund may continue to hold a Municipal Security that, after its purchase
by the Fund, ceases to have a rating, or is downgraded, causing its rating to
fall below that required for purchase by the Fund. Neither event would
necessarily require the Fund to sell the security. However, the Fund will keep
such a security in its portfolio only if the Board of Trustees or its properly
authorized delegate determines that keeping the security is in the best
interests of the Fund.
Pursuant to a fundamental policy, the Fund will not invest 25% or more of
the value of its total assets in the securities of issuers conducting their
principal business activities in the same industry. However, this limitation
shall not apply to Municipal Securities issued by governmental entities.
TEMPORARY INVESTMENTS. The Fund may from time to time, as a defensive
measure, invest any or all of its assets in taxable "temporary investments"
which include: obligations of the U.S. Government, its agencies or
instrumentalities; debt securities (other than Municipal Securities) rated in
one of the two highest rating categories by any NRSRO; commercial paper (other
than Municipal Securities) rated in one of the two highest rating categories by
any NRSRO; certificates of deposit of domestic banks having capital, surplus and
undivided profits in excess of $100 million; and any of the foregoing temporary
investments subject to repurchase agreements. While temporary investments could
cause the Fund to generate dividends taxable to shareholders as ordinary income,
it is the Fund's primary intention to produce dividends which are not subject to
federal regular income taxes.
The investment objective of each Fund is fundamental. All investment
policies above are also fundamental for the Schwab Money Market Fund, Schwab
Government Money Fund, and Schwab U.S. Treasury Money Fund. They, along with
certain investment restrictions adopted by the Funds (see "Investment
Restrictions" in the Statement of Additional Information), cannot be changed
without approval by holders of a majority of a Fund's outstanding voting shares,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
MUNICIPAL SECURITIES AND
MUNICIPAL INVESTMENT TECHNIQUES
Municipal Securities in which the Schwab Municipal Money Fund may invest are
generally classified in one of two categories: "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue securities are secured only by the revenues
derived from: (1) a particular facility or class of facilities; (2) a specific
revenue source such as a special excise tax; or (3) another specific revenue
source, such as the user of the facility being financed.
Revenue securities may include private activity bonds and industrial
development bonds. Such bonds may be issued by or on behalf of public
authorities to finance various privately operated facilities, and they are not
payable from the unrestricted revenues of the issuer. As a result, the credit
quality of private activity bonds is frequently related directly to the credit
standing of private corporations or other entities. From time to time, the Fund
may invest more than 25% of its total assets in industrial development and
private activity bonds.
Among other types of instruments, the Fund may purchase tax-exempt
commercial paper and short-term municipal notes such as tax anticipation notes,
bond anticipation notes, revenue anticipation notes, construction loan notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax payments, the proceeds of bond
placements, or other revenues. The Fund has the ability to invest all of its
assets in Municipal Securities which generate interest which is a tax preference
item for purposes of the federal alternative minimum tax. Thus, if you are
subject to the federal alternative minimum tax, all or a portion of your income
from the Fund may be subject to the federal alternative minimum tax.
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<PAGE> 14
MORAL OBLIGATION SECURITIES. The Fund may also invest in "moral obligation"
securities, which are normally issued by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund. The state or
municipality which created the issuer has a moral commitment, but not a legal
obligation to restore the reserve fund.
MUNICIPAL LEASES. The Fund may invest up to 25% of its assets in municipal
leases, no more than 10% of which may be in illiquid leases. Municipal leases
are obligations issued by state and local governments or authorities to finance
the acquisition of equipment and facilities. These obligations may take the form
of a lease, an installment purchase contract, a conditional sales contract or a
participation interest in any of the above. Investments in municipal leases may
be considered to be illiquid. Municipal leases are subject to "nonappropriation
risk," which is the risk that the municipality may terminate the lease in the
event that the municipality's appropriating body does not allocate the funds
necessary to make lease payments. In such circumstances, the lessor is typically
entitled to repossess the property. The private sector value of the property is,
however, generally less than the value of the property to the municipality. The
Investment Manager, pursuant to guidelines established by the Board of Trustees,
is responsible for determining the credit quality of unrated municipal leases,
on an ongoing basis, including an assessment of the likelihood that the lease
will not be terminated.
SYNTHETIC VARIABLE OR FLOATING-RATE MUNICIPAL SECURITIES. The Fund also may
invest up to 25% of its assets in synthetic variable or floating-rate municipal
securities. These securities generally comprise the following elements in a
trust: (i) a fixed-rate municipal bond (of any duration); (ii) a right to put
the bond at par value on 7-days notice or after a specific interval of time
depending on the terms of the synthetic security; and (iii) a contractual
agreement pursuant to which the investing Fund and a remarketing agent determine
the lowest rate that would permit the bond to be remarketed at par, taking into
account the put right. The trustee of the trust is generally a bank trust
department.
These synthetic floating-rate municipal securities may also include tender
option bond trust receipts, in which a fixed-rate municipal bond (or group of
bonds) is placed into a trust from which two classes of trust receipts are
issued, which represent proportionate interests in the underlying bond(s).
Interest payments are made on the bond(s) based upon a predetermined rate. Under
certain circumstances, the holder of a trust receipt may also participate in any
gain or loss on the sale of such bond(s). Tender option bond trust receipts
generally are structured as private placements and, accordingly, may be deemed
to be restricted securities for purposes of the Fund's investment limitations.
VARIABLE RATE DEMAND INSTRUMENTS. The Fund may invest in variable rate
demand instruments issued by industrial development authorities and other
government entities. In the event a variable rate demand instrument to be
purchased by the Fund is not rated by credit rating agencies, the Investment
Manager, using guidelines approved by the Board of Trustees, must determine that
such instrument is of comparable quality at the time of purchase to a rated
instrument that would be eligible for purchase by the Fund. In some cases, the
Fund may require that the issuer's obligation to pay the principal of the note
be backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend.
Although there may be no active secondary market for a particular variable
rate demand instrument purchased by the Fund, the Fund may, at any time or
during specified periods not exceeding one year (depending upon the instrument
involved), demand payment in full of the principal of the instrument and may
resell the instrument to a third party.
The Fund could suffer a loss from a variable rate demand instrument because
of the absence of an active secondary market, because it may be difficult for
the Fund to dispose of the instrument in the event an issuer defaults on its
payment obligation, because the Fund is only entitled to exercise its demand
rights at certain times, or for other reasons.
Variable rate demand instruments will be subject to the Fund's restrictions
on acquiring and holding illiquid securities to the extent that the absence of
an active secondary market for such securities causes them to be illiquid.
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<PAGE> 15
PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
participation interests in Municipal Securities with fixed, floating or variable
rates of interest. The buyer of a participation interest receives an undivided
interest in the securities underlying the instruments.
The Fund will purchase a participation interest only if: (a) the instrument
subject to the participation interest matures in one year or less, or the
instrument includes a right to demand payment, usually within 7-days, from the
seller; (b) the instrument meets the Fund's previously described quality
standards for Municipal Securities; and (c) the instrument is issued with an
opinion of counsel or is the subject of a ruling of the Internal Revenue
Service, stating that the interest earned on the participation interest is
exempt from federal income tax.
STAND-BY COMMITMENTS. The Schwab Municipal Money Fund also may acquire
"stand-by commitments" for Municipal Securities held in its portfolio. Under a
stand-by commitment, a dealer agrees to purchase at the Fund's option specified
Municipal Securities at a price equal to their amortized cost value plus accrued
interest. The Fund will acquire stand-by commitments solely to improve portfolio
liquidity. The Fund does not intend to exercise its stand-by rights solely for
trading purposes.
GOVERNMENT SECURITIES. The Fund may invest in government securities,
including U.S. Treasury notes, bills, and bonds, which are backed by the full
faith and credit of the U.S. Government. Some securities issued by U.S.
Government agencies or instrumentalities are supported by the credit of the
agency or instrumentality, while others have an additional line of credit with
the U.S. Treasury. However, there is no guarantee that the U.S. Government will
provide support to such agencies or instrumentalities. Accordingly, such
securities may involve risk of loss of principal and interest.
LEGAL OPINIONS. Bond counsel will render opinions on the validity of
Municipal Securities. Bond counsel will also render opinions on whether the
interest paid on Municipal Securities is exempt from federal income tax. Bond
counsel will render such opinions to the issuers of Municipal Securities at the
time the securities are issued. The Fund and the Investment Manager will not
review the proceedings on the issuance of Municipal Securities or the bases for
such opinions.
MATURITY. The Fund will purchase only securities that are deemed to mature
in 397 days or less in accordance with federal securities regulations or
securities that have a variable rate of interest that is readjusted no less
frequently than every 397 days.
SECURITIES SUBJECT TO A PUT FEATURE. A "put" feature permits the Fund to
sell a security at a fixed price prior to maturity to the put issuer. Because of
this feature, Municipal Securities subject to a put generally may be sold to
third parties at market rates. Generally, a premium is paid for a security
subject to a put feature. Investments in Municipal Securities subject to puts
are limited by federal securities laws and expose the Fund to a credit risk
associated with the put provider.
SPECIAL RISK CONSIDERATIONS. Participation interests in Municipal Securities
eligible for purchase by the Schwab Municipal Money Fund and other derivative
securities eligible for purchase by the Funds involve special risks, including a
risk that the Internal Revenue Service may characterize some or all of the
interest paid on such securities to the Fund as taxable. There is also an
increased risk, most typically associated with "municipal lease" obligations,
that a municipality will not appropriate the funds necessary to make the
scheduled payments on, or may seek to cancel or otherwise avoid its obligations
under, the lease that supports the security owned by the Fund.
The Schwab Municipal Money Fund may invest more than 25% of its assets in
Municipal Securities that produce interest that is paid solely from revenues on
similar projects. However, the Fund does not presently intend to invest in such
securities on a regular basis, but will do so if such investment is deemed
necessary or appropriate by the Investment Manager. To the extent that the
Fund's assets are invested in Municipal Securities that produce interest that is
payable solely from revenues on similar projects, the Fund will be subject to
the risks presented by such projects to a greater extent than it would be if the
Fund's assets were not so invested.
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<PAGE> 16
OTHER INVESTMENT TECHNIQUES
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase
securities on a "when-issued" or "delayed delivery" basis. When-issued or
delayed delivery securities are securities purchased for future delivery at a
stated price and yield. A Fund generally will not pay for such securities or
start earning interest on them until they are received. Securities purchased on
a when-issued or delayed delivery basis are recorded as an asset. The value of
such securities may change as the general level of interest rate changes.
Each Fund will not invest more than 25% of its assets in when-issued or
delayed delivery securities. The Funds will not purchase such securities for
speculative purposes and will expect to actually acquire the securities when
purchased. However, each Fund reserves the right to sell any such securities
before their settlement dates if the Investment Manager deems such a sale
advisable.
REPURCHASE TRANSACTIONS. Each Fund (except the Schwab U.S. Treasury Money
Fund) may engage in repurchase agreements, which are instruments under which a
Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which price
is higher than the purchase price), thereby determining the yield during the
Fund's holding period. Maturity of the securities subject to repurchase may
exceed one year.
If the seller of a repurchase agreement becomes bankrupt or otherwise
defaults, a Fund might incur expenses in enforcing its rights, and could
experience losses, including a decline in the value of the underlying securities
and loss of income. The Fund will enter into repurchase agreements only with
banks and other recognized financial institutions that the Investment Manager
deems creditworthy.
ILLIQUID SECURITIES. A Fund will not purchase illiquid securities, including
time deposits and repurchase agreements maturing in more than 7-days, if, as a
result thereof, more than 10% of the Fund's net assets valued at the time of the
transaction are invested in such securities. The investment policy, as set forth
in the Statement of Additional Information, on the purchase of illiquid
securities is fundamental for the Schwab Money Market Fund and the Schwab
Government Money Fund.
VARIABLE RATE SECURITIES. Each Fund may invest in instruments having rates
of interest that are adjusted periodically, or which "float" continuously
according to formulas intended to minimize any fluctuation in the values of the
instruments ("Variable Rate Securities"). The interest rate of Variable Rate
Securities ordinarily is determined by reference to, or is a percentage of, an
objective standard such as a bank's prime rate, the 90-day U.S. Treasury Bill
rate or the rate of return on commercial paper or bank certificates of deposit.
As interest rates decrease or increase, Variable Rate Securities experience less
appreciation or depreciation than fixed rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") have a
demand feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost, or the principal amount thereof plus
accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Fund determines the maturity of Variable Rate Securities in
accordance with SEC rules.
BORROWING POLICY. Pursuant to a fundamental policy as set forth in the
Statement of Additional Information, none of the Funds may borrow money except
as a temporary measure for extraordinary or emergency purposes, and then only in
an amount up to one-third of the value of its total assets in order to meet
redemption requests. Any borrowings under this provision will not be
collateralized, except that the Schwab Tax-Exempt Money Fund and the Schwab
Value Advantage Money Fund may each pledge up to 10% of their net assets, and
the Schwab U.S. Treasury Money Fund may pledge up to 33% of its net assets, to
secure borrowings. No Fund will borrow for leverage purposes.
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<PAGE> 17
ADDITIONAL INFORMATION. Please see the Statement of Additional Information
for further information regarding foreign securities, Section 4(2) paper, the
investment rating categories employed by various NRSROs, and other investment
techniques used by the Funds.
ORGANIZATION AND
MANAGEMENT OF THE FUNDS
GENERAL OVERSIGHT. The Board of Trustees and officers of the Schwab Fund
Family meet regularly to review investments, performance, expenses and other
business affairs.
THE INVESTMENT MANAGER. Professional investment management for each Fund is
provided by the Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, California 94104. The Investment Manager
provides a continuous investment program, including general investment and
economic advice regarding each Fund's investment strategies; manages each Fund's
investment portfolio and performs expense management, accounting and
recordkeeping; and provides other services necessary to the operation of each
Fund and the Schwab Fund Family. The Investment Manager, formed in 1989, is a
wholly-owned subsidiary of The Charles Schwab Corporation and is the investment
adviser and administrator of the mutual funds in the SchwabFunds Family(R), a
family of 26 mutual funds. As of March ___, 1997, the SchwabFunds(R) had
aggregate net assets in excess of $___ billion.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Charles Schwab & Co., Inc.
("Schwab" or the "Transfer Agent"), 101 Montgomery Street, San Francisco,
California 94104, serves as shareholder services agent and transfer agent for
the Funds. Schwab provides information and services to shareholders, which
include reporting share ownership, sales and dividend activity (and associated
tax consequences), responding to daily inquiries, effecting the transfer of Fund
shares and facilitating effective cash management of shareholders' Schwab
account balances. It furnishes such office space and equipment, telephone
facilities, personnel and informational literature distribution as is necessary
or appropriate in providing shareholder and transfer agency information and
services.
Schwab was established in 1971 and is one of America's largest discount
brokers. The firm provides low-cost securities brokerage and related financial
services to over 3.3 million active customer accounts and has over 225 branch
offices. Schwab also offers convenient access to financial information services
and provides products and services that help investors make investment
decisions. Schwab is a wholly-owned subsidiary of The Charles Schwab
Corporation. Charles R. Schwab is the founder, Chairman, Chief Executive Officer
and a Director of The Charles Schwab Corporation. As a result of his beneficial
ownership interests in and other relationships with The Charles Schwab
Corporation and its affiliates, Mr. Schwab may be deemed to be a controlling
person of Schwab and the Investment Manager.
OPERATING FEES AND EXPENSES
Pursuant to Investment Advisory and Administration Agreements with the
Schwab Fund Family, the Investment Manager is entitled to receive from the
Schwab Money Market Fund 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; the Investment Manager is entitled to receive from
the Schwab Government Money Fund, the Schwab Municipal Money Fund and the
Schwab U.S. Treasury Money Fund a graduated annual fee, payable monthly, 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; and the Investment Manager is entitled to
receive from the Schwab Value Advantage Money Fund 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
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<PAGE> 18
billion. The Investment Manager is waiving a portion of each Fund's investment
advisory fee. These investment advisory fee waivers may be discontinued at any
time.
The Investment Manager and Schwab have guaranteed that, at least through
April 30, 1997, total fund operating expenses of the Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, the Sweep Shares
of the Schwab Municipal Money Fund and the Sweep Shares of the Schwab Value
Advantage Money Fund will not exceed 0.75%, 0.75%, 0.65%, 0.66% and 0.50%,
respectively, of the average daily net assets of each such investment portfolio
(a "Series") of the Schwab Fund Family or each class of shares. The effect of
these guarantees is to maintain or lower the expenses and thus maintain or
increase such Fund's total return to shareholders. For the fiscal year ended
December 31, 1995, the Schwab Money Market Fund, Schwab Government Money Fund,
Schwab U.S. Treasury Money Fund and Schwab Municipal Money Fund paid management
fees of 0.29%, 0.29%, 0.19% and 0.20%, respectively, of each such Fund's average
daily net assets and paid total fund operating expenses of 0.75%, 0.75%, 0.65%
and 0.66%, respectively, of the average daily net assets of each such Series or
class of shares (after waivers and reimbursements). The following expenses are
not included as "operating expenses" for purposes of this guarantee: interest
expenses, taxes and capital items such as the cost of the purchase or sale of
portfolio securities, including brokerage fees or commissions.
For transfer agency services provided to the Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, the Sweep Shares
of the Schwab Municipal Money Fund and the Sweep Shares of the Schwab Value
Advantage Money Fund, the Transfer Agent is entitled to receive an annual fee,
payable monthly, of 0.25% of the average daily net assets of each such Fund or
class. Schwab is also entitled to receive an annual fee, for shareholder
services, payable monthly, of 0.20% of the average daily net assets of each such
Fund or class. For information regarding the Transfer Agent and shareholder
servicing fees of the other classes of shares of the Schwab Municipal Money Fund
and the Schwab Value Advantage Money Fund, see "Other Important Information" in
this Prospectus.
Schwab is also the Funds' distributor, but receives no compensation for its
services as such.
OTHER EXPENSES. The Schwab Fund Family pays the expenses of its operations,
including: the fees and expenses for independent accountants, legal counsel and
the custodian of its assets; the cost of maintaining books and records of
account; registration fees; the fees and expenses of qualifying the Schwab Fund
Family and its shares for distribution under federal and state securities laws;
and industry association membership dues. These expenses generally are allocated
among each Series, or class of shares within these Series, in proportion to
their relative net assets at the time the expense is incurred. However, expenses
directly attributable to a particular Series or class of a Series will be
charged to that Series or class, respectively. The differing expenses applicable
to the Sweep Shares and the Value Advantage Shares of the Schwab Municipal Money
Fund and the Investor Shares and the Sweep Shares of the Schwab Value Advantage
Money Fund will cause the performance of these classes of shares to differ.
OTHER INFORMATION
The Schwab Fund Family was organized as a business trust under the laws of
Massachusetts on October 20, 1989 and may issue an unlimited number of shares of
beneficial interest or classes of shares in one or more Series. Currently, the
Schwab Fund Family offers shares of nine Series which may be organized into one
or more classes of shares of beneficial interest. The Board of Trustees may
authorize the issuance of shares of additional Series or classes if it deems it
desirable. Shares within each Series or class have equal, noncumulative voting
rights and equal rights as to distributions, assets, and liquidation of such
Series, except to the extent such voting rights or rights as to distributions,
assets, and liquidation vary among classes of a Series.
SHAREHOLDER MEETINGS AND VOTING RIGHTS. The Schwab Fund Family is not
required to hold annual shareholders' meetings and does not intend to do so. It
will, however, hold special meetings as required or deemed desirable by the
Board of Trustees for such purposes as changing fundamental policies, electing
or removing Trustees, or approving or
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<PAGE> 19
amending an investment advisory agreement. In addition, a Trustee may be removed
by shareholders at a special meeting called upon written request of shareholders
owning in the aggregate at least 10% of the outstanding shares of the Schwab
Fund Family.
Shareholders will vote by Series and not in the aggregate (for example, when
voting to approve the investment advisory agreement), except when voting in the
aggregate is permitted under the 1940 Act, such as for the election of Trustees.
In addition, holders of the Sweep Shares of the Schwab Municipal Money Fund and
the Sweep Shares of the Schwab Value Advantage Money Fund will vote exclusively
as a class on any matter relating solely to the Sweep Shares and on any matter
in which the interests of holders of the Sweep Shares differ from the interests
of the holders of the other Shares of the Funds.
DISTRIBUTIONS AND TAXES
DIVIDENDS AND OTHER DISTRIBUTIONS. On each day that the net asset value per
share of a Fund is determined (a "Business Day"), the Fund's net investment
income is declared as of the close of trading on the New York Stock Exchange
(the "Exchange") (generally 4:00 p.m. Eastern time) as a dividend to
shareholders of record at that time. Dividends are normally paid (and, where
applicable, reinvested) on the 15th of each month, if a Business Day, otherwise
on the next Business Day, with the exception of the dividend paid in December,
which is scheduled to be paid on the last Business Day in December.
FEDERAL INCOME TAX INFORMATION. Each Fund has elected to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), qualified as such and intends to continue to so qualify. In order
to so qualify, each Fund will distribute on a current basis substantially all of
its investment company taxable income, its net exempt-interest income (if any),
and its net capital gains (if any) and will meet certain other requirements.
Such qualification relieves a Fund of liability for federal income taxes to the
extent the Fund's earnings are distributed.
Generally, all distributions are taxable to shareholders as ordinary income,
except for distributions for the Schwab Municipal Money Fund which are exempt
from federal income tax.
Records of dividends and other distributions, purchases and redemptions will
be reflected on shareholders' Schwab account statements. The Funds will notify
shareholders at least annually as to the federal income tax consequences of
distributions made each year.
THE SCHWAB U.S. TREASURY MONEY FUND. Because this Fund will invest
exclusively in U.S. Treasury obligations and other securities backed by the full
faith and credit of the U.S. Government, its dividends are free from state and
local income taxes in the vast majority of states. Potential investors in this
Fund should consult their tax advisers with specific reference to their own tax
situations.
THE SCHWAB MUNICIPAL MONEY FUND. Dividends derived from exempt-interest
income (known as "exempt-interest dividends") will be treated by the Fund's
shareholders as items of interest excludable from their federal gross income. To
the extent dividends paid to shareholders are derived from taxable income or
from capital gains, such dividends will be subject to federal income tax,
whether received in cash or reinvested.
The Fund may at times purchase Municipal Securities or California Municipal
Securities at a discount from the price at which they were initially issued. For
federal income tax purposes, some or all of this market discount will be
included in the Fund's ordinary income and will be taxable to shareholders as
such when it is distributed to them.
If the Fund holds certain private activity bonds ("industrial development
bonds" under prior law), dividends derived from interest on such obligations
will be classified as an item of tax preference which could subject certain
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shareholders to alternative minimum tax liability. Corporate shareholders must
also take all exempt-interest dividends into account in determining "adjusted
current earnings" for purposes of calculating their alternative minimum tax.
Private activity bonds and industrial development bonds generally are bonds
issued by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. Private activity bonds and industrial
development bonds also generally are limited obligation (or revenue) securities,
which means that they are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from some other
specific revenue source. (See "Municipal Securities" in the Statement of
Additional Information.)
Distributions by the Schwab Municipal Money Fund of net investment income
may be taxable to investors under state or local law as dividend income even
though all or a portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that exempt-interest dividends will be taken into account
in determining the taxability of such benefits.
The foregoing is only a brief summary of some of the federal and state
income tax considerations affecting the Funds and their shareholders.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situations.
SHARE PRICE CALCULATION
The price of a share on any given day is its "net asset value" or "NAV." For
the Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S.
Treasury Money Fund, this figure is computed by taking total Fund assets,
subtracting any liabilities of the Fund and dividing the resulting amount by the
number of shares of the Fund outstanding. For the Sweep Shares of the Schwab
Municipal Money Fund and the Sweep Shares of the Value Advantage Money Fund,
this figure is computed by taking total Fund assets allocable to that class,
subtracting any liabilities allocable to the class and dividing the resulting
amount by the number of Sweep Shares of the Fund outstanding. The net asset
value per share of a Fund is determined on each day both the Federal Reserve
Bank of New York and the Exchange are open for business, first at 10:00 a.m.
(Eastern time), then again as of the close of normal trading on the Exchange
(generally 4:00 p.m. Eastern time). Purchase or redemption orders and exchange
requests will be executed at the net asset value next determined after receipt
by the Transfer Agent or its authorized agent. While each Fund attempts to
maintain its net asset value at a constant $1.00 per share, Fund shares are not
insured against a reduction in net asset value.
Each Fund values its portfolio securities at amortized cost, which means
that they are valued at their acquisition cost (as adjusted for amortization of
premium or discount) rather than at current market value. Calculations are made
to compare the value of the Fund's investments using the amortized cost method
with market values. Except as described below, market valuations are obtained by
using: (1) actual quotations provided by third-party pricing services or market
makers; (2) estimates of market value; or (3) values obtained from yield data
relating to comparable classes of money market instruments published by
reputable sources at the mean between the bid and asked prices for the
instruments. If a deviation of 1/2 of 1% or more were to occur between the net
asset value per share of a Fund (or Sweep Shares for the Schwab Municipal Money
Fund and Schwab Value Advantage Money Fund) calculated by reference to market
values and the $1.00 per share amortized cost value of a Fund (or Sweep Shares
for the Schwab Municipal Money Fund and Schwab Value Advantage Money Fund), or
if there were any other deviation which the Board of Trustees believed would
result in a material dilution to shareholders or purchasers, the Board of
Trustees would promptly consider what action, if any, should be initiated.
HOW THE FUNDS REPORT PERFORMANCE
From time to time the Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund and the Sweep Shares of the Schwab Value
Advantage Money Fund may each advertise its yield,
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effective yield and total return. In the case of the Sweep Shares of the Schwab
Municipal Money Fund only, the Fund may advertise the yield, effective yield,
taxable equivalent yield, taxable equivalent effective yield and total return of
the Sweep Shares. Performance figures are based upon historical results and are
not intended to indicate future performance.
Yield refers to the income generated by a hypothetical investment in a Fund
(or, in the case of the Schwab Municipal Money Fund and the Schwab Value
Advantage Money Fund, the Sweep Shares of the Funds) over a specific 7- day
period. This income is then annualized, which means that the income generated
during the 7-day period is assumed to be generated each week over an annual
period and is shown as a percentage of the hypothetical investment.
Effective yield is calculated similarly, but the income earned by the
investment is assumed to be compounded weekly when annualized. Effective yield
will be slightly higher than yield due to this compounding effect.
Taxable equivalent yield is the yield that a taxable investment must
generate in order to equal (after applicable taxes are deducted) the Sweep
Shares of the Schwab Municipal Money Fund's yield for an investor in a stated
federal income tax bracket (normally assumed to be the applicable maximum tax
rate). Taxable equivalent yield will be higher than the tax-exempt yield of the
Sweep Shares of the Schwab Municipal Money Fund. (See "Yield" in the Statement
of Additional Information.)
The taxable equivalent effective yield is computed in the same manner as is
the taxable equivalent yield, except that the effective yield is substituted for
yield in the calculation.
Total return is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The performance of the Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund, the Sweep Shares of the Schwab Municipal
Money Fund and the Sweep Shares of the Schwab Value Advantage Money Fund may be
compared to that of other mutual funds tracked by mutual fund rating services,
various indices of investment performance, U.S. Government obligations, bank
certificates of deposit, other investments for which reliable performance data
is available and the consumer price index.
Because the Sweep Shares of the Schwab Municipal Money Fund are subject to
different expenses than the Value Advantage Shares, and the Sweep Shares of the
Schwab Value Advantage Money Fund are subject to different expenses than the
Investor Shares, the performance of the two classes of shares will differ.
Additional performance information about the Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Sweep Shares of
the Schwab Municipal Money Fund and the Sweep Shares of the Schwab Value
Advantage Money Fund is available in the Funds' Annual Reports, which are sent
to all shareholders. To request a free copy, call your local Schwab office or
800-2 NO-LOAD.
TAX-ADVANTAGED RETIREMENT PLANS
Schwab offers tax-advantaged retirement plans for which the Schwab Money
Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund and
the Sweep Shares of the Schwab Value Advantage Money Fund may be appropriate
investments. It is not recommended that the Schwab Municipal Money Fund be used
as an investment vehicle for an Individual Retirement Account ("IRA") or
qualified retirement plan. Schwab's retirement plans allow participants to defer
taxes while helping them build their retirement savings.
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SCHWAB IRA. A retirement plan with a wide choice of investments offering
people with earned income the opportunity to compound earnings on a tax-deferred
basis. Schwab IRAs with a balance of $10,000 or more by September 15, 1996 will
not be charged Schwab's $29 annual IRA account fee for the life of the account.
SCHWAB KEOGH. A tax-advantaged plan for self-employed individuals and their
employees that permits the employer to make annual tax-deductible contributions
of up to $30,000. Schwab Keogh plans are currently charged an annual fee of $45.
SCHWAB CORPORATE RETIREMENT PLANS. A well designed retirement program can
help a company attract and retain valuable employees. Call your local Schwab
office or 800-2 NO-LOAD for more information.
INVESTING IN
SHARES OF THE FUNDS
SHAREHOLDER SERVICE. You may place Fund purchase orders and orders to sell
shares as well as exchange requests at any one of over 225 Schwab offices
nationwide or by calling 800-2 NO-LOAD, where trained representatives are
available to answer questions about the Funds and your account. The right to
initiate transactions by telephone is automatically available through your
Schwab account. TDD users may contact Schwab at 800-345-2550, 24 hours a day.
Each Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If each Fund follows telephone orders
that it reasonably believes to be genuine, it will not be liable for any losses
a shareholder may experience. If each Fund does not follow reasonable procedures
to confirm that a telephone order is genuine, each Fund may be liable for any
losses a shareholder may suffer from unauthorized or fraudulent orders. These
procedures may include:
- requiring a form of personal identification prior to acting upon
instructions received by telephone;
- providing written confirmation of such instructions; and
- tape recording telephone transactions.
Investors should remember that it may be difficult to complete transactions by
telephone during periods of drastic economic or market changes, when our phone
lines may become very busy with calls from other investors. If you want to buy,
sell or exchange shares but have trouble reaching a Fund by telephone, you may
want to use one of the other ways offered for completing the transactions
discussed below, even though these procedures may mean that completing your
transaction may take longer.
To assist in minimizing administrative costs, share certificates will not be
issued. Records regarding share ownership are maintained by the Transfer Agent.
Telephone purchase or redemption orders or exchange requests received prior
to 8:00 p.m. (Eastern time) on any Business Day, once they have been verified as
to the caller's identity and account ownership, will be deemed to be received by
the Transfer Agent, or its authorized agent, prior to the next net asset value
determination. Subsequent telephone orders received prior to the first net asset
value determination on the following day will be deemed received prior to that
day's second net asset value determination.
HOW TO BUY SHARES
OPENING A SCHWAB ACCOUNT. You may buy shares of the Funds or classes through
an account maintained with Schwab, and payment for shares must be made directly
to Schwab. If you do not presently maintain a Schwab account and wish to
establish one, simply complete a Schwab Account Application (available by
calling 800-2 NO-LOAD, 24 hours a day, or by contacting your local Schwab
office) and deliver it, by mail or in person, to your local Schwab office.
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<PAGE> 23
You may also mail the application to Schwab at 101 Montgomery Street, San
Francisco, California 94104. Corporations and other organizations should contact
their local Schwab office to determine which additional forms may be necessary
to open a Schwab account. With your Schwab account, you have access to other
investments available at Schwab, such as stocks, bonds and other mutual funds.
The Securities Investor Protection Corporation ("SIPC") will provide account
protection, in an amount up to $500,000, for securities, including Fund or class
shares, which you hold in a Schwab account. Of course, SIPC account protection
does not protect shareholders from share price fluctuations. If you already have
a Schwab account, you may buy shares of each Fund as described below and need
not open a new account.
SCHWAB ACCOUNT MINIMUMS AND ASSOCIATED FEES. Schwab requires a $1,000
deposit and account balance minimum to maintain a Schwab brokerage account ($500
for custodial accounts). A fee of $7.50 will be charged to Schwab brokerage
accounts that fall below this minimum for three consecutive months in any
quarter. This fee, if applicable, will be charged at the end of each quarter and
will be waived if there has been at least one commissionable trade within the
last 6 months, or if the shareholder's combined account balances at Schwab total
$10,000 or more.
Schwab currently imposes no fee for opening a Schwab One(R) account with a
minimum of $5,000 account equity. Schwab One accounts containing less than
$5,000 account equity are subject to a fee of $5 per month imposed by Schwab if
there have been fewer than two commissionable trades within the last 12 months.
DEPOSITING FUNDS. You may deposit funds into your Schwab account by check,
wire or many other forms of electronic funds transfer. Securities also may be
deposited. All deposit checks should be made payable to Charles Schwab & Co.,
Inc. If you would like to wire funds into your existing Schwab account, please
contact your local Schwab office for instructions.
WHEN YOU CAN BUY SHARES. You must have funds in your Schwab account in order
to buy Fund or class shares. If funds (including those transmitted by wire) are
received by Schwab before the time of each Fund's last daily net asset value
calculation (normally 4:00 p.m. Eastern time), they will be available for
investment on that day. If funds arrive after that time, they will be available
for investment the next Business Day.
METHODS OF BUYING SHARES
AUTOMATIC SWEEP INVESTMENT: When opening a Schwab brokerage account, an
investor will be asked to select a SchwabFunds class or series with sweep
privileges as a "primary fund." When a Fund or class is selected as a primary
fund, free credit balances in the investor's brokerage account will be invested
automatically in shares of the Fund or class according to the procedures
described in the account agreement with the investor. Depending on the type of
account, the automatic sweep investment of free credit balances will be effected
daily, weekly or at other times and may be subject to minimum investment and
other requirements. Note that, as described below, the Sweep Shares of the
Schwab Value Advantage Money Fund generally require a minimum initial investment
in the Fund of $25,000 and the maintenance of a $20,000 minimum Fund balance.
An investor with an existing Schwab account may add the automatic sweep
investment feature to his or her account by completing the appropriate section
of the Schwab Account Application available at any Schwab office. A shareholder
may change primary funds by calling or writing his or her local Schwab office or
writing Schwab at the address referenced on the cover of this Prospectus. Note
that the automatic sweep investment feature is not available for all classes of
shares of all Funds.
DIRECT PURCHASE: A Schwab account holder may buy shares of a Fund (if it is
not his or her primary fund) in several ways. The minimum initial investment for
such a purchase in the Schwab Money Market Fund, Schwab Government Money Fund,
Schwab U.S. Treasury Fund and the Sweep Shares of the Schwab Municipal Money
Fund is $1,000, and subsequent investments must be at least $100.
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The Sweep Shares of the Schwab Value Advantage Money Fund require a minimum
initial investment of $25,000. In addition, the Sweep Shares of the Schwab Value
Advantage Money Fund are available only to certain Schwab customers who are
included in one of Schwab's preferred customer programs and have at least
$500,000 in account equity at Schwab. The minimum account balance is $20,000.
The Transfer Agent reserves the right to waive these minimums from time to time
for clients of Schwab Institutional, a division of Schwab, the Schwab Trust
Company, certain tax-advantaged retirement plans, and certain customers involved
in one of Schwab's preferred customer programs. For information regarding the
minimum investment requirements of the other classes of shares of the Schwab
Municipal Money Fund and the Schwab Value Advantage Money Fund, see "Other
Important Information" in this Prospectus.
Whether you buy shares by phone, by mail, electronically or in person, the
following information is always needed:
- Your Schwab account number
- The name of the Fund and class, if applicable, in which you wish to
invest.
- The amount you wish to invest
- For initial share purchases only, the distribution option you have
selected (see below).
BY TELEPHONE
- - Call 800-2 NO-LOAD
- - Place a buy order for your account
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - You may direct that funds already in your Schwab account be used to make
initial and subsequent share purchases, or your purchase instructions may be
accompanied by a check made payable to Charles Schwab & Co., Inc., which
will be deposited into your Schwab account and used, as necessary, to cover
all or part of your purchase order.
- Mail to 101 Montgomery Street, San Francisco, California 94104 or to
your local Schwab office
- Once your letter is mailed, you may not modify or cancel your
instructions.
ELECTRONICALLY
For more information regarding how to buy shares electronically using
StreetSmart(TM), e.Schwab(TM), The Equalizer(R),TeleBroker(R), and the World
Wide Web, call 800-2 NO-LOAD.
IN PERSON
- - Deposit your check at your local Schwab office.
- - For the office nearest you, call 800-2 NO-LOAD.
BY WIRE
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- - Contact Schwab for instructions.
DISTRIBUTION OPTIONS. The Schwab account standing instructions that you
selected in your Schwab Account Application will determine which of the two
distribution options listed below will apply to you. Fund distributions will be
automatically reinvested, unless the Transfer Agent, or its authorized agent,
has received instructions that distributions be mailed to you as they are paid.
Please contact your local Schwab office if you already have a Schwab account and
wish to change your account standing instructions.
AUTOMATIC REINVESTMENT: For all the Funds or classes of Shares,
distributions will be reinvested in additional full Shares of the applicable
Fund or class of Shares at the net asset value next determined after their
payable date.
RECEIVE DIVIDENDS BY MAIL: All distributions will be credited to your Schwab
account as of the payable date. If your account is coded to have dividends
mailed immediately, checks will normally be mailed the Business Day after
distributions are credited.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
You can request that your Schwab office wire funds from your Schwab account
to your bank account. There is a $15 fee for each wire transfer of funds.
OTHER PURCHASE INFORMATION. The minimum amounts required for automatic sweep
investment or direct purchase may be reduced or waived on certain occasions. For
example, free credit balances in accounts of certain categories of investors,
such as holders of Schwab One(R) and Schwab custodial accounts, may be invested
automatically irrespective of amount. Each Fund may also waive the required
minimums for purchases by trustees, directors, officers or employees of the
Fund, Schwab or the Investment Manager. Each Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to withdraw or suspend
all or any part of the offering made by this Prospectus, to reject purchase
orders or to change the minimum investment requirements. All orders to buy
shares of a Fund are subject to acceptance by the Fund and are not binding until
confirmed or accepted in writing. Schwab will charge a $15 service fee against
an investor's Schwab account should his or her check be returned because of
insufficient or uncollected funds or a stop payment order.
HOW TO SELL OR
EXCHANGE SHARES
AUTOMATIC REDEMPTION. A sale of Fund shares will be automatically effected
to satisfy debit balances in an investor's Schwab account, to provide necessary
cash collateral for an investor's margin obligation to Schwab and to settle
securities transactions in the account. All such sales will be effected in
accordance with the procedures described in the investor's Schwab Account
Agreement.
DIRECT REDEMPTION. You can sell or exchange your shares at any time by
telephone, by mail, electronically or in person, subject to the following terms
and conditions:
- if you bought your shares by check, we will send you your money as soon
as your check clears your bank, which may take up to 15 days;
- depending on the type of Schwab account you have, your money may earn
interest during any holding period;
- you will receive the dividends declared for the day on which you sell
your shares;
- we will have a check for your shares at your local Schwab office on the
Business Day after the Transfer Agent, or its authorized agent, receives
proper instructions to sell your shares;
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<PAGE> 26
- a check normally will be mailed to you on the Business Day following the
sale of your shares if you specifically request that it be mailed; and
- we may suspend the right to sell shares or postpone payment for a sale
of shares when trading on the Exchange is restricted; the Exchange is
closed for any reason other than its normal weekend or holiday closings,
emergency circumstances as determined by the SEC; or any other
circumstances as the SEC may permit.
EXCHANGE. The exchange privilege allows you to exchange your SchwabFunds(R)
shares for shares of another SchwabFunds Series or class available to investors
in your state, provided you meet the initial and subsequent investment
requirements and any other requirements relating to the Series or class of
shares you wish to buy. Thus, you can conveniently modify your investments if
your goals or market conditions change. For federal income tax and certain other
purposes, an exchange of shares between funds will be treated as a sale of
shares in one fund and the purchase of shares in another fund. An exchange of
shares between classes of the same fund should not be treated as a sale of
shares. Each Fund reserves the right to modify, limit or terminate the exchange
privilege upon 60 days' written notice.
METHODS OF SELLING OR
EXCHANGING SHARES
Whether you sell or exchange shares by phone, mail, electronically or in
person the following information is always needed in order to process your sale
or exchange request:
- your Schwab account number and your name for verification;
- the number of shares you want to sell or exchange;
- the name of the Fund and class, if applicable, from which you wish to
sell or exchange shares;
- the name of the Fund and class into which shares are to be exchanged, if
applicable; and
- the distribution option you select, if you are exchanging shares.
BY TELEPHONE
- - Call 800-2 NO-LOAD.
- - Place a sell or exchange request for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified in the
account.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
ELECTRONICALLY
for more information regarding how to sell or exchange shares electronically
using StreetSmart(TM), e.Schwab(TM), The Equalizer(R), TeleBroker(R) and the
World Wide Web, call 800-2 NO-LOAD.
IN PERSON
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<PAGE> 27
- Place your sell or exchange request at your local Schwab office.
- For the Schwab office nearest you, call 800-2NO-LOAD.
OTHER IMPORTANT INFORMATION
CLASSES OF SHARES. In addition to the Sweep Shares offered by this
prospectus, Schwab also offers Value Advantage Shares of the Schwab Municipal
Money Fund and Investor Shares of the Schwab Value Advantage Money Fund,
pursuant to a multiple class plan adopted by the Board of Trustees of the Schwab
Fund Family. The Value Advantage Shares of the Schwab Municipal Money Fund and
Investor Shares of the Schwab Value Advantage Money Fund are not available
through automatic sweep investment programs. The minimum initial investment
requirement for both of these classes of shares is $25,000 and the minimum
balance required is $20,000. The transfer agency fees for the Value Advantage
Shares of the Schwab Municipal Money Fund and for the Investor Shares of the
Schwab Value Advantage Money Fund is 0.05% of each class' average daily net
assets; the shareholder services fee for each of these classes is 0.20% of that
class's average daily net assets.
The Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S.
Treasury Money Fund are not offered in multiple classes of shares. For a
prospectus describing the other class of shares of the Schwab Municipal Money
Fund (the "Value Advantage Shares") or the Schwab Value Advantage Money Fund
(the "Investor Shares"), call Schwab at 800-2 NO-LOAD.
MINIMUM BALANCE AND BROKERAGE ACCOUNT REQUIREMENTS. Due to the relatively
high cost of maintaining smaller holdings, each Fund reserves the right to
redeem a shareholder's shares if, as a result of redemptions, their aggregate
value drops below the $100 minimum balance requirement for the Schwab Money
Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund and
the Sweep Shares of the Schwab Municipal Money Fund or below the $20,000 minimum
balance requirement for the Sweep Shares of the Schwab Value Advantage Money
Fund. A Fund will notify shareholders in writing 30 days before taking such
action to allow them to increase their holdings to at least the minimum level.
Also note that, because they can only be held in Schwab accounts, Fund shares
will be automatically redeemed should the Schwab account in which they are
carried be closed.
CONSOLIDATED MAILINGS. In an effort to reduce the Funds' mailing costs, the
Funds consolidate shareholder mailings by household. This consolidation means
that a household having multiple accounts with the identical address of record
will receive a single package during each shareholder mailing. If you do not
wish this consolidation to apply to your account(s), please write to
SchwabFunds(R) at 101 Montgomery Street, San Francisco, California 94104 to that
effect.
WIRE TRANSFERS TO YOUR BANK. If you so instruct your local Schwab office,
funds can be wired from your Schwab account to your bank account. Call your
local Schwab office for additional information. A $15 service fee will be
charged against your Schwab account for each wire sent.
SCHWAB ONE(R) ACCOUNT FEATURES. Shareholders who hold shares of the Schwab
Municipal Money Fund in Schwab One accounts are entitled to sell shares of the
Fund through debit cards and checks. Investors should contact Schwab if they are
interested in the benefits and requirements of a Schwab One account.
READING THIS PROSPECTUS. References to "you" and "your" in this Prospectus
refer to prospective investors and/or current shareholders, while references to
"we", "us", "our" or "our Funds" refer to the Funds generally.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
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<PAGE> 28
SCHWAB
MONEY FUNDS-
Sweep Investments(TM)
PROSPECTUS April 30, 1997
[SchwabFunds Logo]
625-15 (8/95) CRS 6701 Printed on recycled paper
[SchwabFunds Logo]
101 Montgomery Street
San Francisco, California 94104
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<PAGE> 29
PART B
THE CHARLES SCHWAB FAMILY OF FUNDS
The information required by Items 10 through 23 for Schwab Municipal
Money Fund-Value Advantage Shares, Schwab California Municipal Money Fund-Value
Advantage Shares, and Schwab New York Municipal Money Fund-Value Advantage
Shares, separate portfolios of registrant, are hereby incorporated by reference
to the joint Statement of Additional Information for these Portfolios, filed
with the SEC pursuant to Rule 497(e) on January 2, 1997.
The information required by Items 10 through 23 for Schwab Value
Advantage Money Fund-Investor Shares, a separate portfolio of Registrant, is
hereby incorporated by reference to the Statement of Additional Information for
this Portfolio filed with the Securities and Exchange Commission pursuant to
Rule 497(e) on November 26, 1996.
<PAGE> 30
CROSS REFERENCE SHEET
THE CHARLES SCHWAB FAMILY OF FUNDS:
Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Municipal Money Fund-Sweep Shares, Schwab California
Municipal Money Fund-Sweep Shares, Schwab New York Municipal Money Fund-Sweep
Shares, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money
Fund(R), and Schwab Value Advantage Money Fund-Sweep Shares.
<TABLE>
<CAPTION>
Statement of Additional
Information Caption
- ----------- -----------------------
Part B Item
- -----------
<S> <C>
Cover Page Cover Page
Table of Contents Table of Contents
General Information and History General Information
Investment Objectives and Policies Investment Restrictions
Management of the Fund Management of the Trust
Control Persons and Principal Holders of Management of the Trust
Securities
Investment Advisory and Other Services Management of the Trust
Brokerage Allocation and Other Practices Portfolio Transactions and Turnover
Capital Stock and Other Securities General Information
Purchase, Redemption and Pricing of Securities Share Price Calculation; Purchase and
Being Offered Redemption of Shares
Tax Status Distributions and Taxes
Underwriters Management of the Trust
Calculation of Performance Data Yield
Financial Statements Financial Statements
</TABLE>
<PAGE> 31
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
THE SCHWAB MONEY FUNDS:
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Sweep Shares
Schwab Retirement Money Fund(R)
Schwab Institutional Advantage Money Fund(R)
Schwab New York Municipal Money Fund-Sweep Shares
Schwab Value Advantage Money Fund-Sweep Shares
[APRIL 30, 1997]
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectuses dated [APRIL 30, 1997] (and as may
be amended from time to time), for Schwab Money Market Fund, Schwab Government
Money Fund, Schwab U.S. Treasury Money Fund, Schwab Municipal Money Fund-Sweep
Shares (formerly known as Schwab Tax- Exempt Money Fund-Sweep Shares), Schwab
California Municipal Money Fund-Sweep Shares (formerly known as Schwab
California Tax-Exempt Money Fund-Sweep Shares) and Schwab New York Municipal
Money Fund-Sweep Shares (formerly known as Schwab New York Tax-Exempt Money
Fund-Sweep Shares), Schwab Retirement Money Fund , Schwab Institutional
Advantage Money Fund and Schwab Value Advantage Money Fund-Sweep Shares (each a
"Fund" and collectively, the "Funds"), 9 separately managed investment
portfolios of The Charles Schwab Family of Funds (the "Trust"). With respect to
Schwab Municipal Money Fund, Schwab California Municipal Money Fund , Schwab New
York Municipal Money Fund and Schwab Value Advantage Money Fund, each of which
is offered in two classes of shares, this Statement of Additional Information
relates to the Sweep Shares of each of those Funds. Prior to June 6, 1995,
Schwab Municipal Money Fund, Schwab California Municipal Money Fund and Schwab
New York Municipal Money Fund were not offered in multiple classes of shares.
The existing shares of those Funds are redesignated as Sweep Shares. Prior to
[April 30, 1997], Schwab Value Advantage Money Fund was not offered in multiple
classes of shares. The existing shares of the Fund are redesignated as Investor
Shares. The other Funds listed above are not offered in multiple classes of
shares. To obtain a copy of any of these Prospectuses, please contact Charles
Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours a day, or 101
Montgomery Street, San Francisco, California 94104. TDD users may contact Schwab
at 800-345-2550, 24 hours a day. These Prospectuses are also available
electronically by using our World Wide Web address: http://www.schwab.com.
SchwabFunds(R)
800-2 NO-LOAD (800-266-5623)
TABLE OF CONTENTS
Page
MUNICIPAL SECURITIES.........................................................2
INVESTMENT TECHNIQUES........................................................8
INVESTMENT RESTRICTIONS.....................................................10
MANAGEMENT OF THE TRUST.....................................................19
PORTFOLIO TRANSACTIONS AND TURNOVER.........................................27
DISTRIBUTIONS AND TAXES.....................................................28
SHARE PRICE CALCULATION.....................................................34
HOW THE FUNDS REPORT PERFORMANCE............................................35
GENERAL INFORMATION.........................................................39
PURCHASE AND REDEMPTION OF SHARES...........................................43
OTHER INFORMATION...........................................................43
APPENDIX - RATINGS OF INVESTMENT SECURITIES.................................45
FINANCIAL STATEMENTS.......................................................F-1
<PAGE> 32
MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that Schwab Municipal Money Fund, Schwab
California Municipal Money Fund and Schwab New York Municipal Money Fund may
purchase include, without limitation, debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which Municipal Securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. Schwab Municipal Money Fund, Schwab
California Municipal Money Fund and Schwab New York Municipal Money Fund 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 are generally classified as "general obligation"
or "revenue." General obligation securities are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Private activity bonds and
industrial development bonds that are Municipal Securities are in most cases
revenue bonds and generally do not constitute the pledge of the credit of the
issuer of such bonds.
Municipal notes are instruments issued by or on behalf of governments
and political sub-divisions thereof. Examples include: tax anticipation notes
("TANS"), which are short-term debt instruments issued by a municipality or
state to finance working capital needs of the issuer in anticipation of
receiving taxes on a future date; revenue anticipation notes ("RANS"), which are
short-term debt instruments issued by a municipality or state to provide cash
prior to receipt of expected non-tax revenues from a specific source; bond
anticipation notes ("BANS"), which are short-term debt instruments issued by a
municipality or state that will be paid off with the proceeds of an upcoming
bond issue; and tax revenue anticipation notes ("TRANS"), which are short-term
debt instruments issued by a municipality or state to finance working capital
needs in anticipation of receiving taxes or other revenues. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. Schwab
Municipal Money Fund, Schwab California Municipal Money Fund and Schwab New York
Municipal Money Fund may purchase other Municipal Securities similar to the
foregoing, which are or may become available, including securities issued to
pre-refund other outstanding obligations of municipal issuers.
Taxable municipal securities are municipal securities the interest on
which is not exempt from federal income tax. Taxable municipal securities may
include "private activity bonds" that are issued by or on behalf of states or
political subdivisions thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and pollution control and to
finance facilities for charitable institutions. The
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<PAGE> 33
payment of the principal and interest on private activity bonds is not backed by
a pledge of tax revenues, and is dependent solely on the ability of the
facility's user to meet its financial obligations. Taxable municipal securities
also may include remarketed certificates of participation.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Risk Factors
Schwab California Municipal Money Fund's and Schwab New York Municipal
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" include
issues that are secured by a direct payment obligation of the State and
obligations of issuers that rely in whole or in part on State revenues for
payment of their obligations. Part of the State's General Fund surplus is
distributed to counties, cities and their various taxing entities; whether and
to what extent a portion of the State's General Fund will be distributed to them
in the future is unclear.
Overview. From mid-1990 to late 1993, the State suffered a recession
with the worst economic, fiscal and budget conditions since the 1930's.
Construction, manufacturing (especially aerospace), exports and financial
services, among other industries, were severely affected. Job losses were the
worst of any post-war recession.
The recession seriously affected State tax revenues and caused an
increase in expenditures for health and welfare programs. As a result, the State
experienced recurring budget deficits. The State Controller reports that
expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93. The State
General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit
of about $1.8 billion. A further consequence of the large budget imbalances has
been that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs.
As a result of the deterioration in the State's budget and cash
situation, the State's credit ratings were reduced. Since October 1992, all
three major nationally recognized statistical rating organizations lowered the
State's general obligation bond rating from the highest ranking of "AAA" to "A"
by S&P, "A1" by Moody's Investors Service ("Moody's") and "A+" by Fitch
Investors Service, Inc. ("Fitch"). However, since the start of 1994,
California's economy has been on a steady recovery. Employment grew
significantly in 1994 and 1995, especially in export-related industries,
business services, electronics, entertainment and tourism. Fitch recognized this
rebound by raising the State's rating from "A" to "A+" on February 26, 1996.
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit, imposed by its
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<PAGE> 34
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.
-4-
<PAGE> 35
1995-96 Fiscal Year
Revenues. The 1995-96 Budget Act projected General Fund revenues and
transfers of $44.1 billion, a 3.5% increase from the prior year, and Special
Fund revenues of $12.7 billion.
Expenditures. The 1995-96 Budget Act included General Fund expenditures
of $43.4 billion and Special Fund expenditures of $13.0 billion. The California
Department of Finance projected that, after repaying the last of the budget
deficit carried over from prior fiscal years, there would be a positive balance
of $28 million in the budget reserve on June 30, 1996.
The Governor's proposed budget for the 1996-97 fiscal year, released on
January 10, 1996, updated the projections for the 1995-96 fiscal year; revenues
and transfers are estimated to be $45 billion and expenditures to be $44.2
billion. As a result, the budget reserve was projected to have a positive
balance of about $50 million on June 30, 1996, with available cash (after
payment of all obligations due) of about $2.2 billion.
1996-97 Fiscal Year
The 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% cut in
personal and corporate tax rates, phased in over a three-year period. On the
assumption that the proposed tax rate cut would be enacted, the Governor's
proposed budget shows a reduction in revenues of about $600 million for 1996-97.
The Governor's proposed budget also projects external cash flow borrowing of up
to $3.2 billion to mature by June 30, 1997.
The foregoing discussions of the 1995-96 Budget and the proposed
1996-97 Budget are based upon the Budget Act for 1995-96 and the Governor's
proposed 1996-97 Budget, respectively, and should not be construed as a
statement of fact. The assumptions used to construct a budget, which include
estimates and projections of revenues and expenditures, may be affected by
numerous factors, including future economic conditions in the State and the
nation. There can be no assurances that any estimates will be achieved.
Issues Affecting Local
Governments and Special Districts
Proposition 13. Certain California Municipal Securities may be
obligations of issuers that rely in whole or in part on ad valorem real property
taxes as a source of revenue. In 1978, California voters approved Proposition
13, which limits ad valorem taxes on real property and restricts the ability of
taxing entities to increase property tax and other revenues.
With certain exceptions, the maximum ad valorem tax on real property is
limited to 1% of the property's full cash value to be collected by the counties
and apportioned according to law. One exception is for debt service on bonded
indebtedness if approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be: adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data; reduced in the event of declining property value caused
by substantial damage, destruction or other factors; or adjusted when there is a
"change in ownership" or "new construction."
The State, in response to the significant reduction in local property
tax revenues as a result of the passage of Proposition 13, enacted legislation
to provide local governments with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.
Proposition 62. This initiative, approved by voters in 1986, placed
further restrictions on the ability of local governments to raise taxes and
allocate approved tax receipts. Although some decisions of the California Courts
of Appeal held that parts of Proposition 62 were unconstitutional, the
California Supreme Court recently upheld Proposition 62's requirement that
special taxes be approved by a two-thirds vote of the voters voting in an
election on the issue. This recent decision may invalidate other taxes that have
been imposed by local governments in California and make it more difficult for
them to raise taxes.
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<PAGE> 36
Propositions 98 and 111. These initiatives changed the State
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues.
The initiatives require that the State establish a prudent state reserve fund
for public education.
Appropriations Limit. Local governments are also subject to annual
appropriations limits. If a local government's revenues in any year exceed the
amount permitted to be spent, the excess must be returned to the public through
a revision of tax rates or fee schedules over the subsequent two years.
Conclusion. The effect of these constitutional and statutory changes
and budget developments on the ability of California issuers to pay interest and
principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent; for example, in December 1994, Orange County filed for
bankruptcy. California Municipal 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 Municipal 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 four counties. Another earthquake could create a
major dislocation of the California economy.
New York Municipal Securities
The State of New York has experienced fiscal problems for several years
as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Although the State
enjoyed good growth throughout the early to mid-1980's, unemployment continues
to be a problem. The State's economy is highly developed and diverse, with a
large emphasis in service, trade, financial services and real estate; however,
extensive job losses in each of these areas has placed a burden on the State to
maintain employment, company development and a stable tax base.
The State has a large accumulated deficit, as reflected in its
financial results. The overall wealth of the State's population, as reflected by
its per capita income, offers a positive credit enhancement, and is among the
highest in the nation. The debt per capita, though, is also among the highest
and poses a large burden on State residents.
The importance of New York City to the State's economy is also an
important consideration, since it represents a significant portion of the
overall economy of the State. The City has struggled to maintain fiscal
stability, and any major changes to the financial condition of the City would
ultimately have an effect on the State. The overall financial condition of the
State can be illustrated by the changes of its debt rating during the last
several years of financial difficulties: Moody's downgraded the State's general
obligation long-term debt from A1 to A in 1990 and S&P downgraded it from A to
A- in early 1992. The State also carries a rating of A+ from Fitch. The
short-term rating assigned by S&P of A1 is within that NRSRO's two highest
rating categories. Moody's rating on New York City general obligation bonds is
Baa1, while S&P rates them BBB+.
Schwab New York Municipal 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
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<PAGE> 37
numerous states and municipal entities. The ability of the State of New York or
its municipalities to meet their obligations will depend on the availability of
tax and other revenues; economic, political and demographic conditions within
the State; and the underlying fiscal condition of the State and its
municipalities.
INVESTMENT TECHNIQUES
EURODOLLAR CERTIFICATES OF DEPOSIT AND
FOREIGN SECURITIES
Before investing in Eurodollar certificates of deposit, a Fund will
consider their marketability, possible restrictions on international currency
transactions, and any regulations imposed by the domicile country of the foreign
issuer. Eurodollar certificates of deposit may not be subject to the same
regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes.
Investments in securities of foreign issuers or securities principally
traded overseas may involve certain special risks due to foreign economic,
political and legal developments, including expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, and possible difficulty in obtaining and enforcing judgments against
foreign entities.
SECTION 4(2) PAPER
Commercial Paper and other securities are issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended, and resold to qualified
institutional buyers under Securities Act Rule 144A ("Section 4(2) paper").
Federal securities laws restrict the disposition of Section 4(2) paper. Section
4(2) paper generally is sold to institutional investors such as the Funds who
agree that they are purchasing the paper for investment and not for public
distribution. Any resale by the purchaser must be in an exempt transaction and
may be accomplished in accordance with Rule 144A. Section 4(2) paper normally is
resold to other institutional investors such as the Funds through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. Because it is not possible to predict with
assurance exactly how this market for Section 4(2) paper sold and offered under
Rule 144A will continue to develop, Charles Schwab Investment Management, Inc.
(the "Investment Manager"), pursuant to guidelines approved by the Board of
Trustees, will carefully monitor a Fund's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information.
ASSET-BACKED COMMERCIAL PAPER
AND OTHER SECURITIES
Schwab Money Market Fund, Schwab Retirement Money Fund(R), Schwab
Institutional Advantage Money Fund(R) and Schwab Value Advantage Money Fund can
invest a portion of their assets in asset-backed commercial paper and other
money market fund Eligible Securities (as that term is hereinafter defined). The
credit quality of most asset-backed commercial paper depends primarily on the
credit quality of the assets underlying such securities, how well the entity
issuing the security is insulated from the credit risk of the originator (or any
other affiliated entities) and the amount and quality of any credit support
provided to the securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payments, such
securities may contain elements of credit support.
Such credit support falls into two classes: liquidity protection and
protection against ultimate default on the underlying assets. Liquidity
protection refers to the provision of advances, generally by the entity
administering the pool of assets, to ensure that scheduled payments on the
underlying pool are made in a timely fashion. Protection against ultimate
default ensures payment on at least a portion of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or
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<PAGE> 38
letters of credit obtained from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
degree of credit support provided on each issue is based generally on historical
information respecting the level of credit risk associated with such payments.
Delinquency or loss in excess of that anticipated could adversely affect the
return on an investment in an asset-backed security.
Bank notes are notes used to represent debt obligations issued by banks
in large denominations.
Tax-exempt commercial paper is an unsecured short-term obligation
issued by a government or political sub-division thereof.
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<PAGE> 39
INVESTMENT RESTRICTIONS
Except as otherwise noted, the restrictions below are fundamental and cannot be
changed without approval of the holders of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940, as amended,
hereinafter the "1940 Act") of the Fund to which they apply.
Each of Schwab Money Market Fund, Schwab Government Money Fund, Schwab
Retirement Money Fund(R) and Schwab Institutional Advantage Money Fund(R) 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 thereof, more than 5% of the value of its assets would
be invested in the securities of such issuer.
(3) Purchase, in the aggregate with all other Schwab Money Funds, more than
10% of any class of securities of any issuer. All debt securities and
all preferred stocks are each considered as one class.
(4) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers'
acceptances issued by domestic branches of U.S. banks and U.S. branches
of foreign banks (which the Fund has determined to be subject to the
same regulation as U.S. banks), or obligations of, or guaranteed by,
the U.S. Government, its agencies or instrumentalities in accordance
its investment objective and policies.
(5) Invest more than 5% of its total net assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) that, with their predecessors, have a
record of less than three years of continuous operation.
(6) Enter into repurchase agreements if, as a result thereof, more than 10%
its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days and invested in
securities restricted as to disposition under the federal securities
laws (except commercial paper issued under Section 4(2) of the
Securities Act of 1933, as amended). Each Fund will invest no more than
10% of its net assets in illiquid securities.
(7) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except commercial paper
issued under Section 4(2) of the Securities Act of 1933, as amended).
(8) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or its Investment Manager or the
Sub-Adviser individually own beneficially more than 1/2 of 1% of the
securities of such issuer and together beneficially own more than 5% of
the securities of such issuer.
(9) Invest in commodities or commodity contracts, futures contracts, real
estate or real estate limited partnerships, although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(10) Invest for the purpose of exercising control or management of another
issuer.
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<PAGE> 40
(11) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets.(1)
(12) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objectives
and policies), except that Schwab Retirement Money Fund(R) and Schwab
Institutional Advantage Money Fund(R) may (i) purchase a portion of an
issue of short-term debt securities or similar obligations (including
repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio
securities.
(13) Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the
value of its total assets in order to meet redemption requests without
immediately selling any portfolio securities. The Fund will not borrow
for leverage purposes or purchase securities or make investments while
reverse repurchase agreements or borrowings are outstanding. Any
borrowings by Schwab Money Market Fund or Schwab Government Money Fund
will not be collateralized. If for any reason the current value of the
total net assets of any Fund falls below an amount equal to three times
the amount of indebtedness from money borrowed, such Fund will, within
three business days, reduce its indebtedness to the extent necessary.
(14) Write, purchase or sell puts, calls or combinations thereof.
(15) Make short sales of securities, or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(16) Invest in interests in oil, gas, mineral leases or other mineral
exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(17) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(18) Issue senior securities as defined in the 1940 Act.
Except for restrictions (4) and (13), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation.
EACH OF SCHWAB MUNICIPAL MONEY FUND, SCHWAB CALIFORNIA MUNICIPAL MONEY FUND AND
SCHWAB NEW YORK MUNICIPAL MONEY FUND:
(1) May not purchase securities or make investments other than in
accordance with investment objectives and policies.
(2) May not 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
- ----------------------
(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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<PAGE> 41
restriction) or in any one state (although the limitation as to
investments in a state or its political subdivision shall not apply to
Schwab California Municipal Money Fund or Schwab New York Municipal
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.
(3) May not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its Investment Manager
individually own beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.
(4) May not 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.
(5) May not invest for the purpose of exercising control or management of
another issuer.
(6) May not 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.
(7) May not 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.
(8) May lend or borrow money to the extent permitted by the Investment
Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.
(9) May pledge, mortgage or hypothecate any of its assets to the extent
permitted by the Investment Company Act of 1940 or the rules or
regulations thereunder, as such statute, rules or regulations may be
amended from time to time.
(10) May issue senior securities to the extent permitted by the Investment
Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.
(11) May purchase securities of any issuer only when consistent with the
maintenance of its respective status as a diversified company (in the
case of Schwab Municipal Money Fund) or non-diversified company (in the
case of Schwab California Municipal Money Fund and Schwab New York
Municipal Money Fund) under the Investment Company Act of 1940 or the
rules or regulations thereunder, as such statute, rules or regulations
may be amended from time to time.
The following restrictions are non-fundamental, and may be changed by the Board
of Trustees. Each of Schwab Municipal Money Fund, Schwab California Municipal
Money Fund and Schwab New York Municipal Money Fund may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
Schwab California Municipal Money Fund and Schwab New York Municipal
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.
-11-
<PAGE> 42
(2) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to Schwab California Municipal Money Fund and
Schwab New York Municipal Money Fund.
(3) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.2
(4) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(5) Borrow money, except from banks for temporary purposes (but not for the
purpose of purchasing investments), and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Fund are
permitted within the limitations of this paragraph. No such Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.
(6) 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.
(7) 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.
(8) Issue senior securities as defined in the 1940 Act.
Except for fundamental restriction (3) and non-fundamental restriction (5), if a
percentage restriction is adhered to at the time of investment, a later increase
in percentage resulting from a change in values or net assets will not be
considered a violation. None of the Funds has a present intention of borrowing
during the coming year and, in any event, each Fund would limit borrowings as
required by the restrictions previously stated.
The following investment restrictions are fundamental for the Schwab Value
Advantage Money Fund. The Fund:
(1) May not 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) May not 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.
- --------
2 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
-12-
<PAGE> 43
(3) May not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that the Fund reserves the freedom of
action to invest up to 100% of its assets in certificates of deposit or
bankers' acceptances issued by domestic branches of U.S. Banks and U.S.
branches of foreign banks which the 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) May not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objectives and policies).
(5) May not issue senior securities as defined in the 1940 Act.
(6) May purchase securities of any issuer only when consistent with the
maintenance of its respective status as a diversified company under the
Investment Company Act of 1940 or the rules or regulations thereunder,
as such statute, rules or regulations may be amended from time to time.
(7) May borrow money to the extent permitted by the Investment Company Act
of 1940 or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
The following restrictions are non-fundamental for the Schwab Value Advantage
Money Fund and may be changed by the Board of Trustees. The Fund may not:
(8) Invest more than 10% of its net assets in illiquid securities,
including repurchase agreements maturing in more than 7-days.
(9) Purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Schwab Fund Family or its 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.
(10) Invest for the purpose of exercising control or management of another
issuer.
(11) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets.3
(12) Write, purchase or sell puts, calls or combinations thereof.
(13) 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.
(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. Except as otherwise
noted, if a percentage restriction is adhered to at
- -------------
3 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
-13-
<PAGE> 44
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.
SCHWAB U.S. TREASURY MONEY FUND MAY NOT:
(1) Purchase securities other than obligations issued by the U.S. Treasury
and securities backed by the "full faith and credit" guarantee of the
U.S. Government that mature in 397 days or less.(4)
(2) Make loans to others (except through the purchase of debt obligations).
(3) Issue senior securities as defined in the 1940 Act.
(4) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
(5) Invest in commodities or in real estate.
(6) Invest for the purpose of exercising control over management of another
company.
(7) Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the
value of the Fund's total assets in order to meet redemption requests
without immediately selling any portfolio securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 33% of the Fund's net assets to secure
borrowings. The Fund will not borrow for leverage purposes or purchase
securities or make investments while reverse repurchase agreements or
borrowings are outstanding. If for any reason the current value of the
total net assets of the Fund falls below an amount equal to three times
the amount of its indebtedness from money borrowed, the Fund will,
within three business days, reduce its indebtedness to the extent
necessary.
The following restrictions are non-fundamental, and may be changed by the Board
of Trustees. Schwab U.S. Treasury Money Fund may not:
(1) Invest more than 10% of its assets in securities which are not readily
marketable, including securities which are restricted as to
disposition; or
(2) Engage in short sales, except for short sales against the box.
Each Schwab Money Fund will only purchase securities that present minimal credit
risks and (except in the case of Schwab U.S. Treasury Money Fund) which are
First Tier or Second Tier Securities (otherwise referred to as "Eligible
Securities").(5) An Eligible Security is:
- --------------
(4) See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
(5) See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
-14-
<PAGE> 45
(1) a security with a remaining maturity of 397 days or less (12 months or
less in the case of Schwab Money Market and Schwab Government Money
Funds): (a) that is rated by the requisite nationally recognized
statistical rating organizations ("NRSROs") designated by the
Securities and Exchange Commission (the "SEC") (currently Moody's, S&P,
Duff and Phelps Credit Rating Co., Fitch, Thomson Bankwatch, and, with
respect to debt issued by banks, bank holding companies, United Kingdom
building societies, broker-dealers and broker-dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate,
IBCA, Inc.) in one of the two highest rating categories for short-term
debt obligations (two NRSROs are required but one rating suffices if
only one NRSRO rates the security), or (b) that itself was unrated by
any NRSRO, but was issued by an issuer that has outstanding a class of
short-term debt obligations (or any security within that class) meeting
the requirements of subparagraph 1(a) above that is of comparable
priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less (12 months or less in the
case of Schwab Money Market and Schwab Government Money Funds), and (a)
whose issuer received a rating within one of the two highest rating
categories from the requisite NRSROs for short-term debt obligations
with respect to a class of short-term debt obligations (or any security
within that class) that is now comparable in priority and security with
the subject security; or (b) that has long-term ratings from the
requisite NRSROs that are in one of the two highest categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating suffices if only one NRSRO rates the security) or
has been determined by the Investment Manager, pursuant to guidelines adopted by
the Board of Trustees, to be of comparable quality to such a security. A Second
Tier Security is any other Eligible Security.
Schwab Money Market Fund, Schwab Government Money Fund, Schwab Retirement Money
Fund(R), Schwab Institutional Advantage Money Fund(R) and Schwab Value Advantage
Money Fund will limit their investments in the First Tier Securities of any one
issuer to no more than 5% of their assets. (Repurchase agreements collateralized
by non-Government securities will be taken into account when making this
calculation.) Moreover, each Fund's total holdings of Second Tier Securities
will not exceed 5% of its assets, with investment in the Second Tier Securities
of any one issuer being limited to the greater of 1% of the Fund's assets or $1
million. In addition, the underlying securities involved in repurchase
agreements collateralized by non-Government securities will be First Tier
Securities at the time the repurchase agreements are executed.
1940 ACT LIMITATIONS
Fundamental investment restrictions (8), (9), (10) and (11) for the
Schwab Municipal Money Funds and fundamental investment restrictions (6) and (7)
for Schwab Value Advantage Money Fund permit the Funds to engage in certain
investment practices and purchase securities to the extent permitted by, or
consistent with, the 1940 Act. Relevant limitations of the 1940 Act are
described below. Each Fund is also subject to more restrictive non-fundamental
investment restrictions. Non-
-15-
<PAGE> 46
fundamental investment restrictions may be changed
by the Board of Trustees. The Board of Trustees has no current intention of
changing any non-fundamental investment restrictions. Shareholders would be
notified prior to any change in non-fundamental investment restrictions.
Fundamental investment restriction (8). (Fundamental investment
restriction (7) for Schwab Value Advantage Money Fund.) The 1940 Act presently
limits a Fund's ability to borrow more than one-third of the value of its total
assets. The positions of the SEC staff on the ability of a mutual fund to borrow
have evolved in recent years with the development of new investment practices,
such as reverse repurchase agreements. Fundamental investment restriction (8)
allows each Fund the ability to consider engaging in new investment practices to
the extent permitted by the 1940 Act as interpretations of the 1940 Act are
further developed.
Borrowing by a Fund is a form of leveraging of its portfolio which will
expose it to certain risks. Leveraging will exaggerate the effect of any
increase or decrease in the value of portfolio securities on a Fund's net asset
value, and money borrowed will be subject to interest costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the interest received from the securities purchased with
borrowed funds.
The 1940 Act also restricts the ability of any mutual fund to lend.
Under the 1940 Act, a Fund may only make loans if expressly permitted to do so
by the Fund's investment policies, and a Fund may not make loans to persons who
control or are under common control with the Fund. Thus, the 1940 Act
effectively prohibits a Fund from making loans to certain persons when conflicts
of interest or undue influence are most likely present. The Funds may, however,
make other loans which if made would expose shareholders to certain additional
risks.
Fundamental investment restriction (9). The 1940 Act, and, in
particular, certain liquidity restrictions, limits a Fund's ability to pledge,
mortgage or hypothecate its assets. To the extent that pledged assets are
encumbered for more than seven days such assets would be considered illiquid
and, therefore, each Fund's use of such techniques would be limited to 10% of
its net assets. Additionally, under the 1940 Act, a Fund is limited to pledging,
mortgaging or hypothecating no more than one-third of its assets.
Fundamental investment restriction (10). The ability of a mutual fund
to issue senior securities, which has evolved somewhat in recent years, is
severely circumscribed by complex regulatory constraints under the 1940 Act that
restrict, for instance, the amount, timing, and form of senior securities that
may be issued. In addition, portfolio management techniques involving the
issuance of senior securities, such as the purchase of securities on margin,
short sales, or the writing of puts on portfolio securities, are all techniques
that involve the leveraging of a portfolio and would not be consistent with the
current SEC rules governing money market funds.
Fundamental investment restriction (11). (Fundamental investment
restriction (6) for Schwab Value Advantage Money Fund.) Under Section 5(b) of
the 1940 Act, an investment company is diversified if, as to 75% of its total
assets, no more than 5% of the value of its total assets is invested in the
securities of a single issuer and no more than
-16-
<PAGE> 47
10% of the issuer's voting securities is held by the investment company. As
non-diversified Funds, Schwab California Municipal Money Fund and Schwab New
York Municipal Money Fund are not subject to this diversification requirement.
However, each of the Funds, including Schwab California Municipal Money Fund and
Schwab New York Municipal Money Fund, is subject to the "per issuer"
diversification requirements of the Code. Under the Code, the 5% "per issuer"
limit is applied only to 50% of a Fund's total assets (not 75% of total assets
as under the 1940 Act).
-16-
<PAGE> 48
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 the Investment Manager, are as
follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
------------------ --------- --------------------
<S> <C> <C>
Chairman and Trustee Chairman, Chief Executive Officer and Director, The
CHARLES R. SCHWAB* Charles Schwab Corporation; Chairman and Director,
July 29, 1937 Charles Schwab & Co., Inc. and Charles Schwab
Investment Management, Inc.; Chairman and Director, The
Charles Schwab Trust Company; Chairman and Director
(current board positions), and Chairman (officer
position) until December 1995, Mayer & Schweitzer, Inc.
(a securities brokerage subsidiary of The Charles Schwab
Corporation); Director, The Gap, Inc. (a clothing
retailer), Transamerica Corporation (a financial services
organization), AirTouch Communications (a
telecommunications company) and Siebel Systems (a
software company).
President and Trustee Executive Vice President - Mutual Funds, Charles
TIMOTHY F. McCARTHY** Schwab & Co., Inc.; Executive Vice President-
September 19, 1951 President, Financial Products and International Group,
The Charles Schwab Corporation; Chief Executive Officer,
Charles Schwab Investment Management, Inc.; President,
Chief Financial Officer and Director, Charles Schwab
Limited; Director, Mayer & Schweitzer. From 1994 to 1995,
Mr. McCarthy was Chief Executive Officer, Jardine Fleming
Unit Trusts Ltd.;
Executive Director, Jardine Fleming Holdings Ltd.;
Chairman, Jardine Fleming Taiwan Securities Ltd.; and
Director of JF India and Fleming Flagship, Europe. Prior
to 1994, he was President of Fidelity Investments Advisor
Group, a division of Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
</TABLE>
- --------------
*Mr. Schwab is an "interested person" of the Trust.
**Mr. McCarthy is an "interested person" of the Trust.
-18-
<PAGE> 49
<TABLE>
<S> <C> <C>
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. Semloh Financial is an
international financial services and investment
advisory firm.
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (investment
June 28, 1938 banking). Prior to 1995, Mr. Stephens was Chairman
and Chief Executive Officer of North American Trust
(a real estate investment trust). Prior to 1992, 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).
TAI-CHIN TUNG Treasurer and Principal Vice President - Finance, Charles Schwab & Co., Inc.
March 7, 1951 Financial Officer Controller, Charles Schwab Investment Management,
Inc. From 1994 to 1996, Ms. Tung was Controller for
Robertson Stephens Investment Management, Inc.
From 1993 to 1994, she was Vice President of Fund
Accounting, Capital Research and Management Co.
Prior to 1993, Ms. Tung was Senior Vice President of
the Sierra Funds and Chief Operating Officer of Great
Western Financial Securities.
Executive Vice Executive Vice President-SchwabFunds(R), Charles
WILLIAM J. KLIPP* President, Chief Schwab & Co., Inc.; President and Chief Operating
December 9, 1955 Operating Officer and Officer, Charles Schwab Investment Management,
Trustee Inc. Prior to 1993, Mr. Klipp was Treasurer of Charles
Schwab & Co., Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President and Senior Vice President and Chief Investment Officer,
April 5, 1955 Chief Investment Charles Schwab Investment Management, Inc.
Officer
</TABLE>
- --------
*Mr. Klipp is an "interested person" of the Trust.
-19-
<PAGE> 50
<TABLE>
<S> <C> <C>
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 for the Franklin Group of
Mutual Funds and Assistant Corporate Counsel of
Franklin Resources, Inc.
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.
KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab Investment Secretary
February 27, 1968 Management, Inc. From October, 1994 to July 1996,
Ms. Seaman was Attorney for Franklin Resources, Inc.
Prior to 1994, Ms. Seaman was an attorney for The
Benham Group.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in
the same capacity as described for the Trust for Schwab Investments, Schwab
Capital Trust and Schwab Annuity Portfolios. The address of each individual
listed above is 101 Montgomery Street, San Francisco, California 94104.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Annual
Benefits Accrued as Benefits Upon
Aggregate Part of Fund Retirement from Total
Name of Person, Compensation Expenses from the the Fund Compensation from
Position from the Trust Fund Complex(2) Complex(2) the Fund Complex(2)
-------------------- -------------- --------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
Timothy F. McCarthy, 0 N/A N/A 0
President and Trustee
William J. Klipp, 0 N/A N/A 0
Executive Vice
President, Chief
Operating Officer and
Trustee
</TABLE>
-20-
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C>
Donald F. Dorward, 47,100 N/A N/A 83,950
Trustee
Robert G. Holmes, 47,100 N/A N/A 83,950
Trustee
Donald R. Stephens, 47,100 N/A N/A 83,950
Trustee
Michael W. Wilsey, 47,150 N/A N/A 83,950
Trustee
</TABLE>
1 Figures are for the Trust's fiscal year ended December 31,
1996.
2 "Fund Complex" comprises all 26 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity
Portfolios.
--------------------------------------------------------
-21-
<PAGE> 52
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. If 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 beneficial interest of the Trust, Schwab
Investments and Schwab Capital Trust.
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. The exemptive relief granted to the Trust permits the
Funds and the Trustees to purchase the Selected SchwabFund Securities, which
transactions would otherwise be limited or prohibited by the investment policies
and/or restrictions of the Funds. See "Investment Restrictions."
INVESTMENT MANAGER
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 Family(R), a family of 26 mutual funds
with over $42 billion in assets as of December 15, 1996. The Investment Manager
is an affiliate of Schwab; the Trust's distributor; and the 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 a majority (as defined in the 1940 Act) of
the outstanding voting securities of a Fund. 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, and will terminate automatically upon assignment.
Pursuant to an Advisory Agreement dated June 15, 1994, the Investment
Manager is entitled to receive from Schwab Money Market Fund a graduated annual
fee, payable monthly, of 0.46% of 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; the Investment
Manager is entitled to receive from Schwab Government Money Fund and Schwab
Municipal Money Fund a graduated annual fee, payable monthly, of 0.46% of the
average daily net assets of each such Fund's average daily net assets not in
excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess
of $2 billion, and 0.40% of such net assets over $2 billion.
-22-
<PAGE> 53
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Municipal Money Fund were $28,697,000 (fees were reduced by $13,405,000);
$5,434,000 (fees were reduced by $2,922,000); and $5,421,000 (fees were reduced
by $6,646,000), respectively.
For the fiscal year ended December 31, 1995, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Municipal Money Fund were $36,652,000 (fees were reduced by $15,603,000);
$1,901,000 (fees were reduced by $2,777,000); and $6,465,000 (fees were reduced
by $7,229,000), respectively.
For the fiscal year ended December 31, 1996, the investment advisory
fees paid by Schwab Money Market Fund, Schwab Government Money Fund and Schwab
Municipal Money Fund were $[46,269,751] (fees were reduced by $[19,250,594];
$[5,671,270] (fees were reduced by $[2,846,736]; and $[8,034,054] (fees were
reduced by $[8,734,054]), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of each of Schwab California Municipal
Money Fund, Schwab New York Municipal Money Fund and Schwab U.S. Treasury Money
Fund's average daily net assets not in excess of $1 billion, 0.41% of such net
assets over $1 billion but not in excess of $2 billion, and 0.40% of such net
assets over $2 billion. In addition, the Investment Manager is entitled to
receive from Schwab Retirement Money Fund(R), Schwab Institutional Advantage
Money Fund(R) and Schwab Value Advantage Money Fund a graduated annual fee,
payable monthly, of 0.46% of each such Fund's average daily net assets not in
excess of $2 billion, 0.45% of such net assets over $2 billion but not in excess
of $3 billion, and 0.40% of such net assets over $3 billion.
For the fiscal year ended December 31, 1994, the investment advisory
fees paid by Schwab California Municipal Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money
Fund(R) were $2,254,000 (fees were reduced by $3,274,000); $1,016,000 (fees were
reduced by $1,442,000); $124,000 (fees were reduced by $96,000); and $75,000
(fees were reduced by $21,000), respectively.
For the fiscal year ended December 31, 1995, the investment advisory
fees paid by Schwab California Municipal Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Institutional Advantage Money Fund and Schwab Retirement Money
Fund were $2,748,000 (fees were reduced by $3,697,000); $2,748,000 (fees were
reduced by $2,674,000); $202,000 (fees were reduced by $162,000); and $338,000
(fees were reduced by $16,000), respectively. For the period February 27, 1995
(commencement of operations) to December 31, 1995, the investment advisory fee
paid by Schwab New York Municipal Money Fund was $464,000 (fees were reduced by
$277,000).
For the fiscal year ended December 31, 1996, the investment advisory
fees paid by Schwab California Municipal Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Institutional Advantage Money Fund, Schwab Retirement Money
Fund and Schwab New York Municipal Money Fund were $[3,736,169] (fees were
reduced by $[4,819,714]), $[2,420,097] (fees were reduced by $[3,302,218]),
$[292,217] (fees were reduced by $[224,783]) $[493,952] (fees were reduced
by $[22,452]), and $[30,666,695] (fees were reduced by $[6,080,955])
respectively.
For the fiscal years ended December 31, 1994, 1995, and 1996, the
investment advisory and administration fees paid by Schwab Value Advantage Money
Fund were $2,144,000 (fees were reduced by $6,741,000), $15,877,000 (fees were
reduced by $7,922,000), and $[30,666,695] (fees were reduced by $[6,080,955]),
respectively.
EXPENSES
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The Trust pays the expenses of its operations, including: the fees and
expenses of independent accountants, counsel and the custodian; the cost of
reports and notices to shareholders; the cost of calculating net asset value;
registration fees; the fees and expenses of qualifying the Trust and its shares
for distribution under federal and state securities laws; and membership dues in
the Investment Company Institute or any similar organization. The Trust's
expenses generally are allocated among the Funds on the basis of relative net
assets at the time the expense is incurred, except that expenses directly
attributable to a particular Fund or class of a Fund are charged to that Fund or
class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost of the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS
TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when the Trust engages it to do so. 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; invest money obtained from the sale of Fund shares; reinvest proceeds
from maturing portfolio securities; and meet redemptions of Fund shares.
Portfolio transactions may increase or decrease the yield of a Fund depending
upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of each Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager will generally select brokers and dealers for the Funds primarily on the
basis of the quality and reliability of brokerage
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services, including execution capability and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for each Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as a
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, each Schwab Money Fund's
portfolio turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of a Fund is determined
("Business Day"), such Fund's net investment income will be declared as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time) as a daily dividend to shareholders of record as of the last calculation
of net asset value prior to the declaration. In the case of Schwab Institutional
Advantage Money Fund(R), for shareholders satisfying certain conditions,
investment income will be declared as a daily dividend to shareholders of record
as of that day's calculation of net asset value. Conditions which must be met in
order to receive a dividend for the day on which the order is received by the
Transfer Agent or its authorized agent are: (1) a minimum investment of
$100,000; (2) receipt by Schwab or the Charles Schwab Trust Company before 1:30
p.m. Eastern time; and (3) payment in immediately available funds. Shareholders
will receive dividends in additional shares unless they elect to receive cash.
For each Fund except Schwab Retirement Money Fund(R) and Schwab Institutional
Advantage Money Fund, dividends will normally be reinvested monthly in full
shares of the Fund (for Schwab Municipal Money Fund, Schwab California Municipal
Money Fund, Schwab New York Municipal Money Fund, and Schwab Value Advantage
Money Fund dividends will normally be reinvested monthly in full Sweep Shares
of the Fund) at the net asset value on the 15th day of each month, if a Business
Day, otherwise on the next Business Day. For Schwab Retirement Money Fund(R) and
Schwab Institutional Advantage Money Fund(R), dividends will normally be
reinvested monthly in full shares of the Fund at the net asset value on the 15th
day of each month, if a Business Day, otherwise on the next Business Day. If
cash payment is requested, checks will normally be mailed on the Business Day
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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 income of a Fund (other than Schwab
Municipal Money Fund, Schwab California Municipal Money Fund, Schwab New York
Municipal Money Fund and Schwab Value Advantage Money Fund) consists of: (1)
accrued interest income, plus or minus amortized discount or premium, minus (2)
accrued expenses allocated to that Fund. For this purpose, for Schwab Municipal
Money Fund, Schwab California Municipal Money Fund, Schwab New York Municipal
Money Fund and Schwab Value Advantage Money Fund, the net investment income of
the Sweep Shares of each Fund consists of: (1) accrued interest income plus or
minus amortized discount or premium, allocated to the Sweep Shares of that Fund
minus (2) accrued expenses allocated to the Sweep Shares of that Fund. If a Fund
realizes any capital gains, they will be distributed at least once during the
year as determined by the Board of Trustees. Any realized capital losses to the
extent not offset by realized capital gains will be carried forward. It is not
anticipated that a Fund will realize any long-term capital gains. Expenses of
the Trust are accrued each day. Should the net asset value of a Fund deviate
significantly from market value, the Board of Trustees could decide to value the
investments at market value and any unrealized gains and losses could affect the
amount of the Fund's distributions.
FEDERAL INCOME TAXES
It is each Fund's policy to qualify for taxation as a "regulated investment
company" by meeting the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). By following this policy, each Fund
expects to eliminate or reduce to a nominal amount the federal income tax to
which it is subject.
In order to qualify as a regulated investment company, each of the Funds
must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash or cash items, U.S. Government securities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or
securities of any other regulated investment company) or of two or more issuers
that the Fund controls, within the meaning of the Code, and that are engaged in
the same, similar or related trades or businesses. These requirements may
restrict the degree to which a Fund may engage in short-term trading and certain
hedging transactions and may limit the range of a Fund's investments. If a Fund
qualifies as a regulated investment company, it will not be subject to federal
income tax on the part of its net investment income and net realized capital
gains, if any, which it distributes to shareholders, provided that the Fund
meets certain minimum distribution requirements. To comply with these
requirements, a Fund must distribute at least (a) 90% of its "investment company
taxable income" (as that term is defined in the Code) and (b) 90% of the excess
of its (i) tax-exempt interest income over (ii) certain deductions attributable
to that income (with certain exceptions), for its taxable year. Each Fund
intends to make sufficient distributions to shareholders to meet these
requirements.
If a Fund fails to distribute in a calendar year (regardless of whether it
has a non-
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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 in which they were declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.
The Funds do not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) 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) are generally 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 other disposition of shares of the
Funds are generally 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 a Fund also may be
subject to state, local and foreign taxes, and its treatment under applicable
tax laws may differ from the federal income tax treatment.
SCHWAB MUNICIPAL MONEY FUND,
SCHWAB CALIFORNIA MUNICIPAL
MONEY FUND AND SCHWAB NEW
YORK MUNICIPAL MONEY FUND
The Code permits a regulated investment company that invests at least 50%
of its assets at the close of each quarter in Municipal Securities to pass
through to its investors, on a tax-exempt basis, net Municipal Securities
interest income. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by Schwab Municipal Money Fund, Schwab
California Municipal Money Fund or Schwab New York Municipal Money Fund and
designated as an exempt-interest dividend in a written notice mailed to
shareholders after the close of such Fund's taxable year, but not to exceed in
the aggregate the net Municipal Securities interest income received by each such
Fund during the
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taxable year. The percentage of the total dividends paid for any taxable year
that qualified as exempt-interest dividends will be the same for all
shareholders receiving dividends from each Fund during such year, regardless of
the period for which the Shares were held. If for any taxable year Schwab
Municipal Money Fund, Schwab California Municipal Money Fund or Schwab New York
Municipal Money Fund does not qualify for the special federal tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to federal tax at regular corporate rates (without any deduction for
distributions to its shareholders) when distributed, and Municipal Securities
interest income, although not taxed to the Funds, would be taxable to
shareholders.
A shareholder should consult his or her own tax adviser with respect to
whether exempt-interest dividends would be excludable from gross income if the
shareholder were treated as a "substantial user" of facilities financed by an
obligation held by a Fund or a "related person" to such user under the Code. Any
loss on the sale or exchange of any share held for six months or less will be
disallowed to the extent of the amount of the exempt-interest dividend received
with respect to such share. The U.S. Treasury Department is authorized to issue
regulations reducing the period to not less than 31 days for certain regulated
investment companies, but no such regulations have been issued as of the date of
this Statement of Additional Information.
All or part of interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund will not be deductible by the
shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of that Fund's total distributions (excluding distributions of the excess of net
long-term capital gains over net short-term capital losses) paid to the
shareholder that are exempt-interest dividends. Under rules used by the
Internal Revenue Service, the purchase of shares of a Fund may be considered to
have been made with borrowed funds even though such funds are not directly
traceable to the purchase of the shares.
The discussion of federal income taxation presented above summarizes only
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 Schwab California Municipal 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"). Schwab
California Municipal Money Fund intends to qualify under the above requirement
so that it can pay California exempt-interest dividends. If Schwab California
Municipal Money Fund fails to so qualify, no part of its dividends will be
exempt from State of California personal income tax.
With respect to Schwab New York Municipal Money Fund, there is no analogous
requirement, so all dividends representing interest on New York Municipal
Securities that is exempt from New York personal income taxation will be exempt
from New York State and municipal income taxes in the hands of non-corporate
shareholders ("New York exempt-interest dividends").
Not later than 60 days after the close of its taxable year, Schwab
California and New York
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Municipal Money Funds will notify each shareholder of the portion of the
dividends paid by it to the shareholder with respect to such taxable year which
is exempt from State of California personal income tax or New York personal
income tax, respectively.
The total amount of California exempt-interest dividends paid by Schwab
California Municipal Money Fund to all of its shareholders with respect to any
taxable year cannot exceed the amount of interest received by the Fund during
such year on California Exempt Obligations, less any expenses or expenditures
(including any expenditures attributable to the acquisition of additional
securities for Schwab California Municipal Money Fund) that are allocable from
such interest. Dividends paid by Schwab California Municipal Money Fund in
excess of this limitation will be treated as ordinary dividends subject to State
of California personal income tax at ordinary rates. For purposes of this
limitation, expenses or other expenditures paid during any year generally will
be allocable with funds attributable to interest received by the Fund from
California Exempt Obligations for such year in the same ratio as such interest
from California Exempt Obligations for such year bears to the total gross income
earned by the Fund for the year. The effect of this accounting convention is
that amounts of interest from California Exempt Obligations received by Schwab
California Municipal Money Fund that would otherwise be available for
distribution as California exempt- interest dividends will be reduced by the
expenses and expenditures be allocable from such amounts.
To the extent, if any, dividends paid to shareholders by Schwab California
Municipal Money Fund or New York Municipal Money Fund are derived from long-term
and short-term capital gains, such dividends will not constitute California or
New York exempt-interest dividends. Rules similar to those regarding the
treatment of such dividends for federal income tax purposes are also applicable
for State of California and New York personal income tax purposes. Moreover,
interest on indebtedness incurred by a shareholder to purchase or carry shares
of Schwab California Municipal Money Fund or New York Municipal 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 a summary of only some of the important state personal
income tax considerations generally affecting Schwab California Municipal and
New York Municipal Money Funds and their shareholders. No attempt is made to
present a detailed explanation of the state personal income tax treatment of
Schwab California Municipal and New York Municipal Money Funds or their
shareholders, and this discussion is not intended as a substitute for careful
planning. Further, it should be noted that the portion of Schwab California
Municipal and New York Municipal 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 Municipal Money Fund or New York Municipal Money Fund, including, in
particular, corporate investors which may be subject to California or New York
franchise or corporate income tax, should consult their tax advisers with
respect to the application of such tax to the receipt of dividends from the
Funds and as to their own state tax situation, in general.
SHARE PRICE CALCULATION
Each Schwab Money Fund values its portfolio instruments at amortized
cost, which means they are valued at their acquisition cost, as adjusted for
amortization of premium or
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discount, rather than at current market value. Calculations are made to compare
the value of a Fund's investments at amortized cost with market values. Market
valuations are obtained by using actual quotations provided by market makers,
estimates of market value or values obtained from yield data relating to classes
of money market instruments published by reputable sources at the mean between
the bid and asked prices for the instruments. The amortized cost method of
valuation seeks to maintain a stable $1.00 per share net asset value even where
there are fluctuations in interest rates that affect the value of portfolio
instruments. Accordingly, this method of valuation can in certain circumstances
lead to a dilution of a shareholder's interest. If a deviation of 1/2 of 1% or
more were to occur between the net asset value per share calculated by reference
to market values and a Schwab Money Fund's $1.00 per share net asset value, or
if there were any other deviation that the Board of Trustees of the Trust
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If a Schwab Money Fund's net asset value per share (computed using
market values) declined, or were expected to decline, below $1.00 (computed
using amortized cost), the Board of Trustees might temporarily reduce or suspend
dividend payments in an effort to maintain the net asset value at $1.00 per
share. As a result of such reduction or suspension of dividends or other action
by the Board of Trustees, an investor would receive less income during a given
period than if such a reduction or suspension had not taken place. Such action
could result in investors receiving no dividend for the period during which they
hold their shares and receiving, upon redemption, a price per share lower than
that which they paid. On the other hand, if a Schwab Money Fund's net asset
value per share (computed using market values) were to increase, or were
anticipated to increase above $1.00 (computed using amortized cost), the Board
of Trustees might supplement dividends in an effort to maintain the net asset
value at $1.00 per share.
HOW THE FUNDS REPORT PERFORMANCE
The historical performance of a Fund may be shown in the form of total
return, yield, effective yield and, for the Sweep Shares of Schwab Municipal
Money Fund, Schwab California Municipal Money Fund and Schwab New York Municipal
Money Fund, taxable equivalent yield and taxable equivalent effective yield.
These measures of performance are described below.
Total Return
Standardized Total Return. Average annual total return for a period is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in a Fund made at the beginning of the period, then
calculating the average annual compounded rate of return that would produce the
same investment return on the $1,000 over the same period. In computing average
annual total return, a Fund assumes the reinvestment of all distributions at net
asset value on applicable reinvestment dates.
Nonstandardized Total Return. Nonstandardized total return for a Fund
differs from standardized total return in that it relates to periods other than
the period for standardized total return and/or that it represents aggregate
(rather than average) total return.
In addition, an after-tax total return for each Fund may be calculated
by taking that Fund's standardized or non-standardized total return and
subtracting applicable federal taxes from the portions of each Fund's total
return attributable to capital gains distributions and ordinary income. This
after-tax total return may be compared to that of other mutual funds with
similar investment objectives as reported by independent sources.
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Each Fund may also report the percentage of that Fund's standardized or
non-standardized total return that would be paid to taxes annually (at the
applicable federal personal income and capital gains tax rates before redemption
of Fund shares). This proportion may be compared to that of other mutual funds
with similar investment objectives as reported by independent sources.
A Fund may also advertise its cumulative total return since inception.
This number is calculated using the same formula that is used for average annual
total return except that, rather than
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calculating the total return based on a one-year period, cumulative total return
is calculated from inception to the date specified.
<TABLE>
<CAPTION>
From Inception Date to
December 31, 1995 One Year
----------------------
Average Total Return
Annual Cumulative as of
Inception Date Total Return Total Return December 31, 1995
-------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Schwab Institutional
Advantage
Money Fund(R) January 4, 1994 4.77% 9.73% 5.65%
Schwab Retirement
Money Fund(R) March 2, 1994 4.76% 8.90% 5.43%
</TABLE>
YIELD
A Fund's yield refers to the net investment income generated by a
hypothetical investment in the Fund (or, in the case of Schwab Municipal Money
Fund, Schwab California Municipal Money Fund, Schwab New York Municipal Money
Fund and Schwab Value Advantage Money Fund, the Sweep Shares of the Fund) over a
specific 7-day period. This net investment income is then annualized, which
means that the net investment income generated during the 7-day period is
assumed to be generated in each 7-day period over an annual period, and is shown
as a percentage of the investment.
EFFECTIVE YIELD
A Fund's effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Sweep Shares of Schwab Municipal
Fund is computed by dividing that portion of the yield of the class (computed as
described above) that is tax-exempt by an amount equal to one minus the stated
federal income tax rate (normally assumed to be the maximum applicable marginal
tax bracket rate) and adding the result to that portion, if any, of the yield of
the class that is not tax-exempt. The taxable equivalent yield of the Sweep
Shares of Schwab California Municipal Money Fund is calculated by dividing that
portion of the yield of the class (computed as described above) which is
tax-exempt by an amount equal to one minus the stated combined State of
California and federal income tax rate (normally assumed to be the maximum
federal marginal rate of 39.6% and the California marginal rate of 9.3%,
although other rates may be used at times), and adding the result to that
portion, if any, of the yield of the class that is not tax-exempt. The taxable
equivalent yield of the Sweep Shares of Schwab New York Municipal Money Fund is
calculated by dividing that portion of the yield of the class (computed as
described above) which is tax-exempt by an amount equal to one minus the stated
combined New York municipal, State of New York and federal income tax rate
(normally assumed to be the maximum federal marginal rate of 39.6%, the State of
New York marginal
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rate of 7.125% and the New York municipal marginal rate of 3.91%, although other
rates may be used at times), and adding the result to that portion, if any, of
the yield of the class that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, Schwab Municipal Money Fund generally assumes an effective tax rate of
39.6%, Schwab California Municipal Money Fund generally assumes an effective tax
rate (combining the federal 39.6% rate and the California 9.30% rate, and
assuming the taxpayer deducts California state taxes paid) of 45.22%, and Schwab
New York Municipal Money Fund generally assumes an effective tax rate (combining
the federal 39.6% rate, the New York state 7.125% rate and the New York
municipal 3.91% rate, and assuming the taxpayer deducts New York state and
municipal taxes paid) of 46.27%. Investors in Schwab New York Municipal Money
Fund should understand that, under legislation enacted in New York State and New
York City, the maximum effective tax rates for 1997 will be 45.79%. The
effective tax rates used in determining such yields do not reflect the tax costs
resulting from the full or partial loss of the benefits of personal exemptions,
itemized deductions and California exemption credits that may result from the
receipt of additional taxable income by taxpayers with adjusted gross incomes
exceeding $117,950 or ($58,975 for married filing separate returns) in 1996.
Actual taxable equivalent yields and taxable equivalent effective yields may be
higher for taxpayers subject to the loss of these benefits than the rates
reported by the Funds.
TAX-EXEMPT VERSUS TAXABLE YIELD
Investors may want to determine which investment -- tax exempt or
taxable -- will provide a higher after-tax return. To determine the taxable
equivalent yield or taxable equivalent effective yield, simply divide the yield
or effective yield of Sweep Shares of Schwab Municipal Money Fund, Schwab
California Municipal Money Fund or Schwab New York Municipal Money Fund by 1
minus your marginal federal tax rate (or combined state and federal tax rate in
the case of Schwab California Municipal Money Fund, or combined municipal,
state, and federal tax rate in the case of Schwab New York Municipal Money
Fund). Note, however, that as discussed above, full or partial loss by certain
investors of the described federal tax benefits could cause the resulting figure
to understate the after-tax return produced by the Sweep Shares of the Fund in
question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1996 is presented below. The taxable equivalent yield and
taxable equivalent effective yield figures are based, in the case of Schwab
Municipal Money Fund, upon an assumed 1996 effective tax rate of [39.6%]; in the
case of Schwab California Municipal Money Fund, upon an assumed 1996 effective
tax rate of [46.24%]; in the case of Schwab New York Municipal Money Fund, upon
an assumed effective tax rate of [46.88%]. The yields below are based on the
maximum rates in effect for 1996. Tax rates in effect for 1997 are different.
See the discussion above relating to federal, State of California and State of
New York tax rates.
<PAGE> 64
<TABLE>
<CAPTION>
Taxable Taxable
Effective Equivalent Equivalent
Yield Yield Yield Effective Yield
----- --------- ---------- ---------------
<S> <C> <C> <C> <C>
Schwab Money Market 4.80% 4.91% -- --
Fund
Schwab Government 4.74% 4.85% -- --
Money Fund
Schwab U.S. Treasury 4.69% 4.80% -- --
Money Fund
Schwab Municipal 3.29% 3.34% 3.45% 5.53%
Money Fund-Sweep Shares
Schwab California 3.20% 3.25% 5.84% 5.93%
Municipal Money
Fund-Sweep Shares
Schwab New York 3.15% 3.20% 5.86% 5.96%
Municipal Money
Fund-Sweep Shares
Schwab Value Advantage N/A N/A -- --
Money Fund-Sweep Shares
</TABLE>
<PAGE> 65
GENERAL INFORMATION
The Trust generally is 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)
determination of 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 ten 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 the 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
<PAGE> 66
terminate the Trust (or any of its investment portfolios) by notice to the
shareholders without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the Trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote, because
it is limited to circumstances in which a disclaimer is inoperative and the
Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
Principal Holders of Securities
As of [March 31, 1997], The Charles Schwab Trust Company FBO Mutual
Fund FSI2 Trading, One Montgomery Street, 7th Floor, San Francisco, California
94104 directly or beneficially owned [ %] of Schwab Retirement Money
Fund(R).
As of [March 31, 1997], The Charles Schwab Trust Company TTEE
Technology Financial Assoc. Inc., Retirement Savings Plan, FBO Henry H. Hoffman,
One Montgomery Street, 7th Floor, San Francisco, California 94104 directly or
beneficially owned [ %] and Queens-Long Island Medical Group-401K Plan, 106
EAB Plaza, 12th Floor, Uniondale, New York 11556 directly or beneficially owned
[ ]% of Schwab Institutional Advantage Money Fund(R).
In addition, as of [April 16, 1997] the officers and Trustees of the
Trust, as a group, owned less than 1% of each Fund's outstanding voting
securities.
Access to Schwab's Mutual
Fund OneSource(R) Service
With Schwab's Mutual Fund OneSource Service ("OneSource"), a
shareholder can invest in over 575 mutual funds from many fund companies,
subject to the following. Schwab's standard transaction fee will be charged on
each redemption of fund shares held for 90 days or less to discourage short-term
trading. Mutual fund shares held for more than 90 days are exempt from the
short-term redemption policy and may be sold without penalty. Up to 15
short-term redemption of fund shares per calendar year are permitted. If you
exceed this number, you will no longer be able to buy or
<PAGE> 67
sell fund shares without paying a transaction fee. As a courtesy, we will notify
you in advance if your short-term redemptions are nearing the point where all of
your future trades will be subject to transaction fees. Schwab reserves the
right to modify OneSource's terms and conditions at any time. For more
information, a shareholder should contact his or her Schwab office during its
regular business hours or call 800-2 NO-LOAD, 24 hours a day.
<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(R)(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)
Schwab S&P 500 Fund-Investor Shares(2)
Schwab S&P 500 Fund-e.Shares(TM)(2), (3)
Schwab Analytics Fund(TM)(2)
Schwab OneSource Portfolios-International
Schwab OneSource Portfolios-Growth Allocation
Schwab OneSource Portfolios-Balanced Allocation
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(4)
Schwab California Long-Term Tax-Free Bond Fund(4)
Money Market Funds(5)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)-Sweep Shares
Schwab Value Advantage Money Fund-Investor Shares
Schwab Municipal Money Fund-Sweep Shares
Schwab Municipal Money Fund-Value Advantage Shares(TM)
Schwab California Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Value Advantage Shares(TM)
Schwab Retirement Money Fund(R)(6)
Schwab Institutional Advantage Money Fund(R)(6)
Schwab New York Municipal Money Fund-Sweep Shares
Schwab New York Municipal Money Fund-Value Advantage Shares(TM)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios classes of shares of Schwab
Capital Trust.
(3) Available only through SchwabLink(TM).
(4) Available only to California residents and residents of selected other
states.
(5) All listed money market funds are separate investment portfolios of the
Trust.
(6) Designed for institutional investors only.
<PAGE> 69
PURCHASE AND REDEMPTION OF SHARES
With the exception of Schwab Retirement Money Fund(R), Schwab
Institutional Advantage Money Fund(R) and Schwab Value Advantage Money Fund(R),
each Fund's minimum initial investment is $1,000 and subsequent investments of
$100 or more may be made. For Schwab Retirement Money Fund, Schwab Institutional
Advantage Money Fund and Schwab Value Advantage Money Fund, the minimum initial
investment is $1, $25,000 and $25,000 for each Fund, respectively, and
subsequent investments of $1 or more may be made for Schwab Retirement Money
Fund and Schwab Institutional Money Fund. These minimum requirements may be
changed at any time and are not applicable to certain types of investors. For
all retirement plan, Schwab One(R) and certain other types of accounts, any
account credit balance in excess of $1.00 and subsequent amounts of $1.00 on any
Business Day will be automatically invested on a daily basis in the Schwab Money
Fund selected (except that this feature is not available for Schwab Retirement
Money Fund or Schwab Institutional Advantage Money Fund). The Trust may waive
the minimums for purchases by Trustees, Directors, officers or employees of the
Trust, Schwab or the Investment Manager. The Trust has made an election with the
SEC to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
its net assets at the beginning of such period. This election is irrevocable
without the SEC's prior approval. Redemption requests in excess of the stated
limits may be paid, in whole or in part, in investment securities or in cash, as
the Trust's Board of Trustees may deem advisable; however, payment will be made
wholly in cash unless the Board of Trustees believes that economic or market
conditions exist that would make such a practice detrimental to the best
interests of the Fund. If redemption proceeds are paid in investment securities,
such securities will be valued as set forth in the Prospectus of the Fund
affected under "Share Price Calculation" and a redeeming shareholder would
normally incur brokerage expenses if he or she converted the securities to cash.
Schwab Institutional Advantage Money Fund and Schwab Retirement Money Fund may
also elect to invoke a 7-day period for cash settlement of individual redemption
requests in excess of $250,000 or 1% of each Fund's net assets, whichever is
less.
OTHER INFORMATION
The Prospectuses of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectuses.
Certain portions of the Registration Statement have been omitted from
the Prospectuses and this Statement of Additional Information pursuant to the
rules and regulations of the SEC. The Registration Statement including the
exhibits filed therewith may be examined at the office of the SEC in Washington,
D.C.
Statements contained in the Prospectuses or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectuses and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
<PAGE> 70
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.
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
An S&P A-1 commercial paper rating indicated a 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 satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
Duff & Phelps Credit Rating Co.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term U.S. Treasury obligations), a Duff-1 rating
signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1-
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-two rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
Fitch Investors Service, Inc.
F-1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F-1 reflect an assurance of timely
payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.
<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
very strong safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a strong 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
good 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 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
<PAGE> 72
quality. The risk factors associated with these bonds are negligible, being only
slightly more than for risk-free U.S. Treasury debt. AA rated bonds are of high
credit quality and have strong protection factors. The risks associated with
them are modest but may vary slightly from time to time because of economic
conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS
ISSUED BY BANKS
Thomson Bankwatch (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very high. 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.
<PAGE> 73
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
CORPORATE
OBLIGATIONS--55.9%(a)
ASSET BACKED SECURITIES--9.2%
Apreco, Inc.
5.67%, 03/07/96 $20,000 $19,795
Asset Securitization
Cooperative Corp.
5.83%, 02/01/96 25,000 24,875
Beta Finance, Inc.
5.78%, 02/05/96 26,500 26,355
5.60%, 05/24/96 25,000 24,455
Broadway Capital Corp.
5.86%, 01/08/96 80,000 79,910
5.92%, 01/12/96 30,179 30,125
5.97%, 02/20/96 10,000 9,918
CXC Inc.
5.71%, 02/29/96 61,000 60,435
Corporate Asset Funding Corp.
5.77%, 02/05/96 17,000 16,906
Corporate Receivables Corp.
5.74%, 02/23/96 28,100 27,866
ESC Securitization, Inc.
5.79%, 01/24/96 25,000 24,909
5.79%, 01/25/96 15,000 14,943
5.79%, 01/26/96 15,000 14,941
5.77%, 02/08/96 25,000 24,850
5.76%, 02/21/96 16,000 15,871
5.58%, 03/21/96 44,000 43,462
Enterprise Funding Corp.
5.81%, 01/09/96 49,041 48,979
5.83%, 01/22/96 26,067 25,980
5.82%, 01/24/96 18,251 18,184
5.84%, 02/02/96 23,804 23,682
5.78%, 02/14/96 12,681 12,593
5.78%, 02/15/96 20,289 20,144
5.75%, 02/23/96 18,649 18,493
5.70%, 03/14/96 21,518 21,273
5.70%, 03/19/96 25,072 24,767
5.58%, 03/20/96 19,705 19,467
5.74%, 05/16/96 10,295 10,078
Eureka Securitization, Inc.
5.78%, 02/15/96 17,000 16,879
5.62%, 03/13/96 50,000 49,445
5.71%, 03/18/96 25,000 24,699
Falcon Asset
Securitization Corp.
5.77%, 02/06/96 25,750 25,604
First Deposit Master Trust
Series 1993-3
5.71%, 03/06/96 30,000 29,695
5.58%, 03/21/96 10,118 9,994
Preferred Receivables Corp.
5.84%, 02/08/96 36,825 36,600
5.76%, 02/12/96 34,375 34,148
Ranger Funding Corp.
5.84%, 01/08/96 21,000 20,977
5.81%, 01/09/96 20,000 19,975
5.81%, 01/10/96 11,000 10,984
5.78%, 02/13/96 10,000 9,932
5.76%, 02/22/96 15,000 14,877
5.62%, 03/04/96 14,500 14,359
5.62%, 03/15/96 10,000 9,886
5.58%, 03/19/96 10,000 9,881
Receivables Capital Corp.
5.84%, 01/10/96 42,886 42,824
5.81%, 01/26/96 38,463 38,310
5.81%, 02/01/96 40,097 39,899
5.79%, 02/21/96 31,677 31,421
Sheffield Receivables Corp.
5.81%, 01/08/96 16,000 15,982
Special Purpose Accounts
Receivable Cooperative Corp.
5.78%, 02/13/96 18,000 17,877
WCP Funding, Inc.
5.79%, 01/22/96 15,000 14,950
5.76%, 02/16/96 25,000 24,819
5.75%, 02/16/96 10,000 9,928
5.70%, 03/18/96 15,800 15,610
---------
1,292,811
---------
AUTOMOTIVE--3.5%
Ford Credit Europe PLC
5.81%, 02/05/96 25,000 24,861
5.79%, 02/05/96 25,000 24,861
5.76%, 02/14/96 50,000 49,654
5.76%, 02/15/96 41,200 40,908
General Motors
Acceptance Corp.
5.82%, 02/09/96 100,000 99,381
5.82%, 02/14/96 30,000 29,790
5.62%, 03/19/96 9,000 8,892
5.72%, 04/22/96 99,000 97,284
5.72%, 05/01/96 70,000 68,691
Renault Credit International SA
Banque
5.83%, 02/15/96 49,600 49,244
--------
493,566
--------
BANKING--AUSTRALIA--1.2%
ANZ (Delaware), Inc.
5.79%, 02/05/96 28,350 28,193
5.55%, 05/10/96 25,000 24,511
5.56%, 05/13/96 25,000 24,498
Westpac Capital Corp.
5.79%, 05/01/96 50,000 49,054
5.54%, 06/12/96 50,000 48,780
--------
175,036
--------
BANKING--BELGIUM--1.2%
Generale Bank, Inc.
5.67%, 01/10/96 129,000 128,822
5.74%, 03/12/96 20,000 19,780
5.80%, 04/03/96 25,000 24,636
--------
173,238
--------
BANKING--CANADA--4.1%
Bank of Montreal
5.79%, 01/11/96 53,000 52,916
5.81%, 01/29/96 132,000 131,413
Bank of Nova Scotia
5.75%, 01/19/96 65,000 64,817
5.75%, 01/24/96 50,000 49,820
5.81%, 02/01/96 50,000 49,754
5.82%, 02/02/96 90,000 89,542
5.81%, 02/02/96 84,000 83,573
Toronto-Dominion Holdings
5.51%, 07/10/96 60,000 58,303
--------
580,138
--------
</TABLE>
F-1
<PAGE> 74
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--DENMARK--0.2%
Den Danske Corp.
5.80%, 04/10/96 $ 30,000 $ 29,530
-------
BANKING--DOMESTIC BANK
HOLDING COMPANY--2.2%
Bankers Trust New York Corp.
5.77%, 02/12/96 25,000 24,834
NationsBank Corp.
5.80%, 01/22/96 67,000 66,777
5.69%, 01/23/96 75,000 74,744
5.80%, 02/08/96 100,000 99,400
5.80%, 02/09/96 20,000 19,877
5.55%, 05/21/96 30,000 29,364
-------
314,996
-------
BANKING--GERMANY--0.4%
Banco Boavista S.A./
(Bayerische Vereinsbank
AG LOC)
5.81%, 01/19/96 10,000 9,971
Kredietbank N.A.
Finance Corp.
5.78%, 01/08/96 18,500 18,480
5.78%, 01/17/96 30,000 29,925
-------
58,376
-------
BANKING--ITALY--0.5%
Cariplo Finance, Inc.
5.76%, 02/15/96 25,000 24,823
5.77%, 02/20/96 40,000 39,684
-------
64,507
-------
BANKING--JAPAN--0.9%
Bancal Tri-State Corp./
(Mitsubishi Bank
Keepwell Agreement)
5.86%, 02/22/96 25,000 24,792
5.81%, 03/15/96 40,000 39,531
Deerfield Capital Corp./
(Sumitomo Bank Ltd. LOC)
6.15%, 01/05/96 38,800 38,774
Ridge Capital II/(Dai-Ichi
Kangyo Bank Ltd. LOC)
6.15%, 01/05/96 14,550 14,540
Stellar Capital Corp./
(Bank of Tokyo
Liquidity Agreement)
6.01%, 02/26/96 12,873 12,754
-------
130,391
-------
BANKING--UNITED KINGDOM--2.0%
Bank of Scotland
Treasury Services
5.53%, 06/11/96 55,000 53,668
Cheltenham & Gloucester PLC
5.80%, 01/29/96 50,000 49,778
5.79%, 02/01/96 30,000 29,852
5.77%, 02/07/96 40,000 39,766
Yorkshire Building Society
5.81%, 02/05/96 25,000 24,861
5.77%, 02/13/96 30,000 29,796
5.69%, 03/13/96 25,000 24,720
5.60%, 05/29/96 25,000 24,436
-------
276,877
-------
COMPUTER AND OFFICE EQUIPMENT--0.2%
CSC Enterprises
5.80%, 01/19/96 29,000 28,917
-------
FINANCE (COMMERCIAL)--8.8%
CIT Group Holdings, Inc.
5.76%, 02/14/96 63,000 62,563
5.77%, 02/16/96 50,000 49,637
General Electric
Capital Corp.
5.76%, 02/13/96 100,000 99,322
5.69%, 03/28/96 63,000 62,150
5.70%, 04/03/96 43,000 42,379
5.55%, 05/02/96 25,000 24,540
5.59%, 05/06/96 156,000 153,019
5.62%, 05/07/96 64,000 62,763
5.51%, 06/12/96 36,000 35,126
5.52%, 06/14/96 60,000 58,526
5.53%, 07/26/96 50,000 48,465
General Electric
Capital Services
5.76%, 02/12/96 50,000 49,669
5.76%, 02/13/96 50,000 49,661
5.76%, 02/15/96 54,000 53,617
5.74%, 03/06/96 64,000 63,355
5.70%, 04/03/96 50,000 49,278
5.61%, 05/03/96 25,000 24,532
5.59%, 05/07/96 50,000 49,037
5.58%, 05/08/96 23,000 22,554
5.52%, 06/13/96 75,000 73,169
Transamerica Finance Corp.
5.74%, 02/22/96 50,000 49,591
5.74%, 02/23/96 50,000 49,583
---------
1,232,536
---------
FINANCE (CONSUMER)--4.0%
American Express Credit Corp.
5.81%, 03/01/96 47,000 46,556
5.75%, 03/08/96 45,000 44,532
5.60%, 05/09/96 43,000 42,157
5.58%, 05/15/96 28,000 27,428
5.57%, 05/15/96 50,000 48,978
5.50%, 06/06/96 39,000 38,090
5.50%, 06/10/96 40,000 39,043
Associates Corp. of
North America
5.65%, 05/09/96 122,000 119,587
Household Finance Corp.
5.80%, 01/25/96 17,000 16,935
Sears Roebuck
Acceptance Corp.
5.82%, 01/10/96 50,000 49,928
5.82%, 01/11/96 34,000 33,946
5.79%, 02/14/96 30,000 29,791
5.79%, 02/16/96 30,000 29,781
--------
566,752
--------
GOVERNMENT LOCALITY--FOREIGN--0.7%
New South Wales
Treasury Corp.
5.81%, 01/10/96 19,000 18,973
5.80%, 01/30/96 76,000 75,650
--------
94,623
--------
</TABLE>
F-2
<PAGE> 75
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
MINING AND MINERAL RESOURCES--0.2%
BHP Finance (U.S.A.), Inc.
5.79%, 02/22/96 $ 15,000 $ 14,877
5.76%, 02/23/96 10,000 9,917
-------
24,794
-------
MISCELLANEOUS MANUFACTURING--2.4%
Hanson Finance (U.K.) PLC
5.82%, 01/12/96 32,000 31,944
5.80%, 01/12/96 60,500 60,394
5.81%, 01/19/96 60,000 59,829
5.80%, 01/19/96 32,000 31,909
5.84%, 02/01/96 115,000 114,434
5.75%, 02/29/96 35,000 34,675
5.58%, 03/21/96 10,000 9,878
-------
343,063
-------
MORTGAGE BANKING--0.5%
Fleet Mortgage Group, Inc.
5.86%, 01/26/96 25,000 24,900
5.81%, 02/22/96 23,000 22,810
5.66%, 03/06/96 25,000 24,747
-------
72,457
-------
PERSONAL CARE PRODUCTS--0.4%
Colgate-Palmolive Co.
5.80%, 01/22/96 52,000 51,827
-------
PHARMACEUTICALS--0.5%
Glaxo Wellcome PLC
5.79%, 01/17/96 50,000 49,873
5.79%, 01/18/96 22,000 21,941
-------
71,814
-------
SECURITIES BROKERAGE-DEALER--12.3%
BT Securities Corp.
5.84%, 01/25/96 18,000 17,931
5.77%, 02/16/96 20,000 19,855
Bear Stearns
Companies, Inc.
5.79%, 02/07/96 65,000 64,619
CS First Boston, Inc.
5.79%, 01/08/96 30,000 29,967
5.82%, 02/05/96 30,000 29,833
Dean Witter Discover
5.79%, 01/19/96 30,000 29,915
5.79%, 02/08/96 23,000 22,862
5.79%, 02/16/96 25,000 24,818
Goldman Sachs Group, LP
5.82%, 01/11/96 100,000 99,841
5.83%, 01/17/96 120,000 119,694
5.83%, 01/18/96 50,000 49,865
5.75%, 01/24/96 50,000 49,820
5.80%, 03/08/96 123,000 121,704
5.77%, 03/21/96 24,000 23,700
5.77%, 03/22/96 44,000 43,443
5.72%, 04/08/96 50,000 49,238
5.72%, 04/09/96 100,000 98,460
Lehman Brothers
Holdings, Inc.
5.74%, 03/15/96 25,000 24,710
5.64%, 03/27/96 16,000 15,787
Morgan Stanley Group,
Inc.
5.83%, 01/08/96 30,000 29,966
5.83%, 01/09/96 42,000 41,946
5.83%, 01/10/96 50,000 49,928
5.78%, 02/06/96 183,000 181,957
5.78%, 02/07/96 50,000 49,707
5.79%, 02/08/96 70,000 69,579
5.79%, 02/09/96 15,000 14,907
5.79%, 02/12/96 75,000 74,501
5.89%, 02/13/96 35,000 34,761
Nomura Holdings
America, Inc.
5.92%, 01/03/96 13,000 12,996
5.92%, 01/04/96 39,000 38,981
5.85%, 01/11/96 15,000 14,976
5.88%, 01/12/96 5,000 4,991
5.86%, 01/18/96 20,000 19,946
5.86%, 01/22/96 9,000 8,970
Paine Webber Group, Inc.
5.95%, 01/03/96 15,000 14,995
5.95%, 01/05/96 35,000 34,977
Salomon, Inc.
6.15%, 01/02/96 16,902 16,899
6.02%, 02/14/96 40,000 39,710
6.02%, 02/15/96 40,000 39,704
---------
1,730,459
---------
STUDENT LOANS--0.5%
Student Loan Corp.
5.77%, 02/16/96 25,000 24,819
5.76%, 02/16/96 25,000 24,819
--------
49,638
--------
TOTAL CORPORATE OBLIGATIONS (Cost
$7,856,346) 7,856,346
---------
VARIABLE RATE OBLIGATIONS--6.8%(b)
ASSET BACKED SECURITIES--0.2%
Advanta Credit Card
Master Trust
5.87%, 01/07/96 24,000 24,000
--------
BANKING--DOMESTIC BANK
HOLDING COMPANY--0.5%
Bankers Trust New York Corp.
6.13%, 01/02/96 75,000 75,000
--------
BANKING--DOMESTIC--0.1%
6700 Cherry Avenue
Partners Variable Rate
Demand Bonds Series
1993/
(Wells Fargo Bank LOC)
6.35%, 01/07/96 10,500 10,500
--------
BANKING--FRANCE--1.0%
New Jersey Economic
Development Authority
Taxable Adjustable Rate
Money Market Securities
(GE Aerospace Camden
Development Project)
Series A/(Banque
Nationale de Paris LOC)
5.86%, 01/07/96 28,700 28,700
</TABLE>
F-3
<PAGE> 76
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Jersey Economic
Development Authority
Taxable Adjustable Rate
Money Market Securities
(GE Aerospace Camden
Development Project)
Series B/(Banque
Nationale de Paris LOC)
5.86%, 01/07/96 $10,000 $ 10,000
The City of New York,
General Obligation
Bonds, Fiscal 1995
Series F-8/
(Societe Generale LOC)
6.00%, 01/07/96 51,000 51,000
The City of New York,
General Obligation
Bonds, Fiscal 1996
Series A-2/
(Societe Generale LOC)
6.00%, 01/07/96 52,500 52,500
-------
142,200
-------
BANKING--GERMANY--0.2%
General Obligation
Refunding Bonds of the
County of Hudson
Variable Rate Demand
Obligations Taxable
Series 1995/ (Landesbank
Hessen-Thuringen
Girozentrale LOC)
6.05%, 01/07/96 22,540 22,540
-------
BANKING--JAPAN--0.1%
Baldwin Park
Redevelopment Agency
1993 Refunding Revenue
Bonds (Baldwin Park
Hotel Project)/
(Sumitomo Bank LOC)
6.07%, 01/09/96 14,700 14,700
Town of Islip Industrial
Development Agency 1992
Taxable Adjustable Rate
Industrial Development
Revenue Bonds (Nussdorf
Associates/Quality King
Distributors, Inc.
Facility)/
(Bank of Tokyo LOC)
5.84%, 01/07/96 6,275 6,275
-------
20,975
-------
BANKING--NETHERLANDS--0.2%
New Jersey Economic
Development Authority
Adjustable Rate Lease
Revenue Taxable Bonds
(Barnes & Noble, Inc.
Distribution and Freight
Consolidation Center
Project) Series 1995A/
(Rabobank Nederland N.V.
LOC)
5.86%, 01/07/96 21,700 21,700
New Jersey Economic
Development Authority
Adjustable Rate Lease
Revenue Taxable Bonds
(Barnes & Noble, Inc.
Distribution and Freight
Consolidation Center
Project) Series 1995B/
(Rabobank Nederland N.V.
LOC)
5.86%, 01/07/96 10,000 10,000
-------
31,700
-------
CITY OR COUNTY
GENERAL OBLIGATIONS--0.3%
Orange County, California
Taxable Notes Series
1994-1995 (d)
5.97%, 06/30/96 41,500 41,500
-------
EDUCATION--0.3%
Development Authority of
Dekalb County Taxable
Variable Rate Revenue
Bonds (Emory University
Project) Series 1995B
6.05%, 01/07/96 36,415 36,415
-------
INSURANCE--0.7%
Commonwealth Life
Insurance Co.
6.03%, 01/01/96 100,000 100,000
-------
MONOLINE INSURANCE--0.3%
Baptist Health Systems of
South Florida, Inc. Taxable
Variable Rate Direct Note
Obligations Series 1995A/
(MBIA Insurance)
6.05%, 01/07/96 13,000 13,000
Baptist Health Systems of
South Florida, Inc. Taxable
Variable Rate Direct Note
Obligations Series 1995B/
(MBIA Insurance)
6.05%, 01/07/96 19,000 19,000
</TABLE>
F-4
<PAGE> 77
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Orleans Aviation
Board Taxable Refunding
Bonds Series 1993A/
(MBIA Insurance)
6.01%, 01/07/96 $ 3,800 $ 3,800
-------
35,800
-------
SECURITIES BROKERAGE-DEALER--2.9%
Bear Stearns
Companies, Inc.
6.03%, 01/04/96 125,000 125,000
5.99%, 01/08/96 50,000 50,000
5.99%, 02/01/96 100,000 100,000
5.91%, 03/21/96 30,000 30,000
Lehman Brothers
Holdings, Inc.
5.90%, 01/30/96 100,000 100,000
-------
405,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $945,630) 945,630
-------
AGENCY OBLIGATIONS--1.6%
COUPON NOTES--1.6%
Federal National
Mortgage Assoc.
5.50%, 06/12/96 56,000 55,959
5.62%, 07/02/96 72,000 71,956
5.91%, 08/19/96 100,000 100,156
-------
TOTAL AGENCY OBLIGATIONS
(Cost $228,071) 228,071
-------
BANK NOTES--4.0%
BANKING--DOMESTIC--4.0%
Bank of America Illinois
5.80%, 01/09/96 95,000 95,000
FCC National Bank
5.52%, 06/06/96 50,000 50,000
5.52%, 06/07/96 50,000 50,000
First of America--Indiana
5.80%, 01/09/96 21,000 21,000
Mellon Bank N.A.
5.80%, 04/02/96 100,000 100,000
5.80%, 10/17/96 30,000 29,987
NationsBank, N.A.
(Carolinas)
5.54%, 06/04/96 50,000 50,000
5.54%, 06/06/96 50,000 50,000
PNC Bank, N.A.
5.58%, 05/24/96 15,000 15,016
Sea First--Seattle
5.80%, 01/11/96 50,000 50,000
5.80%, 01/12/96 50,000 50,000
-------
TOTAL BANK NOTES
(Cost $561,003) 561,003
-------
CERTIFICATES OF DEPOSIT--29.8%
BANKING--CANADA--3.0%
Bank of Montreal
5.84%, 01/05/96 25,000 25,000
5.79%, 01/11/96 25,000 25,000
5.80%, 01/31/96 50,000 50,000
Canadian Imperial Bank
of Commerce
5.81%, 01/24/96 57,000 57,000
5.81%, 01/26/96 125,000 125,000
5.81%, 01/31/96 140,000 140,000
-------
422,000
-------
BANKING--DOMESTIC--0.5%
MBNA America Bank N.A.
5.75%, 04/10/96 33,000 33,000
5.63%, 04/16/96 10,000 10,000
5.62%, 04/19/96 25,000 25,000
-------
68,000
-------
BANKING--FRANCE--4.5%
Banque Nationale de Paris
5.80%, 02/08/96 10,000 10,010
5.58%, 05/07/96 10,000 10,002
5.55%, 05/10/96 18,750 18,749
5.54%, 06/13/96 20,000 20,001
5.47%, 09/16/96 90,000 90,116
Societe Generale
5.84%, 01/18/96 137,000 137,001
5.80%, 01/25/96 145,000 145,000
5.84%, 03/05/96 60,000 60,004
5.74%, 03/07/96 60,000 60,014
5.84%, 03/14/96 25,000 25,002
5.85%, 03/20/96 20,000 20,000
5.78%, 04/17/96 35,000 35,060
-------
630,959
-------
BANKING--GERMANY--2.3%
Commerzbank AG
5.79%, 01/16/96 25,000 25,000
5.79%, 01/17/96 50,000 50,000
Deutsche Bank
5.79%, 01/23/96 125,000 125,000
5.79%, 01/30/96 125,000 125,000
-------
325,000
-------
BANKING--JAPAN--13.6%
Dai-Ichi Kangyo Bank,
Ltd.
6.12%, 01/12/96 30,000 30,000
6.10%, 01/12/96 40,000 40,000
6.22%, 01/18/96 22,000 22,000
6.22%, 01/19/96 25,000 25,000
6.30%, 01/22/96 18,000 18,000
6.42%, 01/23/96 50,000 49,996
6.42%, 01/24/96 25,000 25,000
6.42%, 01/25/96 25,000 25,000
6.42%, 01/26/96 25,000 25,000
6.02%, 02/09/96 27,000 27,004
6.02%, 02/12/96 20,000 20,003
5.88%, 02/21/96 50,000 49,996
5.86%, 03/20/96 32,000 31,997
</TABLE>
F-5
<PAGE> 78
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Industrial Bank of
Japan, Ltd.
6.25%, 01/02/96 $ 69,000 $ 69,000
6.23%, 01/03/96 70,000 70,000
6.25%, 01/04/96 75,000 75,000
6.15%, 01/04/96 52,000 52,000
6.14%, 01/05/96 33,000 33,000
Mitsubishi Bank, Ltd.
6.15%, 01/02/96 50,000 50,000
6.14%, 01/02/96 25,000 25,000
6.14%, 01/03/96 25,000 25,000
5.82%, 03/01/96 49,000 49,013
5.84%, 03/05/96 25,000 25,001
5.82%, 03/06/96 12,000 12,001
5.88%, 03/08/96 40,000 39,994
5.83%, 03/12/96 39,000 38,998
5.80%, 03/12/96 50,000 50,001
5.83%, 03/14/96 60,000 60,001
5.83%, 03/19/96 60,000 60,000
5.83%, 03/20/96 55,000 55,000
Sanwa Bank, Ltd.
6.02%, 02/05/96 10,000 10,001
6.17%, 02/20/96 39,000 39,000
6.15%, 02/20/96 94,000 94,003
6.22%, 02/21/96 72,000 72,001
5.92%, 02/29/96 50,000 50,004
5.82%, 04/15/96 20,000 19,999
5.81%, 04/23/96 50,000 50,002
Sumitomo Bank, Ltd.
6.26%, 01/02/96 35,000 35,000
6.18%, 01/03/96 25,000 25,000
6.38%, 01/05/96 48,000 48,000
6.18%, 01/09/96 25,000 25,000
6.25%, 01/30/96 50,000 50,000
6.25%, 01/31/96 50,000 50,000
5.80%, 02/27/96 50,000 50,001
5.70%, 03/19/96 55,000 55,001
5.70%, 03/20/96 60,000 60,001
---------
1,911,018
---------
BANKING--NETHERLANDS--1.9%
ABN-AMRO Bank N.V.
5.83%, 02/21/96 37,000 36,995
5.57%, 05/08/96 15,000 14,998
5.75%, 06/04/96 25,000 24,978
5.78%, 06/05/96 17,000 16,983
5.75%, 06/05/96 120,000 119,892
5.58%, 06/05/96 58,000 57,988
--------
271,834
--------
BANKING--SWITZERLAND--0.7%
Union Bank of Switzerland
5.55%, 05/03/96 100,000 100,003
--------
BANKING--UNITED KINGDOM--3.3%
Abbey National PLC
5.80%, 01/16/96 146,000 145,996
5.56%, 05/13/96 25,000 24,997
5.53%, 06/14/96 100,000 100,004
5.58%, 06/21/96 70,000 70,020
Bank of Scotland
5.54%, 06/10/96 25,000 24,996
5.51%, 06/11/96 50,000 50,002
National Westminster Bank
PLC
5.72%, 02/06/96 16,000 16,000
5.70%, 04/09/96 25,000 25,001
--------
457,016
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $4,185,830) 4,185,830
---------
REMARKETED CERTIFICATES--0.6%
ASSET BACKED SECURITIES--0.6%
Black & Decker
RECOP Trust
5.73%, 03/13/96 36,592 36,591
5.62%, 03/26/96 15,000 15,000
Circuit City RECOP Trust
5.75%, 03/04/96 27,000 27,000
--------
TOTAL REMARKETED CERTIFICATES
(Cost $78,591) 78,591
--------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENT--1.3%(c)
Salomon Brothers, Inc. 5.92%
Issue Date 12/29/95
Due 01/02/96
Collateralized By:
FHLMC: $47,069 Par;
6.00% Due 11/01/98
FNMA: $42,421 Par;
7.00% Due 05/01/08
FNMA: $42,404 Par;
9.00% Due 04/01/25
FNMA: $42,917 Par;
9.00% Due 03/01/25
FHLMC: $11,137 Par;
6.00% Due 09/01/23
FHLMC: $1,280 Par;
11.25% Due 02/15/15
FHLMC: $35,066 Par;
9.00% Due 03/01/25 185,122 185,000
--------
TOTAL REPURCHASE AGREEMENT
(Cost $185,000) 185,000
--------
TOTAL INVESTMENTS--100.0%
(Cost $14,040,471) $14,040,471
===========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-6
<PAGE> 79
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--17.6%(b)
Federal Home Loan Bank
5.75%, 02/14/96 $ 20,000 $ 20,000
5.51%, 03/08/96 10,000 9,996
5.47%, 03/08/96 20,000 19,994
Student Loan Marketing
Assoc.
5.50%, 01/02/96 29,010 29,038
5.45%, 01/02/96 9,165 9,185
5.43%, 01/02/96 21,675 21,702
5.40%, 01/02/96 125,330 125,299
5.27%, 01/02/96 25,000 25,002
5.26%, 01/02/96 40,000 40,000
5.23%, 01/02/96 30,000 30,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $330,216) 330,216
-------
AGENCY OBLIGATIONS--33.1%
COUPON NOTES--21.5%
Federal Farm Credit Bank
5.88%, 09/03/96 25,000 25,004
Federal Home Loan Bank
7.15%, 01/26/96 28,950 28,955
6.91%, 02/21/96 26,000 26,035
6.11%, 05/17/96 25,000 25,027
8.25%, 05/27/96 9,040 9,125
7.81%, 07/17/96 11,240 11,353
Federal National Mortgage
Assoc.
9.20%, 01/10/96 16,155 16,165
6.46%, 03/27/96 45,000 45,071
6.27%, 04/03/96 15,000 15,010
5.59%, 07/01/96 13,085 13,066
5.62%, 07/02/96 25,000 24,984
8.00%, 07/10/96 19,980 20,191
5.91%, 08/19/96 25,000 25,039
5.64%, 09/09/96 30,000 29,980
5.60%, 09/20/96 20,000 19,981
5.50%, 09/23/96 10,000 9,981
5.68%, 10/07/96 40,000 39,988
5.37%, 12/18/96 20,000 19,990
-------
404,945
-------
DISCOUNT NOTES--11.6%
Federal Farm Credit Bank
5.49%, 02/05/96 15,000 14,920
5.75%, 02/06/96 17,425 17,328
Federal Home Loan Bank
5.74%, 02/05/96 12,000 11,935
5.39%, 03/22/96 11,000 10,868
5.39%, 03/27/96 9,600 9,478
Federal Home Loan Mortgage
Corp.
5.56%, 01/05/96 930 929
5.70%, 01/16/96 45,025 44,919
5.89%, 02/01/96 15,000 14,927
5.42%, 03/07/96 15,000 14,853
5.41%, 03/18/96 34,575 34,180
Federal National Mortgage
Assoc.
5.34%, 09/24/96 20,000 19,239
5.38%, 10/30/96 25,000 23,918
-------
217,494
-------
TOTAL AGENCY OBLIGATIONS
(Cost $622,439) 622,439
-------
U.S. TREASURY OBLIGATIONS--1.0%
U.S. Treasury Notes
4.25%, 05/15/96 $20,000 $ 19,888
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $19,888) 19,888
-------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENTS--48.3%(c)
CS First Boston Corp.
5.72%
Issue Date 12/05/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $40,765 Par;
6.50% Due 04/15/08
FHLMC: $12,000 Par;
6.50% Due 02/15/24
FNMA: $1,195 Par;
6.00% Due 11/25/97 35,790 35,603
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.70%
Issue Date 12/14/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $29,580 Par;
6.07% Due 10/25/17 26,478 26,378
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/02/95
Last Put Date 12/27/95
Due 01/03/96
Collateralized By:
FHLMC: $32,345 Par;
6.58% Due 12/15/23
FHLMC: $24,740 Par;
6.10% Due 12/15/23 50,743 50,000
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/04/95
Last Put Date 12/28/95
Due 01/04/96
Collateralized By:
FNMA: $23,795 Par;
6.25% Due 06/25/20
FNMA: $16,600 Par; 6.10%
Due 12/25/13
FHLMC: $22,000 Par; 9.50%
Due 04/15/20
FNMA: $10,000 Par;
6.53% Due 03/25/24 55,000 54,204
</TABLE>
F-7
<PAGE> 80
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/12/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $46,270 Par;
6.50% Due 11/25/17
FNMA: $6,425 Par;
6.50% Due 05/25/21 $41,011 $40,449
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/17/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $21,865 Par;
5.75% Due 07/25/20
FNMA: $14,725 Par;
6.52% Due 03/25/24
FNMA: $390 Par;
6.50% Due 09/25/20 31,018 30,617
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/18/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $23,975 Par;
5.75% Due 09/25/16 21,976 21,695
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 10/23/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $23,395 Par;
7.18% Due 02/25/22 22,595 22,324
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.75%
Issue Date 12/15/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $27,500 Par;
6.50% Due 07/25/18
FNMA: $8,885 Par;
6.50% Due 07/25/23 34,725 34,598
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.76%
Issue Date 10/25/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $21,555 Par;
5.75% Due 07/25/20
FHLMC: $31,425 Par;
7.00% Due 02/15/22 30,043 29,691
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.78%
Issue Date 11/22/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $22,945 Par;
6.83% Due 02/15/21 22,708 22,542
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.81%
Issue Date 11/16/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $30,000 Par;
6.50% Due 08/15/08
FNMA: $14,365 Par;
5.00% Due 12/25/12 36,627 36,322
Donaldson, Lufkin &
Jenrette
Securities Corp. 5.81%
Issue Date 12/04/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $68,455 Par;
6.49% Due 03/15/24 64,258 63,907
Fuji Securities, Inc.
5.75%
Issue Date 11/01/95
Due 01/08/96
Collateralized By:
U.S. Treasury Notes:
$27,370 Par;
9.13% Due 05/15/99
U.S. Treasury Notes: $200
Par;
6.00% Due 06/30/96 30,326 30,000
Lehman Government
Securities, Inc. 5.75%
Issue Date 10/03/95
Last Put Date 12/26/95
Due 01/02/96
Collateralized By:
FHLMC: $29,600 Par;
5.85% Due 10/15/02
FNMA: $24,057 Par;
8.00% Due 06/01/07
FHLMC: $22,200 Par;
5.50% Due 11/01/00
FHLMC: $769 Par;
6.00% Due 05/15/08 57,350 56,528
Lehman Government
Securities, Inc. 5.75%
Issue Date 12/11/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $13,763 Par;
6.00% Due 08/15/07
FHLMC: $14,794 Par;
5.82% Due 08/15/23
FNMA: $16,570 Par;
6.00% Due 11/25/19
FNMA: $10,000 Par;
6.50% Due 04/25/23
FHLMC: $505 Par;
6.00% Due 05/15/08 44,264 44,074
</TABLE>
F-8
<PAGE> 81
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
Lehman Government
Securities, Inc. 5.76%
Issue Date 10/24/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $18,753 Par;
6.46% Due 09/15/07
FNMA: $9,358 Par;
7.09% Due 10/25/23
FNMA: $18,270 Par;
6.24% Due 08/25/19
FHLMC: $20 Par;
6.50% Due 10/15/08
FHLMC: $938 Par;
6.00% Due 05/15/08 $35,436 $35,016
Lehman Government
Securities, Inc. 5.76%
Issue Date 10/26/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $12,139 Par;
6.25% Due 11/15/08
FHLMC: $9,033 Par;
6.50% Due 01/15/02
FNMA: $13,187 Par;
7.00% Due 11/01/08
FHLMC: $600 Par;
6.00% Due 05/15/08 27,368 27,052
Lehman Government
Securities, Inc. 5.80%
Issue Date 12/08/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $8,777 Par;
7.50% Due 11/15/21
FNMA: $13,332 Par;
6.30% Due 04/25/17
FHLMC: $12,321 Par;
7.50% Due 05/01/09
FNMA: $15,000 Par;
8.50% Due 01/01/08
FHLMC: $9,919 Par;
6.50% Due 10/01/99 44,743 44,528
Lehman Government
Securities, Inc. 5.81%
Issue Date 12/06/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FNMA: $10,341 Par; 6.47%
Due 03/25/24
FHLMC: $4,664 Par;
6.53% Due 11/15/21
FNMA: $21,000 Par;
7.00% Due 08/25/23
FHLMC: $500 Par;
6.00% Due 05/15/08 34,305 34,129
Lehman Government
Securities, Inc. 5.82%
Issue Date 12/13/95 Last
Put Date 12/31/95 Due
01/07/96 Collateralized
By:
FHLMC: $45,760 Par;
6.70% Due 01/15/22
FHLMC: $19,450 Par;
7.00% Due 01/15/23
FNMA: $10,750 Par;
6.24% Due 01/25/24 33,809 33,673
Salomon Brothers, Inc.
5.75%
Issue Date 11/27/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FNMA: $34,664 Par;
7.00% Due 12/01/99
FHLMC: $4,142 Par;
6.00% Due 11/15/07
U.S. Treasury Notes:
$144 Par;
11.25% Due 02/15/15 22,976 22,827
Salomon Brothers, Inc.
5.80%
Issue Date 11/17/95
Last Put Date 12/31/95
Due 01/07/96
Collateralized By:
FHLMC: $17,100 Par;
5.00% Due 09/15/20
FNMA: $32,900 Par;
7.50% Due 06/01/09
FNMA: $38,485 Par;
8.00% Due 06/01/07 61,075 60,577
Salomon Brothers, Inc.
5.84%
Issue Date 11/30/95
Last Put Date 12/29/95
Due 01/05/96
Collateralized By:
FHLMC: $25,201 Par;
8.00% Due 08/01/25
FNMA: $50,000 Par;
8.00% Due 06/01/07
FNMA: $3,921 Par;
7.00% Due 12/01/99 U.S.
Treasury Notes:
$210 Par;
11.25% Due 02/15/15 50,776 50,481
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $907,215) 907,215
--------
TOTAL INVESTMENTS--100.0%
(Cost $1,879,758) $1,879,758
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-9
<PAGE> 82
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--100.0%
U.S. Treasury Bills
5.37%-5.51%, 01/11/96 $ 18,275 $ 18,248
5.34%-5.60%, 01/18/96 12,115 12,084
5.46%, 01/25/96 20,000 19,928
5.58%, 02/01/96 15,000 14,930
5.39%-5.50%, 02/08/96 119,465 118,786
5.38%-5.43%, 02/15/96 5,355 5,319
5.39%-5.42%, 02/22/96 33,670 33,410
5.02%-5.52%, 03/07/96 119,935 118,764
5.49%, 03/14/96 1,525 1,508
5.02%, 03/28/96 11,960 11,817
U.S. Treasury Notes
9.25%, 01/15/96 100,000 100,129
4.00%-7.50%, 01/31/96 78,505 78,462
4.63%-8.88%, 02/15/96 174,250 174,369
4.63%, 02/29/96 108,705 108,543
7.75%, 03/31/96 40,000 40,198
9.38%, 04/15/96 20,000 20,198
5.50%-7.63%, 04/30/96 100,000 100,296
7.38%, 05/15/96 50,000 50,341
5.88%, 05/31/96 54,290 54,385
7.88%, 07/15/96 25,000 25,313
6.13%, 07/31/96 25,000 25,097
6.50%, 09/30/96 23,775 23,980
6.88%, 10/31/96 28,000 28,351
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,184,456) 1,184,456
---------
TOTAL INVESTMENTS--100.0%
(Cost $1,184,456) $1,184,456
==========
</TABLE>
NOTES TO SCHEDULES OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below and Treasury and Agency
notes which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income
tax purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Money Market Fund are
private placement securities exempt from registration by Section 4(2) of
the Securities Act of 1933. These securities generally are issued to
institutional investors, such as the Schwab Money Market Fund. Any
resale by the Fund must be in an exempt transaction, normally to a
qualified institutional buyer. At December 31, 1995, the aggregate value
of private placement securities held by the Schwab Money Market Fund was
$2,002,545,000 which represented 14.29% of net assets. Of this total,
$1,723,954,000 or 12.30% of net assets, was determined by the Investment
Manager to be liquid in accordance with a resolution adopted by the
Board of Trustees relating to Rule 144A, promulgated under the
Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(Continued on next page)
F-10
<PAGE> 83
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS. (CONTINUED)
(c) Due dates shown for repurchase agreements represent either the final
maturity date or put date, which is considered the maturity date for
financial reporting purposes.
(d) With respect to this security, as of December 31, 1995, the Schwab
Money Market Fund was the beneficiary under a $10,375,000 irrevocable
letter of credit issued by Bank of America National Trust and Savings
Association which allows the Fund to make a demand for partial payment
of the security's principal amount under certain conditions upon
maturity or disposition of the security by the Fund. The letter of
credit, which expires on August 1, 1996, does not provide complete
credit support, and therefore, the Fund continues to be exposed to some
risk of loss of principal of the security. The Charles Schwab
Corporation has agreed to reimburse the bank for any payments made by
the bank to the Fund under this letter of credit. See Note 7 to the
Financial Statements for further discussion.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
F-11
<PAGE> 84
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
----------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $14,040,471, $1,879,758
and $1,184,456, respectively) $14,040,471 $1,879,758 $ 1,184,456
Cash -- 24 2
Interest receivable 67,867 18,397 17,149
Deferred organization costs -- -- 11
Prepaid expenses 2,426 80 39
----------- ---------- ----------
Total assets 14,110,764 1,898,259 1,201,657
----------- ---------- ----------
LIABILITIES
Payable for:
Dividends 90,867 12,349 7,248
Investment advisory and
administration fee 3,450 471 188
Transfer agency and shareholder
service fees 4,962 693 387
Other 1,098 177 145
----------- ---------- ----------
Total liabilities 100,377 13,690 7,968
----------- ---------- ----------
Net assets applicable to
outstanding shares $14,010,387 $1,884,569 $ 1,193,689
=========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in $14,010,737 $1,884,838 $ 1,193,821
Accumulated net realized loss
on investments sold (350) (269) (132)
----------- ---------- ----------
$14,010,387 $1,884,569 $ 1,193,689
=========== ========== ==========
THE PRICING OF SHARES
Outstanding shares,
$0.00001 par value
(unlimited shares
authorized) 14,010,737 1,884,838 1,193,821
Net asset value, offering and
redemption price per share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-12
<PAGE> 85
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- -------------
<S> <C> <C> <C>
Interest income $760,926 $113,106 $57,635
-------- -------- -------
Expenses:
Investment advisory and
administration fee 52,254 8,280 4,575
Transfer agency and
shareholder service fees 56,873 8,540 4,502
Custodian fees 886 262 206
Registration fees 1,185 88 221
Professional fees 359 52 26
Shareholder reports 1,275 205 82
Trustees' fees 78 12 5
Amortization of deferred
organization
costs and other prepaid
expenses 120 3 14
Insurance and other expenses 390 59 22
-------- -------- -------
113,420 17,501 9,653
Less expenses reduced (18,632) (3,268) (3,150)
-------- -------- -------
Total expenses incurred by Fund 94,788 14,233 6,503
-------- -------- -------
Net investment income 666,138 98,873 51,132
Net realized gain (loss) on
investments sold 4 (162) (60)
-------- -------- -------
Increase in net assets resulting
from operations $666,142 $ 98,711 $51,072
======== ======== =======
</TABLE>
See accompanying Notes to Financial Statements.
F-13
<PAGE> 86
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Money Schwab Government Schwab U.S. Treasury
Market Fund Money Fund Money Fund
--------------------------- ------------------------- -------------------------
\------------------------- For the year ended December 31, -----------------------\
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 666,138 $ 371,652 $ 98,873 $ 68,248 $ 51,132 $ 19,233
Net realized gain
(loss)
on investments sold 4 (124) (162) (23) (60) (45)
------------ ------------ ----------- ----------- ----------- -----------
Increase in net assets
resulting from
operations 666,142 371,528 98,711 68,225 51,072 19,188
------------ ------------ ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income (666,138) (371,652) (98,873) (68,248) (51,132) (19,233)
------------ ------------ ----------- ----------- ----------- -----------
Capital share
transactions (dollar
amounts and
number of shares
are the same):
Proceeds from shares
sold 35,277,474 27,194,342 4,120,476 4,092,811 2,979,266 1,791,760
Net asset value of
shares issued in
reinvestment of
dividends 630,347 323,920 95,940 61,588 46,352 15,433
Less payments for
shares redeemed (33,124,743) (24,455,432) (4,229,013) (4,001,651) (2,635,740) (1,381,420)
------------ ------------ ----------- ----------- ----------- -----------
Increase (decrease)
in net assets from
capital share
transactions 2,783,078 3,062,830 (12,597) 152,748 389,878 425,773
------------ ------------ ----------- ----------- ----------- -----------
Total increase (decrease)
in net assets 2,783,082 3,062,706 (12,759) 152,725 389,818 425,728
------------ ------------ ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 11,227,305 8,164,599 1,897,328 1,744,603 803,871 378,143
------------ ------------ ----------- ----------- ----------- -----------
End of period $ 14,010,387 $ 11,227,305 $ 1,884,569 $ 1,897,328 $ 1,193,689 $ 803,871
============ ============ =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-14
<PAGE> 87
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab
U.S. Treasury Money Fund (the "Funds") are series of The Charles Schwab Family
of Funds (the "Trust"), an open-end, management investment company organized as
a Massachusetts business trust on October 20, 1989 and registered under the
Investment Company Act of 1940, as amended.
In addition to the three funds described above, the Trust also offers -- the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
Value Advantage Money Fund(R), the Schwab Institutional Advantage Money
Fund(TM) and the Schwab Retirement Money Fund(R). The assets of each series are
segregated and accounted for separately.
The Schwab Money Market Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations. The Schwab Government
Money Fund invests exclusively in a diversified portfolio of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements thereon. The Schwab U.S. Treasury Money Fund invests
solely in United States Treasury notes, bills and other direct obligations of
the United States Treasury, backed by the full faith and credit of the United
States Government.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds and their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from each Fund's commencement of operations.
F-15
<PAGE> 88
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Schwab Money Market Fund pays an annual fee, payable
monthly, of .46% of the first $2 billion of average daily net assets, .45% of
such assets over $2 billion, and .40% of such assets in excess of $3 billion.
For advisory services and facilities furnished, the Schwab Government Money Fund
and the Schwab U.S. Treasury Money Fund each pay an annual fee, payable monthly,
of .46% of the first $1 billion of each Fund's average daily net assets, .41% of
such assets over $1 billion, and .40% of such assets in excess of $2 billion.
Under these agreements, the Schwab Money Market Fund, the Schwab Government
Money Fund and the Schwab U.S. Treasury Money Fund incurred investment advisory
and administration fees of $52,254,000, $8,280,000 and $4,575,000, respectively,
for the year ended December 31, 1995, before the Investment Manager reduced its
fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of each Fund's average daily net assets.
For the year ended December 31, 1995, the Schwab Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred transfer
agency and shareholder service fees of $56,873,000, $8,540,000 and $4,502,000,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Schwab Money Market Fund, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund incurred fees of
$78,000, $12,000 and $5,000, respectively, related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the ratio of operating expenses to average net assets for each Fund. For
the year ended December 31, 1995, the total of such fees reduced by the
Investment Manager was $15,603,000, $2,777,000 and $2,674,000 for the Schwab
Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury
Money Fund, respectively, and the total of such fees reduced by Schwab was
$3,029,000, $491,000 and $476,000 for the Schwab Money Market Fund, the
F-16
<PAGE> 89
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund,
respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab
Schwab Money Schwab Government U.S. Treasury
Market Fund Money Fund Money Fund
------------ ----------------- -------------
<S> <C> <C> <C>
Purchases $54,457,921 $10,324,703 $ 4,666,466
Proceeds of sales and maturities $51,703,327 $10,338,043 $ 4,283,007
</TABLE>
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Money Market Fund
----------------------------------------------------------------
\--------------- For the year ended December 31, --------------\
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .06
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
----------- ----------- ---------- ---------- ----------
Total from investment operations .05 .04 .03 .03 .06
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.06)
Distributions from realized gain on
investments -- -- -- -- --
----------- ----------- ---------- ---------- ----------
Total distributions (.05) (.04) (.03) (.03) (.06)
----------- ----------- ---------- ---------- ----------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== ========== ========== ==========
Total return (%) 5.41 3.68 2.67 3.48 5.70
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $14,010,387 $11,227,305 $8,164,599 $6,134,167 $4,866,584
Ratio of expenses to
average net assets (%) .75 .74 .73 .70 .78
Ratio of net investment income to
average net assets (%) 5.27 3.68 2.64 3.40 5.52
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Money
Market Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991
would have been .90%, .90%, .91%, .92% and .94%, respectively, and the ratio of
net investment income to average net assets would have been 5.12%, 3.52%, 2.46%,
3.18% and 5.36%, respectively.
F-17
<PAGE> 90
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Government Money Fund
--------------------------------------------------------------
\-------------- For the year ended December 31, -------------\
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .05
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from investment operations .05 .04 .03 .03 .05
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.05)
Distributions from realized gain
on investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (.05) (.04) (.03) (.03) (.05)
---------- ---------- ---------- ---------- ----------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total return (%) 5.34 3.62 2.66 3.42 5.53
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,884,569 $1,897,328 $1,744,603 $1,592,793 $1,458,705
Ratio of expenses to
average net assets (%) .75 .74 .73 .72 .70
Ratio of net investment income to
average net assets (%) 5.21 3.56 2.63 3.36 5.38
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Government
Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991
would have been .92%, .92%, .93%, .94% and .95%, respectively, and the ratio of
net investment income to average net assets would have been 5.04%, 3.38%, 2.43%,
3.14% and 5.13%, respectively.
F-18
<PAGE> 91
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND
& SCHWAB U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
------------------------------------------------------------------
For the period
\------ For the year ended December 31, ------\ ended
December 31,
1995 1994 1993 1992 1991 1
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income .05 .04 .03 .03 .01
Net realized and unrealized gain
(loss) on investments -- -- -- -- --
---------- -------- -------- -------- -------
Total from investment operations .05 .04 .03 .03 .01
Less distributions
- ------------------
Dividends from net investment income (.05) (.04) (.03) (.03) (.01)
Distributions from realized gain on
investments -- -- -- -- --
---------- -------- -------- -------- -------
Total distributions (.05) (.04) (.03) (.03) (.01)
---------- -------- -------- -------- -------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00
========== ======== ======== ======== =======
Total return (%) 5.25 3.52 2.54 3.26 .68
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,193,689 $803,871 $378,143 $178,895 $16,906'
Ratio of expenses to
average net assets (%) .65 .65 .65 .59 .24*
Ratio of net investment income to
average net assets (%) 5.11 3.60 2.50 2.91 4.11*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab U.S.
Treasury Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992
and 1991 would have been .96%, 1.00%, 1.05%, 1.15% and 4.11%*, respectively, and
the ratio of net investment income to average net assets would have been 4.80%,
3.25%, 2.10%, 2.35% and .24%*, respectively.
1 For the period November 6, 1991 (commencement of operations) to December 31,
1991.
* Annualized
F-19
<PAGE> 92
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
On December 6, 1994, Orange County, California and the investment pool
maintained by Orange County filed for protection under Chapter 9 of the federal
Bankruptcy Code. At December 31, 1995, the Schwab Money Market Fund had 0.30% of
its net assets, or $41,500,000, in a security issued directly by Orange County.
Prior to this security's original maturity date, the terms of this security were
revised to extend the maturity to June 30, 1996, increase the security's
interest rate and revise the interest payment schedule to require partial
payments of interest prior to June 30, 1996 with a final payment of interest
together with principal on June 30, 1996.
As of December 31, 1995, the Schwab Money Market Fund was the beneficiary under
a $10,375,000 irrevocable letter of credit issued by Bank of America National
Trust and Savings Association which permits the Fund to make a demand for
partial payment under certain conditions upon maturity or disposition of the
Orange County security. This letter of credit does not provide complete credit
support, and therefore, the Fund continues to be exposed to some risk of loss of
principal of the Orange County security. The Charles Schwab Corporation has
agreed to reimburse the bank for any payments made by the bank to the Fund under
this letter of credit. The letter of credit has not been needed to maintain the
Fund's net asset value of $1.00 per share.
F-20
<PAGE> 93
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Money Market Fund,
the Schwab Government Money Fund and
the Schwab U.S. Treasury Money Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schwab Money Market Fund, the
Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund (three
series constituting part of The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-21
<PAGE> 94
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--57.8%(a)
ALABAMA--2.0%
Alabama Housing Finance
Authority Single Family
Housing Revenue Bonds
Collateralized Home
Mortgage Program Series
1995C-1/ (Bayerische
Landesbank Girozentrale
LOC)
5.05%, 01/07/96 $10,400 $10,400
Citronelle, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(AZKO Chemicals, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 1,100 1,100
Jefferson County, Alabama
Sewer Revenue Warrants
Series 1995A/
(Bayerische Landesbank
Girozentrale LOC)
5.20%, 01/07/96 12,500 12,500
Mobile County, Alabama
Industrial Development
Board Revenue Bonds
(Ultraform Co.
Project) Series B/
(Bayerische Landesbank
Girozentrale LOC)
5.00%, 01/07/96 1,000 1,000
Mobile County, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Ultraform Co. Project)
Series A/ (Bayerische
Landesbank Girozentrale
LOC)
5.00%, 01/07/96 7,480 7,480
Mobile, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding
Bonds (Alabama
Power Co. Project)
Series 1993C
5.15%, 01/07/96 12,000 12,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985C/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 2,000 2,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985F/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 9,000 9,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 6,390 6,390
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 5,295 5,295
Opelika, Alabama Industrial
Development Board Revenue
Bonds (Power Guard
Project) Series
1994/(SouthTrust Bank of
Alabama LOC)
5.35%, 01/07/96 3,100 3,100
------
70,265
------
ALASKA--0.0%
Alaska Industrial
Development Authority
Flexible Demand Revenue
Bonds (Advanced Health
Systems)/(Citibank LOC)
5.35%, 01/07/96 600 600
------
ARIZONA--0.5%
Arizona Educational Loan
Marketing Corp.
Revenue Bonds Series A/
(MBIA Insurance &
Fuji Bank SBPA)
5.45%, 01/07/96 10,000 10,000
Yavapai County, Arizona
Industrial Development
Authority Revenue Bonds
(First Health
Care Corp. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,230 4,230
</TABLE>
F-22
<PAGE> 95
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series A/(Citibank LOC)
5.20%, 01/07/96 $3,000 $ 3,000
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series B/(Citibank LOC)
5.50%, 01/07/96 275 275
------
17,505
------
CALIFORNIA--1.4%
California Higher Education
Loan Authority Student
Loan Refunding Bonds
Series E1/(SLMA LOC)
5.25%, 01/07/96 5,000 5,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986B
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 200 200
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Packaging Innovation DZ
Industries, Inc.) Series
1994A-2/ (Bank of Tokyo
LOC)
5.35%, 01/07/96 585 585
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 8,900 8,900
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
A/(Industrial Bank of
Japan LOC)
6.10%, 01/01/96 100 100
Los Angeles County,
California Metropolitan
Transportation Authority
Sales Tax Revenue
Refunding Bonds
Proposition C Second
Senior Series A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.00%, 01/07/96 300 300
Orange County, California
Various Sanitation
Districts Certificates of
Participation Capital
Improvement Programs
Series 1990-92C/ (FGIC
Insurance)
6.00%, 01/01/96 200 200
Orange County, California
Water District
Certificates of
Participation (Sanitation
Districts #1,2,3)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 19,500 19,500
Simi Valley, California
Multi Family Housing
Certificates of
Participation (Lincoln
Wood Ranch Project)/
(Sumitomo Bank LOC)
5.05%, 01/07/96 5,600 5,600
Southern California Public
Power Authority
Transmission Project
Revenue Bonds (Southern
Transmission Project)
Series 1991/ (AMBAC
Insurance & Swiss Bank
LOC)
4.75%, 01/07/96 9,700 9,700
------
50,185
------
COLORADO--4.2%
Colorado Health Facilities
Authority Revenue Bonds
(Sisters of Charity
Health) Series B/(Multiple
Credit Enhancements)
5.05%, 01/07/96 23,300 23,300
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1990A/ (SLMA LOC)
5.20%, 01/07/96 10,790 10,790
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993B/ (SLMA LOC)
5.20%, 01/07/96 2,100 2,100
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993C-2/ (SLMA LOC)
5.05%, 01/07/96 2,200 2,200
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992D/(Morgan Guaranty
Trust LOC)
5.30%, 01/07/96 48,400 48,400
</TABLE>
F-23
<PAGE> 96
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992E/ (Bank of Tokyo LOC)
5.50%, 01/07/96 $30,000 $ 30,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992F/(Bank
of Montreal LOC)
5.30%, 01/07/96 16,000 16,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992G/(Credit Local de
France LOC)
5.30%, 01/07/96 8,500 8,500
Douglas County, Colorado
Multi Family Housing
Revenue Bonds (Autumn
Chase Project)/ (Citibank
LOC)
5.25%, 01/07/96 9,300 9,300
-------
150,590
-------
CONNECTICUT--1.0%
Connecticut State General
Obligation Economic
Recovery Bonds Series
1991B/(Multiple Credit
Enhancements)
5.10%, 01/07/96 11,700 11,700
Connecticut State Special
Assessment Unemployment
Compensation Advance
Fund Revenue Bonds
Series 1993B/(Multiple
Credit Enhancements)
5.40%, 01/07/96 15,900 15,900
Connecticut State Special Tax
Obligation Bonds (Second
Lien Transportation
Information) Series 1990-1/
(Industrial Bank of Japan LOC)
5.10%, 01/07/96 5,800 5,800
-------
33,400
-------
DISTRICT OF COLUMBIA--0.1%
District of Columbia
Revenue Bonds Adjustable
Convertible Extendable
Securities (Georgetown
University) Series 1988D/
(Sanwa Bank LOC)
5.65%, 01/07/96 4,200 4,200
-------
FLORIDA--1.1%
Brevard County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Palm Place Project)/
(Chemical Bank LOC)
5.05%, 01/07/96 5,000 5,000
Dade County, Florida
Solid Waste Industrial
Development Revenue Bonds
(Montenay-Dade, Ltd.
Project)/(Banque
Paribas LOC)
5.10%, 01/07/96 1,280 1,280
Hillsborough County,
Florida Industrial
Development Authority
Revenue Bonds (Seaboard
Tampa Terminals) Series
1986A/ (Barclays Bank LOC)
5.00%, 01/07/96 5,500 5,500
Indian Trace, Florida
Community Development
District (Water & Sewer
Special Assessment
Basin 1 Water)/
(MBIA Insurance &
Swiss Bank SBPA)
4.90%, 01/07/96 2,500 2,500
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Rio Vista Project)/
(First Union Bank of
North Carolina LOC)
5.20%, 01/07/96 3,865 3,865
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds (Smokewood
Project)/ (Citibank LOC)
5.25%, 01/07/96 10,000 10,000
Palm Beach County, Florida
Health Facilities
Authority Revenue
Refunding Bonds
(Joseph L. Morse
Geriatric Center)/
(Sun Bank LOC)
5.20%, 01/07/96 9,800 9,800
Palm Beach County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Crystal II Project)/
(Citibank LOC)
5.15%, 01/07/96 2,850 2,850
------
40,795
------
GEORGIA--3.1%
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 15,300 15,300
</TABLE>
F-24
<PAGE> 97
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1994A/
(FGIC Insurance &
Credit Local de
France SBPA)
5.15%, 01/07/96 $24,000 $24,000
Cobb County, Georgia
Housing Authority
Multi Family Housing
Revenue Bonds
(Walton Green Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 14,000 14,000
Cobb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Williamstown
Apartment Project)/
(Wachovia Bank LOC)
5.20%, 01/07/96 2,000 2,000
Dekalb County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Siemens
Energy, Inc. Project)/
(Siemens AG Guaranty)
5.20%, 01/07/96 3,750 3,750
Dekalb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Wood Hills
Apartment Project)/ (Bank
of Montreal LOC)
5.15%, 01/07/96 5,250 5,250
Douglas County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Mima Inc.
Project)/ (Wachovia Bank
LOC)
5.10%, 01/07/96 4,300 4,300
Laurens County, Georgia
Development Authority
Solid Waste Disposal
Revenue Bonds (Southeast
Paper Co. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 25,000 25,000
Richmond County, Georgia
Industrial Development
Authority Revenue Bonds
(Bok Group Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Rockmart, Georgia
Development Authority
Industrial Development
Revenue Bonds (CW Matthews
Contracting)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 2,500 2,500
Smyrna, Georgia Housing
Authority Multi Family
Housing Revenue Bonds
(Walton Park LP)/
(Wachovia Bank LOC)
5.25%, 01/07/96 8,000 8,000
Villa Rica, Georgia
Industrial Development
Revenue Bonds (Lowes Home
Centers, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,200 1,200
-------
110,300
-------
HAWAII--1.6%
Hawaii State Department of
Budget and Finance Special
Purpose Mortgage Revenue
Bonds (Adventist Health
System West)/ (Bank of
California LOC)
5.15%, 01/07/96 3,100 3,100
Hawaii State Housing
Finance & Development
Corp. Multi-Family Housing
Revenue Bonds (Nani Mauna
Loa Project) Series 1995A/
(Citibank LOC)
4.00%, 01/07/96 4,350 4,350
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 17,100 17,100
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990B/(Industrial
Bank of Japan LOC)
5.20%, 01/07/96 19,600 19,600
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(HaleKa Gardens Project)
Series A/ (Bank of Tokyo
LOC)
5.70%, 01/07/96 5,256 5,256
</TABLE>
F-25
<PAGE> 98
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(Lolani Regents Project)
Series 1990A/
(Bank of Hawaii LOC)
5.55%, 01/07/96 $ 9,300 $ 9,300
------
58,706
------
ILLINOIS--10.2%
Centralia, Illinois
Industrial Development
Authority Revenue Bonds
(Consolidated Foods
Corp./Hollywood
Brands, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,500 4,500
Chicago, Illinois
General Obligation
Bonds Series 1985/
(Sanwa Bank LOC)
5.45%, 01/07/96 14,440 14,440
Chicago, Illinois
General Obligation
Bonds Series 1992B/
(Canadian Imperial Bank of
Commerce LOC)
5.10%, 01/07/96 10,400 10,400
Chicago, Illinois
Industrial Development
Revenue Bonds (Morse
Automotive)/ Series 1995
(American National Bank &
Trust Co. LOC)
5.25%, 01/07/96 3,000 3,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (Adjustable
Convertible Extendable
Securities General Airport
Second Lien) Series B-1/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(Adjustable Convertible
Extendable Securities
General Airport Second
Lien) Series B-2/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series 1994C/
(Societe Generale LOC)
5.15%, 01/07/96 16,100 16,100
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (General
Airport Second Lien)
Series A/(Westpac Banking
Corp. LOC)
5.10%, 01/07/96 13,100 13,100
Illinois Development
Finance Authority Hospital
Revenue Bonds (Palos
Community Hospital) Series
1994/ (Credit Suisse SBPA)
5.20%, 01/07/96 37,700 37,700
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Knead Dough
Baking Co.)/
(Bank of America LOC)
5.35%, 01/07/96 8,870 8,870
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Marriott
Corp. Deerfield Project)/
(National Westminster Bank
LOC)
5.15%, 01/07/96 1,300 1,300
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Rerkin
Paperboard Co. LP) Series
1994/ (Northern Trust LOC)
5.40%, 01/07/96 5,500 5,500
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (F.C. Harris
Pavillion Project) Series
1994/(FNMA LOC)
5.15%, 01/07/96 3,000 3,000
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (River Oak)/ (Swiss
Bank LOC)
5.20%, 01/07/96 3,790 3,790
Illinois Educational
Facility Authority Revenue
Bonds (Chicago Zoological
Society Brookfield Zoo)
Series B/
(Chemical Bank LOC)
5.25%, 01/07/96 2,000 2,000
Illinois Educational
Facility Authority Revenue
Bonds (Chicago
Historical Society)/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 8,300 8,300
</TABLE>
F-26
<PAGE> 99
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Illinois Educational
Facility Authority
Revenue Bonds
(Illinois Institute of
Technology) Series 1990A/
(Northern Trust LOC)
5.05%, 01/07/96 $11,300 $11,300
Illinois Educational
Facility Authority Revenue
Bonds (Northwestern
University)/ (FNB Chicago
LOC)
5.15%, 01/07/96 22,200 22,200
Illinois Educational
Facility Authority Revenue
Bonds (University Pooled
Financing Program) Series
1985/
(FGIC Insurance &
Sakura Bank SBPA)
5.95%, 01/07/96 17,325 17,325
Illinois Health Facility
Authority Revenue Bonds
(Franciscan Village
Project) Series 1989A/
(Commonwealth Bank of
Australia LOC)
5.20%, 01/07/96 2,000 2,000
Illinois Health Facility
Authority Revenue Bonds
(Hospital Sisters
Services) Series E/(MBIA
Insurance &
Morgan Guaranty SBPA)
5.00%, 01/07/96 4,300 4,300
Illinois Health Facility
Authority Revenue Bonds
(Ingalls Memorial
Hospital) Series
1985C/(LaSalle National
Bank LOC)
5.60%, 01/07/96 1,100 1,100
Illinois Health Facility
Authority Revenue Bonds
(Streeterville Corp.)
Series A/
(FNB Chicago LOC)
5.10%, 01/07/96 14,400 14,400
Illinois Health Facility
Authority Revenue Bonds
(Washington & Jane Smith
Home) Series 1991/
(Comerica Bank LOC)
5.20%, 01/07/96 2,800 2,800
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985C/ (FNB Chicago
LOC)
5.20%, 01/07/96 6,000 6,000
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985D/ (FNB Chicago
LOC)
5.20%, 01/07/96 20,000 20,000
Illinois State Toll Highway
Authority Revenue Bonds
Series B/(MBIA Insurance &
Societe Generale SBPA)
5.05%, 01/07/96 63,400 63,400
Kane County, Illinois
Revenue Bonds (Glenwood
School for Boys)/(Harris
Trust & Savings Bank LOC)
5.10%, 01/07/96 9,000 9,000
Lombard, Illinois
Industrial Development
Revenue Refunding Bonds (B
& H Partnership Project)/
(Comerica Bank LOC)
5.38%, 01/07/96 1,500 1,500
McHenry County, Illinois
Industrial Development
Authority Revenue
Refunding Bonds (Dean
Foods Co. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 2,675 2,675
Oak Forest, Illinois
Revenue Bonds (Homewood
Pool) Series 1989/
(FNB Chicago LOC)
5.15%, 01/07/96 37,000 37,000
-------
367,000
-------
INDIANA--0.4%
Crawfordsville, Indiana
Industrial Development
Revenue Bonds (National
Service Industries, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 2,000 2,000
Hammond, Indiana Adjustable
Rate Economic Development
Revenue Bonds (Lear
Seating Corp. Project)
Series 1994/ (Chemical
Bank LOC)
4.25%, 01/07/96 5,750 5,750
Indiana Health Facility
Financing Authority
Hospital Adjustable
Convertible Extentable
Securities Revenue Bonds
(Methodist Hospital)
Series C/
(Credit Suisse SBPA)
5.15%, 01/07/96 4,100 4,100
Indianapolis, Indiana
Economic Development
Authority Revenue Bonds
(Herff-Jones, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 4,100 4,100
-------
15,950
-------
</TABLE>
F-27
<PAGE> 100
SchwabFunds(R) 7
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
IOWA--0.2%
Iowa Higher Education Loan
Authority Revenue Bonds
Adjustable Convertible
Extendable Securities
Education Loan (Private
College Facility)/
(MBIA Insurance &
Dai-Ichi Kangyo
Bank SBPA)
5.50%, 01/07/96 $ 4,100 $ 4,100
Iowa Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Small Business Loan
Project) Series 1985A/
(FHLB of Des Moines LOC)
5.30%, 01/07/96 2,100 2,100
Iowa State Financing
Authority Solid Waste
Disposal Revenue Bonds
(Cedar River Paper
Project) Series 1995A/
(Swiss Bank LOC)
6.10%, 01/01/96 1,000 1,000
------
7,200
------
KANSAS--0.2%
Kansas City, Kansas
Industrial Revenue Bonds
(Owen Industries, Inc.
Project) Series 1987/
(Sanwa Bank LOC)
5.45%, 01/07/96 2,400 2,400
Wichita, Kansas Airport
Facilities Revenue Bonds
(Flightsafety
International, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,000 3,000
Wichita, Kansas Health
Facilities Revenue
Authority (CSJ Health
System) Series XXV/
(Sumitomo Bank LOC)
5.30%, 01/07/96 1,900 1,900
------
7,300
------
KENTUCKY--0.7%
Lebanon, Kentucky
Industrial Development
Revenue Bonds (Wallace
Computer Services, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 5,000 5,000
Mason County, Kentucky
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (East Kentucky Power
Corp.) Series 1984B-1/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 10,600 10,600
Murray, Kentucky Industrial
Development Authority
Revenue Bonds
(Dean Foods Co.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Owensboro, Kentucky Limited
Obligation Revenue Bonds
(Dart Polymers, Inc.
Project) Series 1985A/
(National Westminster Bank
LOC)
4.05%, 01/07/96 1,900 1,900
Wilson County, Kentucky
Industrial Development
Board Revenue Bonds
(Perma Pipe I North
Carolina Project)/ (Harris
Trust & Savings Bank LOC)
5.50%, 01/07/96 3,150 3,150
------
25,650
------
LOUISIANA--3.5%
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991A/
(Swiss Bank LOC)
5.05%, 01/07/96 400 400
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991B/
(Swiss Bank LOC)
5.05%, 01/07/96 15,000 15,000
East Baton Rouge Parish,
Louisiana Pollution
Control Revenue Refunding
Bonds (Exxon Corp.) Series
1989
5.90%, 01/01/96 1,900 1,900
Louisiana Public Facilities
Authority Hospital Revenue
Bonds (Willis Knighton
Medical Project)/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 15,300 15,300
New Orleans, Louisiana
Aviation Board Revenue
Bonds (Passenger Facility
Charge Projects)/ (Banque
Paribas & Canadian
Imperial Bank of Commerce
LOC)
5.50%, 01/07/96 7,000 7,000
</TABLE>
F-28
<PAGE> 101
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New Orleans, Louisiana
Aviation Board Revenue
Bonds Series B/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
4.95%, 01/07/96 $73,020 $ 73,020
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
(Hotel Occupancy Project)
Series B/ (Sanwa Bank LOC)
5.50%, 01/07/96 1,300 1,300
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
Series 1989B/ (Sanwa Bank
LOC)
5.50%, 01/07/96 3,800 3,800
Rapides Parish, Louisiana
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Central Louisiana
Electric Co.)
Series 1991/
(Swiss Bank LOC)
5.05%, 01/07/96 8,150 8,150
--------
125,870
--------
MARYLAND--2.5%
Baltimore, Maryland
Industrial Development
Authority Revenue Bonds
(City of Baltimore Capital
Acquisition Program)
Series 1986/(Dai-Ichi
Kangyo Bank LOC)
5.35%, 01/07/96 52,400 52,400
Maryland State Health and
Higher Educational
Facility Authority Pooled
Revenue Bonds (Kennedy
Kreiger) Series 1993D/
(FNB Maryland LOC)
5.10%, 01/07/96 2,000 2,000
Maryland State Health and
Higher Educational Facility
Authority Pooled Revenue
Bonds (Pooled Loan
Program) Series A/
(Dai-Ichi Kangyo Bank LOC &
FNB Chicago SBPA)
5.00%, 01/07/96 9,700 9,700
Montgomery County, Maryland
Housing Opportunity
Commission Housing Revenue
Bonds (Draper Lane) Series
1991I/(FGIC
Insurance &
Sumitomo Bank SBPA)
5.30%, 01/07/96 16,500 16,500
Northeast Maryland Waste
Disposal Authority
Resource Recovery Bonds
(Hartford County)/ (AMBAC
Insurance &
Credit Local de France
LOC)
5.05%, 01/07/96 9,600 9,600
-------
90,200
-------
MICHIGAN--0.1%
Grand Rapids, Michigan
Water Supply Variable Rate
Revenue Bonds/
(FGIC Insurance &
Societe Generale SBPA)
5.90%, 01/07/96 1,000 1,000
Michigan State Strategic
Fund Limited Obligation
Revenue Bonds (Dean Foods
Co. Project)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 3,500 3,500
------
4,500
------
MINNESOTA--0.9%
Bloomington, Minnesota Port
Authority Tax Increment
Revenue Refunding Bonds
(Mall of America)
Series 1995A/
(Credit Local de
France SBPA &
FSA Insurance)
5.20%, 01/07/96 7,000 7,000
St. Paul, Minnesota Housing
Redevelopment Authority
Rental Multi Family
Housing Development Bonds
Multi City Series 1985A/
(FHLB Des Moines LOC)
5.30%, 01/07/96 19,900 19,900
------
26,900
------
MISSISSIPPI--0.4%
Jackson County, Mississippi
Pollution Control Revenue
Bonds (Chevron U.S.A. Inc.
Project)
5.90%, 01/07/96 14,700 14,700
------
MISSOURI--1.0%
Independence, Missouri
Industrial Development
Authority Revenue Bonds
(Resthaven Project)/
(Credit Local de France
LOC)
5.20%, 01/07/96 9,640 9,640
</TABLE>
F-29
<PAGE> 102
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Industrial Development
Authority of Mexico,
Missouri Revenue Bonds
(ABP Midwest
Manufacturing Co.
Project) Series 1995/
(Royal Bank of Scotland
LOC)
5.25%, 01/07/96 $7,600 $ 7,600
Missouri State Development
Finance Board Industrial
Development Revenue Bonds
(H.R. Williams Mill Supply
Project) Series 1995/
(Union Bank of
Switzerland LOC)
5.30%, 01/07/96 3,100 3,100
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy)
Series 1988A/(Multiple
Credit Enhancements)
5.10%, 01/07/96 3,200 3,200
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy) Series
1992B/ (Toronto-Dominion
Bank SBPA)
5.10%, 01/07/96 3,400 3,400
Missouri State Health and
Educational Facilities
Authority Health
Facilities
Revenue Bonds (St. Anthony
Medical Center)/
(Mitsubishi Bank SBPA)
5.60%, 01/07/96 900 900
St. Charles, Missouri
Industrial Development
Authority Variable Rate
Demand Revenue Refunding
Bonds (Casalon Apartments
Project)/ (Citibank LOC)
5.25%, 01/07/96 3,100 3,100
Washington, Missouri
Industrial Development
Authority Revenue
Bonds (Pauwels
Transformer Project)/
(Generale Bank LOC)
5.40%, 01/07/96 4,000 4,000
------
34,940
------
MONTANA--0.4%
Forsyth, Montana Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Portland General Electric
Coal Stripping Project)
Series 1983B/ (Swiss Bank
LOC)
5.00%, 01/07/96 6,500 6,500
Montana State Health
Facility Authority Revenue
Bonds (Health Care Pooled
Loan Program) Series
1985A/ (FGIC Insurance &
Norwest Bank of
Minnesota SBPA)
5.15%, 01/07/96 7,195 7,195
------
13,695
------
NEVADA--1.6%
Clark County, Nevada Airport
Improvement Revenue
Refunding Bonds
Series 1993A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 55,350 55,350
Clark County, Nevada
Industrial Development
Revenue Bonds
(Cogeneration Project No.
2)/(Swiss Bank LOC)
6.15%, 01/07/96 2,700 2,700
------
58,050
------
NEW HAMPSHIRE--0.2%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (VHA New
England, Inc.) Series
1985B/ (AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 1,000 1,000
New Hampshire State Housing
Finance Authority Multi
Family Housing Revenue
Bonds (Fairways Project)
Series 1994-1/ (General
Electric Capital Corp.
LOC)
5.20%, 01/07/96 7,000 7,000
------
8,000
------
NEW JERSEY--0.1%
New Jersey Turnpike
Authority Revenue Bonds
Series 1991D/
(FGIC Insurance &
Societe General LOC)
4.80%, 01/07/96 3,000 3,000
------
</TABLE>
F-30
<PAGE> 103
SchwabFunds(R) 10
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW MEXICO--0.1%
Albuquerque, New Mexico
Gross Receipts Lodgers Tax
Revenue Adjustable Rate
Tender Revenue Bonds
Series 1994/ (Canadian
Imperial Bank of Commerce
LOC)
5.15%, 01/07/96 $ 1,300 $ 1,300
Belen, New Mexico
Industrial Development
Revenue Bonds
(Solo Cup, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,250 3,250
------
4,550
------
NEW YORK--3.2%
Babylon, New York Variable
Rate General Obligation
Bonds Series B/(Bank of
Nova Scotia SBPA & AMBAC
Insurance)
4.90%, 01/07/96 3,500 3,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries
A-8B/ (Sanwa Bank LOC)
5.95%, 01/07/96 715 715
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-2/
(MBIA Insurance &
Bank Austria AG SBPA)
5.90%, 01/01/96 400 400
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-3/
(MBIA Insurance &
Bank of Nova Scotia SBPA)
5.90%, 01/01/96 1,000 1,000
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 11,900 11,900
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC Insurance &
FGIC SPA)
5.90%, 01/07/96 9,000 9,000
New York City, New York
Trust for Cultural
Resources Revenue Bonds
(Solomon R. Guggenheim
Project) Series 1990B/
(Swiss Bank LOC)
5.90%, 01/01/96 100 100
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B Subseries
B-10/(Union Bank of
Switzerland LOC)
5.00%, 01/07/96 7,500 7,500
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 2,000 2,000
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1993A/ (Multiple
Credit Enhancements)
4.95%, 01/07/96 9,500 9,500
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1994B/ (Credit
Suisse & Swiss Bank LOC)
4.95%, 01/07/96 1,000 1,000
New York Local Government
Assistance Corp. Public
Improvement Revenue
Bonds Series 1995F/
(Toronto-Dominion Bank LOC)
5.05%, 01/07/96 12,700 12,700
New York Municipal Water
Finance Authority Water &
Sewer System Revenue Bonds
Series 1994C/ (FGIC
Insurance & FGIC SPA)
5.90%, 01/01/96 5,500 5,500
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/
(AMBAC Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 3,100 3,100
New York State Energy
Research & Development
Authority Electric Facilities
Revenue Bonds (Long
Island Lighting Co.
Project) Series 1993A/
(Toronto-Dominion Bank LOC)
5.00%, 01/07/96 1,000 1,000
</TABLE>
F-31
<PAGE> 104
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New York State Energy
Research & Development
Authority Pollution
Control Refunding Revenue
Bonds (Orange & Rockland
Utilities, Inc. Project)
Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 $10,700 $ 10,700
New York State Energy
Research & Development
Authority Pollution Control
Revenue Bonds (Central
Hudson Gas & Electric
Corp. Project) Series 1985A/
(Morgan Guaranty Trust LOC)
5.00%, 01/07/96 5,700 5,700
New York State Energy
Research & Development
Authority Pollution
Control Revenue Refunding
Bonds Series B/(Union Bank
of Switzerland LOC)
6.00%, 01/01/96 1,400 1,400
New York State Local
Government Assistance
Corp. Variable Rate
Revenue Bonds Series
1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 14,000 14,000
Triborough Bridge and
Tunnel Authority, New York
Special Obligation Bridge
Revenue Bonds Series 1994/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 11,000 11,000
Yonkers, New York Industrial
Development Authority
Revenue Bonds
Consumers Union Facility/
(AMBAC Insurance &
Credit Local de France SBPA)
4.95%, 01/07/96 1,400 1,400
-------
113,115
-------
NORTH CAROLINA--1.7%
Charlotte, North Carolina
Airport Revenue Refunding
Bonds Series 1993A/ (MBIA
Insurance & Industrial
Bank of Japan SBPA)
5.15%, 01/07/96 6,400 6,400
Haywood County, North
Carolina Industrial
Development Facilities and
Pollution Control
Financing Authority
Revenue Bonds (Solid
Waste--Champion
International Corp.)/
(Bank Austria AG LOC)
4.95%, 01/07/96 2,200 2,200
North Carolina Medical Care
Community Hospital Revenue
Bonds (Pooled Equipment
Finance Project)/(MBIA
Insurance &
Banque Paribas SBPA)
5.05%, 01/07/96 11,300 11,300
North Carolina Medical Care
Community Hospital Revenue
Bonds Adjustable
Convertible Extendable
Securities (Pooled
Financial Project)/ (MBIA
Insurance & Sakura Bank
SPA)
5.05%, 01/07/96 1,810 1,810
North Carolina Medical Care
Community Hospital Revenue
Pooled Finance
Bonds/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/07/96 5,800 5,800
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985B/
(Sumitomo Bank LOC)
5.50%, 01/07/96 2,900 2,900
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985C/
(Sumitomo Bank LOC)
5.50%, 01/07/96 29,400 29,400
------
59,810
------
NORTH DAKOTA--0.2%
Mercer County, North Dakota
National Rural Utility
Pollution Control Revenue
Bonds (Basin Electric
Power Cooperative Antelope
Project) Series 1984C/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 7,150 7,150
------
OHIO--1.0%
Columbus, Ohio Electric
System Revenue Bonds
Series 1984/(Dai-Ichi
Kangyo Bank LOC)
3.90%, 01/07/96 6,880 6,880
</TABLE>
F-32
<PAGE> 105
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Columbus, Ohio General
Obligation Bonds Series
1995-1/ (Westdeutsche
Landesbank LOC)
4.90%, 01/07/96 $ 6,000 $ 6,000
Dayton, Ohio Special
Facilities Revenue
Refunding Bonds (Emery Air
Freight) Series 1993F/
(ABN-AMRO Bank LOC)
5.31%, 01/07/96 8,000 8,000
Ohio Air Quality
Development Authority
Revenue Bonds (JMG
Funding, LP) Series 1994A/
(Societe Generale LOC)
5.00%, 01/07/96 12,000 12,000
Ohio Housing Finance Agency
Multi Family Housing
Revenue Bonds (Kenwood
Congregate Retirement
Community) Series
1985/(Morgan Guaranty
Trust LOC)
3.90%, 01/07/96 2,000 2,000
------
34,880
------
OKLAHOMA--0.0%
Tulsa, Oklahoma Industrial
Development Authority
Hospital Revenue Bonds
(Hillcrest Medical Center)
Series 1988/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 685 685
Tulsa, Oklahoma Industrial
Development Authority
Revenue Bonds
(Thomas & Betts Project)
Series 1991/ (Wachovia
Bank LOC)
5.25%, 01/07/96 300 300
------
985
------
OREGON--1.3%
Medford, Oregon Hospital
Facility Authority (Rogue
Valley Manor Project)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 7,700 7,700
Oregon State Economic
Development Commission
Economic and Industrial
Development Revenue
Bonds/(Wachovia Bank LOC)
5.15%, 01/07/96 4,100 4,100
Oregon State General
Obligation Notes Series
1973F/ (Mitsubishi Bank
LOC)
5.15%, 01/07/96 11,185 11,185
Oregon State General
Obligation Notes Series
1973H/ (Bank of Tokyo LOC)
5.25%, 01/07/96 18,100 18,100
Port of Portland, Oregon
Industrial Development
Revenue Bonds (Schnitzer
Steel Project)/ (Comerica
Bank LOC)
5.30%, 01/07/96 5,000 5,000
------
46,085
------
PENNSYLVANIA--1.4%
Montgomery County,
Pennsylvania Industrial
Development Authority
Revenue Bonds (Seton
Medical Supply Co. Project)/
(Banque Paribas LOC)
5.25%, 01/07/96 5,500 5,500
Pennsylvania Higher
Education Assistance
Agency Student Loan
Revenue Bonds Series
1995A/ (SLMA LOC)
5.25%, 01/07/96 17,000 17,000
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985B/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,365 4,365
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985F/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,100 4,100
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985J/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 9,800 9,800
Washington County,
Pennsylvania Authority
Revenue Bonds Higher
Education Pooled Equipment
Lease/ (Sanwa Bank LOC)
5.35%, 01/07/96 9,400 9,400
------
50,165
------
RHODE ISLAND--0.1%
Rhode Island State Student
Loan Authority Higher
Education Revenue Bonds
Series 1995-1/(National
Westminster Bank LOC)
5.30%, 01/07/96 2,000 2,000
------
</TABLE>
F-33
<PAGE> 106
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.4%
Greenville County, South
Carolina Industrial
Development Revenue Bonds
(Quality Thermoforming
Project)/ (South Carolina
National Bank LOC)
5.25%, 01/07/96 $1,200 $ 1,200
South Carolina Jobs
Economic Development
Authority Hospital
Facilities Revenue Bonds
(Baptist Health Care
System)/ (Credit Local de
France LOC)
5.05%, 01/07/96 6,900 6,900
South Carolina Jobs
Economic Development
Authority Industrial
Development Revenue Bonds
(Ado Corp. Project)/(South
Carolina National Bank
LOC)
5.25%, 01/07/96 800 800
Spartanburg County, South
Carolina Industrial
Development Authority
Revenue Bonds (Bemis,
Inc.)/(Wachovia
Bank LOC)
5.15%, 01/07/96 4,750 4,750
------
13,650
------
SOUTH DAKOTA--0.3%
Rapid City, South Dakota
Industrial Development
Revenue Corp. (Property
Associates Project)/
(Lloyds Bank LOC)
5.15%, 01/07/96 6,025 6,025
South Dakota State Health &
Educational Facilities
Authority Revenue Bonds
(McKenna Hospital) Series
1994/(MBIA Insurance &
Banque Paribas SBPA)
5.20%, 01/07/96 5,000 5,000
------
11,025
------
TENNESSEE--0.2%
Metropolitan Nashville and
Davidson County, Tennessee
Health and Education
Facility Board Revenue
Bonds Series A/
(FGIC Insurance &
Barclays Bank LOC)
5.00%, 01/07/96 1,300 1,300
Metropolitan Nashville and
Davidson County, Tennessee
Industrial Development
Revenue Bonds
(Multi-Family
Housing--Western)/
(Sumitomo Bank LOC)
5.60%, 01/07/96 7,035 7,035
------
8,335
------
TEXAS--7.9%
Amarillo, Texas Health
Facilities Corp. Hospital
Revenue Bonds (High Plains
Baptist Hospital)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 9,300 9,300
Bexar County, Texas Health
Facilities Development
Corp. Revenue Bonds
(Chandler Memorial Home
Project) Series 1995/
(Bank One LOC)
5.20%, 01/07/96 5,170 5,170
Capital Industrial
Development Corp., Texas
Industrial Development
Revenue Refunding Bonds
(National Service
Industries, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 3,950 3,950
Euless, Texas Industrial
Development Authority
Revenue Bonds (Ferguson
Enterprises, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,850 4,850
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1988A/ (AMBAC
Insurance & Citibank SBPA)
5.25%, 01/07/96 18,300 18,300
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1992A/ (SLMA LOC)
5.10%, 01/07/96 16,000 16,000
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993A/ (SLMA LOC)
5.25%, 01/07/96 48,150 48,150
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993B-1/ (SLMA LOC)
5.25%, 01/07/96 11,000 11,000
</TABLE>
F-34
<PAGE> 107
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1995B/ (SLMA LOC)
5.00%, 01/07/96 $30,000 $30,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990A/
(Swiss Bank LOC)
5.10%, 01/07/96 9,000 9,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990B/
(Swiss Bank LOC)
5.10%, 01/07/96 16,300 16,300
Lavaca-Navidad River
Authority, Texas Water
Supply System Contract
Revenue Bonds (Formosa
Plastics Corp. Project)/
(Canadian Imperial Bank of
Commerce LOC)
5.30%, 01/07/96 9,900 9,900
Lower Neches Valley
Authority, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Mobil Corp.
Neches River Treatment
Project) Series 1994
5.00%, 01/07/96 12,000 12,000
Midlothian, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Box-Crow
Co. Project)/(Union Bank
of Switzerland LOC)
5.80%, 01/07/96 1,400 1,400
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1992A/ (SLMA LOC)
5.20%, 01/07/96 2,300 2,300
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1995A/ (SLMA LOC)
5.20%, 01/07/96 10,400 10,400
Port Authority of Corpus
Christi, Texas Nueces
County Marine Terminal
Revenue Bonds (Reynolds
Metals Co.)/ (Barclays
Bank LOC)
5.25%, 01/07/96 3,100 3,100
Robertson County, Texas
Industrial Development
Corp. Variable Rate
Revenue Bonds (Sanderson
Farms Project) Series
1995/ (Harris Trust &
Savings Bank LOC)
5.20%, 01/07/96 4,300 4,300
Texas Health Facilities
Development Corp.
Adjustable Convertible
Extendable Securities
Revenue Bonds (North Texas
Pooled Health) Series
1985B/ (Banque Paribas
LOC)
5.05%, 01/07/96 11,000 11,000
Texas Small Business
Industrial Development
Corp. Revenue Bonds
(Texas Public
Facility Capital Access)/
(Multiple Credit
Enhancements)
5.20%, 01/07/96 41,795 41,795
Texas State Revenue
Refunding Bonds (Veterans
Housing Assistance Fund)
Series 1995
5.05%, 01/07/96 13,000 13,000
Trinity River Authority,
Texas Pollution Control
Revenue Bonds (Lafarge
Corp. Project)/(Banque
Nationale de Paris LOC)
5.20%, 01/07/96 3,100 3,100
-------
284,315
-------
VERMONT--0.1%
Vermont Education and
Health Buildings Financing
Agency Revenue Bonds (VHA
New England) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 4,240 4,240
-------
</TABLE>
F-35
<PAGE> 108
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VIRGINIA--0.4%
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985A/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 $ 500 $ 500
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985B/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 400 400
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985C/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 600 600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985F/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 5,600 5,600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985G/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 8,100 8,100
------
15,200
------
WASHINGTON--1.0%
Snohomish County,
Washington Public
Utilities District #1
Electric Revenue Bonds
(Generation Systems)/
(MBIA Insurance &
Industrial Bank of Japan
SBPA)
5.15%, 01/07/96 20,000 20,000
Washington State Health
Care Facilities Authority
Revenue Refunding Bonds
(Sisters of St. Joseph of
Peace) Series 1993/ (MBIA
Insurance & U.S. Bank of
Washington SBPA)
5.20%, 01/07/96 12,700 12,700
Washington State Housing
Finance Commission Multi
Family Mortgage Revenue
Bonds (Canyon Lake)
Series 1993A/
(U.S. Bank of
Washington LOC)
5.40%, 01/07/96 4,565 4,565
------
37,265
------
WEST VIRGINIA--0.3%
West Virginia State
Hospital Finance Authority
Hospital Revenue Bonds
(St. Joseph's Hospital
Project) Series 1987/
(Mitsubishi Bank LOC)
5.20%, 01/07/96 2,200 2,200
West Virginia State
Hospital Finance Authority
Hospital Revenue
Bonds (VHA
Mid Atlantic States, Inc.)
Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 8,600 8,600
------
10,800
------
WISCONSIN--0.8%
Chilton, Wisconsin
Industrial Development
Revenue Refunding Bonds
(Kaytee Products, Inc.
Project) Series 1995/(Bank
One Milwaukee LOC)
5.35%, 01/07/96 1,865 1,865
Fairwater, Wisconsin
Industrial Development
Revenue Bonds (Dean Foods
Co. Project) Series 1990/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,450 1,450
Lac Du Flambeau Band of
Lake Superior Chippewa
Indians, Wisconsin Special
Obligation Bonds (Simpson
Electric) Series 1985/
(Barclays Bank LOC)
5.25%, 01/07/96 6,300 6,300
</TABLE>
F-36
<PAGE> 109
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Milwaukee, Wisconsin
Redevelopment Authority
Industrial Development
Revenue Bonds (Field
Container Corp. LP)
Series 1994/
(Northern Trust LOC)
5.40%, 01/07/96 $ 5,000 $ 5,000
Sheboygan, Wisconsin
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Wisconsin Power &
Light Co.)
5.25%, 01/07/96 1,000 1,000
Wisconsin State Health and
Education Facilities
Authority Revenue Bonds
(Sinai Samaritan) Series
1994A/(Marshall & Ilsley
Bank LOC)
5.20%, 01/07/96 13,755 13,755
---------
29,370
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $2,072,441) 2,072,441
---------
VARIABLE RATE TENDER
OPTION BONDS--2.5%(a)
GEORGIA--0.6%
Georgia State Public
Improvement General
Obligation Tender Option
Bonds Series 1995B
(Citi-157)/
(Citibank Tender Option)
5.25%, 01/07/96 16,000 16,000
Metropolitan Atlanta Rapid
Transit Authority, Georgia
Sales Tax Revenue
Tender Option Bonds
Series M (BT-69)/
(AMBAC Insurance & Bankers
Trust Tender Option)
4.44%, 01/07/96 5,280 5,280
---------
21,280
---------
NEVADA--0.7%
Nevada State General
Obligation Tender Option
Bonds (Colorado River
Community) Series 1994
(Citi-143)/
(Citibank Tender Option)
5.30%, 01/07/96 25,000 25,000
---------
TEXAS--0.3%
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-138)/
(Citibank Tender Option)
5.30%, 01/07/96 7,000 7,000
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-139)/
(Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
-------
12,000
-------
WASHINGTON--0.9%
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-136)/
(Citibank Tender Option)
5.30%, 01/07/96 15,570 15,570
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-137)/
(Citibank Tender Option)
5.30%, 01/07/96 10,000 10,000
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Tender Option
Bonds Series 1990C
(Citi-145)/
(FGIC Insurance, Escrowed
to Maturity with
Government Securities &
Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
-------
30,570
-------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $88,850) 88,850
-------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--3.9%(a)(c)
CONNECTICUT--0.2%
Connecticut State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1991A (BTP-151)/
(Bankers Trust Tender
Option)
5.20%, 01/07/96 7,365 7,365
-------
GEORGIA--0.4%
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-135)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 3,865 3,865
</TABLE>
F-37
<PAGE> 110
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-140)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 $4,575 $ 4,575
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1994B (BTP-148)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,100 7,100
------
15,540
------
ILLINOIS--0.4%
Chicago, Illinois
Metropolitan Water
Reclamation District
Greater Chicago General
Obligation Tender Option
Bond Partnership
(Cook County) (BTP-71)/
(Automated Data
Processing, Inc. Tender
Option)
4.99%, 01/07/96 9,870 9,870
Chicago, Illinois School
Finance Authority General
Obligation School Finance
Tender Option Bond
Partnership (BTP-70)/
(MBIA Insurance &
Automated Data Processing,
Inc. Tender Option)
4.66%, 01/07/96 5,365 5,365
------
15,235
------
MARYLAND--0.1%
Baltimore County, Maryland
General Obligation
Consolidated Public
Improvement Tender Option
Bond Partnership Series
1991 (BTP-132)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 3,621 3,621
------
MINNESOTA--0.1%
Minnesota State Various
Purpose Sports Health Club
Tax Tender Option Bond
Partnership
(BTP-65)/(Automated Data
Processing, Inc. Tender
Option & Escrowed to
Maturity with
Government Securities)
4.28%, 01/07/96 4,455 4,455
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
Revenue Refunding Tender
Option Bond Partnership
(BTP-147)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 5,370 5,370
------
TEXAS--1.0%
Regents of the University
of Texas Permanent
University Fund Revenue
Tender Option Bond
Partnership Series 1992A
(BTP-143)/ (Permanent
University
Fund Guaranty,
Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 10,685 10,685
Texas State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1993B/(BTP-116)
(Bankers Trust Tender
Option)
4.69%, 01/07/96 10,170 10,170
Texas State Public Finance
Authority General
Obligation Tender Option
Bond Partnership Series
1994 (BTP-127)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 14,980 14,980
------
35,835
------
VIRGINIA--0.4%
Chesterfield County,
Virginia General
Obligation Public
Improvement and Refunding
Tender Option Bond
Partnership Series 1991
(BTP-136)/ (Bankers Trust
Tender Option)
5.20%, 01/07/96 6,025 6,025
Fairfax County, Virginia
Public Improvement General
Obligation Tender Option
Bond Partnership Series
1991A (BTP-131)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,146 7,146
------
13,171
------
</TABLE>
F-38
<PAGE> 111
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
WASHINGTON--0.7%
King County, Washington
Unlimited Tax General
Obligation Tender Option
Bond Partnership Series
1993C (BTP-56)/ (Automated
Data Processing, Inc.
Tender Option)
4.15%, 01/07/96 $6,365 $ 6,365
Washington State General
Obligation Tender Option
Bond Partnership Series
1990 (BTP-152)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 5,655 5,655
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1990C (BTP-130)/
(Bankers Trust Tender
Option)
5.25%, 01/07/96 5,740 5,740
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1993B (BTP-137)/
(Bankers Trust Tender
Option)
5.25%, 01/07/96 6,685 6,685
-------
24,445
-------
WISCONSIN--0.4%
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership
(BTP-62)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.25%, 01/07/96 4,500 4,500
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1992A (BTP-142)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 9,480 9,480
-------
13,980
-------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS (Cost $139,017) 139,017
-------
CERTIFICATES OF PARTICIPATION--2.1%(b)
CALIFORNIA--2.1%
San Jose, California
Certificates of Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 72,315 75,662
-------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $75,662) 75,662
-------
GENERAL OBLIGATIONS--4.5%(b)
ALASKA--0.3%
Anchorage, Alaska Unlimited
General Obligation Bonds
Series 1986/
(FGIC Insurance &
Escrowed to Maturity with
Government Securities)
3.72%, 06/01/96 8,600 8,924
Valdez, Alaska Unlimited
General Obligation Bonds
Series 1990/ (MBIA
Insurance)
3.70%, 01/01/97 1,000 1,028
------
9,952
------
ARKANSAS--0.1%
Arkansas State Unlimited
General Obligation Bonds
(College Savings)
3.32%, 06/01/96 1,975 1,977
------
CONNECTICUT--0.0%
Connecticut State General
Obligation Bonds Series
1992B
5.20%, 05/15/96 1,000 1,004
------
DELAWARE--0.1%
Delaware State General
Obligation Bonds Series
1994A
3.47%, 03/01/96 2,240 2,243
Delaware State General
Obligation Bonds Series B/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 3,000 3,108
------
5,351
------
FLORIDA--0.2%
Dade County, Florida School
District General
Obligation Bonds/(MBIA
Insurance)
3.70%, 08/01/96 5,450 5,548
Florida State Board of
Education Capital Outlay
General Obligation Bonds
3.65%, 06/01/96 2,000 2,012
------
7,560
------
</TABLE>
F-39
<PAGE> 112
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
GEORGIA--0.3%
Chatham County, Georgia
School District Unlimited
General Obligation Bonds
Series 1995B/ (FGIC
Insurance)
3.65%, 08/01/96 $ 1,160 $ 1,170
Clayton County, Georgia
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 10/01/96 1,335 1,370
Gwinnett County, Georgia
School District General
Obligation Bonds Series
1995A
3.78%, 02/01/96 7,035 7,043
------
9,583
------
HAWAII--0.1%
Honolulu, Hawaii City and
County Refunding and
Improvement General
Obligation Bonds Series
1993B
3.65%, 10/01/96 2,000 2,004
------
ILLINOIS--0.0%
Du Page, Illinois Water
Commission General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 03/01/96 1,000 1,026
------
KANSAS--0.7%
Wichita, Kansas General
Obligation Bonds Renewal
and Improvement Temporary
Notes Series 186
3.65%, 02/29/96 24,600 24,614
------
MASSACHUSETTS--0.3%
Massachusetts State
Dedicated Income Tax
Unlimited Tax General
Obligation Bonds Series
1990A/ (FGIC Insurance)
4.30%, 06/01/96 5,000 5,059
Massachusetts State General
Obligation Bonds Series
1986/(Escrowed to
Maturity with
Government Securities)
3.72%, 10/01/96 3,170 3,310
Massachusetts State General
Obligation Bonds Series
1990A/ (MBIA Insurance)
3.63%, 06/01/96 3,000 3,044
------
11,413
------
MINNESOTA--0.6%
Minneapolis, Minnesota
Special School District
General Obligation Bonds
3.73%, 02/01/96 5,500 5,506
Minnesota State General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.89%, 08/01/96 9,500 9,668
Minnesota State General
Obligation Bonds Series
1995
3.70%, 08/01/96 5,400 5,455
Minnesota State Unlimited
General Obligation Bonds
Series 1993
3.70%, 08/01/96 1,000 1,007
------
21,636
------
NEW MEXICO--0.1%
Albuquerque, New Mexico
Municipal School District
Number 12 General
Obligation Bonds
3.60%, 08/01/96 1,700 1,705
New Mexico State Capital
Projects General
Obligation Bonds
3.75%, 08/01/96 2,000 2,000
------
3,705
------
OHIO--0.1%
Columbus, Ohio Limited Tax
General Obligation Bonds
Series 1993A
3.40%, 07/01/96 4,945 4,951
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
General Obligation Bonds
Series 1995B-1
3.70%, 08/01/96 6,400 6,474
------
TENNESSEE--0.0%
Tennessee State General
Obligation Bonds Series
1995A
4.25%, 03/01/96 1,000 1,001
------
TEXAS--0.3%
Amarillo, Texas Independent
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.72%, 08/01/96 1,000 1,027
Dallas County, Texas
Hospital District
Refunding General
Obligation Bonds
4.05%, 02/15/96 1,500 1,502
</TABLE>
F-40
<PAGE> 113
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Dallas, Texas Equipment
Acquisition Contractual
Obligation General
Obligation Bonds
3.73%, 02/15/96 $ 3,405 $ 3,407
Dallas, Texas Limited
General Obligation Bonds
Series 1995
3.75%, 02/15/96 2,750 2,757
Houston, Texas General
Obligation Bonds Series C
3.73%, 04/01/96 1,430 1,436
Tarrant County, Texas
Limited General Obligation
Bonds
3.68%, 07/15/96 1,000 1,029
------
11,158
------
VIRGINIA--0.1%
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989A/
(Escrowed to Maturity with
Government Securities)
3.50%, 06/01/96 1,000 1,028
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989B/
(Escrowed to Maturity with
Government Securities)
3.75%, 11/01/96 1,320 1,359
------
2,387
------
WASHINGTON--0.8%
Washington State
General Obligation Bonds
Series 1986D/
(Escrowed to Maturity with
Government Securities)
3.85%, 09/01/96 13,200 13,554
Washington State
General Obligation Bonds
Series 1990A
3.60%, 02/01/96 2,000 2,004
Washington State
General Obligation Bonds
Series R-1992-C
3.70%, 09/01/96 1,850 1,863
Washington State
Motor Vehicles Fuel Tax
Series 1995B
3.68%, 06/01/96 1,495 1,503
Washington State
Motor Vehicles Fuel Tax
Unlimited General
Obligation Bonds Series
1986E/(Escrowed to
Maturity with
Government Securities)
3.65%, 09/01/96 1,000 1,028
Washington State
Unlimited General
Obligation Bonds Series
R-1994-A
3.60%, 08/01/96 4,000 4,002
Washington State
Unlimited General
Obligation Bonds Series
R-1996-B
3.62%, 04/01/96 4,005 4,008
-------
27,962
-------
WISCONSIN--0.2%
Milwaukee, Wisconsin
Metropolitan Sewer
District Unlimited Tax
General Obligation Bonds
Series 1987A
3.70%, 09/01/96 1,000 1,011
Milwaukee, Wisconsin
Public Improvement
Unlimited General
Obligation Bonds Series
1995CA
3.28%, 06/15/96 1,000 1,004
Wisconsin State
General Obligation Bonds
Series 1995A
3.65%, 05/01/96 2,410 2,432
Wisconsin State
Unlimited General
Obligation Bonds Series
1992
3.70%, 05/01/96 3,000 3,012
-------
7,459
-------
TOTAL GENERAL OBLIGATIONS
(Cost $161,217) 161,217
-------
MANDATORY PUT BONDS--3.1%(b)
CALIFORNIA--0.5%
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 5,000 5,000
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1995E-5/ (SLMA LOC)
4.25%, 06/01/96 11,700 11,700
-------
16,700
-------
FLORIDA--0.1%
Orange County, Florida
Industrial Development
Authority Revenue Bonds
(General Accident
Insurance Co.
of America Project)
4.28%, 06/01/96 3,500 3,500
-------
</TABLE>
F-41
<PAGE> 114
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.6%
Chicago, Illinois
General Obligation Tender
Notes
3.65%, 05/01/96 $22,600 $ 22,600
--------
INDIANA--0.2%
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994C
4.00%, 07/01/96 3,500 3,500
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994D
3.90%, 07/01/96 4,700 4,700
-------
8,200
-------
KENTUCKY--0.1%
Calvert City, Kentucky
Industrial Development
Revenue Refunding Bonds
(SKW Alloys, Inc. Lease
Rent) Series 87/
(Bayerische Vereinsbank
LOC)
4.00%, 04/01/96 2,220 2,220
-------
OREGON--0.3%
Klamath Falls, Oregon
Electric Revenue Bonds
(Salt Caves Hydro
Electric) Series 1986E/
(Escrowed to Maturity with
Government Securities)
4.40%, 05/01/96 10,000 10,000
-------
TEXAS--0.8%
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 14,000 14,000
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1993B-2/ (SLMA LOC)
4.10%, 06/01/96 6,500 6,500
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1995B/ (SLMA LOC)
3.90%, 07/01/96 10,000 10,000
-------
30,500
-------
VIRGINIA--0.3%
Harrisonburg, Virginia
Redevelopment and Housing
Authority
Multi Family Housing
Revenue Bonds
(Rolling Brook
Village Apts.)
Series 1985A/
(Guardian Savings &
Loan Assoc. LOC)
5.10%, 02/01/96 10,000 10,000
-------
WASHINGTON--0.2%
Washington State Housing
Finance Committee
Adjustable Single Family
Mandatory Put Bonds Series
1995-1A-S
4.10%, 06/01/96 5,785 5,785
-------
TOTAL MANDATORY PUT BONDS (Cost
$109,505) 109,505
-------
OPTIONAL PUT BONDS--2.3%(b)
IDAHO--0.3%
Custer County, Idaho
Pollution Control
Revenue Bonds
(Amoco Project)
Series 1983
3.80%, 04/01/96 11,500 11,500
-------
MISSOURI--1.7%
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985A/ (Swiss Bank
LOC)
4.00%, 06/01/96 31,000 31,000
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985B/
(Union Bank of
Switzerland LOC)
4.00%, 06/01/96 28,500 28,500
-------
59,500
-------
NEW HAMPSHIRE--0.1%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (Dartmouth
College) Series 1985A-G
4.10%, 06/01/96 3,000 3,000
-------
</TABLE>
F-42
<PAGE> 115
SchwabFunds(R) 22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TEXAS--0.1%
Yoakum County, Texas
Industrial Development
Authority Pollution
Control Revenue Bonds
(Amoco Project)
3.75%, 05/01/96 $ 5,265 $ 5,265
-------
WYOMING--0.1%
Carbon County, Wyoming
Pollution Control Revenue
Bonds (Amoco Project)
Series 1985
3.75%, 05/01/96 4,800 4,800
-------
TOTAL OPTIONAL PUT BONDS (Cost
$84,065) 84,065
-------
REVENUE ANTICIPATION NOTES--0.6%(b)
ILLINOIS--0.4%
Illinois State Revenue
Anticipation Notes Series
1995-April, 1996
3.70%, 04/12/96 15,000 15,033
-------
OHIO--0.1%
Cleveland, Ohio City
School District Special
Obligation Revenue
Anticipation Notes/ (AMBAC
Insurance)
3.60%, 06/01/96 3,000 3,007
-------
WISCONSIN--0.1%
Milwaukee, Wisconsin
Revenue Anticipation
Notes Series A
4.20%, 02/22/96 5,000 5,009
-------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $23,049) 23,049
-------
REVENUE BONDS--4.0%(b)
ALASKA--0.3%
Anchorage, Alaska Electric
Utilities Revenue Bonds
(Secondary Lien) Series
1986A/ (MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.70%, 06/01/96 8,770 9,083
-------
ARIZONA--0.5%
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series A/
(AMBAC Insurance)
3.80%, 07/01/96 12,910 12,953
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series B/
(AMBAC Insurance)
3.80%, 07/01/96 2,470 2,478
Arizona State University
Revenue Bonds Series 1988/
(AMBAC Insurance &
Escrowed to Maturity with
Government Securities)
3.80%, 07/01/96 1,795 1,860
-------
17,291
-------
CALIFORNIA--0.2%
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series A/(Escrowed to
Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,039
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project)/ (Escrowed to
Maturity with Government
Securities)
3.80%, 07/01/96 5,015 5,262
-------
6,301
-------
FLORIDA--0.1%
Florida State Municipal
Power Agency Revenue
Refunding Bonds (St. Lucie
Project)/ (Escrowed to
Maturity with Government
Securities)
3.65%, 10/01/96 1,000 1,044
Jacksonville, Florida
Electric Authority Revenue
Bonds Series 1988-3A/
(Escrowed to Maturity with
Government Securities)
3.73%, 10/01/96 2,030 2,118
-------
3,162
-------
HAWAII--0.1%
Hawaii State Department
of Budget and Finance
Special Purpose Mortgage
Revenue Bonds (Kapiolani
Medical Center for
Women and Children)/
(Escrowed to Maturity with
Government Securities)
3.73%, 07/01/96 3,900 4,051
-------
</TABLE>
F-43
<PAGE> 116
SchwabFunds(R) 23
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.2%
Chicago, Illinois
Waterworks Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.65%, 11/01/96 $1,000 $ 1,037
Illinois State Sales
Tax Revenue Bonds Series
1986B/(Escrowed to
Maturity with
Government Securities)
4.00%, 06/15/96 5,500 5,698
Illinois State Toll
Highway Authority
Priority Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.00%, 01/01/96 1,000 1,020
------
7,755
------
INDIANA--0.1%
Purdue University,
Indiana University Student
Fee Revenue Bonds Series
1993J
3.65%, 07/01/96 4,800 4,812
------
KENTUCKY--0.3%
Kentucky State Turnpike
Authority Economic
Development Road Revenue
Bonds Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,040
3.70%, 07/01/96 1,350 1,402
3.80%, 07/01/96 8,600 8,923
------
11,365
------
MARYLAND--0.1%
Maryland Department
of Transportation
Consolidated
Transportation Revenue
Refunding Bonds Series
1991
3.80%, 09/01/96 1,200 1,215
Washington, Maryland
Suburban Sanitation
District (Maryland Sewer
Disposal) Revenue Bonds
3.65%, 06/01/96 600 609
------
1,824
------
MINNESOTA--0.1%
Southern Minnesota
Municipal Power Agency
Power Supply System
Revenue Bonds/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.44%, 01/01/96 1,000 1,020
University of Minnesota
Refunding Revenue Bonds
Series A/
(Escrowed to Maturity with
Government Securities)
3.50%, 02/01/96 3,925 4,017
-----
5,037
-----
NEW MEXICO--0.2%
New Mexico State
Severence Tax Revenue
Bonds Series 1995B
3.80%, 07/01/96 3,110 3,136
New Mexico State
Severence Tax Revenue
Refunding Bonds Series
1992B (d)
3.50%, 07/01/96 1,000 1,008
Santa Fe, New Mexico
Single Family Mortgage
Revenue Bonds (FNMA/GNMA
Mortgage Backed Securities
Project) Series 1995B/
(FGIC Insurance)
4.00%, 11/15/96 3,000 3,000
-----
7,144
-----
NEW YORK--0.2%
Metropolitan Transportation
Authority, New York
Revenue Bonds Series
1986F/(Escrowed to
Maturity with
Government Securities)
3.70%, 07/01/96 8,445 8,799
-----
NORTH DAKOTA--0.0%
Fargo, North Dakota
Sales Tax Revenue
Refunding Bonds/ (AMBAC
Insurance)
3.85%, 07/01/96 710 714
-----
PENNSYLVANIA--0.2%
Pennsylvania State Turnpike
Commission Revenue Bonds
Series 1986A/(Escrowed to
Maturity with
Government Securities)
3.67%, 12/01/96 6,865 7,254
-----
RHODE ISLAND--0.0%
Rhode Island Depositors
Economic Protection Corp.
Special Obligation Revenue
Bonds Series A/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.90%, 08/01/96 1,400 1,454
-----
</TABLE>
F-44
<PAGE> 117
SchwabFunds(R) 24
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.1%
South Carolina State
Public Service Authority
Expansion Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.80%, 07/01/96 $ 2,695 $ 2,829
-------
TEXAS--1.2%
Harris County, Texas
Hospital District Mortgage
Revenue Bonds/ (Escrowed
to Maturity with
Government Securities)
3.52%, 04/01/96 23,000 23,734
Houston, Texas
Water & Sewer System
Revenue Exchange Prior
Lien Revenue Bonds Series
1986A/(Escrowed to
Maturity with
Government Securities)
3.65%, 12/01/96 300 315
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
4.25%, 02/01/96 2,150 2,190
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds Series
1985B/(Escrowed to
Maturity with
Government Securities)
3.70%, 02/01/96 10,000 10,198
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1991A
4.25%, 02/01/96 3,000 3,004
Trinity River Authority,
Texas Regional
Wastewater System
Revenue Refunding Bonds
Series A/ (AMBAC
Insurance)
3.80%, 08/01/96 1,500 1,504
University of Texas
Constitutional
Appropriation Revenue
Bonds Series 1995(d)
3.50%, 08/15/96 1,115 1,118
-------
42,063
-------
VIRGINIA--0.0%
Henrico County, Virginia
Water & Sewer Revenue
Refunding Bonds Series
1986/(Escrowed to
Maturity with
Government Securities)
3.70%, 05/01/96 1,055 1,090
WASHINGTON--0.0%
Seattle, Washington
Municipal Metropolitan
Seattle Sewer Revenue
Bonds Series 1988R2/
(Escrowed to Maturity with
Government Securities)
3.70%, 01/01/96 750 765
--------
WISCONSIN--0.1%
Wisconsin State
Clean Water Revenue Bonds
Series 1991-1
3.70%, 06/01/96 1,690 1,704
--------
TOTAL REVENUE BONDS (Cost $144,497)
144,497
--------
TAX ANTICIPATION NOTES--0.8%(b)
NEW YORK--0.2%
New York City, New York
Tax Anticipation Notes
Series 1995-1996A
3.60%, 02/15/96 4,500 4,505
South Huntington, New York
Unified School District
Tax Anticipation Notes
Series 1995-1996
3.64%, 06/28/96 3,850 3,861
--------
8,366
--------
OREGON--0.4%
Lane County, Oregon Tax
Anticipation Notes Series
1995-1996
3.88%, 06/28/96 3,500 3,510
Multnomah County, Oregon
School District Number 1J
Portland Tax Anticipation
Notes
3.65%, 05/30/96 10,500 10,546
--------
14,056
--------
SOUTH CAROLINA--0.2%
Charleston County, South
Carolina School District
Tax Anticipation Notes
Series 1995-1996
3.75%, 04/15/96 8,300 8,317
--------
TOTAL TAX ANTICIPATION NOTES (Cost
$30,739) 30,739
--------
TAX AND REVENUE ANTICIPATION NOTES--6.00%(b)
CALIFORNIA--3.6%
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes Series
1995A/ (MBIA Insurance)
3.75%, 07/03/96 56,500 56,774
</TABLE>
F-45
<PAGE> 118
SchwabFunds(R) 25
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Fullerton, California
Joint Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.80%, 11/14/96 $ 3,725 $ 3,747
Kern County, California
High School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.05%, 09/19/96 20,000 20,096
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.83%, 07/01/96 1,500 1,505
3.68%, 07/01/96 1,200 1,204
Pleasanton, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.00%, 07/05/96 4,030 4,045
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-96
3.89%, 07/25/96 10,000 10,033
San Joaquin County,
California Tax and Revenue
Anticipation Notes Series
1995-1996
3.97%, 10/15/96 30,000 30,121
-------
127,525
-------
IOWA--0.7%
Iowa School Corp.
Warrant Certificates
Iowa School Cash
Anticipation Program
Series 1995A/(Capital
Guaranty Insurance)
3.85%, 06/28/96 25,000 25,106
-------
TEXAS--1.4%
Texas State Tax and Revenue
Anticipation Notes Series
1995-1996A
4.05%, 08/30/96 24,000 24,107
3.95%, 08/30/96 8,190 8,232
3.94%, 08/30/96 1,000 1,005
3.90%, 08/30/96 3,000 3,016
3.73%, 08/30/96 13,000 13,080
-------
49,440
-------
WISCONSIN--0.3%
Kenosha, Wisconsin
Tax and Revenue
Anticipation Notes
3.78%, 06/28/96 4,500 4,510
Wisconsin State Operating
Tax and Revenue
Anticipation Notes
3.50%, 06/17/96 5,000 5,021
-------
9,531
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $211,602) 211,602
-------
TAX-EXEMPT COMMERCIAL PAPER--12.4%(b)
ARIZONA--1.5%
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985B
3.80%, 02/12/96 6,450 6,450
3.85%, 02/26/96 5,000 5,000
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985C
3.85%, 02/08/96 6,250 6,250
3.50%, 02/08/96 5,500 5,500
3.80%, 02/12/96 3,100 3,100
3.75%, 02/14/96 6,450 6,450
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985G
3.85%, 02/26/96 4,000 4,000
Salt River, Arizona
Agricultural Improvement
Program/(Multiple Credit
Enhancements)
3.75%, 01/12/96 15,200 15,200
-------
51,950
-------
COLORADO--1.1%
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990B/ (Sumitomo
Bank LOC)
4.05%, 02/15/96 7,520 7,520
</TABLE>
F-46
<PAGE> 119
SchwabFunds(R) 26
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990C/ (Sumitomo
Bank LOC)
4.00%, 02/08/96 $15,000 $15,000
Platte River, Colorado
Power Authority
Adjustable Tender
Electric Secondary
Lien Bonds Series S-1/
(Morgan Guaranty
Trust LOC)
3.75%, 02/07/96 1,800 1,800
3.75%, 02/08/96 15,000 15,000
------
39,320
------
GEORGIA--1.5%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) 1st Series 1989/
(Credit Suisse LOC)
3.85%, 02/08/96 4,300 4,300
3.80%, 02/08/96 2,700 2,700
3.45%, 02/08/96 1,400 1,400
3.75%, 02/15/96 7,500 7,500
3.75%, 02/26/96 2,000 2,000
3.75%, 02/27/96 11,500 11,500
3.70%, 02/27/96 22,700 22,700
------
52,100
------
KANSAS--0.4%
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987A/
(Toronto-Dominion Bank LOC)
3.75%, 02/15/96 12,150 12,150
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987B/
(Deutsche Bank LOC)
3.80%, 02/07/96 2,200 2,200
------
14,350
------
KENTUCKY--0.1%
Pendleton County, Kentucky
Multiple County Lease
Revenue Bonds (Kentucky
Association of Counties
Lease Program) Series
1989/ (Commonwealth Bank
of Australia LOC)
3.70%, 02/08/96 2,300 2,300
------
LOUISIANA--2.0%
Louisiana State Adjustable
Tender General Obligation
Refunding Bonds Series
1991A/(Credit Local de
France & Fuji Bank LOC)
3.85%, 02/08/96 4,275 4,275
3.80%, 02/13/96 2,500 2,500
3.75%, 02/14/96 4,745 4,745
3.80%, 02/26/96 11,000 11,000
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988B
3.65%, 02/09/96 48,900 48,900
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988C
3.65%, 02/09/96 1,000 1,000
------
72,420
------
MASSACHUSETTS--0.3%
Massachusetts Water
Resource Authority
Commercial Paper Series
1995/(Morgan Guaranty
Trust LOC)
3.75%, 02/22/96 9,400 9,400
------
MICHIGAN--0.9%
Michigan State Building
Authority Commercial Paper
Notes Series 1/ (Canadian
Imperial Bank of Commerce
LOC)
4.10%, 01/16/96 33,600 33,600
------
MINNESOTA--0.2%
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1988E/
(Credit Suisse SBPA)
3.70%, 02/14/96 3,100 3,100
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992A
3.75%, 02/15/96 3,000 3,000
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992C
3.45%, 03/07/96 1,550 1,550
------
7,650
------
</TABLE>
F-47
<PAGE> 120
SchwabFunds(R) 27
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SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW YORK--0.1%
New York City, New York
Municipal Water Finance
Authority Tax-Exempt
Commercial Paper/ (Credit
Suisse LOC)
3.75%, 02/08/96 $ 5,000 $ 5,000
-------
NORTH CAROLINA--1.7%
North Carolina Eastern
Municipal Power Agency
Power System Revenue Bonds
Series 1988B/ (Union Bank
of Switzerland & Morgan
Guaranty Trust LOC)
3.70%, 02/07/96 20,500 20,500
3.75%, 02/26/96 5,400 5,400
North Carolina Eastern
Municipal Power Agency
Tax-Exempt Commercial
Paper/(Industrial Bank of
Japan LOC)
3.80%, 02/07/96 24,321 24,321
3.60%, 02/08/96 9,824 9,824
3.55%, 02/08/96 2,500 2,500
-------
62,545
-------
TEXAS--2.6%
Lower Colorado River
Authority Tax-Exempt
Commercial Paper Series
B/(Morgan Guaranty Trust
Revolving Credit Agreement
3.80%, 02/14/96 15,800 15,800
Texas Municipal Power
Agency Commercial
Paper/(Bank of America,
Canadian Imperial Bank of
Commerce & Morgan Guaranty
Trust Revolving Credit
Agreement)
3.80%, 01/11/96 49,025 49,025
Texas State Tax-Exempt
Commercial Paper Series
1995
3.35%, 08/12/96 30,000 30,000
----------
94,825
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $445,460) 445,460
----------
TOTAL INVESTMENTS--100.0%
(Cost $3,586,104) $3,586,104
==========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time
of purchase.
(c) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab Tax-Exempt Money Fund. Any resale by the
Fund must be in an exempt transaction, normally to a qualified
institutional buyer. At December 31, 1995, the aggregate value of
private placement securities held by the Fund was $139,017,000 which
represented 3.90% of net assets. All of these private placement
securities were determined by the Investment Manager to be liquid in
accordance with procedures adopted by the Board of Trustees.
F-48
<PAGE> 121
SchwabFunds(R) 28
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- --------------------------------------------------------------------------------
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering
into the transaction. The transaction is subject to market fluctuation
and to the risk that the value may be more or less than the purchase
price when the transaction was initiated. The Fund has set aside
sufficient investment securities as collateral for securities
purchased on a delayed-delivery basis.
<TABLE>
<CAPTION>
Abbreviations
---------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
N.R.U.-C.F.C. National Rural Utilities Cooperative Financing Corporation
SBPA Standby Purchase Agreement
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-49
<PAGE> 122
SchwabFunds(R) 29
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $3,586,104) $3,586,104
Cash 166
Interest receivable 30,491
Receivable for fund shares sold 2,940
Prepaid expenses 551
----------
Total assets 3,620,252
----------
LIABILITIES
Payable for:
Dividends 15,284
Fund shares redeemed 670
Investments purchased 37,735
Investment advisory and administration fee 603
Transfer agency and shareholder service fees 1,157
Other 284
----------
Total liabilities 55,733
----------
Net assets applicable to outstanding shares $3,564,519
==========
NET ASSETS CONSIST OF:
Capital paid in $3,566,367
Accumulated net realized loss on investments sold (1,848)
----------
$3,564,519
==========
THE PRICING OF SHARES
3,405,684 outstanding Sweep Shares and
160,683 outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares authorized) 3,566,367
Net asset value, offering and redemption price per each
Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-50
<PAGE> 123
SchwabFunds(R) 30
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $127,090
--------
Expenses:
Investment advisory and administration fee 13,694
Transfer agency and shareholder service fees:
Sweep Shares 14,432
Value Advantage Shares 103
Custodian fees 380
Registration fees 400
Professional fees 187
Shareholder reports 296
Trustees' fees 21
Amortization of deferred organization costs and
other prepaid expenses 76
Insurance and other expenses 139
--------
29,728
Less expenses reduced and absorbed (8,375)
--------
Total expenses incurred by Fund 21,353
--------
Net investment income 105,737
Net realized loss on investments sold (21)
--------
Increase in net assets resulting from operations $105,716
========
</TABLE>
See accompanying Notes to Financial Statements.
F-51
<PAGE> 124
SchwabFunds(R) 31
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 105,737 $ 65,678
Net realized loss on investments sold (21) (1,586)
----------- -----------
Increase in net assets resulting
from operations 105,716 64,092
----------- -----------
Dividends to shareholders from
net investment income:
Sweep Shares (104,288) (65,678)
Value Advantage Shares (1,449) --
----------- -----------
Total dividends to shareholders (105,737) (65,678)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 10,148,323 8,184,151
Net asset value of shares issued in
reinvestment of dividends 100,567 57,664
Less payments for shares redeemed (9,700,301) (7,647,595)
----------- -----------
Increase in net assets from capital
share transactions 548,589 594,220
----------- -----------
Total increase in net assets 548,568 592,634
Net Assets:
Beginning of period 3,015,951 2,423,317
----------- -----------
End of period $ 3,564,519 $ 3,015,951
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-52
<PAGE> 125
SchwabFunds(R) 32
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Tax-Exempt Money Fund (the "Fund") is a series of The Charles Schwab
Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
The Board of Trustees of the Trust adopted a multiple class plan for the Fund on
May 9, 1995. Commencing July 7, 1995, the Fund began offering more than one
class of shares. Pursuant to the plan, the existing shares were redesignated as
Sweep Shares ("Sweep Shares"), and a new class of shares was added -- the Value
Advantage Shares ("Value Advantage Shares"). Both classes represent interests in
the same portfolio of investments of the Fund and are substantially the same in
all respects except that the classes are subject to different transfer agency
and shareholder service fees (see Note 3), investment minimums and certain other
expenses.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the
Schwab New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the
Schwab Value Advantage Money Fund(R), the Schwab Institutional Advantage Money
Fund(TM) and the Schwab Retirement Money Fund(R). The assets of each series are
segregated and accounted for separately.
The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of
short-term high quality municipal securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
F-53
<PAGE> 126
SchwabFunds(R) 33
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets. Expenses attributable to both
classes of shares are allocated daily to each class based on the value of
settled shares outstanding of each respective class. Transfer agency,
shareholder service fees and certain other expenses which are class specific are
calculated daily at the class level.
Interest income and realized gains (losses) -- Interest income is recorded on
the accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis. Income and realized gains (losses) are allocated daily to each class of
shares based on the value of settled shares outstanding of each respective
class.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$13,694,000 for the year ended December 31, 1995, before the Investment Manager
reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% and .25% of average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the year ended
December 31, 1995, the Fund incurred transfer agency and shareholder service
fees of $14,432,000 and $103,000 for the Sweep Shares and Value Advantage
Shares, respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $21,000 related to
the Trust's unaffiliated trustees.
F-54
<PAGE> 127
SchwabFunds(R) 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the Fund's ratio of operating expenses to
average net assets. For the year ended December 31, 1995, the total of such fees
and expenses reduced and absorbed by the Investment Manager were $7,229,000 and
the total of such fees reduced by Schwab was $1,146,000.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, aggregated (in thousands) $6,419,657 and $5,869,911,
respectively.
6. CAPITAL SHARE TRANSACTIONS
The Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the Fund. Transactions in capital shares were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1995* 1994
----------- -----------
<S> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 9,911,852 $ 8,184,151
Value Advantage Shares 236,471 --
----------- -----------
Total proceeds from shares sold 10,148,323 8,184,151
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 99,813 57,664
Value Advantage Shares 754 --
----------- -----------
Total net asset value of shares issued in
reinvestment of dividends 100,567 57,664
Less payments for shares redeemed:
Sweep Shares (9,623,759) (7,647,595)
Value Advantage Shares (76,542) --
----------- -----------
Total payments for shares redeemed (9,700,301) (7,647,595)
Total increase in net assets from
capital share transactions $ 548,589 $ 594,220
=========== ===========
</TABLE>
* The Value Advantage Shares commenced operations on July 7, 1995.
F-55
<PAGE> 128
SchwabFunds(R) 35
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Value
Advantage
Shares Sweep Shares
-------------- ----------------------------------------------------------
For the period
ended For the year ended December 31,
December 31, ----------------------------------------------------------
1995 1 1995 1994 1993 1992 1991
---------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .02 .03 .02 .02 .03 .04
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .02 .03 .02 .02 .03 .04
Less distributions
- ------------------
Dividends from net investment
income (.02) (.03) (.02) (.02) (.03) (.04)
Distributions from realized gain on
investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.03) (.02) (.02) (.03) (.04)
-------- ---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========== ========== ========== ========== ==========
Total return (%) 1.68 3.30 2.32 1.93 2.49 4.01
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $160,682 $3,403,837 $3,015,951 $2,423,317 $1,744,903 $1,359,121
Ratio of expenses to
average net assets (%) .45* .66 .65 .63 .63 .63
Ratio of net investment income to
average net assets (%) 3.50* 3.25 2.31 1.92 2.45 3.91
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, with respect to the Value Advantage Shares, the ratio of expenses to
average net assets and the ratio of net investment income to average net assets
for the period ended December 31, 1995, would have been .95%* and 3.00%*,
respectively. With respect to the Sweep Shares, the ratio of expenses to average
net assets for the periods ended December 31, 1995, 1994, 1993, 1992, and 1991
would have been .91%, .91%, .93%, .94% and .95%, respectively, and the ratio of
net investment income to average net assets would have been 3.00%, 2.05%, 1.62%,
2.14%, and 3.59%, respectively.
1 For the period July 7, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-56
<PAGE> 129
SchwabFunds(R) 36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab Tax-Exempt Money Fund (one of the
series constituting The Charles Schwab Family of Funds, hereafter referred to as
the "Trust") at December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each period presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-57
<PAGE> 130
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--52.2%(a)
ABAG Finance Authority for
Nonprofit Organizations
Certificates of
Participation
(Lucile Salter Packard
Project)/(AMBAC Insurance
& Industrial
Bank of Japan LOC)
5.00%, 01/07/96 $ 4,000 $ 4,000
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Aitchison
Family Project) Series
1993A/
(Wells Fargo Bank LOC)
5.45%, 01/07/96 2,920 2,920
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Scientific
Technology Project) Series
1994A/(Banque Nationale de
Paris LOC)
5.45%, 01/07/96 3,000 3,000
Anaheim, California
Certificates of
Participation (Anaheim
Memorial Hospital Assoc.
Project)/ (AMBAC Insurance
& Industrial Bank of
Japan SBPA)
5.30%, 01/07/96 26,820 26,820
Anaheim, California
Certificates of
Participation (Police
Facility Financing
Project)/(AMBAC Insurance
& Industrial
Bank of Japan SBPA)
5.25%, 01/07/96 1,550 1,550
Anaheim, California Housing
Authority Multi Family
Housing Revenue Bonds
(Heritage Village
Apartments Project) Series
1992A/(Multiple Credit
Enhancements)
4.70%, 01/07/96 3,385 3,385
Big Bear Lake, California
Industrial Development
Revenue Certificates of
Participation (Southwest
Gas Corp. Project) Series
A/(Union Bank of
Switzerland LOC)
5.05%, 01/07/96 12,500 12,500
California Educational
Facilities Authority
Revenue
Bonds (California
Institute
of Technology) Series 1994
4.60%, 01/07/96 16,300 16,300
California Health
Facilities Financing
Authority
Revenue Bonds
(Adventist Health System--
Sutter Health)
Series 1991A/
(Toronto-Dominion
Bank LOC)
4.85%, 01/07/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Childrens Hospital
Project) Series 1991/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 9,900 9,900
California Health
Facilities Financing
Authority Revenue Bonds
(Huntington Memorial
Hospital) Series 1985/
(Morgan Guaranty
Trust LOC)
4.90%, 01/07/96 9,600 9,600
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993A
4.90%, 01/07/96 8,200 8,200
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993B
4.90%, 01/07/96 1,600 1,600
California Health
Facilities Financing
Authority Revenue Bonds
(Saint Joseph's Hospital)
Series 1985B
5.90%, 01/01/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1985B/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 15,120 15,120
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991A/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 1,100 1,100
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991B/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 13,900 13,900
</TABLE>
F-58
<PAGE> 131
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Health
Facilities Financing
Authority Revenue Bonds
(St. Francis Hospital)
Series 1995F/
(MBIA Insurance &
Rabobank Nederland N.V.
SBPA)
4.85%, 01/07/96 $30,000 $30,000
California Health
Facilities Financing
Authority Revenue Bonds
Pooled Loan Program Series
1985B/(FGIC Insurance &
FGIC SPA)
4.95%, 01/07/96 2,000 2,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1988A/(National
Westminster Bank LOC)
5.95%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1989A/(National
Westminster Bank LOC)
5.95%, 01/01/96 200 200
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Reynolds Metals Co.
Project) Series 1985/
(National Westminster Bank
LOC)
5.10%, 01/07/96 1,300 1,300
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southdown, Inc. Project)
Series B/(Societe Generale
LOC)
4.20%, 01/08/96 3,900 3,900
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986A
5.40%, 01/01/96 6,700 6,700
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986D
5.40%, 01/01/96 1,300 1,300
California Pollution
Control Financing
Authority Resource
Recovery Revenue Bonds
(Sanger Project) Series
1990A/ (Credit Suisse LOC)
5.05%, 01/07/96 9,200 9,200
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Athens Disposal Company
Project) Series 1995A/
(Wells Fargo Bank LOC)
5.20%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Burrtec Waste Industries
Project) Series 1995A/
(Union Bank LOC)
5.25%, 01/07/96 4,000 4,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990A/ (Swiss Bank
LOC)
5.05%, 01/07/96 12,900 12,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990B/ (Swiss Bank
LOC)
5.05%, 01/07/96 8,900 8,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990C/ (Swiss Bank
LOC)
5.05%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Contra Costa Services)
Series 1995A/ (Bank of
America LOC)
5.15%, 01/07/96 4,500 4,500
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Shell Oil Co. Martinez
Project) Series 1994A
6.05%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Taormina
Industries Project) Series
1994B/(Sanwa Bank LOC)
5.40%, 01/07/96 11,000 11,000
</TABLE>
F-59
<PAGE> 132
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Statewide
Community Development
Authority Apartment
Development Revenue Bonds
Series 1995-A3/ (FNMA LOC)
4.90%, 01/07/96 $10,000 $10,000
California Statewide
Community Development
Authority Hospital Revenue
Bonds Certificates of
Participation (Sutter
Health Obligation Group)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.90%, 01/01/96 1,100 1,100
California Statewide
Community Development
Authority Revenue
Bonds Certificates of
Participation (Kaiser
Foundation Hospitals)
4.90%, 01/07/96 10,000 10,000
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (13th I
Associates Project)/
(Union Bank LOC)
5.30%, 01/07/96 5,540 5,540
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (ARM Inc. Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 675 675
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Aerostar
Properties Project)/
(Union Bank LOC)
5.40%, 01/07/96 5,095 5,095
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Agricultural Products
Inc. Project)/ (Union Bank
LOC)
5.55%, 01/07/96 1,440 1,440
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Development Industries)
Series 1994A/ (Bank of
Tokyo LOC)
5.35%, 01/07/96 1,640 1,640
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Industrial Dynamics Co.
Project)/ (Union Bank LOC)
5.55%, 01/07/96 5,190 5,190
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Lorber Industries
of California Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,050 1,050
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific
Handy Cutter
Products Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,210 1,210
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific Scientific
Project) Series 1989/
(Bank of California LOC)
5.25%, 01/07/96 5,125 5,125
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Packaging
Innovation Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 2,440 2,440
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (The Diamond
Foods Project) Series
1991/(Union Bank LOC)
5.55%, 01/07/96 1,465 1,465
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Z-Nix Co., Inc.
Project)/(Union Bank LOC)
5.55%, 01/07/96 920 920
California Statewide
Community Development
Corp. Revenue
Bonds (ORA
Real Estate Project)
Series 1995D/
(Union Bank LOC)
5.35%, 01/07/96 3,000 3,000
</TABLE>
F-60
<PAGE> 133
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Carlsbad, California Multi
Family Housing Revenue
Refunding Bonds
Certificates of
Participation (La Costa
Apartment Project) Series
1993A/ (Bank of America
LOC)
4.80%, 01/07/96 $ 4,920 $ 4,920
Concord, California Multi
Family Housing Mortgage
Revenue Bonds (Bel Air
Apartments Project) Series
1986A/(Bank of America LOC)
5.00%, 01/07/96 3,000 3,000
Contra Costa, California
Multi Family Housing
Mortgage Revenue Bonds (El
Cerrito Project) Series A/
(Bank of America LOC)
5.00%, 01/07/96 980 980
Contra Costa, California
Transportation Authority
Sales Tax Revenue Bonds
Series 1993A/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 30,300 30,300
Duarte, California
Redevelopment Agency
Certificates of
Participation (Johnson
Duarte Partners Project)
Series 1984B/ (Bank of
America LOC)
4.90%, 01/07/96 1,600 1,600
Duarte, California
Redevelopment Agency
Certificates of
Participation (Piken
Duarte Partners Project)
Series 1984A/ (Bank of
America LOC)
4.90%, 01/07/96 4,250 4,250
Emeryville, California
Redevelopment Agency Multi
Family Housing Revenue
Bonds (Emery Bay
Apartments II Project)
Series 1991A/
(Bank of America LOC)
4.90%, 01/07/96 6,000 6,000
Encinitas, California Multi
Family Housing Revenue
Refunding Bonds
(Torrey Pines Project)
Series A/
(Bank of America LOC)
4.80%, 01/07/96 8,100 8,100
Foothill Eastern
Transportation Corridor
Agency, California Toll
Road Revenue Bonds Series
1995D/(Industrial Bank of
Japan LOC)
5.00%, 01/07/96 1,000 1,000
Fremont, California Multi
Family Housing Revenue
Refunding Certificates of
Participation (Amber Court
Apartments Project) Series
1990A/(Bank of Tokyo LOC)
5.30%, 01/07/96 10,380 10,380
Fresno, California Multi
Family Mortgage Revenue
Bonds (Oak Cornelia
Apartments Project) Series
1985A/(First Interstate
Bank of California LOC)
5.10%, 01/07/96 25,265 25,265
Glenn, California
Industrial Development
Authority Revenue Bonds
(Land 'O Lakes Project)/
(Sanwa Bank LOC)
5.60%, 01/07/96 1,900 1,900
Grand Terrace, California
Community Redevelopment
Agency Multi Family
Housing Revenue Bonds
(Mount Vernon Villas
Project) Series 1985A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 1,865 1,865
Irvine Ranch, California
Water District
Consolidated District
Numbers 102,103,105,106
Revenue Refunding Bonds/
(Commerzbank AG LOC)
5.90%, 01/01/96 4,300 4,300
Irvine Ranch, California
Water District
Consolidated District
Numbers 105,250,290
Revenue Refunding Bonds
Series 1991/(National
Westminster Bank LOC)
5.90%, 01/01/96 1,200 1,200
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 100 100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-3/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 1,400 1,400
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985B-1/ (Sumitomo Bank
LOC)
6.10%, 01/01/96 100 100
</TABLE>
F-61
<PAGE> 134
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding
Bonds Series 1993A/
(Bank of America LOC)
6.00%, 01/01/96 $1,200 $1,200
Irvine, California
Improvement Bond Act 1915
Revenue Bonds (Special
Assessment District
No. 94-15)/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/01/96 500 500
Kern County, California
Certificates of
Participation (Kern Public
Facilities Project) Series
A/(Sanwa Bank LOC)
4.85%, 01/07/96 200 200
Lancaster, California
Redevelopment Agency Multi
Family Revenue Bonds
(Woodcreek Garden
Apartments Project) Series
1985J/ (Bank of Tokyo LOC)
5.10%, 01/07/96 8,400 8,400
Livermore, California Multi
Family Housing Revenue
Refunding Bonds (Arbors
Apartment Project) Series
1991A/(Bank of Tokyo LOC)
5.30%, 01/07/96 9,255 9,255
Livermore, California Multi
Family Housing Revenue
Refunding Bonds
(Diablo Vista
Apartments Project) Series
1990A/(Union Bank LOC)
5.30%, 01/07/96 6,950 6,950
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985A/
(Bank of America LOC)
4.85%, 01/07/96 3,800 3,800
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985B/
(Bank of America LOC)
4.85%, 01/07/96 3,500 3,500
Los Angeles County,
California Metropolitan
Transportation Authority
General Revenue Bonds
(Union Station Project)
Series 1985A/
(FSA Insurance &
Societe Generale SBPA)
4.75%, 01/07/96 33,100 33,100
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Casden Community
Complex) Series 1991C/
(FHLB LOC)
4.80%, 01/07/96 3,200 3,200
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Valencia Village
Project) Series 1984C/
(Industrial Bank of Japan
LOC)
5.35%, 01/07/96 900 900
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series 1992A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 9,700 9,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Baldwin
Hills Public Parking
Project) Series B/
(Wells Fargo Bank LOC)
4.85%, 01/07/96 10,700 10,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Broadway
Springs Center Project)
Series 1987/
(Bank of America LOC)
4.90%, 01/07/96 10,900 10,900
Los Angeles, California
Multi Family Housing
Revenue Bonds (Poinsettia
Apartments Project) Series
1989A/(Dai-Ichi Kangyo
Bank LOC)
5.35%, 01/07/96 9,600 9,600
Marin County, California
Housing Authority
Multi Family Housing
Revenue Bonds
(Crest Marin II
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.45%, 01/07/96 7,200 7,200
</TABLE>
F-62
<PAGE> 135
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Modesto, California
High School District and
Modesto City School
District Certificates of
Participation (Capital
Facilities Project) Series
1991/(Mitsubishi Bank LOC)
5.00%, 01/07/96 $3,700 $3,700
Monterey County, California
Financing Authority
Revenue Bonds (Reclamation
& Distribution Projects)/
(Dai-Ichi Kangyo
Bank LOC)
5.30%, 01/07/96 5,000 5,000
Moorpark, California Multi
Family Housing Revenue
Refunding Bonds (Le Club
Apartments Project) Series
A/(Citibank LOC)
4.80%, 01/07/96 6,000 6,000
Oakland, California
Economic Development
Revenue Refunding Bonds
(Leamington Hotel Project)
Series 1994A/ (First
Interstate Bank of
California LOC)
4.90%, 01/07/96 4,250 4,250
Oakland, California Health
Facilities Revenue Bonds
Certificates of
Participation (Children's
Hospital Project) Series
1988A/ (Banque Nationale
de Paris LOC)
4.95%, 01/07/96 3,300 3,300
Ontario, California
Redevelopment Agency Multi
Family Housing Revenue
Refunding Bonds Series
1991A/(FHLB LOC)
4.80%, 01/07/96 4,492 4,492
Orange County, California
Apartment Development
Revenue Refunding Bonds
(Jess L. Frost Project)
Series 1985B/
(Wells Fargo Bank LOC)
5.40%, 01/07/96 8,200 8,200
Orange County, California
Certificates of
Participation (Florence
Crittenton Services
Project) Series 1990/
(Swiss Bank LOC)
5.00%, 01/07/96 6,900 6,900
Orange County, California
Municipal Water District
Water Facilities Corp.
Certificates of
Participation/
(Barclays Bank &
National Westminster
Bank LOC)
5.20%, 01/07/96 31,225 31,225
Orange County, California
Various Sanitation
Districts Certificates of
Participation (Capital
Improvement Programs)
Series 1990-92C/
(FGIC Insurance &
FGIC SPA)
6.00%, 01/01/96 7,800 7,800
Orange County, California
Various Sanitation
Districts Certificates of
Participation Series
1990-92A/(National Westminster
Bank LOC)
5.90%, 01/01/96 12,500 12,500
Orange County, California
Water District
Certificates of
Participation Sanitation
Districts #1,2,3/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 11,600 11,600
Panama Buena Vista,
California Unified School
District Certificates of
Participation (1994
Capital Improvement
Financing Project)/(Bank
of California LOC)
5.45%, 01/07/96 4,000 4,000
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility Project)
Series 1985A/
(Sanwa Bank LOC)
4.80%, 01/07/96 8,800 8,800
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility Project)
Series 1985B/
(Sanwa Bank LOC)
5.00%, 01/07/96 100 100
Riverside County,
California Certificates of
Participation (Riverside
County Public Facility Project)
Series 1985C/
(Sanwa Bank LOC)
5.00%, 01/07/96 5,600 5,600
</TABLE>
F-63
<PAGE> 136
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Riverside County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Briarwood Apartment
Project) Series 1985C/
(FHLB LOC)
5.15%, 01/07/96 $ 4,500 $ 4,500
Riverside County,
California
Industrial Development
Authority Revenue Bonds
(Cryogenic Project) Series
1989B-1/ (Rabobank
Nederland N.V. LOC)
5.05%, 01/07/96 4,100 4,100
Sacramento County,
California Certificates of
Participation
(Administration
Center & Court House
Project)/(Union Bank of
Switzerland LOC)
4.75%, 01/07/96 28,200 28,200
Salinas, California
Apartment Development
Multi Family Housing
Revenue Bonds (Mariner
Villa Project) Series
1985B/(Bank of America LOC)
4.80%, 01/07/96 2,725 2,725
San Bernardino County,
California Certificates of
Participation (Glen Helen
Blockbuster Project)
Series 1994C/
(Mitsubishi Bank LOC)
5.50%, 01/07/96 7,255 7,255
San Bernardino County,
California Multi Family
Housing Revenue Bonds
(Western Properties
Project IV) Series 1985/
(Bank of America LOC)
4.55%, 01/07/96 1,100 1,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-1/ (Citibank LOC)
5.30%, 01/07/96 26,500 26,500
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-2/ (Citibank LOC)
5.30%, 01/07/96 3,750 3,750
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series B-2/
(Bank of Nova Scotia LOC)
5.15%, 01/07/96 13,100 13,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Rincon Center Apartments)
Series 1985B/(Citibank LOC)
5.30%, 01/07/96 5,705 5,705
San Francisco, California
Housing Authority Multi
Family Housing Revenue
Bonds (737 Post Project)
Series 1985D/
(Banque Nationale de
Paris LOC)
4.95%, 01/07/96 16,800 16,800
San Jose/Santa Clara,
California Water Financing
Authority Sewer Revenue
Bonds Series B/
(AMBAC Insurance &
Bank of Nova Scotia LOC)
4.75%, 01/07/96 7,600 7,600
San Mateo County,
California Certificates of
Participation (Capital
Projects) Series 1985B/
(Swiss Bank LOC)
4.75%, 01/07/96 3,145 3,145
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985A/(National
Westminster Bank LOC)
4.85%, 01/07/96 7,900 7,900
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985B/(National
Westminster Bank LOC)
4.85%, 01/07/96 8,100 8,100
Santa Clara, California
Electric Revenue Bonds
Series 1985A/(National
Westminster Bank LOC)
4.90%, 01/07/96 13,300 13,300
Santa Clara, California
Electric Revenue Bonds
Series 1985B/(National
Westminster Bank LOC)
4.90%, 01/07/96 12,100 12,100
Santa Clara, California
Electric Revenue Bonds
Series 1985C/(National
Westminster Bank LOC)
4.90%, 01/07/96 8,800 8,800
</TABLE>
F-64
<PAGE> 137
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Santa Cruz County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Paloma del Mar Apartments
Project) Series 1992A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 $ 7,700 $ 7,700
Simi Valley, California
Multi Family Housing
Certificates of
Participation
(Lincoln Wood
Ranch Project)/ (Sumitomo
Bank LOC)
5.30%, 01/07/96 5,600 5,600
South San Francisco,
California Multi Family
Revenue Bonds
(Magnolia Plaza Apartments
Project) Series A/
(Wells Fargo Bank LOC)
5.35%, 01/07/96 4,500 4,500
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project) Series 1991/
(AMBAC Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 21,000 21,000
Vallejo, California
Commercial Development
Revenue Bonds
(Vallejo Center
Association Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 900 900
Victor, California
Elementary School District
Certificates of
Participation
(School Construction
Financing Project)/(National
Westminster Bank LOC)
5.30%, 01/07/96 4,000 4,000
Visalia, California
Public Building Authority
Certificates of
Participation
(Convention Center
Expansion Project)
Series 1991/
(Bank of California LOC)
5.35%, 01/07/96 1,000 1,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $874,397) 874,397
VARIABLE RATE TENDER
OPTION BONDS--0.2%(a)
Southern California Rapid
Transit District,
California Certificates of
Participation Short Mode
Tender Option Bonds
(BT-9)/(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 4,200 4,200
-------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $4,200) 4,200
-------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS--5.4%(a)(c)
California State Department
of Water Resources Revenue
Bonds (Central Valley
Project) Series J3
Tender Option Bond
Partnership (BTP-141)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 5,155 5,155
California State Revenue
Anticipation Warrants
Series 1994C Tender
Option Bond Partnership
(BTP-150)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 10,000 10,000
California State Revenue
Anticipation Warrants
Series C Tender Option
Bond Partnership
(BTP-96)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 18,465 18,465
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Tender Option
Bond Partnership
(BTP-146)/(Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.15%, 01/07/96 23,078 23,078
Los Angeles, California
Department of Water &
Power Electric Plant
Revenue Refunding Bonds
Series 1994 Tender Option
Bond Partnership
(BTP-68)/(Automatic
Data Processing, Inc.
Tender Option)
4.37%, 01/07/96 5,195 5,195
</TABLE>
F-65
<PAGE> 138
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Metropolitan Water District
of Southern California
Waterworks General
Obligation Revenue
Refunding Bonds Series
1993A1 and
1993A2 Tender Option
Bond Partnership
(BTP-115)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 $10,145 $10,145
San Diego County,
California Regional
Transportation Commission
Sales Tax Tender Option
Bonds Partnership
(BTP-135)/
(FGIC Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 2,000 2,000
Southern California Public
Power Authority Power
Project Class A
Tender Option
Bond Partnership (BTP-90)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,290 8,290
Southern California Rapid
Transit District
Certificates of
Participation (Workers
Compensation Funding
Program) Tender Option
Bond Partnership
(BTP-163)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,710 8,710
------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS
(Cost $91,038) 91,038
------
CERTIFICATES OF PARTICIPATION--2.0%(b)
Desert Sands, California
Unified School District
Certificates of
Participation (Measure O
Project) Series B/
(Escrowed to Maturity with
Government Securities)
2.60%, 03/01/96 10,000 10,257
San Jose, California
Certificates of
Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 12,500 13,080
San Mateo, California
Redevelopment Agency
Certificates of
Participation Revenue
Refunding Bonds (Bridge
and Water
Pumping Station)/
(Escrowed to Maturity with
Government Securities)
3.67%, 08/01/96 9,305 9,721
-------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $33,058) 33,058
------
REVENUE ANTICIPATION WARRANTS--2.2%(b)
California State Revenue
Anticipation Warrants
Series C/(FGIC Insurance)
4.61%, 04/25/96 35,900 36,099
------
TOTAL REVENUE ANTICIPATION WARRANTS
(Cost $36,099) 36,099
------
REVENUE BONDS--0.3%(b)
Santa Clara Valley Water
District, California
Revenue Refunding Bonds/
(Escrowed to Maturity with
Government Securities)
3.55%, 06/01/96 1,000 1,009
Southern California Public
Power Authority Revenue
Bonds (Southern California
Public Power
Transmission Project)/
(Escrowed to Maturity with
Government Securities)
3.50%, 07/01/96 3,575 3,756
------
TOTAL REVENUE BONDS
(Cost $4,765) 4,765
------
SPECIAL TAX BONDS--0.1%(b)
South Poway, California
Community Facility
District No. 1 Special Tax
(Pomerado Business Park)
Series 1985A/
(Escrowed to Maturity with
Government Securities)
3.80%, 03/02/96 1,000 1,039
------
TOTAL SPECIAL TAX BONDS
(Cost $1,039) 1,039
------
</TABLE>
F-66
<PAGE> 139
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TAX AND REVENUE
ANTICIPATION
NOTES--17.3%(b)
Berkeley, California
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.95%, 07/17/96 $10,500 $10,543
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes Series
1995A/(MBIA Insurance)
3.95%, 07/03/96 2,800 2,811
3.86%, 07/03/96 25,000 25,102
3.85%, 07/03/96 225 226
3.75%, 07/03/96 40,000 40,194
Desert Sands, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 10,000 10,024
East Side Unified High
School District
Santa Clara County
California Tax and Revenue
Anticipation Notes
4.00%, 10/10/96 8,000 8,030
Elk Grove, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/31/96 10,400 10,429
Fremont, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 07/11/96 13,000 13,034
Fresno, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 06/28/96 19,900 19,947
Livermore, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/10/96 4,600 4,612
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.87%, 07/01/96 7,260 7,281
3.82%, 07/01/96 10,000 10,031
3.80%, 07/01/96 1,000 1,003
3.70%, 07/01/96 5,000 5,018
3.68%, 07/01/96 10,000 10,037
Marin County, California
Tax and Revenue
Anticipation Notes
Series 1995-96
3.85%, 07/03/96 37,000 37,161
Mountain View, California
School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 2,000 2,005
Mountain View/Los Altos,
California Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 4,200 4,210
Oxnard, California Unified
High School District
(Ventura County)
Tax and Revenue
Anticipation Notes
Series 1995-96
3.90%, 10/11/96 5,500 5,535
San Diego County,
California Tax and Revenue
Anticipation Notes
3.76%, 09/30/96 2,000 2,011
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.89%, 07/25/96 40,000 40,131
Santa Rosa, California
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 09/27/96 10,000 10,057
Sutter County, California
Office of Education
Tax and Revenue
Anticipation Notes
Series 1995-96
4.05%, 09/14/96 10,000 10,030
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $289,462) 289,462
-------
TAX-EXEMPT COMMERCIAL PAPER--20.3%(b)
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988A/
(Swiss Bank LOC)
3.75%, 01/11/96 6,200 6,200
3.75%, 02/07/96 5,000 5,000
3.65%, 02/08/96 3,975 3,975
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988B/
(Sumitomo Bank LOC)
3.65%, 02/08/96 58,700 58,700
3.60%, 03/07/96 17,600 17,600
</TABLE>
F-67
<PAGE> 140
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988C/
(Credit Suisse LOC)
3.70%, 01/10/96 $ 5,500 $ 5,500
3.75%, 02/07/96 1,000 1,000
3.70%, 02/07/96 6,800 6,800
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988D/
(Bank of Tokyo LOC)
3.95%, 01/10/96 4,350 4,350
3.60%, 02/08/96 3,495 3,495
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Pacific Gas & Electric)
Series 1988F/
(Banque Nationale de Paris
LOC)
4.25%, 01/09/96 10,000 10,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison)
Series 1985A
3.65%, 02/07/96 900 900
3.65%, 02/08/96 12,000 12,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison)
Series 1985B
3.65%, 02/07/96 800 800
3.65%, 02/08/96 14,000 14,000
California Pollution
Control Financing
Authority
Solid Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP) Series
1988A/(National
Westminster Bank LOC)
3.55%, 02/08/96 35,000 35,000
East Bay Municipal Utility
District, California
(Wastewater Systems)
Tax-Exempt Commercial
Paper/(National
Westminster Bank LOC)
3.65%, 01/12/96 10,700 10,700
Long Beach, California
Harbor Revenue Commercial
Paper Notes Series
1994A/(Multiple Credit
Enhancements)
3.50%, 02/06/96 20,000 20,000
3.45%, 02/09/96 4,000 4,000
Los Angeles County,
California Department of
Water and Power Electric
Plant Short Term
Revenue Bonds
3.65%, 01/12/96 7,000 7,000
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds
Series A/(Multiple
Credit Enhancements)
3.75%, 01/11/96 6,100 6,100
Los Angeles, California
Wastewater System Tax-
Exempt Commercial Paper
3.65%, 01/12/96 10,000 10,000
Metropolitan Water District
of Southern California
Tax-Exempt Commercial
Paper
3.75%, 02/21/96 10,000 10,000
Orange County, California
Local Transportation
Authority Sales Tax
Revenue Commercial Paper
Notes/(Industrial Bank of
Japan LOC)
3.75%, 01/11/96 8,000 8,000
3.70%, 01/11/96 3,000 3,000
3.65%, 02/08/96 52,200 52,200
Sacramento, California
Municipal Utility District
Tax-Exempt Commercial
Paper Series I/
(Bank of America &
Morgan Guaranty
Trust LOC)
3.75%, 02/08/96 2,133 2,133
West and Central Basin
Financing Authority
West Basin
Municipal Water District
Tax-Exempt Commercial
Paper Notes/
(Toronto-Dominion Bank LOC)
3.75%, 01/24/96 7,500 7,500
3.50%, 02/09/96 14,000 14,000
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $339,953) 339,953
----------
TOTAL INVESTMENTS--100.0%
(Cost $1,674,011) $1,674,011
==========
</TABLE>
See accompanying Notes to Schedule of Investments.
F-68
<PAGE> 141
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
(c) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab California Tax-Exempt Money Fund. Any
resale by the Fund must be in an exempt transaction, normally to a
qualified institutional buyer. At December 31, 1995, the aggregate
value of private placement securities held by the Fund was $91,038,000
which represented 5.40% of net assets. All of these private placement
securities were determined by the Investment Manager to be liquid in
accordance with procedures adopted by the Board of Trustees.
<TABLE>
<CAPTION>
Abbreviations
- --------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-69
<PAGE> 142
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $1,674,011) $1,674,011
Cash 38
Interest receivable 14,817
Receivable for fund shares sold 4,914
Prepaid expenses 162
----------
Total assets 1,693,942
----------
LIABILITIES
Payable for:
Dividends 6,832
Fund shares redeemed 485
Investment advisory and administration fee 267
Transfer agency and shareholder service fees 536
Other 119
----------
Total liabilities 8,239
----------
Net assets applicable to outstanding shares $1,685,703
==========
NET ASSETS CONSIST OF:
Capital paid in $1,686,367
Accumulated net realized loss on investments sold (664)
----------
$1,685,703
==========
THE PRICING OF SHARES
1,578,359 outstanding Sweep Shares and
108,008 outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares authorized) 1,686,367
Net asset value, offering and redemption price per each
Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-70
<PAGE> 143
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $55,134
-------
Expenses:
Investment advisory and administration fee 6,445
Transfer agency and shareholder service fees:
Sweep Shares 6,469
Value Advantage Shares 31
Custodian fees 244
Registration fees 207
Professional fees 103
Shareholder reports 64
Trustees' fees 9
Amortization of deferred organization costs and
other prepaid expenses 50
Insurance and other expenses 75
-------
13,697
Less expenses reduced and absorbed (4,297)
-------
Total expenses incurred by Fund 9,400
-------
Net investment income 45,734
Net realized gain on investments sold 8
-------
Increase in net assets resulting from operations $45,742
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-71
<PAGE> 144
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 45,734 $ 27,608
Net realized gain (loss) on
investments sold 8 (600)
----------- -----------
Increase in net assets resulting
from operations 45,742 27,008
----------- -----------
Dividends to shareholders from
net investment income:
Sweep Shares (45,302) (27,608)
Value Advantage Shares (432) --
----------- -----------
Total dividends to shareholders (45,734) (27,608)
----------- -----------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 4,383,313 3,435,641
Net asset value of shares issued in
reinvestment of dividends 43,226 24,116
Less payments for shares redeemed (4,034,727) (3,227,316)
----------- -----------
Increase in net assets from capital
share transactions 391,812 232,441
----------- -----------
Total increase in net assets 391,820 231,841
Net Assets:
Beginning of period 1,293,883 1,062,042
----------- -----------
End of period $ 1,685,703 $ 1,293,883
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-72
<PAGE> 145
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab California Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
The Board of Trustees of the Trust adopted a multiple class plan for the Fund on
May 9, 1995. Commencing October 3, 1995, the Fund began offering more than one
class of shares. Pursuant to the plan, the existing shares were redesignated as
Sweep Shares ("Sweep Shares"), and a new class of shares was added -- the Value
Advantage Shares ("Value Advantage Shares"). Both classes represent interests in
the same portfolio of investments of the Fund and are substantially the same in
all respects except that the classes are subject to different transfer agency
and shareholder service fees (see Note 3), investment minimums and certain other
expenses.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab New
York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab Value
Advantage Money Fund(R), the Schwab Institutional Advantage Money Fund(TM) and
the Schwab Retirement Money Fund(R). The assets of each series are segregated
and accounted for separately.
The Schwab California Tax-Exempt Money Fund, which is not "diversified" within
the meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of California and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of California
personal income tax.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
F-73
<PAGE> 146
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets. Expenses attributable to both
classes of shares are allocated daily to each class based on the value of
settled shares outstanding of each respective class. Transfer agency,
shareholder service fees and certain other expenses which are class specific are
calculated daily at the class level.
Interest income and realized gains (losses) -- Interest income is recorded on
the accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis. Income and realized gains (losses) are allocated daily to each class of
shares based on the value of settled shares outstanding of each respective
class.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$6,445,000 for the year ended December 31, 1995, before the Investment Manager
reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% and .25% of average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the year ended
December 31, 1995, the Fund incurred transfer agency and shareholder service
fees of $6,469,000 and $31,000 for the Sweep Shares and Value Advantage Shares,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $9,000 related to the
Trust's unaffiliated trustees.
F-74
<PAGE> 147
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the Fund's ratio of operating expenses to
average net assets. For the year ended December 31, 1995, the total of such fees
and expenses reduced and absorbed by the Investment Manager were $3,707,000 and
the total of such fees reduced by Schwab was $590,000.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the year ended
December 31, 1995, aggregated (in thousands) $3,297,957 and $2,925,680,
respectively.
6. CAPITAL SHARE TRANSACTIONS
The Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the Fund. Transactions in capital shares were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1995* 1994
----------- -----------
<S> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 4,257,465 $ 3,435,641
Value Advantage Shares 125,848 --
----------- -----------
Total proceeds from shares sold 4,383,313 3,435,641
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 43,152 24,116
Value Advantage Shares 74 --
----------- -----------
Total net assets of shares issued in
reinvestment of dividends 43,226 24,116
Less payments for shares redeemed:
Sweep Shares (4,016,813) (3,227,316)
Value Advantage Shares (17,914) --
----------- -----------
Total payments for shares redeemed (4,034,727) (3,227,316)
Total increase in net assets from
capital share transactions $ 391,812 $ 232,441
=========== ===========
</TABLE>
* The Value Advantage Shares commenced operations on October 3, 1995.
F-75
<PAGE> 148
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Value
Advantage
Shares
------------- Sweep Shares
For the --------------------------------------------------------------
period
ended \-------------- For the year ended December 31, -------------\
December 31,
1995 1 1995 1994 1993 1992 1991
------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .01 .03 .02 .02 .02 .04
Net realized and
unrealized gain (loss)
on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total from investment operations .01 .03 .02 .02 .02 .04
Less distributions
- ------------------
Dividends from net
investment income (.01) (.03) (.02) (.02) (.02) (.04)
Distributions from realized gain
on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total distributions (.01) (.03) (.02) (.02) (.02) (.04)
-------- ---------- ---------- ---------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========== ========== ========== ======== ========
Total return (%) .84 3.20 2.26 1.91 2.35 3.77
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 108,008 $1,577,695 $1,293,883 $1,062,042 $691,176 $494,214
Ratio of expenses to
average net assets (%) .45* .65 .64 .63 .63 .61
Ratio of net investment income
to average net assets (%) 3.48* 3.15 2.25 1.89 2.31 3.70
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, with respect to the Value Advantage Shares, the ratio of expenses to
average net assets and the ratio of net investment income to average net assets
for the period ended December 31, 1995 would have been 1.04%* and 2.89%*,
respectively. With respect to the Sweep Shares, the ratio of expenses to average
net assets for the periods ended December 31, 1995, 1994, 1993, 1992, and 1991
would have been .94%, .94%, .96%, .97%, and .98%, respectively, and the ratio of
net investment income to average net assets would have been 2.86%, 1.95%, 1.56%,
1.97%, and 3.33%, respectively.
1 For the period October 3, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-76
<PAGE> 149
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab California Tax-Exempt Money Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab California Tax-Exempt Money Fund
(one of the series constituting The Charles Schwab Family of Funds, hereafter
referred to as the "Trust") at December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each period presented,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-77
<PAGE> 150
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-78
<PAGE> 151
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-79
<PAGE> 152
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-80
<PAGE> 153
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-81
<PAGE> 154
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-82
<PAGE> 155
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-83
<PAGE> 156
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-84
<PAGE> 157
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-85
<PAGE> 158
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-86
<PAGE> 159
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-87
<PAGE> 160
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-88
<PAGE> 161
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-89
<PAGE> 162
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
with generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-90
<PAGE> 163
SchwabFunds(R) 1
- -------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--81.8%(a)
ASSET BACKED SECURITIES--5.6%
Alamo Funding, LP
5.86%, 01/19/96 $3,500 $3,490
Apreco, Inc.
5.80%, 01/22/96 1,000 997
------
4,487
------
AUTOMOTIVE--3.7%
General Motors Acceptance Corp.
5.82%, 02/14/96 3,000 2,979
------
BANKING--AUSTRALIA--9.7%
ANZ (Delaware), Inc.
5.58%, 05/14/96 3,000 2,939
Westpac Capital Corp.
5.79%, 05/01/96 5,000 4,905
------
7,844
------
BANKING--DOMESTIC BANK HOLDING COMPANY--4.9%
Bankers Trust New York Corp.
5.81%, 01/29/96 3,000 2,987
NationsBank Corp.
5.61%, O5/28/96 1,000 978
------
3,965
------
BANKING--FRANCE--1.9%
Societe Generale, N.A.
5.80%, 03/08/96 1,574 1,557
------
BANKING--GERMANY--4.8%
Commerzbank, U.S. Finance Inc.
5.65%, 02/21/96 377 374
Kredietbank N.A. Finance Corp.
5.80%, 02/13/96 1,000 993
</TABLE>
F-91
<PAGE> 164
SchwabFunds(R) 2
- ------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
KREDIETBANK N.A. FINANCE CORP.
5.83%, 03/01/96 $2,550 $2,526
------
3,893
------
BANKING--ITALY--2.5%
Cariplo Finance, Inc.
5.77%, 02/20/96 2,000 1,984
------
BANKING--JAPAN--2.2%
Bridgestone/Firestone, Inc. / (Dai-Ichi Kangyo
Bank Ltd. LOC)
6.05%, 02/01/96 1,746 1,737
------
BANKING--UNITED KINGDOM--6.2%
Abbey National N.A. Corp.
5.80%, 01/31/96 5,000 4,976
------
FINANCE (COMMERCIAL)--3.9%
General Electric Capital Corp.
5.74%, 03/06/96 1,000 990
USL Capital Corp.
5.81%, 01/09/96 2,130 2,127
------
3,117
------
FINANCE (CONSUMER)--4.9%
American Express Credit Corp.
5.81%, 03/01/96 3,000 2,972
Sears Roebuck Acceptance Corp.
5.82%, 01/11/96 1,000 998
------
3,970
------
MINING AND MINERAL RESOURCES--1.8%
BHP Finance (U.S.A.), Inc.
5.79%, 01/11/96 1,465 1,463
------
</TABLE>
F-92
<PAGE> 165
SchwabFunds(R) 3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
MORTGAGE BANKING-3.7%
Fleet Mortgage Group, Inc.
5.82%, 02/22/96 $3,000 $ 2,975
-------
SECURITIES BROKERAGE-DEALER--26.0%
BT Securities Corp.
5.84%, 01/25/96 2,000 1,992
5.83%, 01/30/96 2,000 1,991
5.80%, 02/05/96 1,000 994
CS First Boston, Inc.
5.81%, 01/11/96 4,000 3,994
Dean Witter Discover
5.79%, 02/08/96 2,000 1,988
Lehman Brothers Holdings, Inc.
5.85%, 01/25/96 2,000 1,992
5.83%, 01/26/96 2,000 1,992
Morgan Stanley Group, Inc.
5.83%, 01/08/96 3,000 2,997
5.80%, 01/23/96 1,000 997
Nomura Holdings America, Inc.
5.86%, 01/22/96 1,000 997
Salomon, Inc.
6.02%, 02/15/96 1,000 991
-------
20,925
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $65,872) 65,872
-------
AGENCY OBLIGATIONS--3.7%
COUPON NOTES--3.7%
Federal National Mortgage Assoc.
5.91%, 08/19/96 3,000 3,005
-------
TOTAL AGENCY OBLIGATIONS
(Cost $3,005) 3,005
-------
</TABLE>
F-93
<PAGE> 166
SchwabFunds(R) 4
- ------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Schedule of Investments (in thousands)
December 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT--11.2%
BANKING--JAPAN--7.5%
Dai-Ichi Kangyo Bank, Ltd.
6.14%, 01/12/96 $2,000 $ 2,000
Mitsubishi Bank, Ltd.
5.83%, 03/19/96 1,000 1,000
Sanwa Bank, Ltd.
6.17%, 02/20/96 1,000 1,000
Sumitomo Bank, Ltd.
6.38%, 01/05/96 2,000 2,000
-------
6,000
-------
BANKING--NETHERLANDS--3.7%
ABN-AMRO Bank N.V.
5.83%, 02/21/96 3,000 3,000
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $9,000) 9,000
-------
Maturity
--------
REPURCHASE AGREEMENT--3.3%
Donaldson, Lufkin & Jenrette
Securities Corp. 5.80%.
Issue Date 12/29/9S
Due 01/02/96
Collateralized By:
FHLMC: $2,675 Par;
7.00% Due 06/15/19 2,643 2,641
-------
TOTAL REPURCHASE AGREEMENT
(Cost $2,641) 2,641
-------
TOTAL INVESTMENTS--100.0%
(Cost $80,518) $80,518
=======
</TABLE>
F-94
<PAGE> 167
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase except for agency
obligations which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market conventions for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Fund are private placement securities
exempt from registration by Section 4(2) of the Securities Act of 1933.
These securities generally are issued to institutional investors, such as
the Schwab Institutional Advantage Money Fund. Any resale by the Fund
must be in an exempt transaction, normally to a qualified institutional
buyer. At December 31, 1995, the aggregate value of private placement
securities held by the Fund was $3,490,000 which represented 4.32% of net
assets. All of these private placement securities were determined by the
Investment Manager to be liquid in accordance with a resolution adopted
by the Board of Trustees relating to Rule 144A, promulgated under the
Securities Act of 1933.
ABBREVIATIONS
FHLMC Federal Home Loan Mortgage Corporation
LOC Letter of Credit
See accompanying Notes to Financial Statements.
F-95
<PAGE> 168
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Assets and Liabilities (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $80,518) $ 80,518
Cash 1
Interest receivable 187
Receivable for fund shares sold 677
Deferred organization costs 34
Prepaid expenses 32
--------
Total assets 81,449
--------
LIABILITIES
Payable for:
Dividends 634
Fund shares redeemed 23
Investment advisory and administration fee 15
Transfer agency and shareholder service fees 0
Total liabilities 703
--------
Net assets applicable to outstanding shares $ 80,746
========
NET ASSETS CONSIST OF:
Capital paid in $ 80,747
Accumulated net realized loss on investments sold (1)
--------
$ 80,746
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 80,747
Net asset value, offering and redemption price per share $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-96
<PAGE> 169
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Operations (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $ 4,774
-------
Expenses:
Investment advisory and administration fee 364
Transfer agency and shareholder service fees 198
Custodian fees 61
Registration fees 33
Professional fees 13
Shareholder reports 23
Amortization of deferred organization costs 12
Insurance and other expenses 6
-------
710
Less expenses reduced (290)
-------
Total expenses incurred by Fund 420
-------
Net investment income 4,354
Net realized loss on investments sold (1)
-------
Increase in net assets resulting from operations $ 4,353
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-97
<PAGE> 170
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
Statement of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994 *
------------ --------------
<S> <C> <C>
Operations:
Net investment income $ 4,354 $ 1,928
Net realized loss on investments sold (1) --
--------- ---------
Increase in net assets resulting
from operations 4,353 1,928
--------- ---------
Dividends to shareholders from
net investment income (4,354) (1,928)
--------- ---------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 281,164 240,455
Net asset value of shares issued in
reinvestment of dividends 1,784 397
Less payments for shares redeemed (262,289) (180,764)
--------- ---------
Increase in net assets from
capital share transactions 20,659 60,088
--------- ---------
Total increase in net assets 20,658 60,088
Net Assets:
Beginning of period 60,088 --
--------- ---------
End of period $ 80,746 $ 60,088
========= =========
</TABLE>
* For the period January 4, 1994 (commencement of operations) to December 31,
1994.
See accompanying Notes to Financial Statements.
F-98
<PAGE> 171
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Institutional Advantage Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
Value Advantage Money Fund(R) and the Schwab Retirement Money Fund(R). The
assets of each series are segregated and accounted for separately.
The Schwab Institutional Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation - Investments are stated at amortized cost which approximates
market value.
Security transactions and interest income - Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
F-99
<PAGE> 172
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
Repurchase agreements - Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders - The Fund declares a daily dividend, equal to its net
investment income for that day, payable monthly.
Deferred organization costs - Costs incurred in connection with the organization
of the Fund and its initial registration with the Securities and Exchange
Commission and with various states are amortized on a straight-line basis over a
five-year period from the Fund's commencement of operations.
Expenses - Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes - It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements - The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$364,000 for the year ended December 31, 1995, before the Investment Manager
reduced its fee (see Note 4).
Transfer agency and shareholder service agreements - The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. For the year
ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $198,000, before Schwab reduced its fees (see Note 4).
F-100
<PAGE> 173
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
Officers and trustees - Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund did not incur fees related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $162,000 and $128,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $1,777,962 and $1,758,519,
respectively.
F-101
<PAGE> 174
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994(1)
------------ --------------
<S> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income .06 .04
Net realized and unrealized gain (loss) investments -- --
-------- -------
Total from investment operations .06 .04
Less distributions
Dividends from net investment income (.06) (.04)
Distributions from realized gain on investments -- --
-------- -------
Total distributions (.06) (.04)
-------- -------
Net asset value at end of period $ 1.00 $ 1.00
======== =======
Total return(%) 5.65 3.86
Ratios/Supplemental data
Net assets, end of period (000s) $ 80,746 $60,088
Ratio of expenses to average net assets(%) .53 .55*
Ratio of net investment income to average net assets(%) 5.50 4.04*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced, the ratio of expenses to average net assets for the
periods ended December 31, 1995 and 1994 would have been .90% and .92%*,
respectively, and the ratio of net investment income to average net assets would
have been 5.13% and 3.67%*, respectively.
(1) For the period January 4, 1994 (commencement of operations) to December 31,
1994.
* Annualized
F-102
<PAGE> 175
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Institutional Advantage Money Fund(TM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab Institutional Advantage Money
Fund (one of the series constituting The Charles Schwab Family of Funds,
hereafter referred to as the "Trust") at December 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-103
<PAGE> 176
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS--69.4%(a)
ASSET BACKED SECURITIES--11.5%
Alamo Funding, LP
5.86%, 01/19/96 $1,000 $ 997
Apreco, Inc.
5.80%, 01/22/96 4,000 3,987
Asset Securitization Cooperative Corp.
5.83%, 02/01/96 2,000 1,990
Broadway Capital Corp.
5.95%, 01/03/96 1,523 1,523
Preferred Receivables Funding Corp.
5.79%, 01/11/96 2,000 1,997
Sheffield Receivables Corp.
5.80%, 01/30/96 1,000 995
-------
11,489
-------
AUTOMOTIVE--5.5%
General Motors Acceptance Corp.
5.79%, 02/05/96 1,500 1,492
5.82%, 02/14/96 3,000 2,979
Renault Credit International SA Banque
5.88%, 01/25/96 1,000 996
-------
5,467
-------
BANKING--AUSTRALIA-1.0%
National Australia Funding (Delaware), Inc.
5.53%, 06/12/96 1,000 976
-------
BANKING--BELGIUM--2.9%
Generale Bank, Inc.
5.81%, 04/04/96 3,000 2,956
-------
BANKING--CANADA--1.0%
Toronto-Dominion Holdings
5.51%, 07/10/96 1,000 972
-------
BANKING--DOMESTIC BANK HOLDING COMPANY--3.9%
Bankers Trust New York Corp.
5.81%, 01/29/96 2,000 1,991
</TABLE>
F-104
<PAGE> 177
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
NationsBank Corp.
5.55%, 05/21/96 $1,000 $ 979
5.61%, 05/28/96 1,000 978
-------
3,948
-------
BANKING--FRANCE--1.0%
Societe Generale, N.A.
5.80%, 03/08/96 1,000 989
-------
BANKING--GERMANY--4.3%
Kredietbank N.A. Finance Corp.
5.78%, 01/11/96 3,000 2,995
5.83%, 03/01/96 1,300 1,288
-------
4,283
-------
BANKING--ITALY--1.0%
Cariplo Finance, Inc.
5.76%, 02/22/96 1,000 992
-------
FINANCE (COMMERCIAL)--2.9%
General Electric Capital Corp.
5.74%, 03/06/96 1,000 990
5.63%, 03/25/96 1,000 987
5.62%, 05/07/96 1,000 981
-------
2,958
-------
FINANCE (CONSUMER)--2.0%
Associates Corp. of North America
5.65%, 05/09/96 2,000 1,960
-------
GOVERNMENT LOCALITY--FOREIGN--4.0%
New South Wales Treasury Corp.
5.81%, 01/10/96 4,000 3,994
-------
MINING AND MINERAL RESOURCES--2.0%
BHP Finance (U.S.A.), Inc.
5.70%, 02/21/96 1,000 992
</TABLE>
F-105
<PAGE> 178
SchwabFunds(R) 3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
BHP Finance (U.S.A.), Inc.
5.76%, 03/05/96 $ 1,000 $ 990
-------
1,982
-------
MORTGAGE BANKING--4.0%
Fleet Mortgage Group, Inc.
5.85%, 01/26/96 3,000 2,988
5.80%, 02/23/96 1,000 992
-------
3,980
-------
SECURITIES BROKERAGE-DEALER--19.4%
BT Securities Corp.
5.80%, 01/03/96 3,000 2,999
5.83%, 01/30/96 1,000 995
Bear Stearns Companies, Inc.
5.80%, 01/12/96 2,500 2,496
Goldman Sachs Group, LP
5.82%, 01/12/96 1,000 998
5.77%, 03/22/96 3,000 2,962
Lehman Brothers Holdings, Inc.
5.85%, 01/23/96 4,000 3,986
Morgan Stanley Group, Inc.
5.83%, 01/08/96 1,000 999
5.78%, 02/08/96 1,000 994
Nomura Holdings America, Inc.
5.92%, 01/04/96 1,000 1,000
5.83%, 03/13/96 1,000 989
Paine Webber Group, Inc.
5.96%, 01/09/96 1,000 999
-------
19,417
-------
</TABLE>
F-106
<PAGE> 179
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
STUDENT LOANS--3.0%
Student Loan Corp.
5.80%, 01/12/96 $ 3,000 $ 2,995
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $69,358) 69,358
-------
AGENCY OBLIGATIONS--3.0%
COUPON NOTES--3.0%
Federal National Mortgage Assoc.
5.91%, 08/19/96 3,000 3,005
-------
TOTAL AGENCY OBLIGATIONS
(Cost $3,005) 3,005
-------
CERTIFICATES OF DEPOSIT--24.0%
BANKING--CANADA--4.0%
Canadian Imperial Bank of Commerce
5.81%, 01/24/96 4,000 4,000
-------
BANKING--DOMESTIC--4.0%
MBNA America Bank N.A.
5.63%, 04/16/96 4,000 4,000
-------
BANKING--FRANCE--2.0%
Societe Generale
5.80%, 01/25/96 2,000 2,000
-------
BANKING--JAPAN--8.0%
Dai-Ichi Kangyo Bank, Ltd.
6.20%, 01/12/96 1,000 1,000
6.14%, 01/12/96 1,000 1,000
6.09%, 01/12/96 1,000 1,000
Industrial Bank of Japan, Ltd.
6.25%, 01/02/96 2,000 2,000
Mitsubishi Bank, Ltd.
5.83%, 03/19/96 1,000 1,000
Sanwa Bank, Ltd.
6.22%, 02/21/96 1,000 1,000
</TABLE>
F-107
<PAGE> 180
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT (CONTINUED)
Sumitomo Bank, Ltd.
6.15%, 01/17/96 $ 1,000 $ 1,000
-------
8,000
-------
BANKING--NETHERLANDS--2.0%
ABN-AMRO Bank N.V.
5.58%, 06/05/96 2,000 2,000
-------
BANKING--UNITED KINGDOM--4.0%
Abbey National PLC
5.80%, 01/16/96 4,000 3,996
-------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $23,996) 23,996
-------
MATURITY
--------
REPURCHASE AGREEMENT--3.6%
Donaldson, Lufkin & Jenrette
Securities Corp. 5.80%
Issue Date 12/29/95
Due 01/02/96
Collateralized By:
FNMA: $13,435 Par;
7.04% Due 04/25/23 3,554 3,552
-------
TOTAL REPURCHASE AGREEMENT
(Cost $3,552) 3,552
-------
TOTAL INVESTMENTS--100.0%
(cost $99,911) $99,911
=======
</TABLE>
See accompanying Notes to Schedule of Investments.
F-108
<PAGE> 181
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Schedule of Investments (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase except for agency
obligations which reflect the coupon rate of the security. Yields for each type
of security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Certain securities purchased by the Fund are private placement securities
exempt from registration by Section 4(2) of the Securities Act of 1933.
These securities generally are issued to institutional investors, such as
the Schwab Retirement Money Fund. Any resale by the Fund must be in an
exempt transaction, normally to a qualified institutional buyer. At
December 31, 1995, the aggregate value of private placement securities
held by Fund was $4,508,000 which represented 4.6% of net assets. All of
these private placement securities were determined by the Investment
Manager to be liquid in accordance with a resolution adopted by the Board
of Trustees relating to Rule 144A, promulgated under the Securities Act of
1933.
Abbreviations
FNMA Federal National Mortgage Association
See accompanying Notes to Financial Statements.
F-109
<PAGE> 182
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Assets and Liabilities (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
<S> <C>
Investments, at value (Cost: $99,911) $ 99,911
Interest receivable 396
Receivable for fund shares sold 177
Deferred organization costs 36
Prepaid expenses 23
--------
Total assets 100,543
--------
LIABILITIES
Payable for:
Dividends 639
Fund shares redeemed 829
Investment advisory and administration fee 37
Transfer agency and shareholder service fees 13
Other 33
--------
Total liabilities 1,551
--------
Net assets applicable to outstanding shares $ 98,992
========
NET ASSETS CONSIST OF:
Capital paid in $ 98,992
Accumulated net realized gain (loss)
on investments sold ---
--------
$ 98,992
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 98,992
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-110
<PAGE> 183
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Operations (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $4,616
------
Expenses:
Investment advisory and administration fee 354
Transfer agency and shareholder service fees 192
Custodian fees 60
Registration fees 50
Professional fees 13
Shareholder reports 18
Amortization of deferred organization costs 12
Insurance and other expenses 6
------
705
Less expenses reduced (144)
------
Total expenses incurred by Fund 561
------
Net investment income 4,055
Net realized gain (loss) on investments sold ---
------
Increase in net assets resulting from operations $4,055
======
</TABLE>
See accompanying Notes to Financial Statements.
F-111
<PAGE> 184
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Statement of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994 *
------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 4,055 $ 842
Net realized gain (loss) on investments sold --- ---
--------- --------
Increase in net assets resulting
from operations 4,055 842
--------- --------
Dividends to shareholders from
net investment income (4,055) (842)
--------- --------
Capital share transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 173,890 84,340
Net asset value of shares issued in
reinvestment of dividends 3,564 661
Less payments for shares redeemed (109,877) (53,586)
--------- --------
Increase in net assets from
capital share transactions 67,577 31,415
--------- --------
Total increase in net assets 67,577 31,415
Net Assets:
Beginning of period 31,415 ---
--------- --------
End of period $ 98,992 $ 31,415
========= ========
</TABLE>
* For the period March 2, 1994 (commencement of operations)
to December 31, 1994.
See accompanying Notes to Financial Statements.
F-112
<PAGE> 185
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Notes to Financial Statements
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Retirement Money Fund (the "Fund") is a series of The Charles Schwab
Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab
Value Advantage Money Fund(R) and the Schwab Institutional Advantage Money
Fund(TM). The assets of each series are segregated and accounted for separately.
The Schwab Retirement Money Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation - Investments are stated at amortized cost which approximates
market value.
Security transactions and interest income - Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements - Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders - The Fund declares a daily dividend, equal to its net
investment income for that day, payable monthly.
F-113
<PAGE> 186
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deferred organization costs - Costs incurred in connection with the organization
of the Fund and its initial registration with the Securities and Exchange
Commission and with various states are amortized on a straight-line basis over a
five year period from the Fund's commencement of operations.
Expenses - Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes - It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements - The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$354,000 for the year ended December 31, 1995, before the Investment Manager
reduced its fee (see Note 4).
Transfer agency and shareholder service agreements - The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. For the year
ended December 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $192,000, before Schwab reduced its fees (see Note 4).
Officers and trustees - Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the year
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund did not incur fees related to the
Trust's unaffiliated trustees.
F-114
<PAGE> 187
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB RETIREMENT MONEY FUND(R)
Notes to Financial Statements
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the year
ended December 31, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $16,000 and $128,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the year ended
December 31, 1995, aggregated (in thousands) $1,753,661 and $1,685,786,
respectively.
F-115
<PAGE> 188
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the year For the period
ended ended
December 31, December 31,
1995 1994(1)
------------ --------------
<S> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income .05 .03
Net realized and unrealized gain (loss)
on investments --- ---
------- -------
Total from investment operations .05 .03
Less distributions
Dividends from net investment income (.05) (.03)
Distributions from realized gain
on investments --- ---
------- -------
Total distributions (.05) (.03)
------- -------
Net asset value at end of period $ 1.00 $ 1.00
======= =======
Total return (%) 5.43 3.29
Ratios/Supplemental data
Net assets, end of period(000s) $98,992 $31,415
Ratio of expenses to average net assets(%) .73 .73*
Ratio of net investment income to
average net assets (%) 5.28 4.04*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced the ratio of expenses to average net assets for the
periods ended December 31, 1995 and 1994 would have been .92%, and 1.05%*,
respectively, and the ratio of net investment income to average net assets would
have been 5.09% and 3.72%*, respectively.
(1) For the period March 2, 1994 (commencement of operations) to
December 31, 1994.
* Annualized
F-116
<PAGE> 189
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Retirement Money Fund(R)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of the Schwab Retirement Money Fund (one of the
series constituting The Charles Schwab Family of Funds, hereafter referred to as
the "Trust") at December 31, 1995, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-117
<PAGE> 190
PART C
OTHER INFORMATION
February 21, 1997
THE CHARLES SCHWAB FAMILY OF FUNDS
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
-- Financial Highlights--Included in Part B, Statement of Additional
Information:
Incorporated by reference to the joint Statement of Additional
Information for Schwab Money Market Fund, Schwab Government Money
Fund, Schwab U.S. Treasury Money Fund, Schwab Municipal Money
Fund-Sweep Shares (formerly Schwab Tax-Exempt Money Fund-Sweep
Shares), Schwab California Municipal Money Fund-Sweep Shares
(formerly Schwab California Tax-Exempt Money Fund-Sweep Shares),
Schwab New York Municipal Money Fund-Sweep Shares (formerly Schwab
New York Tax-Exempt Money Fund-Sweep Shares), Schwab Institutional
Advantage Money Fund(R), Schwab Retirement Money Fund(R) and Schwab
Value Advantage Money Fund(R)-Investor Shares, separate portfolios of
Registrant, filed herewith.
-- Schwab Money Market Fund Schedule of Investments
dated December 31, 1995 (Audited)
-- Schwab Government Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab U.S. Treasury Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund Statements
of Assets and Liabilities dated December 31, 1995
(Audited)
-- Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund Statements
of Operations for the year ended December 31, 1995
(Audited)
-- Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund Statements
of Changes in Net Assets dated December 31, 1995
(Audited)
1
<PAGE> 191
-- Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund Notes to
Financial Statements for the year ended December
31, 1995 (Audited)
-- Report of Independent Accountants for the Schwab
Money Market Fund, Schwab Government Money Fund and
Schwab U.S. Treasury Money Fund dated January 31,
1996
-- Schwab Municipal Money Fund Schedule of Investments
dated December 31, 1995 (Audited)
-- Schwab Municipal Money Fund Statement of Assets and
Liabilities dated December 31, 1995 (Audited)
-- Schwab Municipal Money Fund Statement of Operations
for the year ended December 31, 1995 (Audited)
-- Schwab Municipal Money Fund Statement of Changes in
Net Assets dated December 31, 1995 (Audited)
-- Schwab Municipal Money Fund Notes to Financial
Statements for the year ended December 31, 1995
(Audited)
-- Report of the Independent Accountants for the
Schwab Municipal Money Fund dated January 31, 1996
-- Schwab California Municipal Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab California Municipal Money Fund Statement of
Assets and Liabilities dated December 31, 1995
(Audited)
-- Schwab California Municipal Money Fund Statement of
Operations for the year ended December 31, 1995
(Audited)
-- Schwab California Municipal Money Fund Statement of
Changes in Net Assets dated December 31, 1995
(Audited)
-- Schwab California Municipal Money Fund Notes to
Financial Statements for the year ended December
31, 1995 (Audited)
-- Report of Independent Accountants for the Schwab
California Municipal Money Fund dated January 31,
1996
-- Schwab New York Municipal Money Fund Schedule of
Investments dated December 31, 1995 (Unaudited)
2
<PAGE> 192
-- Schwab New York Municipal Money Fund Statement of
Assets and Liabilities dated December 31, 1995
(Unaudited)
-- Schwab New York Municipal Money Fund Statement of
Operations for the period February 27, 1995
(commencement of operations) to December 31, 1995
(Unaudited)
-- Schwab New York Municipal Money Fund Statement of
Changes in Net Assets for the period February 27,
1995 (commencement of operations) to December 31,
1995 (Unaudited)
-- Schwab New York Municipal Money Fund Notes to
Financial Statements for the period February 27,
1995 (commencement of operations) to December 31,
1995 (Unaudited)
-- Report of Independent Accountants for the Schwab
New York Municipal Money Fund dated January 31,
1996 (Audited)
-- Schwab Institutional Advantage Money Fund(R)
Schedule of Investments dated December 31, 1995
(Audited)
-- Schwab Institutional Advantage Money Fund Statement
of Assets and Liabilities dated December 31, 1995
(Audited)
-- Schwab Institutional Advantage Money Fund Statement
of Operations for the year ended December 31, 1995
(Audited)
-- Schwab Institutional Advantage Money Fund Statement
of Changes in Net Assets for the year ended
December 31, 1995 (Audited)
-- Schwab Institutional Advantage Money Fund Notes to
Financial Statements for the year ended December
31, 1995 (Audited)
-- Report of Independent Accountants for the Schwab
Institutional Advantage Money Fund dated January
31, 1996
-- Schwab Retirement Money Fund(R) Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab Retirement Money Fund Statement of Assets
and Liabilities dated December 31, 1995 (Audited)
-- Schwab Retirement Money Fund Statement of
Operations for the year ended December 31, 1995
(Audited)
3
<PAGE> 193
-- Schwab Retirement Money Fund Statement of Changes
in Net Assets for the year ended December 31, 1995
(Audited)
-- Schwab Retirement Money Fund Notes to Financial
Statements for the year ended December 31, 1995
(Audited)
-- Report of Independent Accountants for the Schwab
Retirement Money Fund dated January 31, 1996
-- Schwab Value Advantage Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab Value Advantage Money Fund Statement of
Assets and Liabilities dated December 31, 1995
(Audited)
-- Schwab Value Advantage Money Fund Statement of
Operations for the year ended December 31, 1995
(Audited)
-- Schwab Value Advantage Money Fund Statement of
Changes in Net Assets dated December 31, 1995
(Audited)
-- Schwab Value Advantage Money Fund Notes to
Financial Statements for the year ended December
31, 1995 (Audited)
-- Report of Independent Accountants for the Schwab
Value Advantage Money Fund dated January 31, 1996
-- Incorporated by reference to the joint Statement of Additional
Information of Schwab Municipal Money Fund-Value Advantage
Shares, Schwab California Municipal Money Fund-Value Advantage
Shares and Schwab New York Municipal Money Fund-Value Advantage
Shares filed with the Securities and Exchange Commission pursuant
to Rule 497(e) on April 1, 1996.
-- Schwab Municipal Money Fund Schedule of Investments
dated December 31, 1995 (Audited)
-- Schwab California Municipal Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
-- Schwab New York Municipal Money Fund Schedule of
Investments dated December 31, 1995 (Audited)
4
<PAGE> 194
-- Schwab Municipal Money Fund, Schwab California
Municipal Money Fund and Schwab New York Municipal
Money Fund Statements of Assets and Liabilities
dated December 31, 1995 (Audited)
-- Schwab Municipal Money Fund, Schwab California
Municipal Money Fund and Schwab New York Municipal
Money Fund Statements of Operations for the year
ended December 31, 1995 (Audited)
-- Schwab Municipal Money Fund, Schwab California
Municipal Money Fund and Schwab New York Municipal
Money Fund Statements of Changes Statement in Net
Assets for the year ended December 31, 1995
(Audited)
-- Schwab Municipal Money Fund, Schwab California
Municipal Money Fund and Schwab New York Municipal
Money Fund Notes to Financial Statements for the
year ended December 31, 1995 (Audited)
-- Report of the Independent Accountants for Schwab
Municipal Money Fund, Schwab California Municipal
Money Fund and Schwab New York Municipal Money Fund
dated January 31, 1996
(a) Exhibits:
(1) Amended and Restated Agreement and Declaration of
Trust is incorporated by reference to Exhibit (1)
to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A, filed on June
6, 1995
(2) Amended and Restated By-Laws are incorporated by
reference to Exhibit (2) to Post-Effective
Amendment No. 23 to Registrant's Registration
Statement on Form N-1A, filed on March 29, 1996
(3) Inapplicable
(4) (a) Article III, Sections 4 and 5; Article
IV, Section 1; Article V; Article VI,
Section 2; Article VIII, Section 4;
and Article IX, Sections 1, 4 and 7 of
the Agreement and Declaration of Trust
are incorporated by reference to
Exhibit (1) to Post-Effective
Amendment No. 19 to Registrant's
Registration Statement on Form N-1A,
filed on June 6, 1995
(b) Article 9 and Article 11 of the
By-Laws are incorporated by reference
to Exhibit (2) to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement on Form N-1A,
filed on March 29, 1996
5
<PAGE> 195
(5) (a) Investment Advisory and Administration
Agreement between Registrant and
Charles Schwab Investment Management,
Inc. (the "Investment Manager") with
respect to Schwab Money Market Fund,
Schwab Government Money Fund and
Schwab Municipal Money Fund, dated
June 15, 1995, is incorporated by
reference to Exhibit (5)(a) to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, filed on June 29, 1995
(b) Investment Advisory and Administration
Agreement between Registrant and the
Investment Manager with respect to
Schwab California Municipal Money
Fund, Schwab U.S. Treasury Money Fund,
Schwab Value Advantage Money Fund,
Schwab Institutional Advantage Money
Fund(R), Schwab Retirement Money Fund
(R)and New York Municipal Money Fund,
dated June 15, 1995, is incorporated
by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, filed on June 29, 1995
(c) Amended Schedules to the Investment
Advisory and Administration Agreement
between Registrant and the Investment
Manager referred to at Exhibit (5)(c)
above are incorporated by reference to
Exhibit (5)(c) to Post-Effective
Amendment No. 16 to Registrant's
Registration Statement on Form N-1A,
filed on February 28, 1995
(d) Amended schedules to the Investment
Advisory and Administration Agreement
between Registrant and the Investment
Manager referred to at Exhibit (5)(c)
above are incorporated by reference to
Exhibit (5)(d) to Post-Effective
Amendment No. 24 to Registrant's
Registration Statement on Form N-1A,
filed on April 26, 1996
(6) (a) Distribution Agreement between
Registrant and Charles Schwab & Co.,
Inc. ("Schwab"), dated June 15, 1995,
is incorporated by reference to
Exhibit (6)(a) to Post-Effective
Amendment No. 13 to Registrant's
Registration Statement on Form N-1A,
filed on June 29, 1995
6
<PAGE> 196
(b) Amended Schedule to the Distribution
Agreement between Registrant and
Schwab referred to at Exhibit (6)(a)
above is incorporated by reference to
Exhibit (6)(b) to Post-Effective
Amendment No. 16 to Registrant's
Registration Statement on Form N-1A,
filed on February 28, 1995
(7) Inapplicable
(8) (a) Accounting Services Agreement between
Registrant and PFPC Inc. (formerly,
Provident Financial Processing
Corporation) dated April 8, 1991 is
incorporated by reference to Exhibit
(8)(c) to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement on Form N-1A, filed on
December 10, 1991
(b) Amended Schedule to the Accounting
Services Agreement referred to at
Exhibit (8)(a) above is incorporated
by reference to Exhibit (8)(b) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement
on Form N-1A, filed on February 28,
1995
(c) Amendment Nos. 1 and 2 to the
Accounting Services Agreement
referred to at Exhibit (8)(a) above
are incorporated by reference to
Exhibit (8)(c) to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement on Form N-1A,
filed on March 29, 1996
(d) Amended and Restated Transfer Agency
Agreement between Registrant and
Schwab dated June 5, 1995 is
incorporated by reference to Exhibit
(8)(c) to Post-Effective Amendment No.
19 to Registrant's Registration
Statement on Form N-1A, filed on June
6, 1995
(e) Form of Amended Schedules to the
Amended and Restated Transfer Agency
Agreement referred to at Exhibit
(6)(d) above is incorporated by
reference to Exhibit (8)(e) to Post-
Effective Amendment No. 24 to
Registrant's Registration Statement on
Form N-1A, filed on April 26, 1996
7
<PAGE> 197
(f) Shareholder Service Agreement between
Registrant and Schwab dated May 1,
1993 is incorporated by reference to
Exhibit (8)(f) to Post-Effective
Amendment No. 10 to Registrant's
Registration Statement on Form N-1A,
filed on September 28, 1993
(g) Amended Schedules to the Shareholder
Service Agreement between Registrant
and Schwab referred to at Exhibit
(8)(f) above are incorporated by
reference to Exhibit (8)(f) to Post-
Effective Amendment No. 16 to
Registrant's Registration Statement on
Form N-1A, filed on February 28, 1995
(h) Form of Amended Schedules to the
Shareholder Service Agreement referred
to at Exhibit (6)(f) above is
incorporated by reference to Exhibit
(8)(h) to Post-Effective Amendment No.
24 to Registrant's Registration
Statement on Form N-1A, filed on April
26, 1996
(i) Custodian Services Agreement between
Registrant and PNC Bank, N.A.
(formerly, Provident National Bank)
dated April 8, 1991 is incorporated
by reference to Exhibit (8)(b) to
Post- Effective Amendment No. 5 to
Registrant's Registration Statement
on Form N-1A, filed on December 10,
1991
(j) Amended Schedule to the Custodian
Services Agreement referred to at
Exhibit (8)(i) above is incorporated
by reference to Exhibit (8)(h) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement
on Form N-1A, filed on February 28,
1995
(k) Amendment Nos. 1 and 2 to the
Custodian Services Agreement
referred to at Exhibit (8)(i) above
are incorporated by reference to
Exhibit (8)(i) to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement on Form N-1A,
filed on March 29, 1996
(9) Inapplicable
(10) Opinion and Consent of Ropes & Gray as
to legality of the securities being
registered is incorporated by
reference to Registrant's Rule 24f-2
Notice, filed on February 19, 1997
(11) (a) Consent of Ropes & Gray is filed
herewith
8
<PAGE> 198
(b) Consent of Price Waterhouse LLP,
Independent Accountants, is filed
herewith
(12) Inapplicable
(13) (a) Purchase Agreement between Registrant
and Schwab relating to the Schwab
U.S. Treasury Money Fund is
incorporated by reference to Exhibit
(13)(a) to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement on Form N-1A, filed on
December 10, 1992
(b) Purchase Agreement between Registrant
and Schwab relating to the Schwab
Value Advantage Money Fund is
incorporated by reference to Exhibit
(13)(b) to Post-Effective Amendment
No. 6 to Registrant's Registration
Statement on Form N-1A, filed on March
3, 1992
(c) Purchase Agreement between Registrant
and Schwab relating to the Schwab
Retirement Money Fund(R) and the
Schwab Institutional Advantage Money
Fund(R) is incorporated by reference
to Exhibit (13)(c) to Post-Effective
Amendment No. 11 to Registrant's
Registration Statement on Form N-1A,
filed on December 1, 1993
(d) Purchase Agreement between Registrant
and Schwab relating to the Schwab New
York Municipal Money Fund is
incorporated by reference to Exhibit
(13)(d) to Post-Effective Amendment
No. 16 to Registrant's Registration
Statement on Form N-1A, filed on
February 28, 1995
(e) Purchase Agreement between Registrant
and Schwab relating to the Schwab
Municipal Money Fund-Value Advantage
Shares is incorporated by reference to
Exhibit (13)(e) to Post-Effective
Amendment No. 19 to Registrant's
Registration Statement on Form N-1A,
filed on June 6, 1995
(f) Purchase Agreement between Registrant
and Schwab relating to the Schwab
California Municipal Money
Fund-Value Advantage Shares is
incorporated by reference to Exhibit
(13)(f) to Post-Effective Amendment
No. 19 to Registrant's Registration
Statement on Form N-1A, filed on
June 6, 1995
9
<PAGE> 199
(g) Purchase Agreement between Registrant
and Schwab relating to the Schwab
New York Municipal Money Fund-Value
Advantage Shares is incorporated by
reference to Exhibit (13)(g) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement
on Form N-1A, filed on June 6, 1995
(14) (a) Model Charles Schwab & Co., Inc.
Individual Retirement Plan is
incorporated by reference to Exhibit
(14)(a) to Post-Effective Amendment
No. 14 to Registrant's Registration
Statement on Form N-1A, filed on
August 25, 1995
(b) Model Charles Schwab & Co., Inc. KEOGH
Plan is incorporated by reference to
Exhibit (14)(b) to Post-Effective
Amendment No. 14 to Registrant's
Registration Statement on Form N-1A,
filed on August 25, 1995
(15) Inapplicable
(16) (a) Performance Calculations for Schwab
Money Market Fund, Schwab Government
Money Fund, Schwab Municipal Money
Fund, Schwab California Municipal
Money Fund and Schwab U.S. Treasury
Money Fund are incorporated by
reference to Exhibit (16) to
Post-Effective Amendment No. 6 to
Registrant's Registration Statement
on Form N-1A, filed on March 3, 1992
(b) Performance Calculations for Schwab
Value Advantage Money Fund are
incorporated by reference to Exhibit
(16) to Post-Effective Amendment
No. 7 to Registrant's Registration
Statement on Form N-1A, filed on
August 7, 1992
(c) Performance Calculations for Schwab
Institutional Advantage Money Fund(R)
and Schwab Retirement Money Fund(R)
are incorporated by reference to
Exhibit (16) to Post-Effective
Amendment No. 17 to Registrant's
Registration Statement on Form N-1A,
filed on April 6, 1995
(d) Performance Calculations for Schwab
New York Municipal Money Fund-Sweep
Shares are incorporated by reference
to Exhibit (16)(d) to Post-Effective
Amendment No. 20 to Registrant's
Registration Statement on Form N-1A,
filed on August 25, 1995
10
<PAGE> 200
(17) (a) Financial Data Schedule for Schwab
Money Market Fund is filed herewith
(b) Financial Data Schedule for Schwab
Government Money Fund is filed
herewith
(c) Financial Data Schedule for Schwab
Municipal Money Fund-Sweep Shares
is filed herewith
(d) Financial Data Schedule for Schwab
Municipal Money Fund-Value Advantage
Shares is filed herewith
(e) Financial Data Schedule for Schwab
California Municipal Money
Fund-Sweep Shares is filed herewith
(f) Financial Data Schedule for Schwab
California Municipal Money
Fund-Value Advantage Shares is filed
herewith
(g) Financial Data Schedule for Schwab
U.S. Treasury Money Fund is filed
herewith
(h) Financial Data Schedule for Schwab
Value Advantage Money Fund-Investor
Shares is filed herewith
(i) Financial Data Schedule for Schwab
Institutional Advantage Money Fund(R)
is filed herewith
(j) Financial Data Schedule for Schwab
Retirement Money Fund(R) is filed
herewith
(k) Financial Data Schedule for Schwab New
York Municipal Money Fund-Sweep
Shares is filed herewith
(l) Financial Data Schedule for Schwab New
York Municipal Money Fund-Value
Advantage Shares is filed herewith
(18) Form of Amended and Restated Multiple
Class Plan of Registrant is filed
herewith
Item 25. Persons Controlled by or under Common Control with Registrant.
Schwab Investments, Schwab Capital Trust, and Schwab Annuity
Portfolios each are Massachusetts business trusts registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); are advised by the
Investment
11
<PAGE> 201
Manager; and employ Schwab as their principal underwriter, transfer agent and
shareholder services agent. As a result, Schwab Investments, Schwab Capital
Trust, and Schwab Annuity Portfolios may be deemed to be under common control
with Registrant.
Item 26. Number of Holders of Securities.
As of February 15, 1997, the number of record holders of shares of
beneficial interest for the series of Registrant was:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Schwab Money Market Fund 1 (for the benefit of [ ]
Schwab Government Money Fund 1 (for the benefit of [ ]
Schwab U.S. Treasury Money Fund 1 (for the benefit of [ ]
Schwab Municipal Money Fund-Sweep Shares 1 (for the benefit of [ ]
Schwab Municipal Money Fund-Value Advantage Shares 1 (for the benefit of [ ]
Schwab California Municipal Money Fund-Sweep Shares 1 (for the benefit of [ ]
Schwab California Municipal Money Fund-Value Advantage Shares 1 (for the benefit of [ ]
Schwab Value Advantage Money Fund-Investor Shares 1 (for the benefit of [ ]
Schwab Retirement Money Fund(R) 1 (for the benefit of [ ]
Schwab Value Advantage Money Fund-Sweep Shares 0 (for the benefit of [ ]
Schwab Institutional Advantage Money Fund(R) 1 (for the benefit of [ ]
Schwab New York Municipal Money Fund-Sweep Shares 1 (for the benefit of [ ]
Schwab New York Municipal Money Fund-Value Advantage Shares 1 (for the benefit of [ ]
</TABLE>
Item 27. Indemnification.
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust (Exhibit (1) hereto, which is incorporated herein by
reference) provides in effect that Registrant will indemnify its officers and
trustees against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise, or as fines and
penalties, and counsel fees reasonably incurred by any such officer or trustee
in connection with the defense or disposition of any action, suit, or other
proceeding. However, in accordance with Section 17(h) and 17(i) of the 1940 Act
and its own terms, said Agreement and Declaration of Trust does not protect any
person against any liability to Registrant or its shareholders to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office. In any event, Registrant will comply with 1940 Act Releases
Nos. 7221 and 11330 respecting the permissible boundaries of indemnification by
an investment company of its officers and trustees.
12
<PAGE> 202
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
(a) Information pertaining to business and other connections of
Registrant's Investment Manager is hereby incorporated by reference to the
section of the Prospectuses for Schwab Money Market Fund, Schwab Government
Money Fund, Schwab U.S. Treasury Money Fund, Schwab Municipal Money Fund-Sweep
Shares, Schwab California Municipal Money Fund-Sweep Shares, Schwab New York
Municipal Money Fund-Sweep Shares, Schwab Institutional Advantage Money Fund(R)
and Schwab Retirement Money Fund(R) captioned "Management of the Fund(s);" the
section of the Prospectuses for Schwab Value Advantage Money Fund, Schwab
Municipal Money Fund-Value Advantage Shares, Schwab California Municipal Money
Fund-Value Advantage Shares and Schwab New York Municipal Money Fund- Value
Advantage Shares captioned "Organization and Management of the Fund(s);" and the
section of the Statements of Additional Information captioned "Management of the
Trust."
Registrant's Investment Manager, Charles Schwab Investment
Management, Inc., a Delaware corporation, organized in October 1989 to serve as
Investment Manager to Registrant, also serves as the Investment Manager to
Schwab Investments, Schwab Capital Trust, and Schwab Annuity Portfolios , each
an open-end, management investment company. The principal place of business of
the Investment Manager is 101 Montgomery Street, San Francisco, California
94104. The only business in which the Investment Manager engages is that of
investment manager and administrator to Registrant, Schwab Investments, Schwab
Capital Trust, Schwab Annuity Portfolios and any other investment companies that
Schwab may sponsor in the future.
13
<PAGE> 203
(b) The business, profession, vocation or employment of a substantial
nature in which each director and/or executive officer of Schwab and/or the
Investment Manager is or has been engaged during the past two fiscal years for
his or her own account in the capacity of director, officer, employee, partner
or trustee is as follows:
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles R. Schwab, Charles Schwab & Co., Inc. Chairman and Director
Chairman and Trustee
The Charles Schwab Corporation Chairman, Chief Executive Officer
and Director
Charles Schwab Investment Chairman and Director
Management, Inc.
The Charles Schwab Trust Chairman and Director
Company
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer
and Director
The Charles Schwab Corporation President, Chief Operating Officer
and Director
</TABLE>
14
<PAGE> 204
<TABLE>
<S> <C> <C>
Charles Schwab Investment Director
Management, Inc.
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
and Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January 1996; Senior Executive Vice
President and Chief Operating
Officer until January 1995
The Charles Schwab Corporation Executive Vice President until
January 1996; Senior Executive Vice
President until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President - Schwab
Institutional
The Charles Schwab Corporation Executive Vice President - Schwab
Institutional
The Charles Schwab Trust Company Director and Executive Vice
President
A. John Gambs, Charles Schwab & Co., Inc. Executive Vice President, Chief
Treasurer and Financial Officer and Director
Principal Financial
Officer
The Charles Schwab Corporation Executive Vice President and Chief
Financial Officer
Charles Schwab Investment Chief Financial Officer and Director
Management, Inc.
The Charles Schwab Trust Chief Financial Officer
Company
Mayer & Schweitzer, Inc. Director
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President - Business
Strategy
</TABLE>
15
<PAGE> 205
<TABLE>
<S> <C> <C>
Charles Schwab & Co., Inc. Executive Vice President - Business
Strategy
Timothy F. McCarthy, Charles Schwab Investment Chief Executive Officer
Trustee and President Management, Inc.
Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds
The Charles Schwab Corporation Executive Vice President - Mutual
Funds
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
October 1995
Fidelity Investment Advisor Group President until 1994
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President -Electronic
Brokerage
The Charles Schwab Corporation Executive Vice President -Electronic
Brokerage
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President - Retail
Brokerage
The Charles Schwab Corporation Executive Vice President - Retail
Brokerage
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - Capital
Markets and Trading until February
1996
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President - Human
Resources and Corporate Support
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
</TABLE>
16
<PAGE> 206
<TABLE>
<S> <C> <C>
Commercial Credit Corporation Managing Director until February
1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice President
The Charles Schwab Corporation Treasurer and Senior Vice President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp, Charles Schwab & Co., Inc. Senior Vice President -SchwabFunds
Trustee, Senior Vice
President Chief
Operating Officer
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer
Stephen B. Ward, Charles Schwab Investment Senior Vice President and Chief
Senior Vice President Management, Inc. Investment Officer
and Chief Investment
Officer
Frances Cole, Charles Schwab Investment Vice President, Chief Counsel, Chief
Secretary Management, Inc. Compliance Officer and Assistant
Corporate Secretary
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Corporate Secretary
Management, Inc.
The Charles Schwab Trust Assistant Corporate Secretary
Company
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Assistant Corporate Secretary
Management, Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary until
Company February 1996
David H. Lui Charles Schwab Investment Vice President and Senior Counsel
Assistant Secretary Management, Inc.
</TABLE>
17
<PAGE> 207
<TABLE>
<S> <C> <C>
Christina M. Perrino Charles Schwab Investment Vice President and Senior Counsel
Assistant Secretary Management, Inc.
Karen L. Seaman Charles Schwab Investment Corporate Counsel
Assistant Secretary Management, Inc.
</TABLE>
Item 29. Principal Underwriters.
(a) Schwab acts as principal underwriter and distributor of
Registrant's shares. Schwab currently also acts as principal underwriter for
Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and intends
to act as such for any other investment company which Schwab may sponsor in the
future.
(b) See Item 28(b) for information on the officers and directors
of Schwab. The principal business address of Schwab is 101 Montgomery Street,
San Francisco, California 94104.
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the 1940 Act and the Rules thereunder are
maintained at the offices of: Registrant (transfer agency and shareholder
records); Registrant's investment manager and administrator, Charles Schwab
Investment Management, Inc., 101 Montgomery Street, San Francisco, California
94104; Registrant's sub-investment adviser, Dimensional Fund Advisors Inc., 1299
Ocean Avenue, Suite 1100, Santa Monica, California 90401; Registrant's principal
underwriter, Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104; Registrant's Custodian, PNC Bank, National Association, Broad
and Market Streets, Philadelphia, Pennsylvania 19104 (ledgers, receipts and
brokerage orders); Registrant's fund accountants, PFPC, Inc., 400 Bellevue
Parkway, Wilmington, Delaware 19809; or Ropes & Gray, counsel to Registrant,
1301 K Street, N.W., Suite 800 East, Washington, D.C. 20005 (minute books,
bylaws and declaration of trust).
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
18
<PAGE> 208
(a) Registrant undertakes to call a meeting of Shareholders,
at the request of at least 10% of registrant's outstanding shares, for the
purpose of voting upon the question of removal of a trustee or trustees and to
assist in communications with other Shareholders as required by Section (16) of
the 1940 Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
19
<PAGE> 209
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended, Registrant
has duly caused this Post-Effective Amendment No. 25 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the District of Columbia, on
the 21st day of February, 1997.
THE CHARLES SCHWAB FAMILY OF FUNDS
Registrant
Charles R. Schwab*
-----------------------------------
Charles R. Schwab, Chairman
Pursuant to the requirements of the 1933 Act, this -Effective Amendment
No. 25 to Registrant's Registration Statement on Form N-1A has been signed below
by the following persons in the capacities indicated this 21st day of FEBRUARY,
1997.
<TABLE>
<CAPTION>
Signature Title
- --------- ------
<S> <C>
Charles R. Schwab* Chairman and Trustee
- ---------------------
Charles R. Schwab
Timothy F. McCarthy* President and Trustee
- ---------------------
Timothy F. McCarthy
William J. Klipp* Executive Vice President, Chief
- --------------------- Operating Officer and Trustee
William J. Klipp
Donald F. Dorward* Trustee
- ---------------------
Donald F. Dorward
Robert G. Holmes* Trustee
- ---------------------
Robert G. Holmes
Donald R. Stephens* Trustee
- ---------------------
Donald R. Stephens
Michael W. Wilsey* Trustee
- ---------------------
Michael W. Wilsey
Tai-Chin Tung** Treasurer and Principal Financial Officer
- ---------------------
Tai-Chin Tung
</TABLE>
*By: /s/ Alan G. Priest
---------------------------------------------------
Alan G. Priest, Attorney-in-Fact pursuant
to Powers of Attorney previously filed
**Pursuant to Power of Attorney filed herewith
<PAGE> 210
POWER OF ATTORNEY
I, the undersigned trustee and officer of The Charles Schwab Family of
Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and
Schwab Advantage Trust (each a "Trust" and collectively the "Trusts"),
Massachusetts business trusts, do hereby constitute and appoint William J.
Klipp, Frances Cole, Martin E. Lybecker and Alan G. Priest, and each of them
singly, my true and lawful attorneys, with full power to them and each of them,
to sign for me and in my name and in the capacity listed below, any and all
amendments to the Registration Statement on Form N-1A of each Trust, and to file
the same with all exhibits thereto, and other documents in connection
thereunder, with the Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in the
premises, as fully as to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys or any of
them may lawfully do or cause to be done by virtue thereof.
WITNESS my hand on the date set forth below.
August 13, 1996 /s/ Tai-Chin Tung
--------------------------------------------
Tai-Chin Tung
Principal Financial Officer
<PAGE> 211
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No
- ----------
<S> <C>
11. (a) Consent of Ropes & Gray
11. (b) Consent of Price Waterhouse LLP
17. (a) Financial Data Schedule for Schwab Money Market Fund
17. (b) Financial Data Schedule for Schwab Government Money Fund
17. (c) Financial Data Schedule for Schwab Municipal Money Fund-
Sweep Shares
17. (d) Financial Data Schedule for Schwab Municipal Money Fund-
Value Advantage Shares
17. (e) Financial Data Schedule for Schwab California Municipal
Money Fund-Sweep Shares
17. (f) Financial Data Schedule for Schwab California Municipal
Money Fund-Value Advantage Shares
17. (g) Financial Data Schedule for Schwab U.S. Treasury Money Fund
17. (h) Financial Data Schedule for Schwab Value Advantage Money
Fund-Investor Shares
17. (i) Financial Data Schedule for Schwab Institutional Advantage
Money Fund(R)
17. (j) Financial Data Schedule for Schwab Retirement Money Fund(R)
17. (k) Financial Data Schedule for Schwab New York Municipal
Money Fund-Sweep Shares
17. (l) Financial Data Schedule for Schwab New York Municipal
Money Fund-Value Advantage Shares
</TABLE>
<PAGE> 212
18. Form of Amended and Restated Multiple Class Plan
of Registrant
<PAGE> 1
Exhibit 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Legal Counsel" included in or made a part of
Post-Effective Amendment No. 25 to the Registration Statement of The Charles
Schwab Family of Funds on Form N-1A (Nos. 33-31894 and 811-05954) under the
Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
February 20, 1997
<PAGE> 1
EXHIBIT 11(b)
Consent of Price Waterhouse LLP
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 25 to the registration
statement on Form N-1A (the Registration Statement) of The Charles Schwab
Family of Funds of our reports dated January 31, 1996, relating to the
financial statements and financial highlights of Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Municipal
Money Fund (formerly Schwab Tax-Exempt Money Fund), Schwab California Municipal
Money Fund (formerly Schwab California Tax-Exempt Money Fund), Schwab New York
Municipal Money Fund (formerly Schwab New York Tax-Exempt Money Fund), Schwab
Institutional Advantage Money Fund and Schwab Retirement Money Fund, which
appear in such Statement of Additional Information, and to the incorporation by
reference of our reports into the Prospectuses of the aforementioned funds,
which constitute part of this Registration Statement. We also consent to the
reference to us under the heading Accountants and Reports to Shareholders in
such Statement of Additional Information and to the reference to us under the
heading Financial Highlights in such Prospectuses.
We further consent to the use in the Prospectus and Statement of Additional
Information of Schwab Value Advantage Money Fund, which are incorporated by
reference into the Registration Statement, of our report dated January 31, 1996,
relating to the financial statements and financial highlights appearing in the
December 31, 1995 Annual Report of Schwab Value Advantage Money Fund. We also
consent to the references to us under the heading Accountants and Reports to
Shareholders in such Statement of Additional Information and to the references
to us under the headings Financial Highlights and Accountants in such
Prospectus.
San Francisco, California
February 21, 1997
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] SCHWAB MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 14040471
[INVESTMENTS-AT-VALUE] 14040471
[RECEIVABLES] 67867
[ASSETS-OTHER] 2426
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 14110764
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 100377
[TOTAL-LIABILITIES] 100377
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14010737
[SHARES-COMMON-STOCK] 14070737
[SHARES-COMMON-PRIOR] 11227659
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (350)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 14010387
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 760926
[OTHER-INCOME] 0
[EXPENSES-NET] 94788
[NET-INVESTMENT-INCOME] 666138
[REALIZED-GAINS-CURRENT] 4
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 666142
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 666138
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 35277474
[NUMBER-OF-SHARES-REDEEMED] 33124743
[SHARES-REINVESTED] 630347
[NET-CHANGE-IN-ASSETS] 2783082
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (354)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 52254
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 113420
[AVERAGE-NET-ASSETS] 12638433
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] SCHWAB GOVERNMENT MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1879758
[INVESTMENTS-AT-VALUE] 1879758
[RECEIVABLES] 18397
[ASSETS-OTHER] 104
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1898259
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 13690
[TOTAL-LIABILITIES] 13690
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1884838
[SHARES-COMMON-STOCK] 1884838
[SHARES-COMMON-PRIOR] 1897435
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (269)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1884569
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 113106
[OTHER-INCOME] 0
[EXPENSES-NET] 14233
[NET-INVESTMENT-INCOME] 98873
[REALIZED-GAINS-CURRENT] (162)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 98711
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 98873
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4120476
[NUMBER-OF-SHARES-REDEEMED] 4229013
[SHARES-REINVESTED] 95940
[NET-CHANGE-IN-ASSETS] (12759)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (107)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8280
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 17501
[AVERAGE-NET-ASSETS] 1897685
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] SCHWAB TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3586104
[INVESTMENTS-AT-VALUE] 3586104
[RECEIVABLES] 33431
[ASSETS-OTHER] 717
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3620252
[PAYABLE-FOR-SECURITIES] 37735
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 17998
[TOTAL-LIABILITIES] 55733
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3405684
[SHARES-COMMON-STOCK] 3405684
[SHARES-COMMON-PRIOR] 3017778
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1847)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3403837
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 125455
[OTHER-INCOME] 0
[EXPENSES-NET] 21167
[NET-INVESTMENT-INCOME] 104288
[REALIZED-GAINS-CURRENT] (20)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 104268
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 104288
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 9911852
[NUMBER-OF-SHARES-REDEEMED] 9623759
[SHARES-REINVESTED] 99813
[NET-CHANGE-IN-ASSETS] 387886
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1827)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 13504
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 29309
[AVERAGE-NET-ASSETS] 3207145
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 4
[NAME] SCHWAB TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3586104
[INVESTMENTS-AT-VALUE] 3586104
[RECEIVABLES] 33431
[ASSETS-OTHER] 717
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3620252
[PAYABLE-FOR-SECURITIES] 37735
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 17998
[TOTAL-LIABILITIES] 55733
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 160683
[SHARES-COMMON-STOCK] 160683
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 160682
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1635
[OTHER-INCOME] 0
[EXPENSES-NET] 186
[NET-INVESTMENT-INCOME] 1449
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 1448
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1449
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 236471
[NUMBER-OF-SHARES-REDEEMED] 76542
[SHARES-REINVESTED] 754
[NET-CHANGE-IN-ASSETS] 160682
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 190
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 419
[AVERAGE-NET-ASSETS] 84933
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .02
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 5
[NAME] SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1674011
[INVESTMENTS-AT-VALUE] 1674011
[RECEIVABLES] 19731
[ASSETS-OTHER] 200
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1693942
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8239
[TOTAL-LIABILITIES] 8239
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1578359
[SHARES-COMMON-STOCK] 1578359
[SHARES-COMMON-PRIOR] 1294555
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (664)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1577695
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 54646
[OTHER-INCOME] 0
[EXPENSES-NET] 9344
[NET-INVESTMENT-INCOME] 45302
[REALIZED-GAINS-CURRENT] 8
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 45310
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 45302
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4257465
[NUMBER-OF-SHARES-REDEEMED] 4016813
[SHARES-REINVESTED] 43152
[NET-CHANGE-IN-ASSETS] 283812
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (672)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 6388
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 13561
[AVERAGE-NET-ASSETS] 1437526
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE
SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1674011
[INVESTMENTS-AT-VALUE] 1674011
[RECEIVABLES] 19731
[ASSETS-OTHER] 200
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1693942
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8239
[TOTAL-LIABILITIES] 8239
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 108008
[SHARES-COMMON-STOCK] 108008
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 108008
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 488
[OTHER-INCOME] 0
[EXPENSES-NET] 56
[NET-INVESTMENT-INCOME] 432
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 432
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 432
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 125848
[NUMBER-OF-SHARES-REDEEMED] 17914
[SHARES-REINVESTED] 74
[NET-CHANGE-IN-ASSETS] 108008
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 57
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 136
[AVERAGE-NET-ASSETS] 50342
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .01
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .01
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 7
[NAME] SCHWAB U.S. TREASURY MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 1184456
[INVESTMENTS-AT-VALUE] 1184456
[RECEIVABLES] 17149
[ASSETS-OTHER] 52
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1201657
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7968
[TOTAL-LIABILITIES] 7968
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1193821
[SHARES-COMMON-STOCK] 1193821
[SHARES-COMMON-PRIOR] 803943
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (132)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1193689
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 57635
[OTHER-INCOME] 0
[EXPENSES-NET] 6503
[NET-INVESTMENT-INCOME] 51132
[REALIZED-GAINS-CURRENT] (60)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 51072
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 51132
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2979266
[NUMBER-OF-SHARES-REDEEMED] 2635740
[SHARES-REINVESTED] 46352
[NET-CHANGE-IN-ASSETS] 389818
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (72)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4575
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9653
[AVERAGE-NET-ASSETS] 1000438
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 8
[CIK]
[NAME] SCHWAB VALUE ADVANTAGE MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 6956238
[INVESTMENTS-AT-VALUE] 6956238
[RECEIVABLES] 65417
[ASSETS-OTHER] 800
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7022455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 98565
[TOTAL-LIABILITIES] 98565
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6924021
[SHARES-COMMON-STOCK] 6924021
[SHARES-COMMON-PRIOR] 3731755
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (131)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 6923890
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 333064
[OTHER-INCOME] 0
[EXPENSES-NET] 22099
[NET-INVESTMENT-INCOME] 310965
[REALIZED-GAINS-CURRENT] (5)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 310960
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 310965
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10404416
[NUMBER-OF-SHARES-REDEEMED] 7474576
[SHARES-REINVESTED] 262426
[NET-CHANGE-IN-ASSETS] 3192261
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (126)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 23799
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 39853
[AVERAGE-NET-ASSETS] 5524637
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 9
[NAME] SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 80518
[INVESTMENTS-AT-VALUE] 80518
[RECEIVABLES] 864
[ASSETS-OTHER] 67
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 81449
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 703
[TOTAL-LIABILITIES] 703
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 80747
[SHARES-COMMON-STOCK] 80747
[SHARES-COMMON-PRIOR] 60088
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 80746
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4774
[OTHER-INCOME] 0
[EXPENSES-NET] 420
[NET-INVESTMENT-INCOME] 4354
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 4353
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4354
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 281164
[NUMBER-OF-SHARES-REDEEMED] 262289
[SHARES-REINVESTED] 1784
[NET-CHANGE-IN-ASSETS] 18874
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 364
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 710
[AVERAGE-NET-ASSETS] 79107
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 10
[NAME] SCHWAB RETIREMENT MONEY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 99911
[INVESTMENTS-AT-VALUE] 99911
[RECEIVABLES] 573
[ASSETS-OTHER] 59
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100543
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1551
[TOTAL-LIABILITIES] 1551
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 98992
[SHARES-COMMON-STOCK] 98992
[SHARES-COMMON-PRIOR] 31415
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 98992
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4616
[OTHER-INCOME] 0
[EXPENSES-NET] 561
[NET-INVESTMENT-INCOME] 4055
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 4055
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4055
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 173890
[NUMBER-OF-SHARES-REDEEMED] 109877
[SHARES-REINVESTED] 3564
[NET-CHANGE-IN-ASSETS] 67577
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 354
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 705
[AVERAGE-NET-ASSETS] 76879
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 11
[NAME] SCHWAB NEW YORK TAX-EXEMPT MONEY FUND - SWEEP SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 218648
[INVESTMENTS-AT-VALUE] 218648
[RECEIVABLES] 2486
[ASSETS-OTHER] 65
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 221199
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1193
[TOTAL-LIABILITIES] 1193
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 204869
[SHARES-COMMON-STOCK] 204869
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (6)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220006
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 6041
[OTHER-INCOME] 0
[EXPENSES-NET] 995
[NET-INVESTMENT-INCOME] 5046
[REALIZED-GAINS-CURRENT] (6)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5040
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5046
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 671692
[NUMBER-OF-SHARES-REDEEMED] 470949
[SHARES-REINVESTED] 4126
[NET-CHANGE-IN-ASSETS] 204863
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 724
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1637
[AVERAGE-NET-ASSETS] 186583
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .63
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 12
[NAME] SCHWAB NEW YORK TAX-EXEMPT MONEY FUND - VALUE ADVANTAGE SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 218648
[INVESTMENTS-AT-VALUE] 218648
[RECEIVABLES] 2486
[ASSETS-OTHER] 65
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 221199
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1193
[TOTAL-LIABILITIES] 1193
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 15143
[SHARES-COMMON-STOCK] 15143
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220006
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 137
[OTHER-INCOME] 0
[EXPENSES-NET] 16
[NET-INVESTMENT-INCOME] 121
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 121
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 121
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 21284
[NUMBER-OF-SHARES-REDEEMED] 6196
[SHARES-REINVESTED] 55
[NET-CHANGE-IN-ASSETS] 15143
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 17
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 64
[AVERAGE-NET-ASSETS] 7262
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .02
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
Exhibit 18
FORM OF
THE CHARLES SCHWAB FAMILY OF FUNDS
AMENDED AND RESTATED
MULTIPLE CLASS PLAN
This document amends and restates a MULTIPLE CLASS PLAN (the "Plan") of
THE CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the
"Trust"), adopted on October 20, 1989 pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Plan is
applicable to each of the Trust's investment portfolios identified on Schedule A
hereto, as such Schedule may be amended from time to time (each a "Fund" and
collectively the "Funds").
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and shareholder servicing needs of its current and future
investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust, as such term is defined by the 1940 Act, mindful of the requirements
imposed by Rule 18f-3(d) under the 1940 Act, has determined to adopt this Plan
to enable the Funds to provide appropriate services to certain designated
classes of shareholders of the Funds;
NOW, THEREFORE, the Trust designates the Plan as follows:
1. Designation of Classes. Each Fund listed in "Group I" on Schedule A
shall offer its units of beneficial interest ("Shares") in two classes: Sweep
Shares and Value Advantage Shares. Each Fund listed in "Group II on Schedule A
shall offer its shares in two classes: Sweep Shares and Investor Shares.
2. Redesignation of Existing Shares. The currently outstanding Shares
of the Fund listed in Group I shall continue to be designated as Sweep Shares
and Value Advantage Shares. The currently outstanding Shares of the Fund listed
in Group II shall be redesignated as Investor Shares.
3. Shareholder Services Specific to Each Class. Transfer agency
services providing for the automatic purchases and redemptions of Shares of the
Funds shall be offered only with respect to Sweep Shares, and not Value
Advantage Shares and Investor Shares. Accordingly, the transfer agency fee
charged to Sweep Shares shall be higher than that charged to Value Advantage
Shares and Investor Shares, as set forth on Schedule A hereto and in the
Transfer Agency Agreement, as may be amended from time to time, between the
Funds and Charles Schwab & Co., Inc. (the "Transfer Agent") dated June 5, 1995.
4. Minimum Transaction Requirements. The minimum initial investment,
subsequent investment, and Fund balance requirements applicable to Value
Advantage Shares and Investor
<PAGE> 2
Shares shall be higher than those applicable to Sweep Shares, as determined from
time to time by Charles Schwab Investment Management, Inc. ("CSIM"), subject to
the ratification by the Board of Trustees (the "Board of Trustees") of the
Trust.
5. Exchange Privilege. Each class of Shares of each Fund shall be
exchangeable for shares of any Fund of the Trust or of Schwab Investments, and
Schwab Capital Trust, including all classes of shares of such Funds, provided
that the minimum investment, and any other requirements of the Fund or class for
which the shares are exchanged are satisfied.
6. Allocation of Expenses. Fund expenses shall be allocated to each
class on the basis of such class' relative net assets (settled shares). Expenses
attributable to a particular class shall be borne entirely by that class.
7. Voting. Shareholders of a class of shares shall vote exclusively as
a class on any matter relating solely to the arrangement of such class as a
class and on any matter in which the interests of that class differ from the
interests of another class.
8. Termination and Amendment. This Plan may be terminated or materially
amended at any time by vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Trust, as such
term is defined by the 1940 Act. Any non-material amendment of this Plan may be
made by CSIM.
9. The names "The Charles Schwab Family of Funds" and "Board of
Trustees" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a Declaration
of Trust, to which reference is hereby made and a copy of which is on file at
the office of the Secretary of the Commonwealth of Massachusetts and elsewhere
as required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Charles Schwab Family of Funds" entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, Shareholders or representatives of the Trust personally, but
bind only the assets of the Trust, and all persons dealing with any series
and/or class of Shares of the Trust must look solely to the assets of the Trust
belonging to such series and/or class for the enforcement of any claims against
the Trust.
THE CHARLES SCHWAB FAMILY OF FUNDS
By:________________________________
Title:_____________________________
Date: ______________, 1997
-2-
<PAGE> 3
Schedule A to the
Multiple Class Plan of
THE CHARLES SCHWAB FAMILY OF FUNDS
<TABLE>
<CAPTION>
Shareholder Service Fee (as a Transfer Agency Fee (as a
percentage of average daily net percentage of average daily net
Name of Fund and Class assets of the Fund) assets of the Fund)
- ---------------------- ------------------------------ -------------------------------
<S> <C> <C>
Group I
Schwab Municipal Money 0.20% 0.25%
Fund - Sweep Shares
Schwab Municipal Money 0.20% 0.05%
Fund - Value Advantage
Shares
Schwab California Municipal 0.20% 0.25%
Money Fund - Sweep Shares
Schwab California Municipal 0.20% 0.05%
Money Fund - Value
Advantage Shares
Schwab New York Municipal 0.20% 0.25%
Money Fund - Sweep Shares
Schwab New York Municipal 0.20% 0.05%
Money Fund - Value
Advantage Shares
Group II
Schwab Value Advantage 0.20% 0.05%
Money Fund - Investor Shares
Schwab Value Advantage 0.__% 0.__%
Money Fund -Sweep Shares
</TABLE>
THE CHARLES SCHWAB FAMILY OF FUNDS
By:_________________________________
Title:______________________________
Date: __________, 1997
A-1
