<PAGE> 1
As filed with the Securities and Exchange Commission on August 6, 1997
File Nos. 33-31894 and 811-05954
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 28 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 [X]
--------------
THE CHARLES SCHWAB FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(415) 627-7000
Timothy F. McCarthy, President
The Charles Schwab Family of Funds
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)
Copies of communications to:
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management, Inc.
1301 K Street, NW, Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On DATE, 1997 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
CROSS REFERENCE SHEET
PROSPECTUS
Schwab Government Cash Reserves Fund
PART A ITEM PROSPECTUS CAPTION
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
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
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Key Features............................ 2
Expenses................................ 3
Performance............................. 4
Organization and Management............. 5
Investment Objective and Policies....... 6
Investing in Shares..................... 8
</TABLE>
The Prospectus provides concise information that you should know before
investing. Retain it for future reference.
The Statement of Additional Information (SAI), dated October 20, 1997, 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 World Wide 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 800-2 NO-LOAD (800-345-2550 for TDD users) or writing
to 101 Montgomery Street, San Francisco, California 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 GOVERNMENT
CASH RESERVES
PROSPECTUS
OCTOBER 20, 1997
SCHWAB GOVERNMENT CASH RESERVES (the Fund) is a money market fund which seeks to
provide current income consistent with liquidity and stability of capital by
investing in U. S. Government securities.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE PER SHARE (NAV) OF $1.00.
<PAGE> 4
KEY FEATURES
MATCHING THE FUND TO YOUR INVESTMENT NEEDS: The Fund seeks income while
preserving the value of your investment, and, therefore, may be appropriate for
a variety of investment programs, which can be long-term or short-term in
nature. However, investment in the Fund is not a substitute for building an
investment portfolio tailored to your specific investment needs and risk
tolerance.
SWEEP FEATURE: The Fund provides automatic investment ("sweep") of the cash
balance in your Schwab _____ Account. Also, shares of the Fund will be
automatically redeemed to cover any negative cash balance in your Schwab _____
Account. The Fund is suitable for investors who wish to have the cash balance in
their Schwab _____ Account invested automatically and in the safety of a money
market fund that invests in U. S. Government securities.
GOAL: The Fund seeks to provide current income, while maintaining a stable share
price of $1.00. There is no guarantee that the Fund will achieve its goal.
STRATEGY: The Fund invests in U. S. Government securities. U.S. Government
securities, while considered among the safest securities, are subject to risks
associated with interest rate changes, which may affect yield.
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 ______ __, 1997.
SHAREHOLDER SERVICE: Charles Schwab & Co., Inc. (Schwab) provides professional
representatives 24 hours a day at 800-2 NO-LOAD to service your accounts. Schwab
was established in 1971 and is one of America's largest brokerage firms. Schwab
helps over 4.4 million customers make investment decisions by offering them low
cost brokerage services and providing them with financial products and
information. Visit one of Schwab's 256 branch offices or Schwab's World Wide Web
site (http://www.schwab.com) for information on investment products and
services. Read the "Investing in Shares" section of the prospectus for
information on "How to Buy" and "How to Sell" shares of the Fund.
2
<PAGE> 5
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy, sell or
exchange shares of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge on purchases
and reinvested dividends NONE
Deferred sales charge
on redemptions NONE
Redemption fee* NONE
Exchange fee NONE
Account maintenance fees ** NONE
</TABLE>
* Read the "Investing in Shares" section of the prospectus for information
concerning wire redemption fees.
** Read the "Investing in Shares" section of the prospectus for information
concerning fees that may be charged if you do not maintain the required
minimums in your Schwab __ Account.
ANNUAL OPERATING EXPENSES are paid by the Fund. 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 Fund's
shares and into the dividends paid to shareholders. As a shareholder, you are
not charged any of these fees directly.
The following figures are based on estimated expenses and are stated as a
percentage of average daily net assets of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Management fee (after reduction) 0.XX%
12b-1 fee NONE
Other expenses* (after reduction) 0.XX%*
------
TOTAL OPERATING EXPENSES
(AFTER REDUCTION) 0.XX%
</TABLE>
EXAMPLE. If the 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> <C>
$ $
</TABLE>
THE EXPENSE TABLE AND EXAMPLE ABOVE ARE SUPPOSED TO HELP YOU UNDERSTAND THE
COSTS OF OWNING SHARES IN THE FUND. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
The Investment Manager and Schwab have voluntarily agreed to guarantee, at least
through October 31, 1998, that total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) of the Fund will not
exceed 0.xx% of its average daily net assets. If this guarantee were not in
effect, the management fee, other expenses and total operating expenses would be
estimated to be xx%, xx% and xx% of average daily net assets, respectively. Read
the "Organization and Management" section of the prospectus for more information
on expenses.
3
<PAGE> 6
PERFORMANCE
Typically, money market funds report performance in terms of total return or
yield.
TOTAL RETURN is the actual annual 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. As a result 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.
4
<PAGE> 7
ORGANIZATION & MANAGEMENT
THE FUND IS A DIVERSIFIED MUTUAL FUND. The Fund is a series of an open-end
investment management company organized as a Massachusetts business trust on
October 20, 1989 and named The Charles Schwab Family of Funds.
THE FUND IS OVERSEEN BY A BOARD OF TRUSTEES. The Board of Trustees meets
regularly to review the Fund's activities, contractual arrangements and
performance. The Board of Trustees is responsible for protecting the interests
of the Fund's shareholders.
THE FUND 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 FUND IS MANAGED BY THE INVESTMENT MANAGER. The Investment Manager is
responsible for managing the Fund's day-to-day business affairs, including
picking the Fund's investments; although the Investment Manager is subject to
the overall authority of the Board of Trustees.
For the services performed under its contract with the Fund, the Investment
Manager is entitled to receive a graduated annual fee, payable monthly, of
0.46% of the Fund's average daily net assets not in excess of $1 billion,
0.45% of such assets over $1 billion but not in excess of $3 billion, 0.40% of
such assets over $3 billion but not in excess of $10 billion, 0.37% of such
assets over $10 billion but not in excess of $20 billion and 0.34% of such
assets over $20 billion. This fee is expected to be 0.xx% of the Fund's average
daily net assets.
SCHWAB IS THE FUND'S SHAREHOLDER SERVICES AND TRANSFER AGENT. Schwab provides
Fund information to shareholders, including calculating share price, reporting
shareholder ownership and account activities and distributing the Fund's
prospectuses, financial reports and other informational literature about the
Fund. Schwab also maintains the office space, equipment and personnel necessary
to provide these services. Schwab also distributes and markets Schwab Funds and
services.
For the services performed as transfer agent under its contract with the Fund,
Schwab is entitled to receive an annual fee from the Fund. The fee is payable
monthly in the amount of 0.xx% of the Fund's average daily net assets. For the
services performed as shareholder services agent under its contract with the
Fund, Schwab is entitled to receive an annual fee from the Fund. The fee is
payable monthly in the amount of 0.xx% of the average daily net assets of the
Fund.
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 to be
a controlling person of the Investment Manager and Schwab.
THE FUND PAYS OTHER EXPENSES. These expenses may cover fees paid to entities who
provide transaction services to the Fund, including checking, Automated Clearing
House and Automatic Teller Machine.
5
<PAGE> 8
INVESTMENT OBJECTIVE & POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide current income consistent with
liquidity and stability of capital.
The Fund intends to achieve its objective by investing in U. S. Government
securities and repurchase agreements for these securities. The Fund also may
engage in reverse repurchase agreements.
The Fund seeks to maintain a stable share price of $1.00, although there is no
guarantee that the Fund will be able to continue to do so. The Fund follows
regulations set forth by the SEC which dictate the quality, maturity and
diversification of the Fund's investments. These requirements are designed to
help the Fund maintain a stable share price of $1.00. The Fund may purchase only
high-quality, short-term securities which 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 risk for losses to the Fund and possible changes in share price.
The Fund earns income at current money market rates and its yield will fluctuate
from day-to-day. The Fund emphasizes capital preservation, so it will not
provide the higher yield or capital appreciation that a more aggressive mutual
fund or other investment may provide.
Please remember that the Fund is not insured or guaranteed by the U. S.
Government.
PRINCIPLE INVESTMENT POLICIES AND TECHNIQUES
The Fund's investment objective is fundamental, which means that it may be
changed only by vote of a majority of the Fund's shareholders. Unless otherwise
noted, policies and limitations are nonfundamental and may be changed without
shareholder approval.
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.
VARIABLE AND FLOATING RATE SECURITIES pay an interest rate which is adjusted
either at specific intervals or periodically or floats continuously according to
a formula or benchmark. These structures are intended for minimizing
fluctuations in values that occur when interest rates rise and fall.
STRIPPED SECURITIES are securities whose income and principal components are
detached and sold separately. While the risks associated with stripped
securities are similar to other money market securities, stripped securities are
typically subject to greater changes in value. U.S. Treasury securities that
have been stripped by a Federal Reserve Bank are obligations of the U.S.
Treasury.
6
<PAGE> 9
REPURCHASE AGREEMENTS involve the 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 involve the Fund selling securities held in its
portfolio and simultaneously agreeing to buy them back at an agreed-upon price
and time. There are risks that the securities will change in value during this
period, which may cause losses to the Fund, and the costs of buying the
securities back could affect the Fund's yield.
PUTS are agreements which allow the buyer to sell a security at a specified
price and time to the seller or "put provider." When the Fund buys a put, losses
could occur as a result of the cost of the put or if the put provider does not
perform as agreed. Losses could result to the Fund (as a put provider), if the
buyer exercises its rights under the put.
ILLIQUID AND RESTRICTED SECURITIES are securities which are not actively traded
or are subject to legal restrictions and therefore, may be difficult to sell
quickly or without losses.
Restriction: The 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, specified date, price and
yield. Generally, the purchaser does not pay for these securities or earn
interest on them until they are delivered and, thus, their value could change.
DIVERSIFICATION involves investing in a wide range of securities, and thereby,
spreading and reducing the risks of investment.
Restriction: The Fund will not purchase a security if, as a result, more than 5%
of its total assets would be invested in the securities of a single issuer;
although the Fund may invest up to 25% of its total assets in the
highest-quality securities of a single issuer for up to three days. This
restriction does not apply to U.S. Government securities.
BORROWING money may be construed as a form of leveraging if the Fund continues
to make investments while borrowings remain outstanding. Borrowing subjects the
Fund to interest costs which may exceed the interest received on the securities
purchased with the borrowed funds. The Fund may borrow from banks or engage in
reverse repurchase agreements, and may make additional investments while
borrowings are outstanding.
Restriction: The Fund may borrow up to 33 1/3% of its total assets.
LENDING securities or money may earn the Fund income, but could result in losses
to the Fund, and possibly affect the share price.
7
<PAGE> 10
INVESTING IN SHARES
BUSINESS DAYS
The Fund is 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 1997: 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 closes early, such as days in advance
of holidays, the Fund reserves the right to advance the time by which purchase
and redemption orders must be received on that day.
NET ASSET VALUE
The price of each share of the Fund is its NAV. NAV is determined each business
day, first at 10:00 a.m. Eastern time, then again at the close of the NYSE,
generally 4:00 p.m. Eastern time. NAV is calculated by adding the value of the
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
the 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.
<TABLE>
<CAPTION>
FUND MINIMUM INVESTMENTS
<S> <C>
INITIAL INVESTMENT $1
ADDITIONAL SHARES $1
MINIMUM BALANCE $1
</TABLE>
HOW TO BUY SHARES
Shares may be purchased only through a Schwab _____ Account. The cash balance in
your Schwab _____ Account will automatically generate an order to purchase
shares of the Fund (a "purchase order"). Please read your Schwab ___ Account
agreement for a detailed explanation of how the sweep feature works. Shares are
purchased at the NAV next determined after your purchase order has been received
and accepted (generally, 10:00 a.m. Eastern time). Shares begin to earn
dividends on the same day.
HOW TO SELL SHARES
A negative cash balance in your Schwab _____ Account will automatically generate
an order to sell shares of the Fund (a "redemption order"). Please read your
Schwab ___ Account agreement for a detailed explanation of how the sweep feature
works. Shares are redeemed ("sold") at the NAV next determined after your
redemption order has been received and accepted (generally, 10:00 a.m. Easter
time). Shares sold do not earn dividends on that day.
OPENING A SCHWAB _____ ACCOUNT 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.
8
<PAGE> 11
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 Fund. It is
important to remember that SIPC insurance does not protect against losses due to
market or economic conditions.
Schwab _____ Accounts require a $xxx minimum investment. A fee of $xxx will be
charged to Schwab _____ Accounts that fall below this minimum at the end of the
month.The fee, if applicable, will be charged at the end of each month, but will
be waived if there have been at least two commissionable trades within the
previous twelve months.
DEPOSITS TO YOUR SCHWAB _____ ACCOUNTS 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.
- - BY TELEPHONE. Call 1-800-2 NO-LOAD, 24 hours a day (1-800-345-2550 for
TDD users).
- - BY MAIL. Write to the Fund at 101 Montgomery Street, San Francisco, CA
94104.
- - ELECTRONICALLY. For more information about StreetSmart(R), The
Equalizer(R) and Telebroker(R), call 1-800-2 NO-LOAD.
Please provide the following information:
- - your name and Schwab _____ Account number;
- - the dollar amount you would like to deposit; and
- - for initial opening only, one of the two distribution choices below.
- AUTOMATIC REINVESTMENT. Dividends will be reinvested in shares of
the Fund. If you do not choose an option, this option will be
assigned to you; or
- CASH OPTION. Dividends will be paid to your Schwab _____ Account
and, if requested, mailed to you the next business day.
Monies received by Schwab before 4:00 p.m. Eastern time will be available for
investment that day. Monies received by Schwab after 4:00 p.m. Eastern time will
be available for investment the next business day.
PLEASE NOTE THE FOLLOWING CONDITIONS:
- - a check may be issued on the business day following receipt and acceptance
of your request, and will be mailed to you upon request;
- - if you deposited a check to your Schwab ___ Account, a check will be issued
as soon as your check clears its bank, which may take up to 15 days;
- - the Fund 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.
Contact Schwab for instructions and any applicable fees if you would like to
wire money from your Schwab _____ Account.
9
<PAGE> 12
DIVIDENDS & TAXES
Each business day the Fund's net investment income is determined 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 income tax
consequences that may affect the Fund and its shareholders. Unless your
investment in the Fund is through a retirement account, you should consider the
tax implications of investing, and consult with your own tax adviser.
To the extent the Fund distributes its net investment income and capital gains,
if any, to shareholders each year, the Fund will pay no federal income tax.
However, all distributions received by shareholders are subject to federal
income tax, and may be subject to state and/or local taxes. Distributions are
taxable when paid, whether they are received in cash or reinvested, although
distributions declared in December, but paid in January, are taxable as if they
were paid on December 31.
Shareholders receive a record of all distributions by the Fund, as well as
purchases and sales made, via their monthly Schwab _____ Account statement. Each
year, the Fund notifies shareholders of all distributions made by the Fund that
year.
GENERAL INFORMATION
As long as the Fund or Schwab follows reasonable procedures to confirm that your
telephone order is genuine, they will not be liable for any losses an investor
may experience. 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 Fund.
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 the
Fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you doe not want
to receive consolidated mailings, you may write to the Fund and request that
your mailings not be consolidated.
The Fund, in its sole discretion and without prior notice, reserves the right to
purchase shares, change minimum investment requirements or withdraw or suspend
any part of the offering made by this prospectus.
10
<PAGE> 13
- -------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY
OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS.
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
BE MADE.
11
<PAGE> 14
CROSS REFERENCE SHEET
STATEMENT OF ADDITIONAL INFORMATION
Schwab Government Cash Reserves Fund
PART B STATEMENT OF ADDITIONAL INFORMATION
ITEM CAPTION
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 Fund Reports Performance
23. Financial Statements Not applicable
<PAGE> 15
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104
SCHWAB GOVERNMENT CASH RESERVES
OCTOBER 20, 1997
This Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the Prospectus dated October 20, 1997 (and
as may be amended from time to time) for Schwab Government Cash Reserves (the
"Fund").
To obtain a copy of the Prospectus, call 800-2 NO-LOAD (800-345-2550
for TDD Users), or write to 101 Montgomery Street, San Francisco, California
94104. The Prospectus also is available electronically by using our World Wide
Web address: http://www.schwab.com/funds.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT POLICIES AND RESTRICTIONS.....................................2
MANAGEMENT OF THE TRUST..................................................4
PORTFOLIO TRANSACTIONS AND TURNOVER......................................9
DISTRIBUTIONS AND TAXES.................................................10
SHARE PRICE CALCULATION.................................................12
HOW THE FUND REPORTS PERFORMANCE........................................12
GENERAL INFORMATION.....................................................13
PURCHASE AND REDEMPTION OF SHARES.......................................18
OTHER INFORMATION.......................................................18
</TABLE>
<PAGE> 16
INVESTMENT POLICIES AND RESTRICTIONS
THE FOLLOWING INVESTMENT POLICIES AND RESTRICTIONS ARE FUNDAMENTAL AND
MAY BE CHANGED ONLY BY APPROVAL OF A MAJORITY OF THE FUND'S SHAREHOLDERS. ALL
OTHER INVESTMENT POLICIES AND RESTRICTIONS CONTAINED IN THE SAI ARE
NON-FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL OR PRIOR NOTICE.
THE FUND MAY NOT:
(1) purchase securities of any issuer unless consistent with its status as
a diversified investment management company as defined 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) 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.
(3) 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.
(4) 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.
(5) 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.
(6) concentrate investments in a particular industry or group of
industries, or within one state, 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.
(7) 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.
The following descriptions of the 1940 Act may assist investors in
understanding the above fundamental policies and restrictions.
DIVERSIFICATION. Under the 1940 Act, a diversified investment
management company may not purchase securities (other than U.S.
Government securities or securities of other investment company) if,
as a result, more than 5% of its total assets would be invested in the
securities of such issuer or it would own more than 10% of such
issuer's outstanding voting securities.
BORROWING. The 1940 Act presently restricts an investment management
company 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, an investment management company may only
make loans if expressly permitted by its investment policies.
CONCENTRATION. The 1940 Act presently defines concentration as
investing more than 25% of an investment company's total assets in an
industry or group of industries, with certain exceptions.
THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS.
THE FUND MAY NOT:
(a) purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of total assets would be invested in the
securities of such issuer; provided that the Fund may invest up to 25%
of its total assets in the first tier securities of a single issuer for
up to three business days.
2
<PAGE> 17
(b) purchase securities of any 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 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.
(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).
3
<PAGE> 18
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and Trustees of the Trust, their
principal occupations over the past five years and their affiliations, if any,
with The Charles Schwab Corporation, Schwab and the Investment Manager, are as
follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ----------------- --------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles 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. President and Trustee Executive Vice President and President,
McCARTHY* Financial Products and International
September 19, 1951 Group, Charles Schwab & Co., Inc.;
Executive Vice President and President,
Financial Products and International
Group, The Charles Schwab Corporation;
Chief Executive Officer, Charles 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.
DONALD F. DORWARD Trustee Executive Vice President and Managing
Director, Grey Advertising. From 1990 to
</TABLE>
- --------
* Mr. Schwab is an "interested person" of the Trust.
* Mr. McCarthy is an "interested person" of the Trust.
4
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
September 23, 1931 1996, Mr. Dorward was President and
Chief Executive Officer. Dorward &
Associates is an advertising and
marketing/consulting firm.
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and
May 15, 1931 Director, 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
August 18, 1943 Director, Wilsey Bennett, Inc. (truck and air
transportation, real estate investment and
management, and investments).
TAI-CHIN TUNG Treasurer and Vice President - Finance, Charles Schwab &
March 7, 1951 Principal Co., Inc.; Controller, Charles Schwab
Financial Officer 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.
WILLIAM J. KLIPP* Executive Vice Executive Vice President-SchwabFunds(R),
December 9, 1955 President, Chief Charles Schwab & Co., Inc.; President and
Operating Officer and Chief Operating Officer, Charles Schwab
Trustee Investment Management, Inc. Prior to 1993,
Mr. Klipp was Treasurer of Charles Schwab &
Co., Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment
April 5, 1955 and Chief Investment Officer, Charles Schwab Investment
Officer Management, Inc.
FRANCES COLE Secretary Vice President, Chief Counsel, Chief
September 9, 1955 Compliance Officer and Assistant Corporate
</TABLE>
- --------
* Mr. Klipp is an "interested person" of the Trust.
5
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
Secretary, Charles Schwab Investment
Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel,
October 14, 1960 Charles Schwab Investment Management,
Inc. From 1991 to 1992, he was Assistant
Secretary and Assistant Corporate
Counsel for the Franklin Group of Mutual
Funds.
CHRISTINA M. Assistant Secretary Vice President and Senior Counsel, Charles
PERRINO Schwab Investment Management, Inc. Prior to
June 16, 1961 1994, she was Counsel and Assistant Secretary
for North American Security Life Insurance
Company and Secretary for North American
Funds.
KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab
February 27, 1968 Investment Management, Inc. From October,
1994 to July 1996, Ms. Seaman was Attorney
for Franklin Resources, Inc. Prior to 1994,
Ms. Seaman was an attorney for The Benham
Group.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in
the same capacity as described for the Trust for Schwab Investments, Schwab
Capital Trust and Schwab Annuity Portfolios. The address of each individual
listed above is 101 Montgomery Street, San Francisco, California 94104.
6
<PAGE> 21
COMPENSATION TABLE 1
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Annual
Benefits Accrued Benefits Upon Total
Aggregate as Part of Fund Retirement from Compensation
Name of Person, Compensation Expenses from the the Fund from the Fund
Position from the Trust Fund Complex 2 Complex 2 Complex 2
- -------------------- -------------- -------------- ---------------- ----------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and Trustee
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 Statement of Additional Information, none of the
Independent Trustees has elected to participate in the Fee Deferral Plan. If an
Independent Trustee does elect to participate in the Plan, the Plan would
operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account, as of any date, will be equal to the value the Account would have
had as of that date, if the amounts credited to the Account had been invested
and reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by
the participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds
include the series or classes of beneficial interest of the Trust, Schwab
Investments and Schwab Capital Trust.
7
<PAGE> 22
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 ("Schwab"), serves as the Fund's investment adviser and
administrator pursuant to an Investment Advisory and Administration Agreement
(the "Advisory Agreement") between it and the Trust. The Investment Manager is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended, and currently provides investment management services to the
SchwabFunds(R), a family of XX mutual funds with over $XX billion in assets as
of XXXXX, 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 the Fund's
average daily net assets not in excess of $1 billion, 0.45% of such net assets
over $1 billion but not in excess of $3 billion, 0.40% of such net assets over
$3 billion but not in excess of $10 billion, 0.37% of such net assets in excess
of $10 billion but not in excess of $20 billion and 0.34% of such net assets
over $20 billion.
The Investment Manager and Schwab have guaranteed that, through at
least XXXXXX, the Fund's total operating expenses will not exceed X.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
relative net assets at the time the expense is incurred, except that expenses
directly attributable to a particular Fund or class of a Fund are charged to
that Fund or class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Fund's shares. The Fund pays the cost of the
prospectuses and shareholder reports to be prepared and delivered to existing
8
<PAGE> 23
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 Fund's 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 Fund in relation to movements in the general level of interest
rates; invest money obtained from the sale of Fund shares; reinvest proceeds
from maturing portfolio securities; and meet redemptions of Fund shares.
Portfolio transactions may increase or decrease the yield of a Fund depending
upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of the Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager will generally select brokers and dealers for the Fund primarily on the
basis of the quality and reliability of brokerage services, including execution
capability and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
9
<PAGE> 24
The investment decisions for the Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as 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 the Fund. However, it is the opinion of the Board of Trustees that the
benefits conferred by the Investment Manager outweigh any disadvantages that may
arise from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, the Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the NAV of the Fund is determined ("Business Day"),
the Fund's net investment income will be declared as of the close of trading on
the New York Stock Exchange ("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. The Fund will pay shareholders, who redeem all of their shares, all
dividends accrued to the time of the redemption within 7 days.
The Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Fund consists of: (1)
accrued interest income, plus or minus amortized discount or premium, minus (2)
accrued expenses allocated to that Fund. If the Fund realizes any capital gains,
they will be distributed at least once during the year as determined by the
Board of Trustees. Any realized capital losses, to the extent not offset by
realized capital gains, will be carried forward. It is not anticipated that the
Fund will realize any long-term capital gains. Expenses of the Trust are accrued
each day. Should the NAV of the Fund deviate significantly from market value,
the Board of Trustees could decide to value the investments at market value and
any unrealized gains and losses could affect the amount of the Fund's
distributions.
FEDERAL INCOME TAXES
It is the 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, the
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, the Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stocks, securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than
10
<PAGE> 25
three months; and (3) diversify its holdings so that at the end of each quarter
of its taxable year (i) at least 50% of the market value of the Fund's total
assets is represented by cash or cash items, U.S. Government securities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or
securities of any other regulated investment company) or of two or more issuers
that the Fund controls, within the meaning of the Code, and that are engaged in
the same, similar or related trades or businesses. These requirements may
restrict the degree to which the Fund may engage in short-term trading and
certain hedging transactions and may limit the range of the Fund's investments.
If the Fund qualifies as a regulated investment company, it will not be subject
to federal income tax on the part of its net investment income and net realized
capital gains, if any, which it distributes to shareholders, provided that the
Fund meets certain minimum distribution requirements. To comply with these
requirements, the Fund must distribute at least (a) 90% of its "investment
company taxable income" (as that term is defined in the Code) and (b) 90% of the
excess of its (i) tax-exempt interest income over (ii) certain deductions
attributable to that income (with certain exceptions), for its taxable year. The
Fund intends to make sufficient distributions to shareholders to meet these
requirements.
If the Fund fails to distribute in a calendar year (regardless of
whether it has a non-calendar taxable year) substantially all of its (i)
ordinary income for such year; and (ii) capital gain net income for the year
ending October 31 (or later if the Fund is permitted so to elect and so elects),
plus any retained amount from the prior year, the Fund will be subject to a
nondeductible 4% excise tax on the undistributed amounts. The Fund intends
generally to make distributions sufficient to avoid imposition of this excise
tax.
Any distributions declared by the 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. The Fund may
adjust its schedule for the reinvestment of distributions for the month of
December to assist in complying with the reporting and minimum distribution
requirements of the Code.
The Fund does not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to 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.
The Fund may engage in investment techniques that may alter the timing
and character of the Fund's income. The Fund may be restricted in its use of
these techniques by rules relating to their qualification as regulated
investment companies.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The 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
11
<PAGE> 26
disposition of shares of the Fund 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 Fund also may be subject to state, local and foreign taxes,
and its treatment under applicable tax laws may differ from the federal income
tax treatment.
SHARE PRICE CALCULATION
The 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 the Fund's investments at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. The amortized
cost method of valuation seeks to maintain a stable 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
the 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 the 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 the
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 FUND REPORTS PERFORMANCE
The historical performance of the Fund may be shown in the form of
total return, yield and effective yield. These measures of performance are
described below.
TOTAL RETURN
Standardized Total Return. Average annual total return for a period is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in the 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, the Fund assumes the reinvestment of all distributions at
NAV on applicable reinvestment dates.
Nonstandardized Total Return. Nonstandardized total return for the 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.
12
<PAGE> 27
In addition, an after-tax total return for the 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.
The 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.
The 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
The 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.
GENERAL INFORMATION
The Trust generally is not required to hold shareholder meetings. However, as
provided in its Agreement and Declaration of Trust and Bylaws, shareholder
meetings will be held in connection with the following matters: (1) election or
removal of Trustees, if a meeting is requested in writing by a shareholder or
shareholders who beneficially own(s) 10% or more of the Trust's shares; (2)
adoption of any contract for which shareholder approval is required by the 1940
Act; (3) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (4) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any of its investment portfolios,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (5)
determination of whether a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing Trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act, (i) the Trust
will hold a shareholder
13
<PAGE> 28
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
As of XXXX, 1997, THE CHARLES SCHWAB TRUST COMPANY FBO MUTUAL FUND FSI2
TRADING, 101 Montgomery Street, San Francisco, California 94104 directly or
beneficially owned XX% of __________
In addition, as of XXXX, 1997 the officers and Trustees of the Trust,
as a group, owned less than 1% of each Fund's outstanding voting securities.
ACCESS TO SCHWAB'S MUTUAL FUND ONESOURCE(R) SERVICE
14
<PAGE> 29
With Schwab's Mutual Fund OneSource Service ("OneSource"), a
shareholder can invest in over 650 mutual funds from many fund companies,
subject to the following. Schwab's standard transaction fee will be charged on
each redemption of fund shares held for 90 days or less to discourage short-term
trading. Mutual fund shares held for more than 90 days are exempt from the
short-term redemption policy and may be sold without penalty. Up to 15
short-term redemption of fund shares per calendar year are permitted. If you
exceed this number, you will no longer be able to buy or sell fund shares
without paying a transaction fee. As a courtesy, we will notify you in advance
if your short-term redemptions are nearing the point where all of your future
trades will be subject to transaction fees. Schwab reserves the right to modify
OneSource's terms and conditions at any time. For more information, a
shareholder should contact his or her Schwab office during its regular business
hours or call 800-2 NO-LOAD, 24 hours a day.
15
<PAGE> 30
SCHWABFUNDS(R)
SchwabFunds offers a variety of series and classes of shares of beneficial
interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R) - Investor Shares 1
Schwab 1000 Fund - Select Shares(TM)
Schwab International Index Fund(R) - Investor Shares 2
Schwab International Index Fund - Select Shares(TM), 2
Schwab Small-Cap Index Fund(R) - Investor Shares 2
Schwab Small-Cap Index Fund - Select Shares
Schwab Asset Director(R)-High Growth Fund 2, 7
Schwab Asset Director-Balanced Growth Fund 2, 7
Schwab Asset Director-Conservative Growth Fund 2, 7
Schwab S&P 500 Fund-Investor Shares 2
Schwab S&P 500 Fund-e.Shares(TM) 2, 3
Schwab S&P 500 Fund - Select Shares 2
Schwab Analytics Fund(TM) 2
Schwab OneSource Portfolios-International 2, 7
Schwab OneSource Portfolios-Growth Allocation 2, 7
Schwab OneSource Portfolios-Balanced Allocation 2, 7
Schwab OneSource Portfolios - Small Company Fund 2, 7
FIXED INCOME FUNDS 1
Schwab Short/Intermediate Government Bond Fund
Schwab California Long-Term Tax-Free Bond Fund 4
Schwab Long-Term Tax-Free Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund 4
MONEY MARKET FUNDS 5
Schwab Money Market Fund
Schwab Government Money Fund
Schwab Municipal Money Fund-Sweep Shares
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R) - Investor Shares
Schwab Institutional Advantage Money Fund(R) 6
Schwab Retirement Money Fund(R) 6
Schwab Municipal Money Fund-Value Advantage Shares(TM)
Schwab California Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Value Advantage Shares(TM)
Schwab New York Municipal Money Fund-Sweep Shares
Schwab New York Municipal Money Fund-Value Advantage Shares(TM)
16
<PAGE> 31
1 The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
2 The Funds are separate investment portfolios or classes of shares of
Schwab Capital Trust.
3 Available only through SchwabLinkR.
4 Available only to California residents and residents of selected other
states.
5 All listed money market funds are separate investment portfolios of The
Charles Schwab Family of Funds.
6 Designed for institutional investors only.
7 The Asset DirectorR Funds may not invest in these Funds.
17
<PAGE> 32
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 the 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.
18
<PAGE> 33
PART C
OTHER INFORMATION
AUGUST 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 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 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.
<PAGE> 34
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) Form of 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. 27.
(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
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
<PAGE> 35
Registrant and the Investment Manager with respect to
Schwab California Municipal Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Value Advantage Money
Fund, Schwab Institutional Advantage Money Fund(R),
Schwab Retirement Money Fund(R) and New York
Municipal Money Fund, dated June 15, 1994, was
electronically filed and is incorporated herein by
reference to Exhibit (5)(d) to Post-Effective
Amendment No. 27.
(e) Form of Schedule A, amended [ 1997], 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), New
York Municipal Money Fund Schwab Government Cash
Reserves Fund dated June 15, 1994, as 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) and New York Municipal Money
Fund, dated June 15, 1994, 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) and New York Municipal Money
Fund, dated June 15, 1994, 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 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), New
York Municipal Money Fund and Schwab Government Cash
Reserves Fund dated June 15, 1994 is filed herein as
Exhibit 5(h).
(6) (a) Distribution Agreement between Registrant and Charles
Schwab & Co., Inc. ("Schwab"), dated June 15, 1994,
is incorporated by reference to Exhibit (6)(a) to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A, filed on
<PAGE> 36
June 29, 1995.
(b) Form of Amended Schedule to the Distribution
Agreement between Registrant and Schwab referred to
at Exhibit (6)(a) above is 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 of Amended Schedule B to the Accounting Services
Agreement referred to at Exhibit (8)(a) above is
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) Schedule B to the Amended and Restated Transfer
Agency Agreement 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.
(f) Shareholder Service Agreement between Registrant and
Schwab dated May 1, 1993 is incorporated by reference
to Exhibit (8)(f) to Post-Effective Amendment No. 10
to Registrant's Registration Statement on Form N-1A,
filed on September 28, 1993.
(g) Amended Schedule B to the Shareholder Service
Agreement between Registrant and Schwab referred to
at Exhibit (8)(f) is 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 A and C to the Shareholder
Service Agreement referred to at Exhibit (8)(g) above
are 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.
<PAGE> 37
(j) Form of Amended Schedule A to the Custodian Services
Agreement referred to at Exhibit (8)(i) above is
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.
(l) Form of Amended Schedules A and C to the Amended and
Restated Transfer Agency Agreement referred to in
Exhibit 8(d) above are filed herein as Exhibit
(8)(l).
(9) Inapplicable.
(10) Opinion and Consent of Ropes & Gray as to legality of
the securities being registered is incorporated by
reference to Registrant's Rule 24f-2 Notice, filed on
February 19, 1997.
(11) (a) Consent of Ropes & Gray was electronically filed and
is incorporated herein by reference to Exhibit 11(a)
to Post-Effective Amendment No. 27.
(b) Consent of Price Waterhouse LLP, Independent
Accountants, was electronically filed and is
incorporated herein by reference to Exhibit 11(a) to
Post-Effective Amendment No. 27.
(12) Inapplicable.
(13) (a) Purchase Agreement between Registrant and Schwab
relating to the Schwab U.S. Treasury Money Fund is
incorporated by reference to Exhibit (13)(a) to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A, filed on
December 10, 1992.
(b) Purchase Agreement between Registrant and Schwab
relating to the Schwab Value Advantage Money Fund is
incorporated by reference to Exhibit (13)(b) to
Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A, filed on March
3, 1992.
(c) Purchase Agreement between Registrant and Schwab
relating to the Schwab Retirement Money Fund(R) and
the Schwab Institutional Advantage Money Fund(R) is
incorporated by reference to Exhibit (13)(c) to
Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A, filed on
December 1, 1993.
(d) Purchase Agreement between Registrant and Schwab
relating to the Schwab New York Municipal Money Fund
is incorporated by reference to Exhibit (13)(d) to
Post-Effective Amendment No. 16 to Registrant's
Registration Statement on Form N-1A, filed on
February 28, 1995.
(e) Purchase Agreement between Registrant and Schwab
relating to the Schwab Municipal Money Fund-Value
Advantage Shares is incorporated by reference to
Exhibit (13)(e) to Post-Effective
<PAGE> 38
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 is filed herein as Exhibit 13(h).
(14) (a) Model Charles Schwab & Co., Inc. Individual
Retirement Plan is incorporated by reference to
Exhibit (14)(a) to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A,
filed on August 25, 1995.
(b) Model Charles Schwab & Co., Inc. KEOGH Plan is
incorporated by reference to Exhibit (14)(b) to
Post-Effective Amendment No. 14 to Registrant's
Registration Statement on Form N-1A, filed on August
25, 1995.
(15) Inapplicable.
(16) (a) Performance Calculations for Schwab Money Market
Fund, Schwab Government Money Fund, Schwab Municipal
Money Fund, Schwab California Municipal Money Fund
and Schwab U.S. Treasury Money Fund are incorporated
by reference to Exhibit (16) to Post-Effective
Amendment No. 6 to Registrant's Registration
Statement on Form N-1A, filed on March 3, 1992.
(b) Performance Calculations for Schwab Value Advantage
Money Fund are incorporated by reference to Exhibit
(16) to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A,
filed on August 7, 1992.
(c) Performance Calculations for Schwab Institutional
Advantage Money Fund(R) and Schwab Retirement Money
Fund(R) are incorporated by reference to Exhibit (16)
to Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A, filed on April
6, 1995.
(d) Performance Calculations for Schwab New York
Municipal Money Fund-Sweep Shares are incorporated by
reference to Exhibit (16)(d) to Post-Effective
Amendment No. 20 to Registrant's Registration
Statement on Form N-1A, filed on August 25, 1995.
(17) (a) Financial Data Schedule for Schwab Money Market Fund
was electronically filed and is incorporated herein
by reference to
<PAGE> 39
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 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
<PAGE> 40
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 _______, 1997, the number of record holders of shares of
beneficial interest for the series of Registrant was:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Schwab Money Market Fund 1 (for the benefit of ________)
Schwab Government Money Fund 1 (for the benefit of _______)
Schwab U.S. Treasury Money Fund 1 (for the benefit of _______)
Schwab Municipal Money Fund-Sweep Shares 1 (for the benefit of _______)
Schwab Municipal Money Fund-Value Advantage Shares 1 (for the benefit of _______)
Schwab California Municipal Money Fund-Sweep Shares 1 (for the benefit of _______)
Schwab California Municipal Money Fund-Value Advantage Shares 1 (for the benefit of _______)
Schwab Value Advantage Money Fund-Investor Shares 1 (for the benefit of ________)
Schwab Retirement Money Fund(R) 1 (for the benefit of _____)
Schwab Value Advantage Money Fund-Sweep Shares 0
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 ______)
</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
<PAGE> 41
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.
(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),
Schwab Retirement Money Fund(R) and Schwab Government Cash Reserves Fund
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, Schwab
New York Municipal Money Fund-Value Advantage Shares and Schwab Government Cash
Reserves Fund 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:
<PAGE> 42
<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 Management, Inc. Chairman and Director
The Charles Schwab Trust Chairman and Director
Company
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer and
Director
The Charles Schwab Corporation President, Chief Operating Officer and
Director
Charles Schwab Investment Management, Inc. Director
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer and
Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C>
1996; Senior Executive Vice
President and Chief Operating Officer
until January 1995
The Charles Schwab Corporation Executive Vice President until January
1996; Senior Executive Vice President
until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President
Executive Vice President
The Charles Schwab Corporation
The Charles Schwab Trust Company Director and Executive Vice President
A. John Gambs, Charles Schwab & Co., Inc. Executive Vice President, Chief
Treasurer and Principal Financial Officer and Director
Financial Officer
The Charles Schwab Corporation Executive Vice President and Chief
Financial Officer
Charles Schwab Investment Management, Inc. Chief Financial Officer and Director
The Charles Schwab Trust Chief Financial Officer
Company
Mayer & Schweitzer, Inc. Director
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President
Charles Schwab & Co., Inc. Executive Vice President - Business
Strategy
Timothy F. McCarthy, Charles Schwab Investment Management, Inc. Chief Executive Officer
Trustee and President
Charles Schwab & Co., Inc. Executive Vice President
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C>
The Charles Schwab Corporation Executive Vice President
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until October
1995
Fidelity Investment Advisor Group President until 1994
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President - Electronic
Brokerage
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President
Charles Schwab Investment Management, Inc. President and Chief Operating Officer
until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - until
February 1996
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
Commercial Credit Corporation Managing Director until February 1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice President
The Charles Schwab Corporation Treasurer and Senior Vice President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp, Charles Schwab & Co., Inc. Senior Vice President - SchwabFunds
Trustee, Senior Vice
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C>
President
and Chief Operating Officer
Charles Schwab Investment Management, Inc. President and Chief Operating Officer
Stephen B. Ward, Charles Schwab Investment Management, Inc. Senior Vice President and Chief
Senior Vice President and Investment Officer
Chief Investment Officer
Frances Cole, Charles Schwab Investment Management, Inc. Vice President, Chief Counsel, Chief
Secretary Compliance Officer and Assistant
Corporate Secretary
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Management, Inc. Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary
Company
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Management, Inc. Assistant Corporate Secretary
The Charles Schwab Corporation Senior Vice President, General Counsel
and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General Counsel
and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary until
Company February 1996
David H. Lui Charles Schwab Investment Management, Inc. Vice President and Senior Counsel
Assistant Secretary
Christina M. Perrino Charles Schwab Investment Management, Inc. Vice President and Senior Counsel
Assistant Secretary
Karen L. Seaman Charles Schwab Investment Corporate Counsel
Assistant Secretary Management, Inc.
</TABLE>
<PAGE> 46
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, and 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) Registrant undertakes to furnish financial statements
within 4 to 6 months.
<PAGE> 47
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended,
Registrant certifies that it meets all of the requirements for effectiveness of
this Post-Effective Amendment No. 28 to Registrant's Registration Statement on
Form N-1A pursuant to Rule 485(a) under the 1933 Act and has duly caused this
Post-Effective Amendment No. 28 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the District of Columbia, on this 4th day of
August, 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. 28 to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities indicated this 4th day
of August, 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,
- -------------------- Chief Operating Officer and Trustee
William J. Klipp
Donald F. Dorward* Trustee
- --------------------
Donald F. Dorward
Robert G. Holmes* Trustee
- --------------------
Robert G. Holmes
Donald R. Stephens* Trustee
- --------------------
Donald R. Stephens
Michael W. Wilsey* Trustee
- --------------------
Michael W. Wilsey
Tai-Chin Tung* Treasurer and Principal Financial Officer
- --------------------
Tai-Chin Tung
*By /s/ Alan G. Priest
-------------------
Alan G. Priest, Attorney-In-Fact pursuant
to Powers of Attorney filed previously
<PAGE> 48
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT TITLE
5(e) Form of Schedule A to Investment Advisory and Administration
Agreement
5(h) Form of Schedule D to Investment Advisory and Administration
Agreement
6(b) Form of Schedule A to Distribution Agreement
8(b) Form of Schedule B to Accounting Services Agreement
8(h) Form of Schedules A and C to Shareholder Services Agreement
8(j) Form of Schedule A to Custodian Services Agreement
8(l) Form of Schedule A to Transfer Agency Agreement
13(h) Form of Purchase Agreement
<PAGE> 1
EXHIBIT 5e
FORM OF
SCHEDULE A
AMENDED [ , 1997]
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 (formerly Schwab New York November 10, 1994
Tax-Exempt Money Fund)
Schwab Government Cash Reserves Fund October 20, 1997
THE CHARLES SCHWAB FAMILY OF FUNDS
By:______________________
Name: Timothy F. McCarthy
Title: President and Trustee
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
By:______________________
Name: William J. Klipp
Title: President and Chief Operating Officer
<PAGE> 1
EXHIBIT 5h
FORM OF
SCHEDULE D
ADVISORY FEE SCHEDULE
AMENDED [ , 1997]
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 TAX-EXEMPT MONEY FUND NOVEMBER 5, 1990
Forty-six one-hundredths of one percent (.46%) of the Schwab California Tax-Exempt
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.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
FUND DATE
- ---- ----
<S> <C>
SCHWAB RETIREMENT MONEY FUND NOVEMBER 26, 1993
Forty-six one-hundredths of one percent (.46%) of the Schwab Retirement 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 NEW YORK TAX-EXEMPT MONEY FUND NOVEMBER 10, 1994
Forty-six one-hundredths of one percent (.46%) of the Schwab New York Tax-Exempt
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 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.
</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 6b
FORM OF
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN THE CHARLES SCHWAB FAMILY OF FUNDS AND
CHARLES SCHWAB & CO., INC.
FUND EFFECTIVE DATE
- ---- --------------
Schwab Money Market Fund December 15, 1989
Schwab Government Money Fund December 15, 1989
Schwab Tax-Exempt Money Fund December 15, 1989
Schwab California Tax-Exempt Money Fund November 5, 1990
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 Tax-Exempt Money Fund November 10, 1994
Schwab Government Cash Reserves Fund October 20, 1997
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 8b
FORM OF
ACCOUNTING SERVICES AGREEMENT
SCHEDULE B
1. Schwab California Tax Exempt Money Fund November 6, 1990
2. Schwab Money Market Fund April 8, 1991
3. Schwab Government Money Fund April 8, 1991
4. Schwab Tax Exempt 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 Advantage Money Fund November 26, 1993
8. Schwab Retirement Money Fund November 26, 1993
9. Schwab New York Tax Exempt Money Fund November 8, 1994
10. Schwab Government Cash Reserves Fund October 20, 1997
PFPC INC.
By: ______________________
Joseph T. Gramlich
Title: Senior Vice President
SCHWAB CAPITAL TRUST
By: ______________________
William J. Klipp
Title: Executive Vice President and
Chief Operating Officer
<PAGE> 1
EXHIBIT 8h
FORM OF
SCHEDULE A
SHAREHOLDER SERVICE AGREEMENT
FUND EFFECTIVE DATE
- ---- --------------
A. Sweep Funds
Schwab Money Market Fund May 1, 1993
Schwab Government Money Fund May 1, 1993
Schwab Tax-Exempt Money Fund May 1, 1993
Schwab California Tax-Exempt Money Fund May 1, 1993
Schwab U.S. Treasury Money Fund May 1, 1993
Schwab New York Tax-Exempt Money Fund November 10, 1994
Schwab Government Cash Reserves Fund October 20, 1997
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
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 Tax-Exempt 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 Tax-Exempt An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab U.S. Treasury An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab New York Tax-Exempt An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab Government Cash Reserves An annual fee, payable monthly, of twenty
Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
B. Other Funds:
Schwab Value Advantage An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's
<PAGE> 3
average daily net assets
FUND FEE
Schwab Institutional Advantage An annual fee, payable monthly, of twenty
Money Fund one-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: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: ______________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
EXHIBIT 8j
FORM OF
CUSTODIAN SERVICES AGREEMENT
SCHEDULE A
1. Schwab California Tax Exempt Money Fund November 6, 1990
2. Schwab Money Market Fund April 8, 1991
3. Schwab Government Money Fund April 8, 1991
4. Schwab Tax Exempt 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 Advantage Money Fund November 26, 1993
8. Schwab Retirement Money Fund November 26, 1993
9. Schwab New York Tax Exempt Money Fund November 8, 1994
10. Schwab Government Cash Reserves Fund October 20, 1997
PFPC INC.
By: ______________________
Joseph T. Gramlich
Title: Senior Vice President
SCHWAB CAPITAL TRUST
By: ______________________
William J. Klipp
Title: Executive Vice President and
Chief Operating Officer
<PAGE> 1
Exhibit 8l
FORM OF
SCHEDULE A
TRANSFER AGENCY AGREEMENT
NAME OF FUND EFFECTIVE DATE
- ------------ --------------
A. Sweep Funds
Schwab Money Market Fund May 1, 1993
Schwab Government Money Fund May 1, 1993
Schwab Tax-Exempt Money Fund -- Sweep Class May 1, 1993
Schwab Tax-Exempt Money Fund -- Value Advantage Class June 6, 1995
Schwab California Tax-Exempt Money Fund -- Sweep Class May 1, 1993
Schwab California Tax-Exempt Money Fund -- Value Advantage
Class June 6, 1995
Schwab U.S. Treasury Money Fund May 1, 1993
Schwab New York Tax-Exempt Money Fund -- Sweep Class November 10, 1994
Schwab New York Tax-Exempt Money Fund -- Value Advantage
Class June 6, 1995
Schwab Government Cash Reserves Fund October 20, 1997
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
FORM OF
AMENDED SCHEDULE C
TRANSFER AGENCY 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 Tax-Exempt 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 Tax-Exempt An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab U.S. Treasury An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab New York Tax-Exempt An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
Schwab Government Cash Reserves An annual fee, payable monthly, of twenty
Fund one-hundredths of one percent (.20%) of the
Fund's average daily net assets
B. Other Funds:
Schwab Value Advantage An annual fee, payable monthly, of twenty
Money Fund one-hundredths of one percent (.20%) of the
Fund's
<PAGE> 3
average daily net assets
FUND FEE
Schwab Institutional Advantage An annual fee, payable monthly, of twenty
Money Fund one-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: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: ______________________
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
EXHIBIT 13h
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 Schwab Government Cash Reserves (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.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THE
AGREEMENT AS OF THE ___ day of ____ 1997.
Attest: THE CHARLES SCHWAB FAMILY OF FUNDS
______________________ By: ___________________________
Name: Stephen B. Ward
Title: Executive Vice President and
Chief Investment Officer
Attest: CHARLES SCHWAB & CO., INC.
______________________ By: ___________________________
Name: Colleen M. Hummer
Title: Senior Vice President
