<PAGE> 1
As filed with the Securities and Exchange Commission on November 6, 1997
File Nos. 33-31894 and 811-05954
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 30 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 32 [X]
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THE CHARLES SCHWAB FAMILY OF FUNDS
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(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street, San Francisco, California 94104
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(415) 627-7000
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Timothy F. McCarthy, President
The Charles Schwab Family of Funds
101 Montgomery Street, San Francisco, California 94104
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(Name and Address of Agent for Service)
Copies of communications to:
<TABLE>
<S> <C>
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management , Inc.
1301 K Street, NW, Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104
</TABLE>
It is proposed that this filing will become effective (check appropriate box):
/_/ Immediately upon filing pursuant to paragraph (b)
/_/ On ______________ pursuant to paragraph (b)
/_/ 60 days after filing pursuant to paragraph (a)(1)
/_/ On (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/_/ On (date) pursuant to paragraph (a)(2) of Rule 485 if
appropriate, check the following 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
CROSS REFERENCE SHEET
PROSPECTUS
Schwab New Jersey Municipal Money Fund
Schwab Pennsylvania Municipal Money Fund
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PART A ITEM PROSPECTUS CAPTION
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1. Cover Page Cover Page
2. Synopsis Key Features; Expenses;
3. Condensed Financial Information Not applicable
4. General Description of Registrant Organization & Management;
Investment Objective,
Policies & Risks
5. Management of the Fund Organization & Management
5A. Management's Discussion of Fund Performance Not applicable
6. Capital Stock and Other Securities Organization & Management;
Investing in Shares
7. Purchase of Securities Being Offered Investing in Shares
8. Redemption or Repurchase Investing in Shares
9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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KEY FEATURES..................................
EXPENSES......................................
FINANCIAL HIGHLIGHTS..........................
PERFORMANCE...................................
ORGANIZATION & MANAGEMENT.....................
INVESTMENT OBJECTIVES, POLICIES & RISKS.......
INVESTING IN SHARES...........................
</TABLE>
The Prospectus provides concise information that you should know before
investing. Retain it for future reference.
The Statement of Additional Information (SAI), dated January 20, 1998, contains
additional information and is incorporated by reference into the Prospectus. The
SAI has been filed with the Securities and Exchange Commission (SEC). The SEC
maintains a web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference and other information. The SAI is available without
charge by calling 1-800-435-4000 (1-800-345-2550 for TDD users) or writing to
101 Montgomery Street, San Francisco, CA 94104.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SCHWAB NEW JERSEY
MUNICIPAL MONEY FUND
SCHWAB PENNSYLVANIA
MUNICIPAL MONEY FUND
SWEEP SHARES
PROSPECTUS
JANUARY 20, 1998
SCHWAB NEW JERSEY MUNICIPAL MONEY FUND (NJ FUND) seeks income exempt from
federal and New Jersey state personal income taxes consistent with liquidity and
stability of capital.
SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND (PA FUND) seeks income exempt from
federal and Pennsylvania state personal income taxes consistent with liquidity
and stability of capital.
Each Fund intends to invest in municipal money market securities of a single
state, and may invest a significant percentage of its assets in the securities
of a single issuer. Therefore, each Fund may be riskier than other types of
money market funds.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE PER SHARE OF $1.00.
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KEY FEATURES
MATCHING THE FUNDS TO YOUR INVESTMENT NEEDS: Each Fund seeks tax-exempt income
while preserving the value of your investment and, therefore, may be appropriate
for a variety of investment programs. However, an investment in either Fund is
not a substitute for building an investment portfolio tailored to your specific
investment needs and risk tolerance.
The Funds are designed to provide income exempt from federal and either New
Jersey or Pennsylvania personal income taxes. The Funds are not suitable for
investors who would not benefit from the tax-exempt character of each Fund's
investments, such as IRAs, qualified retirement plans or other tax-exempt
entities.
SWEEP FEATURE: Each Fund provides automatic investment ("sweep") of the cash
balance in your Schwab account. Also, shares of a Fund will be automatically
redeemed to cover any negative cash balance in your Schwab account. The Funds
are suitable for investors who wish to have the cash balance in their Schwab
account invested automatically in a municipal money market fund.
GOALS: Each Fund seeks tax-exempt income, while maintaining a stable share price
of $1.00. There is no guarantee that the Funds will achieve their goals.
STRATEGY: The Funds invest in high-quality, short-term municipal money market
securities of a single state.
Each Fund is a non-diversified mutual fund.
RISKS: Because each Fund invests substantially in municipal money market
securities of a single state, the performance of each Fund may be especially
affected by that state's economic conditions and political developments, as well
as the ability of issuers to meet their obligations.
MANAGEMENT: Charles Schwab Investment Management, Inc. (the Investment Manager)
currently provides investment management services to the SchwabFunds(R), a
family of xx mutual funds with over $xx billion in assets as of [date].
SHAREHOLDER SERVICE: Charles Schwab & Co., Inc. (Schwab) provides professional
representatives 24 hours a day at 1-800-435-4000 to service your accounts. Read
the "Investing in Shares" section of the prospectus for information on "How to
Buy Shares" and "How to Sell Shares" of a Fund.
LOW-COST INVESTING: The Investment Manager and Schwab have voluntarily
guaranteed that, through at least [date], total operating expenses of each Fund
will not exceed xx% of each Fund's daily net assets.
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EXPENSES
ANNUAL OPERATING EXPENSES are paid by the Funds. These expenses include
management fees paid to the Investment Manager, and other fees for services such
as maintaining shareholder records and furnishing shareholder statements and
financial reports. These expenses are factored into the price of the Funds'
shares and into the dividends paid to shareholders. As a shareholder, you are
not charged any of these fees directly.
The following figures are stated as a percentage of average daily net assets of
each Fund.
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<CAPTION>
NJ PA
FUND FUND
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Management fee (after reduction) 0.XX% 0.XX%
12b-1 fees NONE NONE
Other expenses (after reduction) 0.XX% 0.XX%
---- ----
TOTAL OPERATING EXPENSES
(AFTER REDUCTION) 0.XX% 0.XX%
</TABLE>
EXAMPLE. If each Fund were to provide an annual return of 5%, you would pay the
following expenses on a $1,000 investment, whether you redeemed your shares at
the end of each period or left your shares invested.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------ -------
<S> <C>
$ X $ X
</TABLE>
THE EXPENSE TABLE AND EXAMPLE ABOVE ARE SUPPOSED TO HELP YOU UNDERSTAND THE
COSTS OF OWNING SHARES IN THE FUNDS. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
The Investment Manager and Schwab have voluntarily agreed to guarantee, at least
through [date], that total operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) of each Fund will not exceed
0.xx% of its average daily net assets. If these guarantees were not in effect
the management fee, other expenses and total operating expenses of each Fund
would be 0.xx%, 0.xx% and 0.xx% of its average daily net assets. Read the
"Organization & Management" section of the prospectus for more information on
expenses.
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PERFORMANCE
Typically, money market funds report performance in terms of total return or
yield.
TOTAL RETURN is the actual return of an investment, assuming both the
reinvestment of any income earned and any change in share price. A cumulative
total return is the actual total return of an investment over a stated period of
time, while an average annual total return is a hypothetical rate of return,
which, if achieved annually would have produced the same cumulative total
return. An average annual total return will smooth out the actual year-to-year
fluctuations of an investment's return.
YIELD is the actual income earned on an investment over a stated period of time
and annualized (assumed to be generated over a year). For example, a seven-day
yield measures the income earned on an investment over a seven-day period,
annualizes it and expresses that income as a percentage of the original
investment.
An effective yield is calculated similarly, but income earned is assumed to be
reinvested. Because of this compounding effect, effective yields are generally
higher. Because money market funds seek to maintain a stable share price of
$1.00, seven-day yields are the most common method of measuring performance.
TAXABLE EQUIVALENT YIELD shows the yield that a taxable investment would have to
generate in order to equal a tax-free yield. A taxable equivalent effective
yield is calculated similarly, except that the effective yield is used in the
calculation.
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ORGANIZATION & MANAGEMENT
THE FUNDS ARE NON-DIVERSIFIED MUTUAL FUNDS. Each Fund is a series of The Charles
Schwab Family of Funds (the Trust).
THE FUNDS ARE OVERSEEN BY A BOARD OF TRUSTEES. The Board of Trustees meets
regularly to review the Funds' activities, contractual arrangements and
performance. The Board of Trustees is responsible for protecting the interests
of the Funds' shareholders.
THE FUNDS MAY HOLD SPECIAL MEETINGS. These meetings may be called for purposes
such as electing Trustees, changing fundamental policies and amending management
contracts. Shareholders are entitled to one vote for each share owned and may
vote by proxy or in person. Proxy materials will be mailed to shareholders prior
to any meetings, and will include a voting card and information explaining the
matters to be voted upon.
THE FUNDS ARE MANAGED BY THE INVESTMENT MANAGER. The Investment Manager is
responsible for managing the Funds' day-to-day business affairs, including
picking the Funds' investments. The Investment Manager, however, is subject to
the overall authority of the Board of Trustees.
For the services performed under its contract with each Fund, the Investment
Manager is entitled to receive 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 assets over $1 billion but not in excess of $2 billion, and 0.40% of such
assets over $2 billion.
SCHWAB IS THE FUNDS' SHAREHOLDER SERVICES AND TRANSFER AGENT. Schwab provides
Fund information to shareholders, including share price, reporting shareholder
ownership and account activities and distributing the Funds' prospectuses,
financial reports and other informational literature. Schwab also maintains the
office space, equipment and personnel necessary to provide these services.
Schwab also distributes and markets SchwabFunds and services.
For the services performed as transfer agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.25% of each Fund's average daily net assets. For the services
performed as shareholder services agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.20% of the average daily net assets of each Fund.
THE FUNDS PAY OTHER EXPENSES. These expenses are typically connected with the
Trust's operations, and include legal, audit and custodian fees, as well as the
costs of accounting and registration of the Funds. Expenses not directly
attributable to a particular fund will be allocated equitably among the funds in
the Trust.
The Charles Schwab Corporation is the parent company of the Investment Manager
and Schwab. Charles R. Schwab is the founder, Chairman, Chief Executive Officer
and Director of The Charles Schwab Corporation. As a result of his ownership of
and interests in The Charles Schwab Corporation, Mr. Schwab may be deemed a
controlling person of the Investment Manager and Schwab.
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<PAGE> 8
INVESTMENT OBJECTIVES, POLICIES & RISKS
INVESTMENT OBJECTIVES
NJ FUND seeks to provide maximum current income exempt from federal and New
Jersey state personal income taxes consistent with liquidity and stability of
capital.
PA FUND seeks to provide maximum current income exempt from federal and
Pennsylvania state personal income taxes consistent with liquidity and stability
of capital.
Each Fund's investment objective may be changed only by vote of a majority of
its shareholders. Unless otherwise noted, policies and limitations may be
changed without shareholder approval.
INVESTMENT STRATEGIES
NJ FUND seeks to achieve its investment objective by investing in New Jersey
municipal money market securities.
PA FUND seeks to achieve its investment objective by investing in Pennsylvania
municipal money market securities.
The Funds seek to maintain a stable share price of $1.00, although there is no
guarantee that they will be able to continue to do so. The Funds follow
regulations set forth by the SEC that dictate the quality, maturity and
diversification of a Fund's investments. These requirements are designed to help
the Funds maintain a stable share price of $1.00.
The Funds earn tax-exempt income at current money market rates and their yields
will fluctuate from day to day. The Funds emphasize capital preservation, so
they will not provide the higher yield or capital appreciation that a more
aggressive mutual fund or other investment may provide.
INVESTMENT RISKS
The Funds may purchase only high-quality, short-term debt securities that the
Investment Manager believes present minimal credit risk. In general, the longer
the maturity, the more sensitive the security will be to interest rate changes.
While these securities, as well as securities with more credit risk, may provide
higher yields, they also pose more risks, and could result in losses to a Fund
and a possible change in share price.
Because each Fund intends to invest substantially in the municipal money market
securities of a single state, its performance and, possibly, its share price may
be affected by the economic and political conditions within that state. An
investment in either Fund poses additional risk considerations not present in
municipal money market funds that do not invest substantially in the securities
of a single state.
PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES
MUNICIPAL MONEY MARKET SECURITIES are high-quality, short-term debt securities
(money market securities) issued by or on behalf of a state, including its
counties, municipalities, authorities and other subdivisions, or the territories
and possessions of the United States and the District of Columbia, including
their subdivisions, agencies and instrumentalities. These securities are issued
to raise money for various public purposes or private activities, such as
general financing for state and local governments or financing for specific
projects or facilities. Municipal securities
6
<PAGE> 9
pay fixed, variable or floating rates of interest, which also is meant to be
exempt from federal income tax, and, typically, personal income tax of a state
or locality.
Municipal securities may be owned directly or through participation interests,
and include general obligation or revenue securities, anticipation notes and
municipal leases. The maturity date or price of and financial assets
collateralizing a municipal security may be structured in order to make it
qualify as or act like a municipal money market security. These securities may
be subject to greater credit and interest rate risks than other municipal money
market securities because of their structure.
The value of municipal securities may be affected by legislation or litigation
involving the taxation of municipal securities or the rights of holders of
municipal securities. In addition, some municipal securities involve private
entities, and the value of these securities could be affected by the credit
quality of the private entity and possibly by the circumstances affecting the
project.
Restriction: Each Fund will normally invest at least 80% of its total assets in
municipal money market securities. This policy may be changed only by
shareholders. In addition, each Fund may invest more than 25% in municipal
securities financing similar projects.
NEW JERSEY/PENNSYLVANIA MUNICIPAL MONEY MARKET SECURITIES are municipal money
market securities issued by or on behalf of either the state of New Jersey or
the Commonwealth of Pennsylvania, or either state's counties, municipalities,
authorities or other subdivisions. These securities are subject to the same
general risks associated with other municipal money market securities, although
their values will be particularly affected by economic, political, geographic
and demographic conditions and developments within either New Jersey or
Pennsylvania. Additionally, like all securities, the value of municipal money
market securities, including those of New Jersey or Pennsylvania issuers, may be
affected by any change in the perceived ability of issuers to meet their
obligations.
Restriction: Each Fund will normally invest at least 65% of its total assets in
municipal money market securities of either New Jersey or Pennsylvania issuers.
CREDIT AND LIQUIDITY SUPPORTS may be employed by issuers to reduce the credit
risk of their securities. Credit supports include letters of credit, insurance
and guarantees provided by foreign and domestic entities. Municipal money market
securities are sometimes issued with moral obligations, which are a type of
credit support. Liquidity supports include puts and demand features. These
arrangements move the credit risk of an investment from the issuer of the
security to the support provider. In addition, credit and liquidity supports
provided by foreign entities may be affected by foreign economic, political and
legal developments.
VARIABLE AND FLOATING RATE SECURITIES pay an interest rate, which is adjusted
either periodically or at specific intervals or floats continuously according to
a formula or benchmark. Although these structures generally are intended to
minimize the fluctuations in value that occur when interest rates rise and fall,
some structures may be linked to a benchmark in such a way as to cause greater
volatility to the security's value.
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PUTS are agreements that allow the buyer to sell a security at a specified price
and time to the seller or "put provider." When a Fund buys a put, losses could
occur as a result of the costs of the put or if the put provider does not
perform as agreed. Losses could result to a Fund (as a put provider), if the
buyer exercises its rights under the put. Standby commitments and demand
features are types of puts.
ILLIQUID SECURITIES are securities that are not actively traded or are subject
to legal restrictions and, therefore, are difficult to sell quickly or without
losses.
Restriction: Each Fund will not invest more than 10% of its net assets in
illiquid securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES are securities that are purchased,
but are to be delivered to the buyer at a later than customary date, price and
yield. Generally, the purchaser does not pay for these securities or earn
interest on them until they are delivered, but their value could change prior to
delivery.
SECURITIES OF OTHER INVESTMENT COMPANIES may be purchased by a Fund. These
investments will cause a Fund to bear duplicative fees for certain services.
The Funds also may employ the policies described below.
BORROWING money is a form of leveraging if a Fund continues to make investments
while borrowings remain outstanding. Borrowing subjects the Funds to interest
costs that may exceed the interest received on the securities purchased with the
borrowed funds. The Funds may borrow from banks or engage in reverse repurchase
agreements, and may make additional investments while borrowings are
outstanding.
Restriction: Each Fund may borrow up to 33-1/3% of its total assets.
LENDING securities may earn income for a Fund, but also could result in losses,
and possibly affect its share price.
TEMPORARY INVESTMENTS in U.S. Government securities, money market securities or
other taxable securities, and repurchase agreements for all of these securities
may be made by each Fund as a defensive measure or under abnormal market
conditions.
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INVESTING IN SHARES
BUSINESS DAYS
The Funds are open each day that both the Federal Reserve Bank of New York (New
York Fed) and New York Stock Exchange (NYSE) are open (business days). The
following holiday closings are currently scheduled for 1998: New Year's Day,
Martin Luther King's Birthday (observed), President's Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving Day and Christmas Day. On any day that the New York Fed, NYSE
or principal government securities markets close early, such as days in advance
of holidays, the Funds reserve the right to advance the time by which purchase,
redemption and exchanges orders must be received on that day.
NET ASSET VALUE
The price of each share of a Fund is its net asset value per share (NAV). NAV is
determined each business day, first at 10 a.m. Eastern time, then again at the
close of the NYSE, generally 4 p.m. Eastern time. NAV is calculated by adding
the value of a Fund's assets, subtracting its liabilities and dividing the
result by the number of outstanding shares.
Investment holdings are valued on the basis of amortized cost, which means that
a Fund's securities are valued at cost, plus or minus any premium or discount
that has accrued since purchase. The amortized cost method is designed for money
market funds, which seek to maintain a stable share price, and most money market
funds use this method to calculate NAV.
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MINIMUM SWEEP INVESTMENTS
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INITIAL INVESTMENT $1,000
for SchwabOne(R)Accounts $ 1
ADDITIONAL SHARES $ 100
for SchwabOne(R)Accounts $ 1
MINIMUM BALANCE $ 100*
for SchwabOne(R)Accounts $ 1
</TABLE>
* Your shares may be automatically redeemed if you do not meet a Fund's
minimum balance requirement and if your balance falls to zero you may be
required to meet the minimum initial investment requirement again.
These minimums may be different if you hold shares of a Fund through an entity
other than Schwab. Also, these minimums may not be applicable to certain
customers of Schwab Institutional's Services for Investment Managers or Schwab's
Retirement Plan Services.
HOW TO BUY, SELL OR EXCHANGE SHARES
Shares may be purchased, sold or exchanged through a Schwab account or through
an account with any other entity designated by Schwab. The following information
on how to buy, sell and exchange shares is for transactions through a Schwab
account.
Your Schwab account application and agreement contain more information on how
the sweep feature works, but basically it is activated by a positive or negative
cash balance in your Schwab account. If your Schwab account has a positive cash
balance, the sweep feature will automatically purchase shares at the NAV next
determined. If your Schwab account has a negative cash balance,
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<PAGE> 12
the sweep feature will automatically sell shares at the NAV next determined.
You may buy or sell shares of a Fund even if it is not the Sweep Money Fund
linked to your Schwab account.
- - BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users). Telephone orders received in good order after the close of the NYSE
but prior to 8 p.m. Eastern time will be executed at the NAV next
determined for the Fund. However, telephone orders received in good order
after 8 p.m. Eastern time but prior to 10 a.m. Eastern time will be
executed at the Fund's second NAV calculation.
- - BY MAIL. Write to the Funds at 101 Montgomery Street, San Francisco, CA
94104.
- - BY WIRE. Call 1-800-435-4000 for wire instructions.
Please provide the following information:
- - your name and Schwab account number;
- - the name of the Fund;
- - the dollar amount you would like to purchase, sell or exchange;
- - for initial purchases only, one of the two distribution choices below:
AUTOMATIC REINVESTMENT. All distributions will be reinvested in shares of
the Fund you are purchasing. If you do not choose an option, this option
will be assigned to you; or
CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day.
- - for exchanges, the name of the Fund and class, if applicable, into which
you want to exchange shares and the distribution option you select.
- - if selling or exchanging by mail, a signature of at least one of the
persons named on your Schwab account.
PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUNDS:
- - redemption and exchange request by mail are irrevocable and, once mailed,
may not be modified or canceled;
- - a check for your shares will be issued on the business day following
receipt and acceptance of your sale order, and will be mailed to you upon
request;
- - if you bought your shares by check, a check will be issued as soon as your
check clears, 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 may exchange your shares for shares of other SchwabFunds, provided you
meet the Fund's minimum investment or other requirements;
- - the Funds and Schwab reserve the right to modify, limit or terminate the
exchange privilege upon 60 days' written notification;
- - an exchange of a Fund's shares for shares of other SchwabFunds will be
treated as a taxable event for federal income tax purposes; and
- - the Funds may suspend the right to sell shares or postpone payment for a
sale of shares when trading on the NYSE is restricted, the NYSE is closed
for any reason other than its customary weekend and holiday closings,
emergency circumstances exist as determined by the SEC or as otherwise
permitted by the SEC.
OPENING A SCHWAB ACCOUNT
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Schwab was established in 1971 and is one of America's largest discount brokers.
Schwab helps over 4.1 million customers make investment decisions by offering
low-cost brokerage services and providing financial products and information.
Visit one of Schwab's 263 branch offices or Schwab's web site
(http://www.schwab.com) for information on investment products and services.
Investors may open a Schwab account by simply completing an application,
although institutional investors should contact Schwab to find out if any
additional forms need to be completed.
Using a Schwab account, investors have access to investments other than just
mutual funds, such as stocks and bonds. The Securities Investor Protection
Corporation (SIPC) provides insurance protection of up to $500,000 for the
securities held in a Schwab account, including shares of the Funds. It is
important to remember that SIPC insurance does not protect against losses due to
market or economic conditions.
Schwab accounts require a $1,000 minimum investment and account balance ($500
for custodial accounts). A fee of $7.50 will be charged to Schwab accounts that
fall below these minimums for three consecutive months. The fee, if applicable,
will be charged at the end of each quarter, unless there has been at least one
commissionable trade within the previous six months, or if your combined Schwab
account balances are at least $10,000.
SchwabOne(R) Accounts require a $5,000 minimum investment and account balance. A
fee of $5 will be charged to SchwabOne(R) Accounts that fall below this minimum,
unless there have been at least two commissionable trades within the previous 12
months.
Deposits to your Schwab account may be made by check, wire and other forms of
electronic funds transfer. Securities also may be deposited. All checks should
be made out to Charles Schwab & Co., Inc. Schwab will charge a $15 service fee
for any checks returned as a result of insufficient or uncollected funds or a
stop order.
Monies received by Schwab before 4 p.m. Eastern time will be available for
investment that day. Monies received by Schwab after 4 p.m. Eastern time will be
available for investment the next business day.
Contact Schwab for instructions and any applicable fees if you would like to
wire money from your Schwab account.
DIVIDENDS & TAXES
Each business day, a Fund's net investment income is determined as of the close
of the NYSE as a dividend to shareholders of record as of the previous NAV
calculation. Net investment income is calculated by subtracting its expenses
from the income earned on its investments that day. Dividends are declared each
business day based on the net investment income determined and are paid on the
15th of each month, if it is a business day, except in December when dividends
are paid on the last business day of the month. If the 15th is not a business
day, dividends are paid on the next business day.
The following is only a brief summary of some of the federal and state income
tax consequences that may affect each Fund and its shareholders. You should
consider the tax implications of investing in a Fund, and consult with your own
tax advisor.
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Each Fund will distribute its net investment income and capital gains, if any,
to shareholders each year. Dividends derived from exempt-interest income will be
exempt from federal income tax when distributed to shareholders. In addition,
dividends paid by the Funds are expected to be exempt from either New Jersey or
Pennsylvania personal income tax. Some distributions received by shareholders
may be subject to federal or state and/or local income taxes.
The interest from some municipal money market securities is subject to the
federal alternative minimum tax. Each Fund may invest all of its assets in these
securities. Shareholders subject to federal alternative minimum tax must take
this interest into account when computing their federal alternative minimum tax
liability.
Shareholders receive a record of all distributions by the Funds, as well as
purchases and sales they have made, via their monthly Schwab account statement.
Each year, each Fund notifies shareholders of the tax treatment of all
distributions made that year.
GENERAL INFORMATION
As long as the Funds or Schwab follow reasonable procedures to confirm that your
telephone order is genuine, they will not be liable for any losses an investor
may experience due to unauthorized or fraudulent instructions. These procedures
may include:
- - requiring a form of personal identification before acting upon any
telephone order;
- - providing written confirmation of telephone orders; and
- - tape-recording all telephone orders.
It may be difficult to place orders by telephone during periods of drastic
economic or market changes because Schwab's phone lines may become very busy
with calls from other investors. Consider other methods for placing an order,
such as writing to the Funds.
Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by Schwab.
Twice a year, financial reports will be mailed to shareholders describing a
Fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you do not want
to receive consolidated mailings, you may write to the Funds and request that
your mailings not be consolidated.
Each Fund, in its sole discretion and without prior notice, reserves the right
to reject orders to purchase shares, change minimum investment requirements or
withdraw or suspend any part of the offering made by this prospectus.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY
OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS.
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS
12
<PAGE> 15
IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT BE MADE.
13
<PAGE> 16
PART B
CROSS REFERENCE SHEET
STATEMENT OF ADDITIONAL INFORMATION
Schwab New Jersey Municipal Money Fund
Schwab Pennsylvania Municipal Money Fund
<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION
ITEM CAPTION
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History General Information
13. Investment Objectives and Policies Investment Policies and Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Principal
Holders of Securities General Information
16. Investment Advisory and Other
Services Management of the Trust
17. Brokerage Allocation and Other
Practices Portfolio Transactions and Turnover
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and
Pricing of Securities Being Offered Share Price Calculation; Purchase
and Redemption of Shares
20. Tax Status Distributions and Taxes
21. Underwriters Management of the Trust
22. Calculation of Performance Data How the Funds Report Performance
23. Financial Statements Not applicable
</TABLE>
<PAGE> 17
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
SCHWAB NEW JERSEY MUNICIPAL MONEY FUND
SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND
JANUARY 20, 1998
The Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the Prospectus dated January 20, 1998 (and as may be
amended from time to time) for Schwab New Jersey Municipal Money Fund (a Fund)
and Schwab Pennsylvania Municipal Money Fund (also a Fund) (together the Funds).
To obtain a copy of the Prospectus, call 1-800-435-4000 (1-800-345-2550
for TDD Users), or write to the Funds at 101 Montgomery Street, San Francisco,
California 94104.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT SECURITIES
INVESTMENT POLICIES AND RESTRICTIONS
MANAGEMENT OF THE TRUST
PORTFOLIO TRANSACTIONS AND TURNOVER
DISTRIBUTIONS AND TAXES
SHARE PRICE CALCULATION
HOW THE FUNDS REPORT PERFORMANCE
GENERAL INFORMATION
PURCHASE AND REDEMPTION OF SHARES
OTHER INFORMATION
</TABLE>
<PAGE> 18
INVESTMENT SECURITIES
MUNICIPAL SECURITIES. Municipal securities are debt securities issued by a
state, its political subdivisions, agencies, authorities and corporations. These
securities may be issued to obtain money 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 include refunding
outstanding obligations, obtaining funds for general operating expenses and
obtaining funds to loan to other public institutions and facilities.
Municipal securities also may be issued to finance various private activities,
including certain types of private activity bonds ("industrial development
bonds" under prior law). These securities may be issued by or on behalf of
public authorities to obtain funds to provide certain privately owned or
operated facilities. The Funds may not be desirable investments for "substantial
users" of facilities financed by private activity bonds or industrial
development bonds or for "related persons" of substantial users because
distributions from the Funds 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" and may be purchased directly or through participation interests.
General obligation notes are secured by the issuer's pledge of its full credit
and taxing power for the payment of principal and interest. Revenue notes 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
are, in most cases, revenue bonds and generally do not constitute the pledge of
the credit of the issuer of such bonds. The credit quality of private activity
bonds is frequently related to the credit standing of private corporations or
other entities.
Examples of municipal securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds and tax-free commercial paper. Tax anticipation notes are typically sold
to finance working capital needs of municipalities in anticipation of the
receipt of property taxes on a future date. Bond anticipation notes are sold on
an interim basis in anticipation of a municipality's issuance of a longer-term
bond in the future. Revenue anticipation notes are issued in expectation of the
receipt of other types of revenue such as that available under the Federal
Revenue Sharing Program. 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.
Pre-refunded municipal bonds are bonds that are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal bond
issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Funds may
purchase other municipal securities similar to the foregoing, which are or may
become available, including securities issued to pre-refund other outstanding
obligations of municipal issuers.
The Funds also may invest in moral obligation securities, which are normally
issued by special purpose public authorities. If the issuer of a moral
obligation security is unable to meet its obligation from current revenues, it
may draw on a reserve fund. The state or municipality that created the entity
has only a moral commitment, not a legal obligation, to restore the reserve
fund.
The value of municipal securities may be affected by uncertainties with respect
to the rights of holders of municipal securities in the event of bankruptcy or
the taxation of municipal securities as a result of legislation or litigation.
For example, under federal law, certain issuers of municipal securities may be
authorized in certain circumstances to initiate bankruptcy proceedings without
prior notice to or the consent of creditors. Such action could result in
material adverse changes in the rights of holders of the securities. In
addition, litigation challenging the validity under the state constitutions of
present systems of financing public education has been initiated or adjudicated
in a number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law, which ultimately could
affect the validity of those municipal securities or the tax-free nature of the
interest thereon.
<PAGE> 19
The Investment Manager relies on the opinion of the issuer's counsel, which is
rendered at the time the security is issued, to determine whether the security
is fit, with respect to its tax status, to be purchased by a Fund.
MUNICIPAL LEASES. Municipal leases are obligations issued to finance the
acquisition of equipment or 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 these obligations. Municipal leases may be
considered illiquid investments. Additionally, municipal leases are subject to
"nonappropriation risk," which is the risk that the municipality may terminate
the lease because funds have not been allocated to make the necessary lease
payments. The lessor would then be entitled to repossess the property, but the
value of the property may be less to private sector entities than it would be to
the municipality.
ILLIQUID SECURITIES. Investments that cannot be sold or disposed of in the
normal course of business within seven days at their approximate value will be
considered illiquid. The Investment Manager determines the liquidity of a fund's
investments under the supervision and direction of the Board of Trustees.
Investments currently considered illiquid include repurchase agreements not
maturing within seven days, some restricted securities and municipal lease
obligations.
VARIABLE AND FLOATING RATE SECURITIES. Some variable rate securities have a
demand feature, which entitles the holder to resell the securities at a
specified price and/or times. There are risks involved with these securities
because there may be no active secondary market for a particular variable rate
demand security purchased by a Fund. In addition, the Fund may only exercise its
demand rights at certain times. The Fund could suffer losses in the event that
the issuer defaults on its obligation. Synthetic variable or floating rate
securities include tender option bonds.
TAXABLE SECURITIES. Under normal conditions, the Funds do not intend to invest
in securities the interest on which is subject to federal income and/or state
and local personal income taxes. However, from time to time, as a defensive
measure or under abnormal market conditions, the Funds may make temporary
investments in securities the interest on which is subject to federal income
and/or state and local personal income taxes.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are securities issued by
the U.S. Treasury or issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities. U.S. Treasury securities are backed by the full
faith and credit of the United States. Not all U.S. Government securities are
backed by the full faith and credit of the United States. Some U.S. Government
securities are supported by a line of credit the issuing entity has with the
U.S. Treasury. Others are supported solely by the credit of the issuing agency
or instrumentality. Of course U.S. Government securities are among the safest
securities, but they are still sensitive to interest rate changes, which will
cause their yields to fluctuate.
ASSET-BACKED SECURITIES. Asset-Backed securities are securities that are backed
by the loans or account receivables of an entity, such as a bank or credit card
company. These securities are obligations which the issuer intends to repay
using the assets backing them (once collected). Therefore, repayment may depend
largely on the cash-flows generated by the assets backing the securities.
Sometimes the credit support for these securities is limited to the underlying
assets, but, in other cases, may be provided by a third party via a letter of
credit or insurance guarantee. Asset-backed securities are subject to credit and
prepayment risks.
Repayment of these is intended to be obtained from an identified pool of assets,
typically receivables related to a particular industry, such an asset-backed
securities related to credit card receivables, automobile receivables, trade
receivables or diversified financial assets. Based on the primary
characteristics of the various types of asset-backed securities, for purposes of
each Fund's concentration policy, each of the Funds has selected the following
asset-backed securities industries: credit card receivables, automobile
receivables, trade receivables and diversified financial assets, and each Fund
will limit its investments in each such industry to less than 25% of its total
assets.
REPURCHASE AGREEMENTS. Repurchase agreements involve a Fund buying securities
(usually U.S. Government securities) from a seller and simultaneously agreeing
to sell them back at an agreed-upon price (usually higher) and time. There are
risks that losses will result if the seller does not perform as agreed.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund sells
portfolio securities to another party and simultaneously agrees to buy them back
at an agreed-upon price and time. These agreements may increase the possibility
of the Fund's NAV to fluctuate and may be viewed as a form of leveraging.
<PAGE> 20
LENDING. Loans of portfolio securities made by a Fund will be fully
collateralized and will be marked-to-market daily.
QUALITY OF INVESTMENTS. The Funds will invest in high-quality securities.
Generally, high-quality securities are securities that are rated in one of the
two highest rating categories by two nationally recognized statistical rating
organizations (NRSROs), or by one if only one NRSRO has rated the securities,
or, if unrated, determined to be of comparable quality by the Investment Manager
pursuant to guidelines adopted by the Board of Trustees. High-quality securities
may be "first tier " or "second tier" securities. First tier securities are
rated within the highest category, and second tier securities are rated within
the second highest category.
Should a security's high-quality rating change after purchase by a Fund, the
Investment Manager would take such action, including no action, as determined to
be in the best interest of the Fund by the Board of Trustees. For more
information about the ratings assigned by some NRSROs, refer to the Appendix
section of the SAI.
MATURITY OF INVESTMENTS. The Funds will purchase only short-term debt
securities. Basically, a short-term security is a security that is deemed to
mature within 397 days or less.
INVESTMENT POLICIES AND RESTRICTIONS
THE FOLLOWING INVESTMENT POLICIES AND RESTRICTIONS MAY BE CHANGED ONLY BY
APPROVAL OF A MAJORITY OF A FUND'S SHAREHOLDERS. ALL OTHER INVESTMENT POLICIES
AND RESTRICTIONS CONTAINED IN THE SAI MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL OR PRIOR NOTICE.
EACH FUND MAY NOT:
(1) lend or borrow money, except as 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.
(2) pledge, mortgage or hypothecate any of its assets, except as 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.
(3) issue senior securities, except as 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.
(4) underwrite securities, except as 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.
(5) concentrate investments in a particular industry or group of
industries, as concentration is defined 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.
(6) purchase or sell commodities, commodities contracts, futures contracts,
or real estate, except as 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.
<PAGE> 21
THE FOLLOWING DESCRIPTIONS OF THE 1940 ACT MAY ASSIST INVESTORS IN UNDERSTANDING
THE ABOVE POLICIES AND RESTRICTIONS.
Borrowing. The 1940 Act presently restricts a Fund from borrowing (including
pledging, mortgaging or hypothecating assets) in excess of 33 1/3% of its total
assets (not including temporary borrowings not in excess of 5% of its total
assets).
Lending. Under the 1940 Act, a Fund may only make loans if expressly permitted
by its investment policies.
Concentration. The 1940 Act presently defines concentration as investing 25% or
more of a Fund's total assets in an industry or group of industries, with
certain exceptions. This means that the Funds currently may not purchase
securities of any issuer, if, as a result, 25% or more (other than U.S.
Government securities) of its total assets would be invested in the securities
of an issuer from a single industry or group of industries.
THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS.
EACH FUND MAY NOT:
(a) with respect to 75% of its total assets, purchase securities of any
issuer (other than U.S. Government securities or securities subject to
an unconditional demand feature issued by a person not controlled by
the issuer) if, as a result, more than 5% of total assets would be
invested in the securities of such issuer; provided that the Fund may
not invest more than 5% of its total assets in securities of a single
issuer unless such securities are first tier securities.
(b) purchase securities of any issuer (other than securities subject to an
unconditional demand feature issued by a person not controlled by the
issuer) if, as a result, more than the greater of 1% of its total
assets or $1 million would be invested in second tier securities of
such issuer.
(c) purchase securities of any issuer (other than securities subject to an
unconditional demand feature issued by a person not controlled by the
issuer) if, as a result, more than 5% of its total assets would be
invested in second tier securities of any issuer.
(d) purchase securities of other investment companies, except as permitted
by the 1940 Act.
(e) borrow money except that the Fund may (i) borrow money from banks and
(ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total
assets (any borrowings that come to exceed this amount will be reduced
to the extent necessary to comply with the limitation within three
business days).
(f) purchase of any issuer, securities if, as a result, more than 25%
(other than obligations of, or guaranteed by the U.S. Government its
agencies or instrumentalities) of its total assets would be invested in
the securities of an issuer from a single industry or group of
industries.
<PAGE> 22
(g) lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or
repurchase agreements).
(h) purchase securities of any issuer if, as a result, more than 10% of its
net assets would be invested in illiquid securities.
(i) sell securities short unless it owns the security or the right to
obtain the security or equivalent securities (transactions in futures
contracts and options are not considered selling securities short).
(j) purchase securities on margin, except that the Fund may obtain
short-term credits that are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
MANAGEMENT OF THE TRUST
OFFICER AND TRUSTEES. The Officers and Trustees of the Trust, their principal
occupations over the past five years and their affiliations, if any, with The
Charles Schwab Corporation, Schwab and Charles Schwab Investment Management,
Inc., the Investment Manager, are as follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ --------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Chairman, Chief Executive Officer and Director, The Charles
July 29, 1937 Schwab Corporation; Chairman and Director, 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).
TIMOTHY F. McCARTHY* President and Trustee Executive Vice President and President - Financial Products and
September 19, 1951 International Group, Charles Schwab & Co., Inc.; Executive Vice
President - President, Financial Products and International
Group, the Charles Schwab Corporation; Chief Executive Officer,
Charles
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
Schwab Investment Management, Inc.; Vice Chairman and
Chief Operating Officer, 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.
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
DONALD F. DORWARD Trustee Executive Vice President and Managing Director,
September 23, 1931 Grey Advertising. From 1990 to 1996, Mr.
Dorward was President and Chief Executive
Officer, Dorward & Associates. Dorward &
Associates is an advertising and
marketing/consulting firm.
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.
June 28, 1938 (investment 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.,
March 7, 1951 Financial Officer Inc.; 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.
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C>
WILLIAM J. KLIPP* Executive Vice Executive Vice President, SchwabFunds(R),
December 9, 1955 President, Chief Charles Schwab & Co., Inc.; President and Chief
Operating Officer and Operating Officer, Charles Schwab Investment
Trustee Management, Inc. Prior to 1993, Mr. Klipp was
Treasurer of Charles Schwab & Co., Inc. and
Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment
April 5, 1955 and Chief Investment Officer, Charles Schwab Investment Management,
Officer Inc.
FRANCES COLE Secretary Senior Vice President, Chief Counsel, Chief
September 9, 1955 Compliance Officer and Assistant Corporate
Secretary, Charles Schwab Investment Management,
Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel, Charles
October 14, 1960 Schwab Investment Management, Inc. From 1991 to
1992, he was Assistant Secretary for the
Franklin Group of Mutual Funds and Assistant
Corporate Counsel for Franklin Resources, Inc.
KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab Investment
February 27, 1968 Management, Inc. From October 1994 to July
1996, she was an Attorney for Franklin
Resources, Inc. Prior to 1994, Ms. Seaman was
an Attorney for The Benham Group.
MATTHEW O'TOOLE Assistant Secretary Corporate Counsel, Charles Schwab Investment
September 26, 1964 Management, Inc. From November 1995 to April
1997, Mr. O'Toole was Assistant General Counsel
for Chancellor LGT Asset Management, Inc. Prior
there to, Mr. O'Toole was Senior Counsel at the
U.S. Securities and Exchange Commission in
Washington, D.C.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in the same
capacity as described for the Trust for The Charles Schwab Family of Funds,
Schwab Capital Trust and Schwab Annuity Portfolios. The address of each
individual listed above is 101 Montgomery Street, San Francisco, California
94104.
- --------------------
*This Trustee is an "interested person" of the Trust.
<PAGE> 26
COMPENSATION TABLE 1
<TABLE>
<CAPTION>
Pension or
Retirement Benefits Estimated Annual
Accrued as Part of Benefits Upon Total
Aggregate Fund Expenses Retirement Compensation
Name of Person, Compensation from from the from the from the Fund
Position the Trust Fund Complex 2 Fund Complex 2 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
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, $47,100 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 29 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity
Portfolios.
--------------------------------------------------------
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 SAI, 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
<PAGE> 27
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.
INVESTMENT MANAGER
The Investment Manager, a wholly owned subsidiary of The Charles Schwab
Corporation, serves as each Fund's investment adviser and administrator pursuant
to an Investment Advisory and Administration Agreement (the "Advisory
Agreement") between it and the Trust. The Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
currently provides investment management services to the SchwabFunds(R), a
family of 30 mutual funds with over $53 billion in assets as of September 30,
1997. The Investment Manager is an affiliate of Schwab; the Trust's distributor
and the shareholder services and transfer agent.
The Advisory Agreement will continue in effect for one-year terms
subject to annual approval by: (1) the Trust's Board of Trustees or (2) a vote
of a majority of the Fund's shareholders. In either event, the continuance also
must be approved by a majority of the Trust's Board of Trustees who are not
parties to the Agreement or interested persons of any such party by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated at any time upon 60 days' notice by either
party, or by a majority vote of the Fund's shareholders and will terminate
automatically upon assignment.
Pursuant to the Advisory Agreement, the Investment Manager is entitled
to receive a graduated annual fee, payable monthly, of 0.46% of each Fund's
average daily net assets not in excess of $1 billion, 0.41% of such assets over
$1 billion but not in excess of $2 billion and 0.40% of such assets over $2
billion.
The Investment Manager and Schwab have voluntarily agreed to limit, or
reimburse, if necessary, a Fund's total operating expenses to 0.xx% of its
average daily net assets.
EXPENSES
The Trust pays the expenses of its operations, including: the fees and
expenses of independent accountants, counsel and the custodian; the cost of
reports and notices to shareholders; the cost of calculating net asset value per
share (NAV); 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
<PAGE> 28
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 each Fund's shares. Each Fund pays the cost of its
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 Agreement.
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 audit and report on the annual
financial statements of each series of the Trust and review certain regulatory
reports and the Funds' federal income tax return. It 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.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the
objective of the Funds 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 a 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 a Fund primarily on the basis of the
quality and reliability of brokerage services, including execution capability
and financial responsibility.
<PAGE> 29
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 a Fund. However, it is the opinion of the Board of Trustees that the
benefits conferred by the Investment Manager outweigh any disadvantages that may
arise from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the NAV of a Fund is determined ("Business Day"), that
Fund's net investment income will be declared as of the close of trading on the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time) as a daily
dividend to shareholders of record as of the last calculation of NAV prior to
the declaration. Shareholders will receive dividends in additional shares unless
they elect to receive cash. Dividends will normally be reinvested monthly in
full shares of the Fund at the NAV on the 15th day of each month, if a Business
Day, otherwise on the next Business Day. If cash payment is requested, checks
will normally be mailed on the Business Day following the reinvestment date.
Each Fund will pay shareholders, who redeem all of their shares, all dividends
accrued to the time of the redemption within 7 days.
<PAGE> 30
Each Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of a Fund consists of: (1)
accrued interest income, plus or minus amortized discount or premium, minus (2)
accrued expenses allocated to 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
either Fund will realize any long-term capital gains. Expenses of the Trust are
accrued each day. Should the NAV 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, a Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stocks, securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
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 certain hedging transactions and may limit the range of its
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, each 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 exception), for its
taxable year. Each Fund intends to make sufficient distributions to shareholders
to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net income for the year ending October 31
(or later if the Fund is permitted so to elect and so elects), plus any retained
amount from the prior year, the Fund will be subject to a nondeductible 4%
<PAGE> 31
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 a Fund 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.
Each Fund may engage in investment techniques that may alter the timing
and character of its income. Each Fund may be restricted in its use of these
techniques by rules relating to its qualification as regulated investment
companies.
Each 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.
As noted in the prospectus, exempt-interest dividends are excludable
from a shareholder's gross income for federal income tax purposes.
Exempt-interest dividends may nevertheless be subject to the federal alternative
minimum tax imposed by Section 55 of the Code (AMT) or the environmental tax
imposed by Section 59A of the Code (environmental tax). The AMT is imposed at
rates of 26% and 28%, in the case of non-corporate taxpayers, and at the rate of
20%, in the case of corporate taxpayers, to the extent it exceeds the taxpayer's
federal income tax liability. The AMT and the environmental tax may be imposed
in the following two circumstances. First, exempt-interest dividends derived
from certain private activity bonds issued after August 7, 1986, will generally
be an item of tax preference (and therefore potentially subject to AMT and the
environmental tax) for both corporate and non-corporate taxpayers. Second, in
the case of exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporations' alternative minimum
taxable income for purposes of determining the AMT and environmental tax.
<PAGE> 32
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 the Funds 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.
ADDITIONAL CONSIDERATIONS FOR NEW JERSEY AND PENNSYLVANIA FUNDS
The New Jersey and PA Funds will each distribute all of their net
investment income (including net short-term capital gain) to their respective
Shareholders. If, at the close of each quarter of its taxable year, at least 50%
of the value of a Fund's assets consist of obligations the interest on which is
excludable from gross income, the Fund may pay "exempt-interest dividends" to
its Shareholders. Those dividends constitute the portion of the aggregate
dividends as designated by the Fund, equal to the excess of the excludable
interest over certain amounts disallowed as deductions. Exempt-interest
dividends are excludable from a Shareholder's gross income for federal income
tax purposes, but may have federal alternative minimum tax consequences.
Current federal law limits the types and volume of bonds qualifying for
the federal income tax exemption of interest, which may have an effect on the
ability of a Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Interest on indebtedness incurred or continued by a Shareholder in
order to purchase or carry shares of the New Jersey or PA Fund is not deductible
for federal income tax purposes. Furthermore, these funds may not be an
appropriate investment for persons (including corporations and other business
entities) who are "substantial users" (or persons related to "substantial
users") or facilities financed by industrial development private activity bonds.
Such persons should consult their tax advisors before purchasing shares. A
"substantial user" is defined generally to include "certain persons" who
regularly use in their trade or business a part of a facilities financed from
the proceeds of such bonds.
NEW JERSEY TAX CONSIDERATIONS
Investors of the New Jersey Fund will not be subject to the New Jersey
Gross Income Tax on distributions from the Fund attributable to interest income
from (and net gain, if any, from the disposition of) New Jersey Municipal
Securities or obligations of the United States, its territories and possessions
and certain of its agencies and instrumentalities ("Federal Securities") held by
the
<PAGE> 33
Fund, either when received by the Fund or when credited or distributed to the
investors, provided that the Fund meets the requirements for a qualified
investment fund by: 1) maintaining its registration as a registered investment
company with the Securities and Exchange Commission; 2) investing at least 80%
of the aggregate principal amount of the Fund's investments, excluding financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto to the extent such instruments are authorized under
the regulated investment company rules under the Code, cash and cash items,
which cash items shall include receivables, in New Jersey Municipal Securities
or Federal Securities at the close of each quarter of the tax year; 3) investing
100% of its assets in interest-bearing obligations, discount obligations, cash
and cash items, including receivables, financial options, futures forward
contracts, or other similar financial instruments relating to interest-bearing
obligations, discount obligations or bond indexes related thereto; and 4)
complying with certain continuing reporting requirements.
For New Jersey Gross Income Tax purposes, net income or gains and
distributions derived from investments in other than New Jersey Municipal
Securities and Federal Securities, and distributions from net realized capital
gains in respect of such investments, will be taxable.
Gain on the disposition of Shares is not subject to New Jersey Gross
Income Tax, provided that the Fund meets the requirements for qualified
investment fund set forth above.
PENNSYLVANIA TAX CONSIDERATIONS
For purposes of the Pennsylvania Personal Income Tax and Philadelphia
School District Investment Net Income Tax, distributions which are attributable
to interest received by the PA Fund from its investments in Pennsylvania
Municipal Securities or Federal Securities are not taxable. Distributions by the
Fund to a Pennsylvania resident that are attributable to most other sources may
be subject to the Pennsylvania Personal Income Tax and (for residents of
Philadelphia) to the Philadelphia School District Investment Net Income Tax.
Distributions paid by the Fund which are excludable as exempted income
for federal tax purposes are not subject to the Pennsylvania corporate net
income tax. An additional deduction from Pennsylvania taxable income is
permitted for the amount of distributions paid by the Fund attributable to
interest received by the Fund from its investments in Pennsylvania Municipal
Securities and Federal Securities to the extent included in federal taxable
income, but such a deduction is reduced by any interest on indebtedness incurred
to carry the securities and other expenses incurred in the production of such
interest income, including expenses deducted on the federal income tax return
that would not have been allowed under the Code if the interest were exempt from
federal income tax. Distributions by the Fund attributable to most other sources
may be subject to the Pennsylvania corporate net income tax. It is the current
position of the Pennsylvania Department of Revenue that Fund shares are
considered exempt assets (with a pro rata exclusion based on the value of the
Fund attributable to its investments in Pennsylvania Municipal Securities and
Federal Securities) for purposes of determining a corporation's stock value
subject to the Commonwealth's capital stock or franchise tax.
<PAGE> 34
Shares purchased as an investment in the PA Fund are exempt from
Pennsylvania county personal property taxes to the extent that the Fund's
investments consist of obligations which are themselves exempt from taxation in
Pennsylvania.
The Fund intends to invest primarily in obligations which produce
interest exempt from federal and Pennsylvania taxes. If the Fund invests in
obligations that are not exempt for Pennsylvania purposes but are exempt for
federal purposes, a portion of the Fund's distributions will be subject to
Pennsylvania personal income tax.
SHARE PRICE CALCULATION
Each Fund values its portfolio instruments at amortized cost, which
means they are valued at their acquisition cost, as adjusted for amortization of
premium or discount, rather than at current market value. Calculations are made
to compare the value of a Fund's investments at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. The amortized
cost method of valuation seeks to maintain a stable NAV of $1.00, 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 NAV calculated by reference to market values and
a Fund's NAV of $1.00, 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 Fund's NAV (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 NAV. As a result of such reduction or suspension of dividends or
other action by the Board of Trustees, an investor would receive less income
during a given period than if such a reduction or suspension had not taken
place. Such action could result in investors receiving no dividend for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if a Fund's
NAV (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 NAV at $1.00.
HOW THE FUNDS REPORT PERFORMANCE
The historical performance of the Funds may be shown in the form of
total return, yield and effective yield. These measures of performance are
described below.
TOTAL RETURN
<PAGE> 35
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, each Fund assumes the reinvestment of all distributions at
NAV 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 a Fund may be calculated by
taking the Fund's standardized or non-standardized total return and subtracting
applicable federal taxes from the portions of the 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.
Each Fund may also report the percentage of the 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.
Each 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 calculating the total
return based on a one-year period, cumulative total return is calculated from
inception to the date specified.
YIELD
A Fund's yield refers to the net investment income generated by a
hypothetical investment in the Fund over a specific 7-day period. This net
investment income is then annualized, which means that the net investment income
generated during the 7-day period is assumed to be generated in each 7-day
period over an annual period, and is shown as a percentage of the investment.
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.
TAX-EQUIVALENT YIELD
The tax equivalent yield for the New Jersey and Pennsylvania Funds is
computed by dividing that portion of the Fund's yield which is tax-exempt by one
minus a stated federal and/or
<PAGE> 36
state income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt. (Tax equivalent yields assume the payment
of federal income taxes at a rate of [31%] and New Jersey income taxes at a rate
of 6.5% and Pennsylvania income taxes at a rate of 2.8%.)
Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth above and differences in the
methods used in valuing portfolio instruments.
The yield of these Funds fluctuates, and the annualization of a week's
dividend is not a representation by the Trust as to what an investment in the
Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments the
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of the Fund and other factors.
GENERAL INFORMATION
The Trust is an open-end investment management company organized as a
Massachusetts business trust on October 20, 1989. Currently, there are twelve
funds of the Trust: Schwab Money Market Fund, Schwab Government Money Fund,
Schwab Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value
Advantage Money Fund, Schwab Institutional Advantage Money Fund, Schwab
Retirement Money Fund, Schwab New York Municipal Money Fund, and Schwab
California Municipal Money Fund, Schwab Government Cash Reserves, Schwab New
Jersey Municipal Money Fund and Schwab Pennsylvania Municipal Money Fund. The
Declaration of Trust permits the Trustees to create additional funds. There is a
remote possibility that one fund might become liable for a misstatement in the
prospectus or SAI about another fund. 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
<PAGE> 37
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 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
<PAGE> 38
As of October 1, 1997, no person owns of record directly or
beneficially 5% of either Fund's shares.
In addition, as of October 1, 1997 the officers and Trustees of the
Trust, as a group, owned less than 1% of each Fund's outstanding voting
securities.
PURCHASE AND REDEMPTION OF SHARES
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 a Fund. If redemption proceeds
are paid in investment securities, such securities will be valued as set forth
in "Share Price Calculation" and a redeeming shareholder would normally incur
brokerage expenses if he or she converted the securities to cash.
OTHER INFORMATION
The Prospectus and SAI do not contain all the information included in
the Registration Statement filed with the SEC under the Securities Act of 1933,
as amended, with respect to the securities offered by the Prospectus. Certain
portions of the Registration Statement have been omitted from the Prospectus and
the SAI pursuant to the rules and regulations of the SEC. The Registration
Statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or SAI as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which the Prospectus and SAI form
a part, each such statement being qualified in all respects by such reference.
THIS SAI 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.
<PAGE> 39
PART C
OTHER INFORMATION
November 6, 1997
THE CHARLES SCHWAB FAMILY OF FUNDS
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) Financial statements and financial highlights included in the Annual
Report for Schwab Money Market Fund, Schwab Government Money Fund and
Schwab U.S. Treasury Fund for the fiscal year ended December 31,
1996, are incorporated by reference into the SAI, were filed on March
6, 1997, pursuant to Rule 30d-1 under the Investment Company Act of
1940 ("1940 Act"), and are incorporated herein by reference.
(2) Financial statements and financial highlights included in the Annual
Report 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 for the
fiscal year ended December 31, 1996, are incorporated by reference
into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1
under the 1940 Act, and are incorporated herein by reference.
(3) Financial statements and financial highlights included in the Annual
Report for Schwab New York Municipal Money Fund - Sweep Shares for
the fiscal year ended December 31, 1996, are incorporated by
reference into the SAI, were filed on March 6, 1997, pursuant to Rule
30d-1 under the 1940 Act, and are incorporated herein by reference.
(4) Financial statements and financial highlights included in the Annual
Report for Schwab California Municipal Money Fund - Sweep Shares for
the fiscal year ended December 31, 1996, are incorporated by
reference into the SAI, were filed on March 6, 1997, pursuant to Rule
30d-1 under the 1940 Act, and are incorporated herein by reference.
(5) Financial statements and financial highlights included in the Annual
Report for Schwab Municipal Money Fund - Sweep Shares for the fiscal
year ended December 31, 1996, are incorporated by reference into the
SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the
1940 Act, and are incorporated herein by reference.
(6) Financial statements and financial highlights included in the Annual
Report for Schwab Value Advantage Money Fund - Investor Shares
(formerly known as Schwab Value Advantage Money Fund) for the fiscal
year ended December 31, 1996, are incorporated by reference into the
SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the
1940 Act, and are incorporated herein by reference.
(7) Financial statements and financial highlights included in the Annual
Report for Schwab Retirement Money Fund for the fiscal year ended
December 31, 1996, are incorporated by reference into the SAI, were
filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act,
and are incorporated herein by reference.
(8) Financial statements and financial highlights included in the Annual
Report for Schwab Institutional Advantage Money Fund for the fiscal
year ended December 31, 1996, are incorporated by reference into the
SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the
1940 Act, and are incorporated herein by reference.
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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) (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 May 1, 1997, was electronically filed and is incorporated
herein by reference to Exhibit 5(a) to Post-Effective Amendment
No. 29.
(b) Schedule A to the 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 May 1, 1997, was
electronically filed and is incorporated herein by reference to
Exhibit 5(b) to Post-Effective Amendment No. 27.
(c) Schedule B to the 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 May 1, 1997, was
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<PAGE> 41
electronically filed and is incorporated herein by reference to
Exhibit 5(c) to Post-Effective Amendment No. 27.
(d) 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), Schwab
New York Municipal Money Fund, Schwab Government Cash Reserves
Fund, Schwab New Jersey Municipal Money Fund, Schwab
Pennsylvania Municipal Money Fund, dated June 15, 1995, was
electronically filed and is incorporated herein by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 27.
(e) Form of Schedule A to the 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), Schwab New York Municipal Money Fund, Schwab Government
Cash Reserves Fund, Schwab New Jersey Municipal Money Fund and
Schwab Pennsylvania Municipal Money Fund, dated June 15, 1995,
is electronically filed herein as Exhibit (5)(e).
(f) Schedule B to the 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), Schwab New York Municipal Money Fund, Schwab Government
Cash Reserves Fund, Schwab New Jersey Municipal Money Fund and
Schwab Pennsylvania Municipal Money Fund, dated June 15, 1995,
was electronically filed and is incorporated herein by reference
to Exhibit (5)(f) to Post-Effective Amendment No. 27.
(g) Schedule C to the 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), Schwab New York Municipal Money Fund, Schwab Government
Cash Reserves Fund, Schwab New Jersey Municipal Money Fund and
Schwab Pennsylvania Municipal Money Fund, dated June 15, 1995,
was electronically filed and is incorporated herein by reference
to Exhibit (5)(g) to Post-Effective Amendment No. 27.
(h) Form of Schedule D, amended [ , 1997,] to the Investment
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<PAGE> 42
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), Schwab New York
Municipal Money Fund, Schwab Government Cash Reserves Fund,
Schwab New Jersey Municipal Money Fund and Schwab Pennsylvania
Municipal Money Fund, dated June 15, 1995, is electronically
filed herein as Exhibit (5)(h).
(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.
(b) Form of Amended Schedule to the Distribution Agreement between
Registrant and Schwab referred to at Exhibit (6)(a) above is
electronically filed herein as Exhibit (6)(b).
(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) Form Amended Schedule B to the Accounting Services Agreement
referred to at Exhibit (8)(a) above is electronically filed
herein as Exhibit (8)(b).
(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 Schedule A and Form of Amended Schedule C to the
Amended and Restated Transfer Agency Agreement referred to at
Exhibit (8)(d) above are electronically filed herein as Exhibit
(8)(e).
(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
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<PAGE> 43
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 (8)(f) above is electronically filed
herein as Exhibit (8)(h).
(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) Form of Amended Schedule A to the Custodian Services Agreement
referred to at Exhibit (8)(i) above is electronically filed
herein as Exhibit (8)(j).
(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) Inapplicable.
(b) Inapplicable.
(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
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<PAGE> 44
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.
(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.
(h) Form of Purchase Agreement between Registrant and Schwab
relating to the Schwab Government Cash Reserves Fund was
electronically filed and is incorporated herein by reference as
Exhibit (13)(h) to Post-Effective Amendment No. 28.
(i) Form of Purchase Agreement between Registrant and Schwab
relating to the Schwab New Jersey Municipal Money Fund is
electronically filed herein as Exhibit (13)(i).
(j) Form of Purchase Agreement between Registrant and Schwab
relating to the Schwab Pennsylvania Municipal Money Fund is
electronically filed herein as Exhibit (13)(j).
(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
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<PAGE> 45
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.
(17) (a) Financial Data Schedule for Schwab Money Market Fund was
electronically filed and is incorporated herein by reference to
Exhibit 17(a) to Post-Effective Amendment No. 27.
(b) Financial Data Schedule for Schwab Government Money Fund was
electronically filed and is incorporated herein by reference to
Exhibit 17(a) to Post-Effective Amendment No. 27.
(c) Financial Data Schedule for Schwab Municipal Money Fund-Sweep
Shares was electronically filed and is incorporated herein by
reference to Exhibit 17(a) to Post-Effective Amendment No. 27.
(d) Financial Data Schedule for Schwab Municipal Money Fund-Value
Advantage Shares was electronically filed and is incorporated
herein by reference to Exhibit 17(a) to Post-Effective Amendment
No. 27.
(e) Financial Data Schedule for Schwab California Municipal Money
Fund-Sweep Shares was electronically filed and is incorporated
herein by reference to Exhibit 17(a) to Post-Effective Amendment
No. 27.
(f) Financial Data Schedule for Schwab California Municipal Money
Fund-Value Advantage Shares was electronically filed and is
incorporated herein by reference to Exhibit 17(a) to
Post-Effective Amendment No. 27.
(g) Financial Data Schedule for Schwab U.S. Treasury Money Fund was
electronically filed and is incorporated herein by reference to
Exhibit 17(a) to Post-Effective Amendment No. 27.
(h) Financial Data Schedule for Schwab Value Advantage Money
Fund-Investor Shares was electronically filed and is
incorporated herein by reference to Exhibit 17(a) to
Post-Effective
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<PAGE> 46
Amendment No. 27.
(i) Financial Data Schedule for Schwab Institutional Advantage Money
Fund(R) was electronically filed and is incorporated herein by
reference to Exhibit 17(a) to Post-Effective Amendment No. 27.
(j) Financial Data Schedule for Schwab Retirement Money Fund(R) was
electronically filed and is incorporated herein by reference to
Exhibit 17(a) to Post-Effective Amendment No. 27.
(k) Financial Data Schedule for Schwab New York Municipal Money
Fund-Sweep Shares was electronically filed and is incorporated
herein by reference to Exhibit 17(a) to Post-Effective Amendment
No. 27.
(l) Financial Data Schedule for Schwab New York Municipal Money
Fund-Value Advantage Shares was electronically filed and is
incorporated herein by reference to Exhibit 17(a) to
Post-Effective Amendment No. 27.
(18) Form of Amended and Restated Multiple Class Plan of Registrant
is incorporated by reference to Exhibit (18) to Post-Effective
Amendment No. 25 to Registrant's Registration Statement on Form
N-1A, filed on February 21, 1997.
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 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 [DATE], 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 [ ]
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
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 [ ]
Schwab Government Cash Reserves Fund 1 (for the benefit of [ ]
Schwab New Jersey Municipal Money Fund 1 (for the benefit of [ ]
Schwab Pennsylvania Municipal Money Fund 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.
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.
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<PAGE> 48
(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.
(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.
Charles Schwab Limited Chairman and Chief Executive
Officer
The Charles Schwab Trust Company Chairman and Director
Mayer & Schweitzer, Inc. Director and Chairman of Board
of Directors
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C> <C>
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems, Inc. Director
Performance Technologies, Inc. Chairman and Director
TrustMark, Inc. Chairman and Director
Schwab Retirement Plan Services, Inc. Chairman and Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995
The Charles Schwab Corporation Vice Chairman and Director
The Charles Schwab Trust Company Director until December 1996
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive
Officer and Director
The Charles Schwab Corporation President, Chief Operating
Officer and Director
Charles Schwab Investment Director
Management, Inc.
Mayer & Schweitzer, Inc. Director
Performance Technologies, Inc. Director
TrustMark, Inc. Director
Schwab Retirement Plan Services, Inc. Director
Charles Schwab Limited Director
Decibel Director
McKesson Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman - Ex Officio; Vice
President Chairman an Director
until January 1996
The Charles Schwab Corporation Executive Vice President until
January 1996
Mayer & Schweitzer, Inc. Director until January 1996
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C> <C>
Parkash P. Ahuja Charles Schwab & Co., Inc. Senior Vice President
Robert J. Almeida Charles Schwab & Co., Inc. Senior Vice President
Rhet Andrews Charles Schwab & Co., Inc. Senior Vice President
William S. Baughman Charles Schwab & Co., Inc. Senior Vice President until
March 1997
Karen Chang Charles Schwab & Co., Inc. Executive Vice President
Rochelle A. Bays Charles Schwab & Co., Inc. Senior Vice President
Michelle B. Blieberg Charles Schwab & Co., Inc. Senior Vice President
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President
The Charles Schwab Trust Company Director and Executive Vice
President
TrustMark, Inc. Director
Performance Technologies, Inc. Director
Schwab Retirement Plan Services, Inc. Director
Reid P. Conklin Charles Schwab & Co., Inc.
John Danton Charles Schwab & Co., Inc. Senior Vice President
Martha J. Deevy Charles Schwab & Co., Inc. Senior Vice President
Linnet Deily Charles Schwab & Co., Inc. Executive Vice President
Evelyn S. Dilsaver Charles Schwab & Co., Inc. Senior Vice President
Sidney J. Dorr Charles Schwab & Co., Inc. Senior Vice President
Carrie Dwyer Charles Schwab & Co., Inc. Executive Vice President
Wayne W. Fieldsa Charles Schwab & Co., Inc. Senior Vice President
Edward V. Garlich, Jr. Charles Schwab & Co., Inc. Senior Vice President
Lon Gorman Charles Schwab & Co., Inc. Executive Vice President and
President
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
</TABLE>
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<PAGE> 51
<TABLE>
<S> <C> <C>
and Director
Edward A. Greene Charles Schwab & Co., Inc. Senior Vice President
Therese Haberle Charles Schwab & Co., Inc. Senior Vice President
James M. Hackley Charles Schwab & Co., Inc. Executive Vice President
Gerry L. Hansen Charles Schwab & Co., Inc. Senior Vice President
The Charles Schwab Corporation Senior Vice President and
Controller
Barbara Heinrich Charles Schwab & Co., Inc. Senior Vice President
Jan K. Hier-King Charles Schwab & Co., Inc. Senior Vice President
Colleen M. Hummer Charles Schwab & Co., Inc. Senior Vice President
Daniel J. Keller Charles Schwab & Co., Inc. Senior Vice President
Michael S. Knight Charles Schwab & Co., Inc. Senior Vice President
Gloria J. Lau Charles Schwab & Co., Inc. Senior Vice President
Thomas N. Lawrie Charles Schwab & Co., Inc. Senior Vice President
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 and
Chief Strategy Officer
Charles Schwab & Co., Inc. Executive Vice President
James G. Losi Charles Schwab & Co., Inc. Senior Vice President
Jeffrey M. Lyons Charles Schwab & Co., Inc. Senior Vice President
Susanne D. Lyons Charles Schwab & Co., Inc. Executive Vice President
Elinor MacKinnon Charles Schwab & Co., Inc. Senior Vice President
Frederick E. Matteson Charles Schwab & Co., Inc. Senior Vice President
</TABLE>
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<PAGE> 52
<TABLE>
<S> <C> <C>
Timothy F. McCarthy, Charles Schwab Investment Chief Executive Officer
Trustee and President Management, Inc.
Charles Schwab & Co., Inc. President and Chief Operating
Officer
Charles Schwab Limited Vice Chairman; Chief Operating
Officer; Director
The Charles Schwab Corporation Executive Vice President
Mayer & Schweitzer, Inc. Director
John McGonigle Charles Schwab & Co., Inc. Senior Vice President
Peter J. McIntosh Charles Schwab & Co., Inc. Executive Vice President
Roger G. Neaves Charles Schwab & Co., Inc. Senior Vice President
Geoffrey Penney Charles Schwab & Co., Inc. Senior Vice President
Kenneth W. Perlman Charles Schwab & Co., Inc. Senior Vice President
Mayer & Schweitzer, Inc. Senior Vice President and
General Counsel
Earlene Perry Charles Schwab & Co., Inc. Senior Vice President
Hugo W. Quackenbush Charles Schwab & Co., Inc. Senior Vice President
The Charles Schwab Corporation Senior Vice President
Edward M. Rodden Charles Schwab & Co., Inc. Senior Vice President
Kate Rohrbach Charles Schwab & Co., Inc. Senior Vice President and Chief
Communications Officer
Myra Rothfeld Charles Schwab & Co., Inc. Senior Vice President
Louise J. Rothman Charles Schwab & Co., Inc. Senior Vice President
Gideon Sasson Charles Schwab & Co., Inc. Senior Vice President
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President
</TABLE>
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<PAGE> 53
<TABLE>
<S> <C> <C>
The Charles Schwab Corporation Executive Vice President
Steven L. Scheid Charles Schwab & Co., Inc. Executive Vice President,
Director and Chief Financial
Officer
The Charles Schwab Corporation Executive Vice President and
Chief Financial Officer
Charles Schwab Investment Director and Chief Financial
Management, Inc. Officer
The Charles Schwab Trust Company Chief Financial Officer
Schwab Retirement Plan Services, Director
Inc.
TrustMark, Inc. Director
Charles Schwab Limited Director and Finance Officer
Performance Technologies, Inc. Director
Mayer & Schweitzer, Inc. Director
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President
Arthur V. Shaw Charles Schwab & Co., Inc. Senior Vice President
Leonard Short Charles Schwab & Co., Inc. Senior Vice President
Betsy Snow Charles Schwab & Co., Inc. Senior Vice President
Ray Straka Charles Schwab & Co., Inc. Senior Vice President
Michelle Swenson Charles Schwab & Co., Inc. Senior Vice President
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Richard Tinervin Charles Schwab & Co., Inc. Executive Vice President
Mark Thompson Charles Schwab & Co., Inc. Senior Vice President
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President and
Chief Administrative Officer;
Executive Vice President until
October 1996
</TABLE>
C-15
<PAGE> 54
<TABLE>
<S> <C> <C>
The Charles Schwab Corporation Executive Vice President and
Chief Administrative Officer
Daniel J. Voet Charles Schwab & Co., Inc. Senior Vice President
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
Schwab Retirement Plan Services, Treasurer
Inc.
TrustMark, Inc. Treasurer
Performance Technologies, Inc. Treasurer
William J. Klipp, Charles Schwab & Co., Inc. Executive Vice President
Trustee, Senior Vice
President and Chief
Operating Officer
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer
Stephen B. Ward, Charles Schwab Investment Senior Vice President and Chief
Senior Vice President and Management, Inc. Investment Officer
Chief Investment Officer
The Charles Schwab Trust Company Chief Investment Officer
Charles Schwab & Co., Inc. Senior Vice President and Chief
Investment Officer - Portfolio
Management
Frances Cole, Charles Schwab Investment Senior Vice President, Chief
Secretary Management, Inc. Counsel, Chief Compliance
Officer and Assistant Corporate
Secretary
Tai-Chin Tung, Charles Schwab & Co., Inc. Vice President-Finance
Treasurer and Principal
Financial Officer
Charles Schwab Investment Vice President and Controller
Management, Inc.
Robertson Stephens Investment Controller until 1996
Management, Inc.
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
Charles Schwab & Co., Inc. Vice President and Assistant
Corporate Secretary
Charles Schwab Investment Corporate Secretary
Management, Inc.
</TABLE>
C-16
<PAGE> 55
<TABLE>
<S> <C> <C>
The Charles Schwab Trust Assistant Corporate Secretary
Company
Mayer & Schweitzer, Inc. Corporate Secretary
Performance Technologies, Inc. Assistant Corporate Secretary
Schwab Retirement Plan Services, Assistant Corporate Secretary
Inc.
TrustMark, Inc. Assistant Corporate Secretary
Mary B. Templeton Charles Schwab Investment Assistant Corporate Secretary
Management, Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary
Company until February 1996
TrustMark, Inc. Corporate Secretary
Schwab Retirement Plan Services, Corporate Secretary
Inc.
Performance Technologies, Inc. Corporate Secretary
David H. Lui Charles Schwab Investment Vice President and Senior Counsel
Assistant Secretary Management, Inc.
Matthew M. O'Toole Charles Schwab Investment Corporate Counsel
Assistant Secretary Management, Inc.
Karen L. Seaman Charles Schwab Investment Corporate Counsel
Assistant Secretary Management, Inc.
</TABLE>
C-17
<PAGE> 56
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.
(a) Registrant undertakes to call a meeting of Shareholders, at
the request of at least 10% of registrant's outstanding shares, for the purpose
of voting upon the question of removal of a trustee or trustees and to assist in
communications with other Shareholders as required by Section (16) of the 1940
Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
C-18
<PAGE> 57
(c) Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the commencement of the Fund's operations.
C-19
<PAGE> 58
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. 30 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Washington, District of Colombia on the 6th day of November, 1997.
THE CHARLES SCHWAB FAMILY OF FUNDS
Registrant
Charles R. Schwab*
---------------------------------
Charles R. Schwab, Chairman
Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 30 to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities indicated this 6th day
of November, 1997.
Signature Title
- --------- -----
Charles R. Schwab* Chairman and Trustee
- ---------------------------------
Charles R. Schwab
Timothy F. McCarthy* President and Trustee
- ---------------------------------
Timothy F. McCarthy
William J. Klipp* Executive Vice President, Trustee and
- --------------------------------- Chief Operating Officer
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
*By: /s/ Alan G. Priest
-----------------------
Alan G. Priest, Attorney-in-Fact
pursuant to Powers of Attorney previously filed.
<PAGE> 59
EXHIBITS INDEX
Exhibit Description
- ------- -----------
(5)(e) Form of Schedule A to the Investment Advisory Agreement
(5)(h) Form of Schedule D to the Investment Advisory Agreement
(6)(b) Form of Amended Schedule to the Distribution Agreement
(8)(b) Form of Amended Schedule B to the Accounting Services Agreements
(8)(e) Form of Amended Schedule A and Form of Amended Schedule C to the
Amended and Restated Transfer Agency Agreement
(8)(h) Form of Amended Schedule A and Form of Amended Schedule C to the
Shareholder Service Agreement
(8)(j) Form of Amended Schedule A to the Custodian Services Agreement
(13)(i) Form of Purchase Agreement
(13)(j) Form of Purchase Agreement
<PAGE> 1
Exhibit 5(e)
FORM OF
SCHEDULE A
AMENDED [ ]
FUND FUND EFFECTIVE DATE
- ---- -------------------
Schwab California Municipal Money Fund NOVEMBER 5, 1990
(formerly Schwab California Tax-Exempt Money Fund)
Schwab U.S. Treasury Money Fund NOVEMBER 5, 1991
Schwab Value Advantage Money Fund FEBRUARY 7, 1992
Schwab Institutional Advantage Money Fund NOVEMBER 26, 1993
Schwab Retirement Money Fund NOVEMBER 26, 1993
Schwab New York Municipal Money Fund NOVEMBER 10, 1994
(formerly Schwab New York Tax-Exempt Money Fund)
Schwab Government Cash Reserves Fund OCTOBER 20, 1997
Schwab New Jersey Municipal Money Fund JANUARY 20, 1998
Schwab Pennsylvania Municipal Money Fund JANUARY 20, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
Exhibit 5(h)
FORM OF
SCHEDULE D
ADVISORY FEE SCHEDULE
AMENDED [ ]
THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS AGREEMENT
AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN ARREARS:
<TABLE>
<CAPTION>
FUND DATE
- ---- ----
<S> <C>
SCHWAB CALIFORNIA MUNICIPAL MONEY FUND NOVEMBER 5, 1990
Forty-six one-hundredths of one percent (.46%) of the Schwab California
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.
SCHWAB U.S. TREASURY MONEY FUND NOVEMBER 5, 1991
Forty-six one-hundredths of one percent (.46%) of the Schwab U.S. Treasury Money
Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.
SCHWAB VALUE ADVANTAGE MONEY FUND FEBRUARY 7, 1992
Forty-six one-hundredths of one percent (.46%) of the Schwab Value Advantage
Money Fund's average daily net assets not in excess of $1 billion; forty-five
one-hundredths of one percent (.45%) of such net assets over $1 billion but not
in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net
assets over $3 billion but not in excess of $10 billion; thirty-seven
one-hundredths of one percent (.37%) of such net assets over $10 billion but not
in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%)
of such net assets over $20 billion.
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND NOVEMBER 26, 1993
Forty-six one-hundredths of one percent (.46%) of the Schwab Institutional
Advantage Money Fund's average daily net assets not in excess of $1 billion;
forty-five one-hundredths of one percent (.45%) of such net assets over $1
billion but not in excess of $3 billion; forty one-hundredths of one percent
(.40%) of such net assets over $3 billion but not in excess of $10 billion;
thirty-seven one-hundredths of one percent (.37%) of such net assets over $10
billion but not in excess of $20 billion; and thirty-four one-hundredths of one
percent (.34%) of such net assets over $20 billion.
SCHWAB RETIREMENT MONEY FUND NOVEMBER 26, 1993
Forty-six one-hundredths of one percent (.46%) of the Schwab Value Advantage
Money Fund's average daily net assets not in excess of $1 billion; forty-five
one-hundredths of one percent (.45%) of such net assets over $1 billion but not
in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net
assets over $3 billion but not in excess of $10 billion; thirty-seven
one-hundredths of one percent (.37%) of
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
such net assets over $10 billion but not in excess of $20 billion; and
thirty-four one-hundredths of one percent (.34%) of such net assets over $20
billion.
SCHWAB NEW YORK MUNICIPAL MONEY FUND NOVEMBER 10, 1994
Forty-six one-hundredths of one percent (.46%) of the Schwab New York Municipal
Money Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.
SCHWAB GOVERNMENT CASH RESERVES FUND OCTOBER 20, 1997
Forty-six one-hundredths of one percent (.46%) of the Schwab Government Cash
Reserves Fund's average daily net assets not in excess of $1 billion; forty-five
one-hundredths of one percent (.45%) of such net assets over $1 billion but not
in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net
assets over $3 billion but not in excess of $10 billion; thirty-seven
one-hundredths of one percent (.37%) of such net assets over $10 billion but not
in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%)
of such net assets over $20 billion.
SCHWAB NEW JERSEY MUNICIPAL MONEY FUND JANUARY 20, 1998
Forty-six one-hundredths of one percent (.46%) of the Schwab New Jersey
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.
SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND JANUARY 20, 1998
Forty-six one-hundredths of one percent (.46%) of the Schwab Pennsylvania
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.
</TABLE>
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
Exhibit 6(b)
FORM OF
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN THE CHARLES SCHWAB FAMILY OF FUNDS AND
CHARLES SCHWAB & CO., INC.
AMENDED [ ]
FUND EFFECTIVE DATE
- ---- --------------
Schwab Money Market Fund December 15, 1989
Schwab Government Money Fund December 15, 1989
Schwab Municipal Money Fund December 15, 1989
Schwab California Municipal Money Fund November 5, 1990
Schwab US Treasury Money Fund November 5, 1991
Schwab Value Advantage Money Fund February 7, 1992
Schwab Institutional Advantage Money Fund November 26, 1993
Schwab Retirement Money Fund November 26, 1993
Schwab New York Municipal Money Fund November 10, 1994
Schwab Government Cash Reserves Fund October 20, 1997
Schwab New Jersey Municipal Money Fund January 20, 1998
Schwab Pennsylvania Municipal Money Fund January 20, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: Stephen B. Ward
Title: Executive Vice President and Chief
Investment Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
Exhibit 8(b)
FORM OF
ACCOUNTING SERVICES AGREEMENT
SCHEDULE B
AMENDED [ ]
1. Schwab California Municipal Money Fund November 6, 1990
2. Schwab Money Market Fund April 8, 1991
3. Schwab Government Money Fund April 8, 1991
4. Schwab Municipal Money Fund May 3, 1991
5. Schwab US Treasury Money Fund November 5, 1991
6. Schwab Value Advantage Money Fund February 7, 1992
7. Schwab Institutional Money Fund November 26, 1993
8. Schwab Retirement Money Fund November 26, 1993
9. Schwab New York Municipal Money Fund November 8, 1994
10. Schwab Government Cash Reserves Fund October 20, 1997
11. Schwab New Jersey Municipal Money Fund January 20, 1998
12. Schwab Pennsylvania Municipal Money Fund January 20, 1998
PFPC INC.
By: _____________________________________
Joseph T. Gramlich
Title: Senior Vice President
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
<PAGE> 1
Exhibit 8(e)
FORM OF
SCHEDULE A
TRANSFER AGENCY AGREEMENT
AMENDED [ ]
<TABLE>
<CAPTION>
NAME OF FUND EFFECTIVE DATE
- ------------ --------------
<S> <C>
A. Sweep Funds
Schwab Money Market Fund May 1, 1993
Schwab Government Money Fund May 1, 1993
Schwab Municipal Money Fund -- Sweep Class May 1, 1993
Schwab Municipal Money Fund -- Value Advantage Class June 6, 1995
Schwab California Municipal Money Fund -- Sweep Class May 1, 1993
Schwab California Municipal Money Fund -- Value Advantage Class June 6, 1995
Schwab US Treasury Money Fund May 1, 1993
Schwab New York Municipal Money Fund -- Sweep Class November 10, 1994
Schwab New York Municipal Money Fund -- Value Advantage Class June 6, 1995
Schwab Government Cash Reserves Fund October 20, 1997
Schwab New Jersey Municipal Money Fund January 20, 1998
Schwab Pennsylvania Municipal Money Fund January 20, 1998
B. Other Funds
Schwab Value Advantage Money Fund May 1, 1993
Schwab Institutional Advantage Money Fund May 1, 1993
Schwab Retirement Money Fund November 26, 1993
</TABLE>
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 2
Exhibit 8(e)
FORM OF
SCHEDULE C
TRANSFER AGENCY AGREEMENT
AMENDED [ ]
The fees listed below are for services provided under this Agreement and are to
be accrued daily and paid monthly in arrears:
FUND FEE
---- ---
A. Sweep Funds
Schwab Money Market Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Government Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab California Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab US Treasury Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab New York Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Government Cash Reserves Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab New Jersey Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
B. Other Funds
Schwab Value Advantage Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
<PAGE> 3
Schwab Institutional Advantage Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
Schwab Retirement Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
Schwab Municipal Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
Schwab California Municipal Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
Schwab New York Municipal Money Fund An annual fee, payable monthly,
of five one-hundredths of one
percent (.05%) of the Fund's
average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
Exhibit 8(h)
FORM OF
SCHEDULE A
SHAREHOLDER SERVICES AGREEMENT
AMENDED [ ]
FUND EFFECTIVE DATE
- ---- --------------
A. Sweep Funds
Schwab Money Market Fund May 1, 1993
Schwab Government Money Fund May 1, 1993
Schwab Municipal Money Fund May 1, 1993
Schwab California Municipal Money Fund May 1, 1993
Schwab US Treasury Money Fund May 1, 1993
Schwab New York Municipal Money Fund November 10, 1994
Schwab Government Cash Reserves Fund October 20, 1997
Schwab New Jersey Municipal Money Fund January 20, 1998
Schwab Pennsylvania Municipal Money Fund January 20, 1998
B. Other Funds
Schwab Value Advantage Money Fund May 1, 1993
Schwab Institutional Advantage Money Fund May 1, 1993
Schwab Retirement Money Fund November 26, 1993
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 2
Exhibit 8(h)
FORM OF
AMENDED SCHEDULE C
SHAREHOLDER SERVICES AGREEMENT
The fees listed below are for services provided under this Agreement and are to
be accrued daily and paid monthly in arrears:
FUND FEE
---- ---
A. Sweep Funds
Schwab Money Market Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Government Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab California Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab US Treasury Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab New York Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Government Cash Reserves Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab New Jersey Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
B. Other Funds
Schwab Value Advantage Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
Schwab Institutional Advantage Money Fund An annual fee, payable monthly,
of twenty one-
<PAGE> 3
hundredths of one percent (.20%)
of the Fund's average daily net
assets
Schwab Retirement Money Fund An annual fee, payable monthly,
of twenty one-hundredths of one
percent (.20%) of the Fund's
average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
CHARLES SCHWAB & CO., INC.
By: _____________________________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
Exhibit 8(j)
FORM OF
CUSTODIAN SERVICES AGREEMENT
SCHEDULE A
AMENDED [ ]
1. Schwab California Municipal Money Fund November 6, 1990
2. Schwab Money Market Fund April 8, 1991
3. Schwab Government Money Fund April 8, 1991
4. Schwab Municipal Money Fund May 3, 1991
5. Schwab US Treasury Money Fund November 5, 1991
6. Schwab Value Advantage Money Fund February 7, 1992
7. Schwab Institutional Money Fund November 26, 1993
8. Schwab Retirement Money Fund November 26, 1993
9. Schwab New York Municipal Money Fund November 8, 1994
10. Schwab Government Cash Reserves Fund October 20, 1997
11. Schwab New Jersey Municipal Money Fund January 20, 1998
12. Schwab Pennsylvania Municipal Money Fund January 20, 1998
PFPC INC.
By: _____________________________________
Joseph T. Gramlich
Title: Senior Vice President
THE CHARLES SCHWAB FAMILY OF FUNDS
By: _____________________________________
William J. Klipp
Title: Executive Vice President and Chief
Operating Officer
<PAGE> 1
Exhibit 13(i)
FORM OF
PURCHASE AGREEMENT
The Charles Schwab Family of Funds (the "Trust"), a Massachusetts
business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California
corporation, hereby agree as follows:
1. The Trust hereby offers and Schwab hereby purchases ______ units of
beneficial interest of the Sweep Shares of the series of shares known as the
Schwab New Jersey Municipal Money Fund (such ______ units of beneficial interest
being hereafter collectively known as "Shares") at a price of $1.00 per Share.
Schwab hereby acknowledges purchase of the Shares and the Trust hereby
acknowledges receipt from Schwab of funds in the amount of $ for the Shares of
the Trust in full payment for the Shares. It is further agreed that no
certificate for the Shares will be issued by the Trust.
2. Schwab represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view of the distribution
thereof.
3. The names "The Charles Schwab Family of Funds" and "Trustees of The
Charles Schwab Family of Funds" refer, respectively, to the Trust created and
the Trustees as Trustees but not individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated as of October 20, 1989,
as amended and restated on May 9, 1995, to which reference is hereby made and a
copy of which is on file at the Office of the Secretary of State 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 not made individually, but
only 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 of Shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the _______ day of ________, 1998.
Attest: THE CHARLES SCHWAB FAMILY OF FUNDS
_______________________ By:
Name:
Title:
Attest: CHARLES SCHWAB & CO., INC.
_______________________ By:
Name:
Title:
<PAGE> 1
Exhibit 13(j)
FORM OF
PURCHASE AGREEMENT
The Charles Schwab Family of Funds (the "Trust"), a Massachusetts
business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California
corporation, hereby agree as follows:
1. The Trust hereby offers and Schwab hereby purchases ______ units of
beneficial interest of the Sweep Shares of the series of shares known as the
Schwab Pennsylvania Municipal Money Fund (such ______ units of beneficial
interest being hereafter collectively known as "Shares") at a price of $1.00 per
Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby
acknowledges receipt from Schwab of funds in the amount of $ for the Shares of
the Trust in full payment for the Shares. It is further agreed that no
certificate for the Shares will be issued by the Trust.
2. Schwab represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view of the distribution
thereof.
3. The names "The Charles Schwab Family of Funds" and "Trustees of The
Charles Schwab Family of Funds" refer, respectively, to the Trust created and
the Trustees as Trustees but not individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated as of October 20, 1989,
as amended and restated on May 9, 1995, to which reference is hereby made and a
copy of which is on file at the Office of the Secretary of State 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 not made individually, but
only 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 of Shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the _______ day of ________, 1998.
Attest: THE CHARLES SCHWAB FAMILY OF FUNDS
_______________________ By:
Name:
Title:
Attest: CHARLES SCHWAB & CO., INC.
_______________________ By:
Name:
Title:
