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STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
THE SCHWAB MONEY FUNDS: VALUE ADVANTAGE SHARES
SCHWAB MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB NEW YORK MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
APRIL 1, 1996, AS AMENDED JANUARY 2, 1997
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus dated April 1, 1996, as amended
January 2, 1997 (and as may be amended further from time to time), for the Value
Advantage Shares of the Schwab Municipal Money Fund (formerly known as Schwab
Tax-Exempt Money Fund), Schwab California Municipal Money Fund (formerly known
as Schwab California Tax-Exempt Money Fund), and Schwab New York Municipal Money
Fund (formerly known as Schwab New York Tax-Exempt Money Fund), each a "Fund"
and collectively, the "Funds", three separately managed investment portfolios of
The Charles Schwab Family of Funds (the "Trust").
This Statement of Additional Information relates to the Value Advantage
Shares of the Funds. To obtain a copy of the Prospectus, please contact Charles
Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours a day, or 101
Montgomery Street, San Francisco, California 94104. TDD users may contact Schwab
at 800-345-2550, 24 hours a day. The Prospectus is also available electronically
by using our World Wide Web address: http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
(800-266-5623)
TABLE OF CONTENTS
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MUNICIPAL SECURITIES........................................................... 2
INVESTMENT RESTRICTIONS........................................................ 8
MANAGEMENT OF THE TRUST........................................................ 13
PORTFOLIO TRANSACTIONS AND TURNOVER............................................ 21
DISTRIBUTIONS AND TAXES........................................................ 22
SHARE PRICE CALCULATION........................................................ 27
HOW THE FUNDS REPORT PERFORMANCE............................................... 28
GENERAL INFORMATION............................................................ 31
PURCHASE AND REDEMPTION OF SHARES.............................................. 36
OTHER INFORMATION.............................................................. 36
APPENDIX - RATINGS OF INVESTMENT SECURITIES.................................... 37
FINANCIAL STATEMENTS........................................................... F-1
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MUNICIPAL SECURITIES
"Municipal Securities" are debt securities issued by a state, its
political subdivisions, agencies, authorities and corporations. Municipal
Securities issued by or on behalf of the State of California, its subdivisions,
agencies or authorities are referred to herein as "California Municipal
Securities." Municipal Securities issued by or on behalf of the State of New
York, its subdivisions, agencies or instrumentalities are referred to herein as
"New York Municipal Securities."
Municipal Securities that the Funds may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities. The Funds may not be desirable
investments for "substantial users" of facilities financed by private activity
bonds or industrial development bonds or for "related persons" of substantial
users for whom dividends attributable to interest on such bonds may not be
tax-exempt. Shareholders should consult their own tax advisers regarding the
potential effect on them (if any) of any investment in these Funds.
Municipal Securities are generally classified as "general obligation"
or "revenue." General obligation securities are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Private activity bonds and
industrial development bonds that are Municipal Securities are in most cases
revenue bonds and generally do not constitute the pledge of the credit of the
issuer of such bonds.
Municipal notes are instruments issued by or on behalf of governments
and political sub-divisions thereof. Examples include: tax anticipation notes
("TANS"), which are short-term debt instruments issued by a municipality or
state to finance working capital needs of the issuer in anticipation of
receiving taxes on a future date; revenue anticipation notes ("RANS"), which are
short-term debt instruments issued by a municipality or state to provide cash
prior to receipt of expected non-tax revenues from a specific source; bond
anticipation notes ("BANS"), which are short-term debt instruments issued by a
municipality or state that will be paid off with the proceeds of an upcoming
bond issue; and tax revenue anticipation notes ("TRANS"), which are short-term
debt instruments issued by a municipality or state to finance working
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capital needs in anticipation of receiving taxes or other revenues. Construction
loan notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Funds may
purchase other Municipal Securities similar to the foregoing, which are or may
become available, including securities issued to pre-refund other outstanding
obligations of municipal issuers.
Taxable municipal securities are municipal securities the interest on
which is not exempt from federal income tax. Taxable municipal securities may
include "private activity bonds" that are issued by or on behalf of states or
political subdivisions thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and pollution control and to
finance facilities for charitable institutions. The payment of the principal and
interest on private activity bonds is not backed by a pledge of tax revenues,
and is dependent solely on the ability of the facility's user to meet its
financial obligations. Taxable municipal securities also may include remarketed
certificates of participation.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
RISK FACTORS
Schwab California Municipal Money Fund and Schwab New York Municipal
Money Fund's concentration in securities issued by a single state and its
political subdivisions provides a greater level of risk than does a fund that is
diversified across numerous states and municipal entities. The ability of a
single state and its municipalities to meet their obligations will depend on the
availability of tax and other revenues, economic, political, and demographic
conditions within the state, and the underlying fiscal condition of the state
and its municipalities.
CALIFORNIA MUNICIPAL SECURITIES
In addition to general economic pressures which affect the State of
California's ability to raise revenues to meet its financial obligations,
certain California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could also result in
the adverse effects described below. The following information is only a brief
summary, is not a complete description and is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State of California that have come to the attention of the Trust and were
available before the date of this Statement of Additional Information. The Trust
has not independently verified the accuracy and completeness of the information
contained in those statements and prospectuses.
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As used in this section, "California Municipal Securities" include
issues that are secured by a direct payment obligation of the State and
obligations of issuers that rely in whole or in part on State revenues for
payment of their obligations. Part of the State's General Fund surplus is
distributed to counties, cities and their various taxing entities; whether and
to what extent a portion of the State's General Fund will be distributed in the
future to them is unclear.
Overview. From mid-1990 to late 1993, the State suffered a recession
with the worst economic, fiscal and budget conditions since the 1930's.
Construction, manufacturing (especially aerospace), exports and financial
services, among other industries, were severely affected. Job losses were the
worst of any post-war recession.
The recession seriously affected State tax revenues and caused an
increase in expenditures for health and welfare programs. As a result, the State
experienced recurring budget deficits. The State Controller reports that
expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93. The State
General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit
of about $1.8 billion. A further consequence of the large budget imbalances has
been that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs.
As a result of the deterioration in the State's budget and cash
situation, the State's credit ratings were reduced. Since October 1992, all
three major nationally recognized statistical rating organizations have lowered
the State's general obligation bond rating from the highest ranking of "AAA" to
"A" by S&P, "A1" by Moody's Investors Service ("Moody's") and "A+" by Fitch
Investors Service, Inc. ("Fitch"). However, since the start of 1994,
California's economy has been on a steady recovery. Employment grew
significantly in 1994 and 1995, especially in export-related industries,
business services, electronics, entertainment and tourism. Fitch recognized this
rebound by raising the State's rating from "A" to "A+" on February 26, 1996.
State Appropriations Limit. Subject to certain exceptions, the State is
subject to an annual appropriations limit, imposed by its Constitution, on
"proceeds of taxes." Various expenditures, including but not limited to debt
service on certain bonds and appropriations for qualified capital outlay
projects, are not included in the appropriations limit.
1995-96 FISCAL YEAR
Revenues. The 1995-96 Budget Act projected General Fund revenues and
transfers of $44.1 billion, a 3.5% increase from the prior year, and Special
Fund revenues of $12.7 billion.
Expenditures. The 1995-96 Budget Act included General Fund expenditures
of $43.4 billion, and Special Fund expenditures of $13.0 billion. The California
Department of Finance projected that, after repaying the last of the budget
deficit carried over from prior fiscal years, there would be a positive balance
of $28 million in the budget reserve on June 30, 1996.
The Governor's proposed budget for the 1996-97 fiscal year, released on
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January 10, 1996, updated the projections for the 1995-96 fiscal year; revenues
and transfers are estimated to be $45 billion and expenditures to be $44.2
billion. As a result, the budget reserve was projected to have a positive
balance of about $50 million on June 30, 1996, with available cash (after
payment of all obligations due) of about $2.2 billion.
1996-97 FISCAL YEAR
The Governor's proposed budget for 1996-97 projected General Fund
revenues and transfers of about $45.6 billion and requested total General Fund
appropriations of about $45.2 billion, which would leave a budget reserve of
about $400 million on June 30, 1997. The Governor's proposed budget renewed a
proposal, which had been rejected by the Legislature in 1995, for a 15% cut in
personal and corporate tax rates, phased in over a three-year period. On the
assumption that the proposed tax rate cut would be enacted, the Governor's
proposed budget shows a reduction in revenues of about $600 million for 1996-97.
The Governor's proposed budget also projects external cash flow borrowing of up
to $3.2 billion to mature by June 30, 1997.
The foregoing discussions of the 1995-96 Budget and the proposed
1996-97 Budget are based upon the Budget Act for 1995-96 and the Governor's
proposed 1996-97 Budget, respectively, and should not be construed as a
statement of fact. The assumptions used to construct a budget, which include
estimates and projections of revenues and expenditures, may be affected by
numerous factors, including future economic conditions in the State and the
nation. There can be no assurances that any estimates will be achieved.
ISSUES AFFECTING LOCAL
GOVERNMENTS AND SPECIAL DISTRICTS
Proposition 13. Certain California Municipal Securities may be
obligations of issuers that rely in whole or in part on ad valorem real property
taxes as a source of revenue. In 1978, California voters approved Proposition
13, which limits ad valorem taxes on real property and restricts the ability of
taxing entities to increase property tax and other revenues.
With certain exceptions, the maximum ad valorem tax on real property is
limited to 1% of the property's full cash value to be collected by the counties
and apportioned according to law. One exception is for debt service on bonded
indebtedness if approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be: adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data; reduced in the event of declining property value caused
by substantial damage, destruction or other factors; or adjusted when there is a
"change in ownership" or "new construction."
The State, in response to the significant reduction in local property
tax revenues as a result of the passage of Proposition 13, enacted legislation
to provide local governments with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.
Proposition 62. This initiative, approved by voters in 1986, placed
further restrictions on the ability of local governments to raise taxes and
allocate approved tax receipts. Although some
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decisions of the California Courts of Appeal held that parts of Proposition 62
were unconstitutional, the California Supreme Court recently upheld Proposition
62's requirement that special taxes be approved by a two-thirds vote of the
voters voting in an election on the issue. This recent decision may invalidate
other taxes that have been imposed by local governments in California and make
it more difficult for them to raise taxes.
Propositions 98 and 111. These initiatives changed the State
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues. The
initiatives require that the State establish a prudent state reserve fund for
public education.
Appropriations Limit. Local governments are also subject to annual
appropriations limits. If a local government's revenues in any year exceed the
amount permitted to be spent, the excess must be returned to the public through
a revision of tax rates or fee schedules over the subsequent two years.
Conclusion. The effect of these constitutional and statutory changes
and of budget developments on the ability of California issuers to pay interest
and principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent; for example, in December 1994, Orange County filed for
bankruptcy. California Municipal Money Fund's concentration in California
Municipal Securities provides a greater level of risk than a fund that is
diversified across numerous states and municipal entities.
ADDITIONAL ISSUES
Mortgages and Deeds of Trust. The California Municipal Money Fund may
invest in issues which are secured in whole or in part by a mortgage or deed of
trust on real property. California law limits the remedies of a creditor secured
by a mortgage or deed of trust, which may result in delays in the flow of
revenues to an issuer.
Lease Financings. Some local governments and districts finance certain
activities through lease arrangements. It is uncertain whether such lease
financings are debt that require voter approval.
Seismic Risk. It is impossible to predict the time, magnitude or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck Los Angeles, causing significant damage
to structures and facilities in four counties. Another earthquake could create a
major dislocation of the California economy.
NEW YORK MUNICIPAL SECURITIES
The State of New York has experienced fiscal problems for several years
as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Although the State
enjoyed good growth throughout the early to mid-1980's, unemployment continues
to be a problem. The State's economy is highly developed and diverse, with a
large emphasis in service, trade, financial services and real estate; however,
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extensive job losses in each of these areas has placed a burden on the State to
maintain employment, company development and a stable tax base.
The State has a large accumulated deficit, as reflected in its
financial results. The overall wealth of the State's population, as reflected by
its per capita income, offers a positive credit enhancement, and is among the
highest in the nation. The debt per capita, though, is also among the highest
and poses a large burden on State residents.
The importance of New York City to the State's economy is also an
important consideration, since it represents a significant portion of the
overall economy of the State. The City has struggled to maintain fiscal
stability, and any major changes to the financial condition of the City would
ultimately have an effect on the State. The overall financial condition of the
State can be illustrated by the changes of its debt rating during the last
several years of financial difficulties: Moody's downgraded the State's general
obligation long-term debt from A1 to A in 1990 and S&P downgraded it from A to
A- in early 1992. The State also carries a rating of A+ from Fitch. The
short-term rating assigned by S&P of A1 is within that NRSRO's two highest
rating categories. Moody's rating on New York City general obligation bonds is
Baa1, while S&P rates them BBB+.
Schwab New York Municipal Money Fund's concentration in securities
issued by the State of New York and its political subdivisions provides a
greater level of risk than a fund which is diversified across numerous states
and municipal entities. The ability of the State of New York or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political and demographic conditions within the
State; and the underlying fiscal condition of the State and its municipalities.
OTHER ISSUES
Repurchase Agreements. If the seller of a repurchase agreement becomes
bankrupt or otherwise defaults, a Fund might incur expenses in enforcing its
rights and could experience losses, including a decline in the value of the
underlying securities and a loss of income. Therefore, a Fund will enter in
repurchase agreements only with banks and other recognized financial
institutions that the Investment Manger deems creditworthy.
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INVESTMENT RESTRICTIONS
EXCEPT AS OTHERWISE NOTED, THE RESTRICTIONS BELOW ARE FUNDAMENTAL AND CANNOT BE
CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
HEREINAFTER THE "1940 ACT") OF THE FUND TO WHICH THEY APPLY. THE FUNDS:
(1) May not purchase securities or make investments other than in
accordance with investment objectives and policies.
(2) May not purchase securities (other than securities of the U.S.
Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of its total assets would be invested in any
industry (although securities issued by governments or political
subdivisions of governments are not considered to be securities subject
to this industry concentration restriction) or in any one state
(although the limitation as to investments in a state or its political
subdivision shall not apply to Schwab California Municipal Money Fund
or Schwab New York Municipal Money Fund), nor may it enter into a
repurchase agreement if more than 10% of its net assets would be
subject to repurchase agreements maturing in more than 7-days.
(3) May not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its Investment Manager
individually own beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.
(4) May not invest in commodities or commodity futures contracts or in real
estate, except that each Fund may invest in Municipal Securities
secured by real estate or interests therein.
(5) May not invest for the purpose of exercising control or management of
another issuer.
(6) May not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.
(7) May not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws,
in connection with the disposition of securities from its investment
portfolio.
(8) May lend or borrow money to the extent permitted by the Investment
Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.
(9) May pledge, mortgage or hypothecate any of its assets to the extent
permitted by the Investment Company Act of 1940 or the rules or
regulations thereunder, as such statute, rules or regulations may be
amended from time to time.
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(10) May issue senior securities to the extent permitted by the Investment
Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.
(11) May purchase securities of any issuer only when consistent with the
maintenance of its respective status as a diversified company (in the
case of Schwab Municipal Money Fund) or non-diversified company (in the
case of Schwab California Municipal Money Fund and Schwab New York
Municipal Money Fund) under the Investment Company Act of 1940 or the
rules or regulations thereunder, as such statute, rules or regulations
may be amended from time to time.
The following restrictions are non-fundamental, and may be changed by the Board
of Trustees:
Each Fund may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
Schwab California Municipal Money Fund and Schwab New York Municipal
Money Fund, provided no more than 25% of the Fund's total assets would
be invested in the securities of a single issuer, up to 50% of the
value of the Fund's assets may be invested without regard to this 5%
limitation. For purposes of this limitation, the Fund will regard the
entity which has the primary responsibility for the payment of interest
and principal as the issuer.
(2) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to Schwab California Municipal Money Fund and
Schwab New York Municipal Money Fund.
(3) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets.(1)
(4) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(5) Borrow money, except from banks for temporary purposes (but not for the
purpose of purchasing investments), and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Fund are
permitted within the limitations of this paragraph. No such Fund will
purchase securities or
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(1) See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information
for an exception to this investment restriction.
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make investments while reverse repurchase agreements or borrowings are
outstanding.
(6) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.
(7) Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance
of transactions.
(8) Issue senior securities as defined in the 1940 Act.
Except for fundamental restriction (3) and non-fundamental restriction (5), if a
percentage restriction is adhered to at the time of investment, a later increase
in percentage resulting from a change in values or net assets will not be
considered a violation. None of the Funds has a present intention of borrowing
during the coming year and, in any event, each Fund would limit borrowings as
required by the restrictions previously stated.
Each Fund will only purchase securities that present minimal credit risks and
which are First Tier or Second Tier Securities (otherwise referred to as
"Eligible Securities")*. An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's, S&P, Duff and Phelps Credit
Rating Co., Fitch, Thomson Bankwatch, and, with respect to debt issued
by banks, bank holding companies, United Kingdom building societies,
broker-dealers and broker-dealers' parent companies, and bank-supported
debt, IBCA Limited and its affiliate, IBCA, Inc.) in one of the two
highest rating categories for short-term debt obligations (two NRSROs
are required but one rating suffices if only one NRSRO rates the
security), or (b) that itself was unrated by any NRSRO, but was issued
by an issuer that has outstanding a class of short-term debt
obligations (or any security within that class) meeting the
requirements of subparagraph 1(a) above that is of comparable priority
and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less and (a) whose issuer
received a rating within one of the two highest rating categories from
the requisite NRSROs for short-term debt obligations with respect to a
class of short-term debt obligations (or any security within that
class) that is now comparable in priority and security with the subject
security; or (b) that has long-term ratings from the requisite NRSROs
that are in one of the two highest categories; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risks.
* See the description of the Trustees' deferred compensation plan under
"Management of the Trust" in this Statement of Additional Information for an
exception to this investment restriction.
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A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating suffices if only one NRSRO rates the security) or
has been determined by the Investment Manager, pursuant to guidelines adopted by
the Board of Trustees, to be of comparable quality to such a security. A Second
Tier Security is any other Eligible Security.
1940 ACT LIMITATIONS
Fundamental investment restrictions (8), (9), (10) and (11) permit
the Funds to engage in certain investment practices and purchase securities to
the extent permitted by, or consistent with, the 1940 Act. Relevant limitations
of the 1940 Act are described below. Each Fund is also subject to more
restrictive non-fundamental investment restrictions. Non-fundamental investment
restrictions may be changed by the Board of Trustees. The Board of Trustees has
no current intention of changing any non-fundamental investment restrictions.
Shareholders would be notified prior to any change in non-fundamental investment
restrictions.
Fundamental investment restriction (8). The 1940 Act presently limits a
Fund's ability to borrow more than one-third of the value of its total assets.
The positions of the SEC staff on the ability of a mutual fund to borrow have
evolved in recent years with the development of new investment practices, such
as reverse repurchase agreements. Fundamental investment restriction (8) allows
each Fund the ability to consider engaging in new investment practices to the
extent permitted by the 1940 Act as interpretations of the 1940 Act are further
developed.
Borrowing by a Fund is a form of leveraging of its portfolio which will
expose it to certain risks. Leveraging will exaggerate the effect of any
increase or decrease in the value of portfolio securities on Fund's net asset
value, and money borrowed will be subject to interest costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the interest received from the securities purchased with
borrowed funds.
The 1940 Act also restricts the ability of any mutual fund to lend.
Under the 1940 Act a Fund may only make loans if expressly permitted to do so by
the Fund's investment policies; and may not make loans to persons who control or
are under common control with the Fund. Thus, the 1940 Act effectively prohibits
a Fund from making loans to certain persons where conflicts of interest or undue
influence are most likely present. The Funds' may, however, make other loans
which if made would expose shareholders to certain additional risks.
Fundamental investment restriction (9). The 1940 Act, and in particular
certain liquidity restrictions, limit a Fund's ability to pledge, mortgage or
hypothecate its assets. To the extent that pledged assets are encumbered for
more than seven days such assets would be considered illiquid and, therefore,
each Fund's use of such techniques would be limited to 10% of net assets.
Additionally, under the 1940 Act, a Fund is limited to pledging, mortgaging or
hypothecating no more than one-third of its assets.
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Fundamental investment restriction (10). The ability of a mutual fund
to issue senior securities, which has evolved somewhat in recent years, is
severely circumscribed by complex regulatory constraints under the 1940 Act,
restricting, for instance, the amount, timing, and form of senior securities
that may be issued. In addition, portfolio management techniques involving the
issuance of senior securities, such as the purchase of securities on margin,
short sales, or writing puts on portfolio securities, are all techniques that
involve the leveraging of a portfolio and would not be consistent with the
current SEC rules governing money market funds.
Fundamental investment restriction (11). Under Section 5(b) of the 1940
Act, an investment company is diversified if, as to 75% of its total assets, no
more than 5% of the value of its total assets is invested in the securities of a
single issuer and no more than 10% of the issuer's voting securities is held by
the investment company. As non-diversified Funds, Schwab California Municipal
Money Fund and Schwab New York Municipal Money Fund are not subject to this
diversification requirement. However, each of the Funds, including Schwab
California Municipal Money Fund and Schwab New York Municipal Money Fund, is
subject to the "per issuer" diversification requirements of the Code. Under the
Code, the 5% "per issuer" limit is applied only to 50% of a Fund's total assets
(not 75% of total assets as under the 1940 Act).
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MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and Trustees of the Trust, their
principal occupations over the past five years and their affiliations, if any,
with The Charles Schwab Corporation, 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 Director, The
July 29, 1937 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. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles
September 19, 1951 Schwab & Co., Inc.; Executive Vice
President-President, Financial Products and
International Group, The Charles Schwab Corporation;
Chief Executive Officer, Charles Schwab Investment
Management, Inc.; President, Chief Financial Officer
and Director, Charles Schwab Limited; Director, Mayer
& Schweitzer. From 1994 to 1995, Mr. McCarthy was
Chief Executive Officer, Jardine Fleming Unit Trusts
Ltd.;
</TABLE>
*Mr. Schwab is an "interested person" of the Trust.
**Mr. McCarthy is an "interested person" of the Trust.
13
<PAGE> 14
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ --------- --------------------
<S> <C> <C>
Executive Director, Jardine Fleming Holdings Ltd.;
Chairman, Jardine Fleming Taiwan Securities Ltd.; and
Director of JF India and Fleming Flagship, Europe.
Prior to 1994, he was President of Fidelity
Investments Advisor Group, a division of Fidelity
Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward &
September 23, 1931 Associates (advertising and marketing/consulting).
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. Semloh Financial is an
international financial services and investment
advisory firm.
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (investment
June 28, 1938 banking). Prior to 1995, Mr. Stephens was
Chairman and Chief Executive Officer of
North American Trust (a real estate investment
trust). Prior to 1992, Mr. Stephens was Chairman and
Chief Executive Officer of the Bank of San Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment and management, and
investments).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ --------- --------------------
<S> <C> <C>
TAI-CHIN TUNG Treasurer and Vice President - Finance, Charles Schwab & Co.,
March 7, 1951 Principal Inc.; Controller, Charles Schwab Investment
Financial Officer 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), Charles
December 9, 1955 President, Chief Schwab & Co., Inc.; President and Chief Operating
Operating Officer and Officer, Charles Schwab Investment Management, Inc.
Trustee Prior to 1993, Mr. Klipp was Treasurer of Charles
Schwab & Co., Inc. and Mayer & Schweitzer, Inc.
STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment Officer,
April 5, 1955 and Chief Investment Charles Schwab Investment Management, Inc.
Officer
FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance
September 9, 1955 Officer and Assistant Corporate Secretary, Charles
Schwab Investment Management, Inc.
</TABLE>
*Mr. Klipp is an "interested person" of the Trust.
15
<PAGE> 16
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ --------- --------------------
<S> <C> <C>
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel, Charles Schwab
October 14, 1960 Investment Management, Inc. From 1991 to 1992, he
was Assistant Secretary for the Franklin Group of
Mutual Funds and Assistant Corporate Counsel of
Franklin Resources, Inc.
CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel, Charles Schwab
June 16, 1961 Investment Management, Inc. Prior to 1994, she was
Counsel and Assistant Secretary for North American
Security Life Insurance Company and Secretary for
North American Funds.
KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab Investment
February 27, 1968 Management, Inc. From October, 1994 to July 1996,
Ms. Seaman was Attorney for Franklin Resources,
Inc. Prior to 1994, Ms. Seaman was an attorney
for The Benham Group.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in
the same capacity as described for the Trust, Schwab Investments, Schwab Capital
Trust and Schwab Annuity Portfolios. The address of each individual listed above
is 101 Montgomery Street, San Francisco, California 94104.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement Benefits Estimated
Accrued as Part Annual Benefits
of Fund Upon Total
Aggregate Expenses from Retirement from Compensation
Name of Person, Compensation the Fund the Fund from the Fund
Position from the Trust Complex(2) Complex(2) Complex(2)
- --------------- -------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and
Trustee
Elizabeth G. Sawi(3), 0 N/A N/A 0
President and
Trustee
</TABLE>
16
<PAGE> 17
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or Estimated
Retirement Benefits Annual Benefits
Accrued as Part of Upon Total
Aggregate Fund Expenses from Retirement from Compensation
Name of Person, Compensation the Fund the Fund from the Fund
Position from the Trust Complex(2) Complex(2) Complex(2)
- --------------- -------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C>
Timothy F. McCarthy(4), 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, 38,500 N/A N/A 73,000
Trustee
Robert G. Holmes, 38,500 N/A N/A 73,000
Trustee
Donald R. Stephens, 38,500 N/A N/A 73,000
Trustee
Michael W. Wilsey, 38,500 N/A N/A 73,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended December 31,
1995.
(2) "Fund Complex" comprises all 22 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity
Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
--------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's Trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to
17
<PAGE> 18
participate in the Fee Deferral Plan. In the event an Independent Trustee does
elect to participate in the Plan, the Plan would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account"), as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds
include the series or classes of beneficial interest of the Trust, Schwab
Investments and Schwab Capital Trust.
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. The exemptive relief granted to the Trust permits the
Funds and the Trustees to purchase the Selected SchwabFund Securities, which
transactions would otherwise be limited or prohibited by the investment policies
and/or restrictions of the Funds. See "Investment Restrictions."
INVESTMENT MANAGER
The Investment Manager, a wholly-owned subsidiary of The Charles Schwab
Corporation, serves as the Funds' investment adviser and administrator pursuant
to two separate yet otherwise substantially similar Investment Advisory and
Administration Agreements (the "Advisory Agreements") between it and the Trust.
The Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and currently provides investment
management services to the SchwabFunds Family(R), a family of 26 mutual funds
with over $42 billion in assets as of December 15, 1996. The Investment
Manager is an affiliate of Schwab; the Trust's distributor; and the shareholder
services and transfer agent.
Each Advisory Agreement will continue in effect for one-year terms for
each Fund to which it relates, subject to annual approval by: (1) the Trust's
Board of Trustees or (2) a vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of a Fund. In either event, the continuance
must also be approved by a majority of the Trust's Board of Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party by vote cast in person at a meeting called for the purpose of
voting on such approval. Each Advisory Agreement may be terminated at any time
upon 60 days' notice by either party, or by a majority vote of the outstanding
shares of a Fund, and will terminate automatically upon assignment.
Pursuant to an Advisory Agreement dated June 15, 1994, as may be
amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of the Schwab Municipal Fund's average
daily net assets not in excess of $1 billion, 0.41% of such net assets over $1
billion
18
<PAGE> 19
but not in excess of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995 the
investment advisory fees paid by the Schwab Municipal Money Fund were $3,494,000
(fees were reduced by $5,424,000), $5,421,000 (fees were reduced by $6,646,000),
and $6,482,000 (fees were reduced by $7,237,000), respectively.
Pursuant to a separate Advisory Agreement dated June 15, 1994, as may
be amended from time to time, the Investment Manager is entitled to receive an
annual fee, payable monthly, of 0.46% of each of Schwab California Municipal
Money Fund and Schwab New York Municipal Money Fund Fund's average daily net
assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but
not in excess of $2 billion, and 0.40% of such net assets over $2 billion.
For the fiscal year ended December 31, 1993, 1994, and 1995, the
investment advisory fees paid by the Schwab California Municipal Money Fund were
$1,437,000 (fees were reduced by $2,450,000), $2,254,000 (fees were reduced by
$3,274,000) and $2,748,000 (fees were reduced by $3,703,000), respectively.
For the Schwab New York Municipal Money Fund for the period from
February 27, 1995 (commencement of operations) to the period ended December 31,
1995, the investment advisory fees paid was $464,000 (fees were reduced by
$277,000).
EXPENSES
The Trust pays the expenses of its operations, including: the fees and
expenses of independent accountants, counsel and the custodian; the cost of
reports and notices to shareholders; the cost of calculating net asset value;
registration fees; the fees and expenses of qualifying the Trust and its shares
for distribution under federal and state securities laws; and membership dues in
the Investment Company Institute or any similar organization. The Trust's
expenses generally are allocated among the Funds on the basis of relative net
assets at the time the expense is incurred, except that expenses directly
attributable to a particular Fund or class of a Fund are charged to that Fund or
class, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost of the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreements.
19
<PAGE> 20
CUSTODIAN AND FUND ACCOUNTANT
PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the Trust.
PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves
as Fund Accountant for the Trust.
ACCOUNTANTS AND REPORTS
TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when the Trust engages it to do so. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, D.C. 20005, is counsel to the Trust.
20
<PAGE> 21
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to: pursue the
objective of each Fund in relation to movements in the general level of interest
rates; invest money obtained from the sale of Fund shares; reinvest proceeds
from maturing portfolio securities; and meet redemptions of Fund shares.
Portfolio transactions may increase or decrease the yield of a Fund depending
upon management's ability to correctly time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of each Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Investment
Manager will generally select brokers and dealers for the Funds primarily on the
basis of the quality and reliability of brokerage services, including execution
capability and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
The investment decisions for each Fund are reached independently from
those for other accounts managed by the Investment Manager. Such other accounts
may also make investments in instruments or securities at the same time as a
Fund. When two or more accounts managed by the Investment Manager have funds
available for investment in similar instruments, available instruments are
allocated as to amount in a manner considered equitable to each account. In some
cases this procedure may affect the size or price of the position obtainable for
a Fund. However, it is the opinion of the Board of Trustees that the benefits
conferred by the Investment Manager outweigh any disadvantages that may arise
from exposure to simultaneous transactions.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded
from required portfolio turnover rate calculations, each Fund's portfolio
turnover rate for reporting purposes is expected to be zero.
21
<PAGE> 22
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the net asset value per share of the Value Advantage
Shares of a Fund is determined ("Business Day"), such Shares' net investment
income will be declared as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) as a daily dividend to shareholders
of record as of the last calculation of net asset value prior to the
declaration. For the Value Advantage Shares of each Fund, Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will normally be reinvested monthly in full and fractional Value
Advantage Shares of the Fund at the net asset value on the 15th day of each
month, if a Business Day, otherwise on the next Business Day. If cash payment is
requested, checks will normally be mailed on the Business Day following the
reinvestment date. Each Fund will pay shareholders, who redeem all of their
shares, all dividends accrued to the time of the redemption within 7 days.
Each Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Value Advantage
Shares of a Fund consists of: (1) accrued interest income, plus or minus
amortized discount or premium, allocated to the Value Advantage Shares of that
Fund minus (2) accrued expenses allocated to the Value Advantage Shares of that
Fund. If a Fund realizes any capital gains, they will be distributed at least
once during the year as determined by the Board of Trustees. Any realized
capital losses to the extent not offset by realized capital gains will be
carried forward. It is not anticipated that a Fund will realize any long-term
capital gains. Expenses of the Trust are accrued each day. Should the net asset
value of the Value Advantage Share of a Fund deviate significantly from market
value, the Board of Trustees could decide to value the investments at market
value and any unrealized gains and losses could affect the amount of the Fund's
distributions to holders of Value Advantage Shares.
FEDERAL INCOME TAXES
It is each Fund's policy to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income tax
to which it is subject.
In order to qualify as a regulated investment company, each of the
Funds must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less
22
<PAGE> 23
than 30% of its gross income from gains from the sale or other disposition of
certain assets (including stocks and securities) held for less than three
months; and (3) diversify its holdings so that at the end of each quarter of its
taxable year (i) at least 50% of the market value of the Fund's total assets is
represented by cash or cash items, U.S. Government securities, securities of
other regulated investment companies and other securities limited, in respect of
any one issuer, to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities or securities of any other
regulated investment company) or of two or more issuers that the Fund controls,
within the meaning of the Code, and that are engaged in the same, similar or
related trades or businesses. These requirements may restrict the degree to
which a Fund may engage in short-term trading and certain hedging transactions
and may limit the range of a Fund's investments. If a Fund qualifies as a
regulated investment company, it will not be subject to federal income tax on
the part of its net investment income and net realized capital gains, if any,
which it distributes to shareholders, provided that the Fund meets certain
minimum distribution requirements. To comply with these requirements, a Fund
must distribute at least (a) 90% of its "investment company taxable income" (as
that term is defined in the Code) and (b) 90% of the excess of its tax-exempt
interest income over certain deductions attributable to that income (with
certain exceptions), for its taxable year. Each Fund intends to make sufficient
distributions to shareholders to meet these requirements.
If a Fund fails to distribute in a calendar year (regardless of whether
it has a non-calendar taxable year) substantially all of its (i) ordinary income
for such year; and (ii) capital gain net income for the year ending October 31
(or later if the Fund is permitted so to elect and so elects), plus any retained
amount from the prior year, the Fund will be subject to a nondeductible 4%
excise tax on the undistributed amounts. Each Fund intends generally to make
distributions sufficient to avoid imposition of this excise tax.
Any distributions declared by the Funds in October, November or
December to shareholders of record during those months and paid during the
following January are treated, for tax purposes, as if they were received by
each shareholder on December 31 of the year declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.
The Funds do not expect to realize any significant amount of long-term
capital gain. However, any distributions of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares. If a shareholder disposes of shares at a
loss before holding such shares for longer than six months, the loss will be
treated as a long-term capital loss to the extent the shareholder received a
capital gain dividend on the shares.
23
<PAGE> 24
A Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The Funds may engage in investment techniques that may alter the timing
and character of the Funds' income. The Funds may be restricted in their use of
these techniques by rules relating to their qualification as regulated
investment companies.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) are generally subject to U.S. withholding tax at the rate of 30% (or a
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or other disposition of shares of the
Funds are generally not subject to U.S. taxation, unless the recipient is an
individual who meets the Code's definition of "resident alien." Different tax
consequences may result if the foreign shareholder is engaged in a trade or
business within the United States. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by a Fund also may be
subject to state, local and foreign taxes, and its treatment under applicable
tax laws may differ from the federal income tax treatment.
The Code permits a regulated investment company that invests at least
50% of its assets at the close of each quarter in Municipal Securities to pass
through to its investors, on a tax-exempt basis, net Municipal Securities
interest income. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by any Fund and designated as an
exempt-interest dividend in a written notice mailed to shareholders after the
close of such Fund's taxable year, but not to exceed in the aggregate the net
Municipal Securities interest income received by each such Fund during the
taxable year. The percentage of the total dividends paid for any taxable year
that qualified as exempt-interest dividends will be the same for all
shareholders receiving dividends from each Fund during such year, regardless of
the period for which the Shares were held. If for any taxable year any Fund does
not qualify for the special federal tax treatment afforded regulated investment
companies, all of its taxable income will be subject to federal tax at regular
corporate rates (without any deduction for distributions to its shareholders)
when distributed, and Municipal Securities interest income, although not taxed
to the Funds, would be taxable to shareholders.
24
<PAGE> 25
A shareholder should consult his or her own tax adviser with respect to
whether exempt-interest dividends would be excludable from gross income if the
shareholder were treated as a "substantial user" of facilities financed by an
obligation held by a Fund or a "related person" to such user under the Code. Any
loss on the sale or exchange of any share held for six months or less will be
disallowed to the extent of the amount of the exempt-interest dividend received
with respect to such share. The U.S. Treasury Department is authorized to issue
regulations reducing the period to not less than 31 days for certain regulated
investment companies, but no such regulations have been issued as of the date of
this Statement of Additional Information.
All or part of interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund will not be deductible by the
shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of that Fund's total distributions (excluding distributions of the excess of net
long-term capital gains over net short-term capital losses) paid to the
shareholder that are exempt-interest dividends. Under rules used by the Internal
Revenue Service, the purchase of shares of a Fund may be considered to have been
made with borrowed funds even though such funds are not directly traceable to
the purchase of the shares.
The discussion of federal income taxation presented above summarizes
only some of the important federal tax considerations generally affecting
purchasers of Fund shares. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund and its shareholders,
and the discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a Fund.
STATE TAXES
With respect to Schwab California Municipal Money Fund, if, at the
close of each quarter of its taxable year, at least 50% of the value of the
total assets of the Fund consists of obligations the interest on which is exempt
from California personal income taxation under the Constitution or laws of
California or of the United States when held by an individual ("California
Exempt Obligations"), then the Fund will be qualified to pay dividends exempt
from State of California personal income tax to its non-corporate shareholders
(hereinafter referred to as "California exempt-interest dividends"). Schwab
California Municipal Money Fund intends to qualify under the above requirement
so that it can pay California exempt-interest dividends. If Schwab California
Municipal Money Fund fails to so qualify, no part of its dividends will be
exempt from State of California personal income tax.
With respect to Schwab New York Municipal Money Fund, there is no
analogous requirement, so all dividends representing interest on New York
Municipal Securities that is exempt from New York personal income taxation will
be exempt from New York State and
25
<PAGE> 26
municipal income taxes in the hands of non-corporate shareholders ("New York
exempt-interest dividends"). Not later than 60 days after the close of its
taxable year, Schwab California and New York Municipal Money Funds will notify
each shareholder of the portion of the dividends paid by it to the shareholder
with respect to such taxable year which is exempt from State of California
personal income tax or New York personal income tax, respectively.
The total amount of California exempt-interest dividends paid by Schwab
California Municipal Money Fund to all of its shareholders with respect to any
taxable year cannot exceed the amount of interest received by the Fund during
such year on California Exempt Obligations, less any expenses or expenditures
(including any expenditures attributable to the acquisition of additional
securities for Schwab California Municipal Money Fund) that are allocable to
such interest. Dividends paid by Schwab California Municipal Money Fund in
excess of this limitation will be treated as ordinary dividends subject to State
of California personal income tax at ordinary rates. For purposes of this
limitation, expenses or other expenditures paid during any year generally will
be allocable with funds attributable to interest received by the Fund from
California Exempt Obligations for such year in the same ratio as such interest
from California Exempt Obligations for such year bears to the total gross income
earned by the Fund for the year. The effect of this accounting convention is
that amounts of interest from California Exempt Obligations received by Schwab
California Municipal Money Fund that would otherwise be available for
distribution as California exempt-interest dividends will be reduced by the
expenses and expenditures be allocable from such amounts.
To the extent, if any, dividends paid to shareholders by Schwab
California Municipal Money Fund or New York Municipal Money Fund are derived
from long-term and short-term capital gains, such dividends will not constitute
California or New York exempt-interest dividends. Rules similar to those
regarding the treatment of such dividends for federal income tax purposes are
also applicable for State of California and New York personal income tax
purposes. Moreover, interest on indebtedness incurred by a shareholder to
purchase or carry shares of Schwab California Municipal Money Fund or New York
Municipal Money Fund is not deductible for state personal income tax purposes if
the Fund distributes California or New York exempt-interest dividends to the
shareholder during his or her taxable year.
The foregoing is a summary of only some of the important state personal
income tax considerations generally affecting Schwab California Municipal and
New York Municipal Money Funds and their shareholders. No attempt is made to
present a detailed explanation of the state personal income tax treatment of
Schwab California Municipal and New York Municipal Money Funds or their
shareholders, and this discussion is not intended as a substitute for careful
planning. Further, it should be noted that the portion of Schwab California
Municipal and New York Municipal Money Funds' dividends constituting California
or New York exempt-interest dividends, respectively, is excludable from
26
<PAGE> 27
income for State of California or State of New York personal income tax purposes
only.
Any dividends paid to shareholders of the Funds subject to state
franchise or corporate income tax will be taxed as ordinary dividends to such
shareholders, notwithstanding that all or a portion of such dividends is exempt
from state personal income tax. Accordingly, potential investors in the Schwab
California Municipal Money Fund or New York Municipal Money Fund, including, in
particular, corporate investors which may be subject to California or New York
franchise or corporate income tax, should consult their tax advisers with
respect to the application of such tax to the receipt of dividends from the
Funds and as to their own state tax situation, in general.
SHARE PRICE CALCULATION
Each Fund values its portfolio instruments at amortized cost, which
means they are valued at their acquisition cost, as adjusted for amortization of
premium or discount, rather than at current market value. Calculations are made
to compare the value of a Fund's investments at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. The amortized
cost method of valuation seeks to maintain a stable $1.00 per share net asset
value even where there are fluctuations in interest rates that affect the value
of portfolio instruments. Accordingly, this method of valuation can in certain
circumstances lead to a dilution of a shareholder's interest. If a deviation of
1/2 of 1% or more were to occur between the net asset value per share calculated
by reference to market values and a Fund's $1.00 per share net asset value for
its Value Advantage Shares, or if there were any other deviation that the Board
of Trustees of the Trust believed would result in a material dilution to
shareholders or purchasers, the Board of Trustees would promptly consider what
action, if any, should be initiated. If the net asset value per share for a
Fund's Value Advantage Shares (computed using market values) declined, or were
expected to decline, below $1.00 (computed using amortized
27
<PAGE> 28
cost), the Board of Trustees might temporarily reduce or suspend dividend
payments in an effort to maintain the net asset value at $1.00 per share for a
Fund's Value Advantage Shares. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividend for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if a Fund's
net asset value per share for its Value Advantage Shares (computed using market
values) were to increase, or were anticipated to increase above $1.00 (computed
using amortized cost), the Board of Trustees might supplement dividends in an
effort to maintain the net asset value at $1.00 per share for its Value
Advantage Shares.
HOW THE FUNDS REPORT PERFORMANCE
The historical performance of the Value Advantage Shares of each Fund
may be shown in the form of total return, yield, effective yield, taxable
equivalent yield and taxable equivalent effective yield. These measures of
performance are described below.
TOTAL RETURN
Standardized Total Return. Average annual total return for a period is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in a Fund made at the beginning of the period, then
calculating the average annual compounded rate of return that would produce the
same investment return on the $1,000 over the same period. In computing average
annual total return, a Fund assumes the reinvestment of all distributions at net
asset value on applicable reinvestment dates.
Nonstandardized Total Return. Nonstandardized total return for a Fund
differs from standardized total return in that it relates to periods other than
the period for standardized total return and/or that it represents aggregate
(rather than average) total return.
28
<PAGE> 29
In addition, an after-tax total return for each Fund may be calculated
by taking that Fund's standardized or non-standardized total return and
subtracting applicable federal taxes from the portions of each Fund's total
return attributable to capital gains distributions and ordinary income. This
after-tax total return may be compared to that of other mutual funds with
similar investment objectives as reported by independent sources.
Each Fund also may report the percentage of that Fund's standardized or
non-standardized total return which would be paid to taxes annually (at the
applicable federal personal income and capital gains tax rates) before
redemption of Fund shares. This proportion may be compared to that of other
mutual funds with similar investment objectives as reported by independent
sources.
A Fund may also advertise its cumulative total return since inception.
This number is calculated using the same formula that is used for average annual
total return except that, rather than calculating the total return based on a
one-year period, cumulative total return is calculated from inception to the
date specified.
YIELD
A Fund's yield refers to the net investment income generated by a
hypothetical investment in the Value Advantage Shares of a Fund over a specific
7-day period. This net investment income is then annualized, which means that
the net investment income generated during the 7-day period is assumed to be
generated in each 7-day period over an annual period, and is shown as a
percentage of the investment.
EFFECTIVE YIELD
A Fund's effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
TAXABLE EQUIVALENT YIELD AND
TAXABLE EQUIVALENT EFFECTIVE YIELD
The taxable equivalent yield of the Value Advantage Shares of the
Schwab Municipal Money Fund is computed by dividing that portion of the Value
Advantage Shares' yield (computed as described above) that is tax-exempt by an
amount equal to one minus the stated federal income tax rate (normally assumed
to be the maximum applicable marginal tax bracket rate) and adding the result to
that portion, if any, of the yield of the Value Advantage Shares that is not
tax-exempt. The taxable equivalent yield of the Value Advantage Shares of the
Schwab California Municipal Money Fund is calculated by dividing that portion of
the Value Advantage Shares' yield (computed as described above) which is
tax-exempt by an amount equal to one minus the stated combined State of
California and federal income tax rate (normally assumed to be the maximum
federal marginal rate of 39.6% and the California marginal rate of 9.3%,
although other rates may be used at times), and adding the result to that
29
<PAGE> 30
portion, if any, of the Value Advantage Shares' yield that is not tax-exempt.
The taxable equivalent yield of the Value Advantage Shares of Schwab New York
Municipal Money Fund is calculated by dividing that portion of the Value
Advantage Shares' yield (computed as described above) which is tax-exempt by an
amount equal to one minus the stated combined New York municipal, State of New
York and federal income tax rate (normally assumed to be the maximum federal
marginal rate of 39.6%, the State of New York marginal rate of 7.125% and the
New York municipal marginal rate of 3.91%, although other rates may be used at
times), and adding the result to that portion, if any, of the Value Advantage
Shares' yield that is not tax-exempt.
Taxable equivalent effective yields are computed in the same manner as
taxable equivalent yields, except that effective yield is substituted for yield
in the calculation. In calculating taxable equivalent yields and effective
yields, Schwab Municipal Money Fund generally assumes an effective tax rate of
39.6%, Schwab California Municipal Money Fund generally assumes an effective tax
rate (combining the federal 39.6% rate and the California 9.30% rate, and
assuming the taxpayer deducts California state taxes paid) of 45.22%, and Schwab
New York Municipal Money Fund generally assumes an effective tax rate (combining
the federal 39.6% rate, the New York state 7.125%, rate and the New York
municipal 3.91%, rate, and assuming the taxpayer deducts New York state and
municipal taxes paid) of 46.27%. Investors in Schwab New York Municipal Money
Fund should understand that, under legislation enacted in New York State and New
York City, the maximum effective tax rate for 1997 will be 45.79%. The effective
tax rates used in determining such yields do not reflect the tax costs resulting
from the full or partial loss of the benefits of personal exemptions, itemized
deductions and California exemption credits that may result from the receipt of
additional taxable income by taxpayers with adjusted gross incomes exceeding
$117,950 ($58,975 for married filing separate returns) in 1996. Actual taxable
equivalent yields and taxable equivalent effective yields may be higher for
taxpayers subject to the loss of these benefits than the rates reported by the
Funds.
TAX-EXEMPT VERSUS TAXABLE YIELD
Investors may want to determine which investment, tax-exempt or
taxable, will provide a higher after-tax return. To determine the taxable
equivalent yield or taxable equivalent effective yield, simply divide the yield
or effective yield of the Value Advantage Shares of a Fund by 1 minus your
marginal federal tax rate (or combined state and federal tax rate in the case of
Schwab California Municipal Money Fund, or combined municipal, state, and
federal tax rate in the case of Schwab New York Municipal Money Fund). Note,
however, that as discussed above, full or partial loss by certain investors of
the described federal tax benefits could cause the resulting figure to
understate the after-tax return produced by the Value Advantage Shares of the
Fund in question.
Performance information for each of the Funds for the 7-day period
ended December 31, 1995 is presented below.
30
<PAGE> 31
The taxable equivalent yield and taxable equivalent effective yield figures are
based, in the case of Schwab Municipal Money Fund, upon an assumed 1995
effective tax rate of 39.6%; in the case of Schwab California Municipal Money
Fund, upon an assumed effective tax rate of 46.24%; and in the case of Schwab
New York Municipal Money Fund, upon an assumed effective tax rate of 46.88%. The
yields below are based on the maximum rates in effect for 1995. Tax rates in
effect for 1996 are different. See the discussion above relating to federal,
State of California and State of New York tax rates.
<TABLE>
<CAPTION>
Taxable
Taxable Equivalent
Yield Effective Yield Equivalent Yield Effective Yield
----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Schwab Municipal Money Fund-Value 4.17% 4.26% 6.90% 7.05%
Advantage Shares
Schwab California Municipal Money 3.99% 4.06% 7.42% 7.55%
Fund-Value Advantage Shares
Schwab New York Municipal Money 4.07% 4.16% 7.66% 7.83%
Fund-Value Advantage Shares
</TABLE>
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
31
<PAGE> 32
Trust's shares; (2) adoption of any contract for which shareholder approval is
required by the 1940 Act; (3) any termination of the Trust to the extent and as
provided in the Declaration of Trust; (4) any amendment of the Declaration of
Trust (other than amendments changing the name of the Trust or any of its
investment portfolios, supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision thereof);
(5) determination of whether a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing Trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act, (i) the Trust
will hold a shareholder meeting for the election of Trustees when less than a
majority of the Trustees have been elected by shareholders and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
Trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of ten or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more Trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of the Bylaws permits
or requires that (i) holders of any series shall vote as a series, then a
majority of the aggregate number of shares of that series entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
series, or (ii) holders of any class shall vote as a class, then a majority of
the aggregate number of shares of that class entitled to vote shall be necessary
to constitute a quorum for the transaction of business by that class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without
32
<PAGE> 33
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 March 15, 1996, the following persons directly or beneficially
owned 5% or more of each Fund's Value Advantage Shares: Walter R. Koepp (EX) and
EST E. H. Shumway, 15717 Larch Way Lynnwood, WA 98037 at 5.98% for the Schwab
Municipal Money Fund-Value Advantage Shares(TM); Louis A. Simpson, P.O. Box
1487, Rancho Santa Fe, CA 92067 at 7.68% for the Schwab California Municipal
Money Fund-Value Advantage Shares(TM); Victoria Shaw, 14 East 90th Street, New
York, NY 10128 at 10.49%, PEI Partnership Architects, 257 Park Avenue South, New
York, NY 10010 at 6.43%, and Patricia Meehan, 18 Heather Lane, Miller Place, NY
11764 at 12.29% for the Schwab New York Municipal Money Fund-Value Advantage
Shares(TM).
As of March 22, 1996, the officers and Trustees of the Trust, as a
group, owned of record or beneficially less than 1% of the outstanding voting
securities of the remaining series of the Trust.
ACCESS TO SCHWAB'S MUTUAL
FUND ONESOURCE(R) SERVICE
With Schwab's Mutual Fund OneSource Service ("OneSource"), a
shareholder can invest in over 575 mutual
33
<PAGE> 34
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.
34
<PAGE> 35
SCHWABFUNDS(R)
--------------
SchwabFunds offers a variety of series and classes of shares of beneficial
interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(R)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
Schwab S&P 500 Fund-Investor Shares(2)
Schwab S&P 500 Fund-e.Shares(TM)(2),(3)
Schwab Analytics Fund(TM)(2)
Schwab OneSource Portfolios-International
Schwab OneSource Portfolios-Growth Allocation
Schwab OneSource Portfolios-Balanced Allocation
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(4)
Schwab California Long-Term Tax-Free Bond Fund(4)
MONEY MARKET FUNDS(5)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Municipal Money Fund-Sweep Shares
Schwab Municipal Money Fund-Value Advantage Shares(TM)
Schwab California Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Value Advantage Shares(TM)
Schwab Retirement Money Fund(R)(6)
Schwab Institutional Advantage Money Fund(R)(6)
Schwab New York Municipal Money Fund-Sweep Shares
Schwab New York Municipal Money Fund-Value Advantage Shares(TM)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios or classes of shares of Schwab
Capital Trust.
(3) Available only through SchwabLink(TM).
(4) Available only to California residents and residents of selected other
states.
(5) All listed money market funds are separate investment portfolios of the
Trust.
(6) Designed for institutional investors only.
35
<PAGE> 36
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment for the Value Advantage Shares of each
Fund is $25,000 and subsequent investments of $5,000 or more may be made. These
minimum requirements may be changed at any time and are not applicable to
certain types of investors. The Trust may waive the minimums for purchases by
Trustees, Directors, officers or employees of the Trust, Schwab or the
Investment Manager. The Trust has made an election with the SEC to pay in cash
all redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of its net assets at the
beginning of such period. This election is irrevocable without the SEC's prior
approval. Redemption requests in excess of the stated limits may be paid, in
whole or in part, in investment securities or in cash, as the Trust's Board of
Trustees may deem advisable; however, payment will be made wholly in cash unless
the Board of Trustees believes that economic or market conditions exist that
would make such a practice detrimental to the best interests of the Fund. If
redemption proceeds are paid in investment securities, such securities will be
valued as set forth in the Prospectus of the Fund affected under "Share Price
Calculation" and a redeeming shareholder would normally incur brokerage expenses
if he or she converted the securities to cash.
OTHER INFORMATION
The Prospectus of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectus.
Certain portions of the Registration Statement have been omitted from
the Prospectus and this Statement of Additional Information pursuant to the
rules and regulations of the SEC. The Registration Statement including the
exhibits filed therewith may be examined at the office of the SEC in Washington,
D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
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<PAGE> 37
APPENDIX - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.
STANDARD & POOR'S CORPORATION
An S&P A-1 commercial paper rating indicates a strong degree of safety
regarding timely payment of principal and interest. Issues determined to possess
overwhelming safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
DUFF & PHELPS CREDIT RATING CO.
Duff-1 is the highest commercial paper rating assigned by Duff & Phelps
Credit Rating Co. ("Duff"). Three gradations exist within this rating category:
a Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term U.S. Treasury obligations), a Duff-1 rating
signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-2 rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.
FITCH INVESTORS SERVICE, INC.
F-1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F-1 reflect an assurance of timely
payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.
37
<PAGE> 38
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
very strong safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
IBCA
Obligations supported by the highest capacity for timely repayment are
rated A1+. An A1 rating indicates that the obligation is supported by a very
strong capacity for timely repayment. Obligations rated A2 are supported by a
good capacity for timely repayment, although adverse changes in business,
economic, or financial conditions may affect this capacity.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protection, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
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<PAGE> 39
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree.
DUFF & PHELPS CREDIT RATING CO.
Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free U.S. Treasury debt. AA rated bonds
are of high credit quality and have strong protection factors. The risks
associated with them are modest but may vary slightly from time to time because
of economic conditions.
COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS
ISSUED BY BANKS
THOMSON BANKWATCH (TBW)
TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very high. TBW-2 is the
second highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.
39
<PAGE> 40
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--57.8%(a)
ALABAMA--2.0%
Alabama Housing Finance
Authority Single Family
Housing Revenue Bonds
Collateralized Home
Mortgage Program Series
1995C-1/ (Bayerische
Landesbank Girozentrale
LOC)
5.05%, 01/07/96 $10,400 $10,400
Citronelle, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(AZKO Chemicals, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 1,100 1,100
Jefferson County, Alabama
Sewer Revenue Warrants
Series 1995A/
(Bayerische Landesbank
Girozentrale LOC)
5.20%, 01/07/96 12,500 12,500
Mobile County, Alabama
Industrial Development
Board Revenue Bonds
(Ultraform Co.
Project) Series B/
(Bayerische Landesbank
Girozentrale LOC)
5.00%, 01/07/96 1,000 1,000
Mobile County, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Ultraform Co. Project)
Series A/ (Bayerische
Landesbank Girozentrale
LOC)
5.00%, 01/07/96 7,480 7,480
Mobile, Alabama
Industrial Development
Board Pollution Control
Revenue Refunding
Bonds (Alabama
Power Co. Project)
Series 1993C
5.15%, 01/07/96 12,000 12,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985C/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 2,000 2,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985F/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 9,000 9,000
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 6,390 6,390
Montgomery, Alabama Special
Care Facility Financing
Authority Revenue Bonds
(Baptist Medical Center
VHA) Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 5,295 5,295
Opelika, Alabama Industrial
Development Board Revenue
Bonds (Power Guard
Project) Series
1994/(SouthTrust Bank of
Alabama LOC)
5.35%, 01/07/96 3,100 3,100
------
70,265
------
ALASKA--0.0%
Alaska Industrial
Development Authority
Flexible Demand Revenue
Bonds (Advanced Health
Systems)/(Citibank LOC)
5.35%, 01/07/96 600 600
------
ARIZONA--0.5%
Arizona Educational Loan
Marketing Corp.
Revenue Bonds Series A/
(MBIA Insurance &
Fuji Bank SBPA)
5.45%, 01/07/96 10,000 10,000
Yavapai County, Arizona
Industrial Development
Authority Revenue Bonds
(First Health
Care Corp. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,230 4,230
</TABLE>
F-1
<PAGE> 41
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series A/(Citibank LOC)
5.20%, 01/07/96 $3,000 $ 3,000
Yuma, Arizona Industrial
Development Authority
Multi Family Housing
Revenue Bonds
(El Encanto Apartments)
Series B/(Citibank LOC)
5.50%, 01/07/96 275 275
------
17,505
------
CALIFORNIA--1.4%
California Higher Education
Loan Authority Student
Loan Refunding Bonds
Series E1/(SLMA LOC)
5.25%, 01/07/96 5,000 5,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986B
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 200 200
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Packaging Innovation DZ
Industries, Inc.) Series
1994A-2/ (Bank of Tokyo
LOC)
5.35%, 01/07/96 585 585
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 8,900 8,900
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
A/(Industrial Bank of
Japan LOC)
6.10%, 01/01/96 100 100
Los Angeles County,
California Metropolitan
Transportation Authority
Sales Tax Revenue
Refunding Bonds
Proposition C Second
Senior Series A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.00%, 01/07/96 300 300
Orange County, California
Various Sanitation
Districts Certificates of
Participation Capital
Improvement Programs
Series 1990-92C/ (FGIC
Insurance)
6.00%, 01/01/96 200 200
Orange County, California
Water District
Certificates of
Participation (Sanitation
Districts #1,2,3)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 19,500 19,500
Simi Valley, California
Multi Family Housing
Certificates of
Participation (Lincoln
Wood Ranch Project)/
(Sumitomo Bank LOC)
5.05%, 01/07/96 5,600 5,600
Southern California Public
Power Authority
Transmission Project
Revenue Bonds (Southern
Transmission Project)
Series 1991/ (AMBAC
Insurance & Swiss Bank
LOC)
4.75%, 01/07/96 9,700 9,700
------
50,185
------
COLORADO--4.2%
Colorado Health Facilities
Authority Revenue Bonds
(Sisters of Charity
Health) Series B/(Multiple
Credit Enhancements)
5.05%, 01/07/96 23,300 23,300
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1990A/ (SLMA LOC)
5.20%, 01/07/96 10,790 10,790
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993B/ (SLMA LOC)
5.20%, 01/07/96 2,100 2,100
Colorado Student Obligation
Bond Authority Student
Loan Revenue Bonds
(Colorado University)
Series 1993C-2/ (SLMA LOC)
5.05%, 01/07/96 2,200 2,200
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992D/(Morgan Guaranty
Trust LOC)
5.30%, 01/07/96 48,400 48,400
</TABLE>
F-2
<PAGE> 42
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992E/ (Bank of Tokyo LOC)
5.50%, 01/07/96 $30,000 $ 30,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992F/
(Bank of Montreal LOC)
5.30%, 01/07/96 16,000 16,000
Denver, Colorado City and
County Airport System
Revenue Bonds Series
1992G/(Credit Local de
France LOC)
5.30%, 01/07/96 8,500 8,500
Douglas County, Colorado
Multi Family Housing
Revenue Bonds (Autumn
Chase Project)/ (Citibank
LOC)
5.25%, 01/07/96 9,300 9,300
-------
150,590
-------
CONNECTICUT--1.0%
Connecticut State General
Obligation Economic
Recovery Bonds Series
1991B/(Multiple Credit
Enhancements)
5.10%, 01/07/96 11,700 11,700
Connecticut State Special
Assessment Unemployment
Compensation Advance
Fund Revenue Bonds
Series 1993B/(Multiple
Credit Enhancements)
5.40%, 01/07/96 15,900 15,900
Connecticut State Special Tax
Obligation Bonds (Second
Lien Transportation
Information) Series 1990-1/
(Industrial Bank of Japan LOC)
5.10%, 01/07/96 5,800 5,800
-------
33,400
-------
DISTRICT OF COLUMBIA--0.1%
District of Columbia
Revenue Bonds Adjustable
Convertible Extendable
Securities (Georgetown
University) Series 1988D/
(Sanwa Bank LOC)
5.65%, 01/07/96 4,200 4,200
-------
FLORIDA--1.1%
Brevard County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Palm Place Project)/
(Chemical Bank LOC)
5.05%, 01/07/96 5,000 5,000
Dade County, Florida
Solid Waste Industrial
Development Revenue Bonds
(Montenay-Dade, Ltd.
Project)/
(Banque Paribas LOC)
5.10%, 01/07/96 1,280 1,280
Hillsborough County,
Florida Industrial
Development Authority
Revenue Bonds (Seaboard
Tampa Terminals) Series
1986A/ (Barclays Bank LOC)
5.00%, 01/07/96 5,500 5,500
Indian Trace, Florida
Community Development
District (Water & Sewer
Special Assessment
Basin 1 Water)/
(MBIA Insurance &
Swiss Bank SBPA)
4.90%, 01/07/96 2,500 2,500
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Rio Vista Project)/
(First Union Bank of
North Carolina LOC)
5.20%, 01/07/96 3,865 3,865
Orange County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds (Smokewood
Project)/ (Citibank LOC)
5.25%, 01/07/96 10,000 10,000
Palm Beach County, Florida
Health Facilities
Authority Revenue
Refunding Bonds
(Joseph L. Morse
Geriatric Center)/
(Sun Bank LOC)
5.20%, 01/07/96 9,800 9,800
Palm Beach County, Florida
Housing Finance Authority
Multi Family Housing
Revenue Bonds
(Crystal II Project)/
(Citibank LOC)
5.15%, 01/07/96 2,850 2,850
------
40,795
------
GEORGIA--3.1%
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 15,300 15,300
</TABLE>
F-3
<PAGE> 43
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Burke County, Georgia
Development Authority
Pollution Control Revenue
Bonds (Oglethorpe
Power Corp. Project)
Series 1994A/
(FGIC Insurance &
Credit Local de
France SBPA)
5.15%, 01/07/96 $24,000 $24,000
Cobb County, Georgia
Housing Authority
Multi Family Housing
Revenue Bonds
(Walton Green Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 14,000 14,000
Cobb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Williamstown
Apartment Project)/
(Wachovia Bank LOC)
5.20%, 01/07/96 2,000 2,000
Dekalb County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Siemens
Energy, Inc. Project)/
(Siemens AG Guaranty)
5.20%, 01/07/96 3,750 3,750
Dekalb County, Georgia
Housing Authority Multi
Family Housing Revenue
Bonds (Wood Hills
Apartment Project)/ (Bank
of Montreal LOC)
5.15%, 01/07/96 5,250 5,250
Douglas County, Georgia
Development Authority
Industrial Development
Revenue Bonds (Mima Inc.
Project)/ (Wachovia Bank
LOC)
5.10%, 01/07/96 4,300 4,300
Laurens County, Georgia
Development Authority
Solid Waste Disposal
Revenue Bonds (Southeast
Paper Co. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 25,000 25,000
Richmond County, Georgia
Industrial Development
Authority Revenue Bonds
(Bok Group Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Rockmart, Georgia
Development Authority
Industrial Development
Revenue Bonds (CW Matthews
Contracting)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 2,500 2,500
Smyrna, Georgia Housing
Authority Multi Family
Housing Revenue Bonds
(Walton Park LP)/
(Wachovia Bank LOC)
5.25%, 01/07/96 8,000 8,000
Villa Rica, Georgia
Industrial Development
Revenue Bonds (Lowes Home
Centers, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,200 1,200
-------
110,300
-------
HAWAII--1.6%
Hawaii State Department of
Budget and Finance Special
Purpose Mortgage Revenue
Bonds (Adventist Health
System West)/ (Bank of
California LOC)
5.15%, 01/07/96 3,100 3,100
Hawaii State Housing
Finance & Development
Corp. Multi-Family Housing
Revenue Bonds (Nani Mauna
Loa Project) Series 1995A/
(Citibank LOC)
4.00%, 01/07/96 4,350 4,350
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 17,100 17,100
Hawaii State Housing
Finance & Development
Corp. Revenue Bonds
(Rental Housing System)
Series 1990B/(Industrial
Bank of Japan LOC)
5.20%, 01/07/96 19,600 19,600
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(HaleKa Gardens Project)
Series A/ (Bank of Tokyo
LOC)
5.70%, 01/07/96 5,256 5,256
</TABLE>
F-4
<PAGE> 44
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Honolulu, Hawaii City and
County Multi Family
Housing Revenue Bonds
(Lolani Regents Project)
Series 1990A/
(Bank of Hawaii LOC)
5.55%, 01/07/96 $ 9,300 $ 9,300
------
58,706
------
ILLINOIS--10.2%
Centralia, Illinois
Industrial Development
Authority Revenue Bonds
(Consolidated Foods
Corp./Hollywood
Brands, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,500 4,500
Chicago, Illinois
General Obligation
Bonds Series 1985/
(Sanwa Bank LOC)
5.45%, 01/07/96 14,440 14,440
Chicago, Illinois
General Obligation
Bonds Series 1992B/
(Canadian Imperial Bank of
Commerce LOC)
5.10%, 01/07/96 10,400 10,400
Chicago, Illinois
Industrial Development
Revenue Bonds (Morse
Automotive)/ Series 1995
(American National Bank &
Trust Co. LOC)
5.25%, 01/07/96 3,000 3,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (Adjustable
Convertible Extendable
Securities General Airport
Second Lien) Series B-1/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(Adjustable Convertible
Extendable Securities
General Airport Second
Lien) Series B-2/
(Sanwa Bank LOC)
5.40%, 01/07/96 10,000 10,000
Chicago, Illinois O'Hare
International Airport
Revenue Bonds
(General Airport Second
Lien) Series 1994C/
(Societe Generale LOC)
5.15%, 01/07/96 16,100 16,100
Chicago, Illinois O'Hare
International Airport
Revenue Bonds (General
Airport Second Lien)
Series A/(Westpac Banking
Corp. LOC)
5.10%, 01/07/96 13,100 13,100
Illinois Development
Finance Authority Hospital
Revenue Bonds (Palos
Community Hospital) Series
1994/ (Credit Suisse SBPA)
5.20%, 01/07/96 37,700 37,700
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Knead Dough
Baking Co.)/
(Bank of America LOC)
5.35%, 01/07/96 8,870 8,870
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Marriott
Corp. Deerfield Project)/
(National Westminster Bank
LOC)
5.15%, 01/07/96 1,300 1,300
Illinois Development
Finance Authority
Industrial Development
Revenue Bonds (Rerkin
Paperboard Co. LP) Series
1994/ (Northern Trust LOC)
5.40%, 01/07/96 5,500 5,500
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (F.C. Harris
Pavillion Project) Series
1994/(FNMA LOC)
5.15%, 01/07/96 3,000 3,000
Illinois Development
Finance Authority Revenue
Residential Rental Revenue
Bonds (River Oak)/ (Swiss
Bank LOC)
5.20%, 01/07/96 3,790 3,790
Illinois Educational
Facility Authority Revenue
Bonds (Chicago Zoological
Society Brookfield Zoo)
Series B/
(Chemical Bank LOC)
5.25%, 01/07/96 2,000 2,000
Illinois Educational
Facility Authority Revenue
Bonds (Chicago
Historical Society)/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 8,300 8,300
</TABLE>
F-5
<PAGE> 45
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Illinois Educational
Facility Authority
Revenue Bonds
(Illinois Institute of
Technology) Series 1990A/
(Northern Trust LOC)
5.05%, 01/07/96 $11,300 $11,300
Illinois Educational
Facility Authority Revenue
Bonds (Northwestern
University)/ (FNB Chicago
LOC)
5.15%, 01/07/96 22,200 22,200
Illinois Educational
Facility Authority Revenue
Bonds (University Pooled
Financing Program)
Series 1985/
(FGIC Insurance &
Sakura Bank SBPA)
5.95%, 01/07/96 17,325 17,325
Illinois Health Facility
Authority Revenue Bonds
(Franciscan Village
Project) Series 1989A/
(Commonwealth Bank of
Australia LOC)
5.20%, 01/07/96 2,000 2,000
Illinois Health Facility
Authority Revenue Bonds
(Hospital Sisters
Services) Series E/(MBIA
Insurance &
Morgan Guaranty SBPA)
5.00%, 01/07/96 4,300 4,300
Illinois Health Facility
Authority Revenue Bonds
(Ingalls Memorial
Hospital) Series
1985C/(LaSalle National
Bank LOC)
5.60%, 01/07/96 1,100 1,100
Illinois Health Facility
Authority Revenue Bonds
(Streeterville Corp.)
Series A/
(FNB Chicago LOC)
5.10%, 01/07/96 14,400 14,400
Illinois Health Facility
Authority Revenue Bonds
(Washington & Jane Smith
Home) Series 1991/
(Comerica Bank LOC)
5.20%, 01/07/96 2,800 2,800
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985C/ (FNB Chicago
LOC)
5.20%, 01/07/96 6,000 6,000
Illinois Health Facility
Authority Revenue Bonds
Revolving Fund Pooled Loan
Series 1985D/ (FNB Chicago
LOC)
5.20%, 01/07/96 20,000 20,000
Illinois State Toll Highway
Authority Revenue Bonds
Series B/(MBIA Insurance &
Societe Generale SBPA)
5.05%, 01/07/96 63,400 63,400
Kane County, Illinois
Revenue Bonds (Glenwood
School for Boys)/(Harris
Trust & Savings Bank LOC)
5.10%, 01/07/96 9,000 9,000
Lombard, Illinois
Industrial Development
Revenue Refunding Bonds (B
& H Partnership Project)/
(Comerica Bank LOC)
5.38%, 01/07/96 1,500 1,500
McHenry County, Illinois
Industrial Development
Authority Revenue
Refunding Bonds (Dean
Foods Co. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 2,675 2,675
Oak Forest, Illinois
Revenue Bonds (Homewood
Pool) Series 1989/
(FNB Chicago LOC)
5.15%, 01/07/96 37,000 37,000
-------
367,000
-------
INDIANA--0.4%
Crawfordsville, Indiana
Industrial Development
Revenue Bonds (National
Service Industries, Inc.
Project)/ (Wachovia Bank
LOC)
5.15%, 01/07/96 2,000 2,000
Hammond, Indiana Adjustable
Rate Economic Development
Revenue Bonds (Lear
Seating Corp. Project)
Series 1994/ (Chemical
Bank LOC)
4.25%, 01/07/96 5,750 5,750
Indiana Health Facility
Financing Authority
Hospital Adjustable
Convertible Extentable
Securities Revenue Bonds
(Methodist Hospital)
Series C/
(Credit Suisse SBPA)
5.15%, 01/07/96 4,100 4,100
Indianapolis, Indiana
Economic Development
Authority Revenue Bonds
(Herff-Jones, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 4,100 4,100
-------
15,950
-------
</TABLE>
F-6
<PAGE> 46
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
IOWA--0.2%
Iowa Higher Education Loan
Authority Revenue Bonds
Adjustable Convertible
Extendable Securities
Education Loan (Private
College Facility)/
(MBIA Insurance &
Dai-Ichi Kangyo
Bank SBPA)
5.50%, 01/07/96 $ 4,100 $ 4,100
Iowa Housing Finance
Authority Multi Family
Housing Revenue Bonds
(Small Business Loan
Project) Series 1985A/
(FHLB of Des Moines LOC)
5.30%, 01/07/96 2,100 2,100
Iowa State Financing
Authority Solid Waste
Disposal Revenue Bonds
(Cedar River Paper
Project) Series 1995A/
(Swiss Bank LOC)
6.10%, 01/01/96 1,000 1,000
------
7,200
------
KANSAS--0.2%
Kansas City, Kansas
Industrial Revenue Bonds
(Owen Industries, Inc.
Project) Series 1987/
(Sanwa Bank LOC)
5.45%, 01/07/96 2,400 2,400
Wichita, Kansas Airport
Facilities Revenue Bonds
(Flightsafety
International, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,000 3,000
Wichita, Kansas Health
Facilities Revenue
Authority (CSJ Health
System) Series XXV/
(Sumitomo Bank LOC)
5.30%, 01/07/96 1,900 1,900
------
7,300
------
KENTUCKY--0.7%
Lebanon, Kentucky
Industrial Development
Revenue Bonds (Wallace
Computer Services, Inc.)/
(Wachovia Bank LOC)
5.25%, 01/07/96 5,000 5,000
Mason County, Kentucky
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (East Kentucky Power
Corp.) Series 1984B-1/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 10,600 10,600
Murray, Kentucky Industrial
Development Authority
Revenue Bonds
(Dean Foods Co.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 5,000 5,000
Owensboro, Kentucky Limited
Obligation Revenue Bonds
(Dart Polymers, Inc.
Project) Series 1985A/
(National Westminster Bank
LOC)
4.05%, 01/07/96 1,900 1,900
Wilson County, Kentucky
Industrial Development
Board Revenue Bonds
(Perma Pipe I North
Carolina Project)/ (Harris
Trust & Savings Bank LOC)
5.50%, 01/07/96 3,150 3,150
------
25,650
------
LOUISIANA--3.5%
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991A/
(Swiss Bank LOC)
5.05%, 01/07/96 400 400
De Soto Parish, Louisiana
Pollution Control
Financing Authority
Pollution Control Revenue
Refunding Bonds (Central
Louisiana
Electric Co.)
Series 1991B/
(Swiss Bank LOC)
5.05%, 01/07/96 15,000 15,000
East Baton Rouge Parish,
Louisiana Pollution
Control Revenue Refunding
Bonds (Exxon Corp.) Series
1989
5.90%, 01/01/96 1,900 1,900
Louisiana Public Facilities
Authority Hospital Revenue
Bonds (Willis Knighton
Medical Project)/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 15,300 15,300
New Orleans, Louisiana
Aviation Board Revenue
Bonds (Passenger Facility
Charge Projects)/ (Banque
Paribas & Canadian
Imperial Bank of Commerce
LOC)
5.50%, 01/07/96 7,000 7,000
</TABLE>
F-7
<PAGE> 47
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New Orleans, Louisiana
Aviation Board Revenue
Bonds Series B/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
4.95%, 01/07/96 $73,020 $ 73,020
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
(Hotel Occupancy Project)
Series B/ (Sanwa Bank LOC)
5.50%, 01/07/96 1,300 1,300
New Orleans, Louisiana
Exhibition Hall Authority
Special Tax Revenue Bonds
Series 1989B/ (Sanwa Bank
LOC)
5.50%, 01/07/96 3,800 3,800
Rapides Parish, Louisiana
Industrial Development
Board Pollution Control
Revenue Refunding Bonds
(Central Louisiana
Electric Co.)
Series 1991/
(Swiss Bank LOC)
5.05%, 01/07/96 8,150 8,150
-------
125,870
-------
MARYLAND--2.5%
Baltimore, Maryland
Industrial Development
Authority Revenue Bonds
(City of Baltimore Capital
Acquisition Program)
Series 1986/(Dai-Ichi
Kangyo Bank LOC)
5.35%, 01/07/96 52,400 52,400
Maryland State Health and
Higher Educational
Facility Authority Pooled
Revenue Bonds (Kennedy
Kreiger) Series 1993D/
(FNB Maryland LOC)
5.10%, 01/07/96 2,000 2,000
Maryland State Health and
Higher Educational Facility
Authority Pooled Revenue
Bonds (Pooled Loan
Program) Series A/
(Dai-Ichi Kangyo Bank LOC &
FNB Chicago SBPA)
5.00%, 01/07/96 9,700 9,700
Montgomery County, Maryland
Housing Opportunity
Commission Housing Revenue
Bonds (Draper Lane)
Series 1991I/
(FGIC Insurance &
Sumitomo Bank SBPA)
5.30%, 01/07/96 16,500 16,500
Northeast Maryland Waste
Disposal Authority
Resource Recovery Bonds
(Hartford County)/ (AMBAC
Insurance &
Credit Local de France
LOC)
5.05%, 01/07/96 9,600 9,600
------
90,200
------
MICHIGAN--0.1%
Grand Rapids, Michigan
Water Supply Variable Rate
Revenue Bonds/
(FGIC Insurance &
Societe Generale SBPA)
5.90%, 01/07/96 1,000 1,000
Michigan State Strategic
Fund Limited Obligation
Revenue Bonds (Dean Foods
Co. Project)/ (Wachovia
Bank LOC)
5.25%, 01/07/96 3,500 3,500
------
4,500
------
MINNESOTA--0.9%
Bloomington, Minnesota Port
Authority Tax Increment
Revenue Refunding Bonds
(Mall of America)
Series 1995A/
(Credit Local de
France SBPA &
FSA Insurance)
5.20%, 01/07/96 7,000 7,000
St. Paul, Minnesota Housing
Redevelopment Authority
Rental Multi Family
Housing Development Bonds
Multi City Series 1985A/
(FHLB Des Moines LOC)
5.30%, 01/07/96 19,900 19,900
------
26,900
------
MISSISSIPPI--0.4%
Jackson County, Mississippi
Pollution Control Revenue
Bonds (Chevron U.S.A. Inc.
Project)
5.90%, 01/07/96 14,700 14,700
------
MISSOURI--1.0%
Independence, Missouri
Industrial Development
Authority Revenue Bonds
(Resthaven Project)/
(Credit Local de France
LOC)
5.20%, 01/07/96 9,640 9,640
</TABLE>
F-8
<PAGE> 48
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Industrial Development
Authority of Mexico,
Missouri Revenue Bonds
(ABP Midwest
Manufacturing Co.
Project) Series 1995/
(Royal Bank of Scotland
LOC)
5.25%, 01/07/96 $7,600 $ 7,600
Missouri State Development
Finance Board Industrial
Development Revenue Bonds
(H.R. Williams Mill Supply
Project) Series 1995/
(Union Bank of
Switzerland LOC)
5.30%, 01/07/96 3,100 3,100
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy)
Series 1988A/(Multiple
Credit Enhancements)
5.10%, 01/07/96 3,200 3,200
Missouri State Health and
Educational Facilities
Authority Health
Facilities Revenue Bonds
(Sisters of Mercy) Series
1992B/ (Toronto-Dominion
Bank SBPA)
5.10%, 01/07/96 3,400 3,400
Missouri State Health and
Educational Facilities
Authority Health
Facilities
Revenue Bonds (St. Anthony
Medical Center)/
(Mitsubishi Bank SBPA)
5.60%, 01/07/96 900 900
St. Charles, Missouri
Industrial Development
Authority Variable Rate
Demand Revenue Refunding
Bonds (Casalon Apartments
Project)/ (Citibank LOC)
5.25%, 01/07/96 3,100 3,100
Washington, Missouri
Industrial Development
Authority Revenue
Bonds (Pauwels
Transformer Project)/
(Generale Bank LOC)
5.40%, 01/07/96 4,000 4,000
------
34,940
------
MONTANA--0.4%
Forsyth, Montana Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Portland General Electric
Coal Stripping Project)
Series 1983B/ (Swiss Bank
LOC)
5.00%, 01/07/96 6,500 6,500
Montana State Health
Facility Authority Revenue
Bonds (Health Care Pooled
Loan Program) Series
1985A/ (FGIC Insurance &
Norwest Bank of
Minnesota SBPA)
5.15%, 01/07/96 7,195 7,195
------
13,695
------
NEVADA--1.6%
Clark County, Nevada Airport
Improvement Revenue
Refunding Bonds
Series 1993A/
(MBIA Insurance &
Industrial Bank of
Japan SBPA)
5.15%, 01/07/96 55,350 55,350
Clark County, Nevada
Industrial Development
Revenue Bonds
(Cogeneration Project No.
2)/(Swiss Bank LOC)
6.15%, 01/07/96 2,700 2,700
------
58,050
------
NEW HAMPSHIRE--0.2%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (VHA New
England, Inc.) Series
1985B/ (AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 1,000 1,000
New Hampshire State Housing
Finance Authority Multi
Family Housing Revenue
Bonds (Fairways Project)
Series 1994-1/ (General
Electric Capital Corp.
LOC)
5.20%, 01/07/96 7,000 7,000
------
8,000
------
NEW JERSEY--0.1%
New Jersey Turnpike
Authority Revenue Bonds
Series 1991D/
(FGIC Insurance &
Societe General LOC)
4.80%, 01/07/96 3,000 3,000
------
</TABLE>
F-9
<PAGE> 49
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW MEXICO--0.1%
Albuquerque, New Mexico
Gross Receipts Lodgers Tax
Revenue Adjustable Rate
Tender Revenue Bonds
Series 1994/ (Canadian
Imperial Bank of Commerce
LOC)
5.15%, 01/07/96 $ 1,300 $ 1,300
Belen, New Mexico
Industrial Development
Revenue Bonds
(Solo Cup, Inc. Project)/
(Wachovia Bank LOC)
5.25%, 01/07/96 3,250 3,250
------
4,550
------
NEW YORK--3.2%
Babylon, New York Variable
Rate General Obligation
Bonds Series B/(Bank of
Nova Scotia SBPA & AMBAC
Insurance)
4.90%, 01/07/96 3,500 3,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries
A-8B/ (Sanwa Bank LOC)
5.95%, 01/07/96 715 715
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-2/
(MBIA Insurance &
Bank Austria AG SBPA)
5.90%, 01/01/96 400 400
New York City, New York
General Obligation Bonds
Series 1994B
Subseries B-3/
(MBIA Insurance &
Bank of Nova Scotia SBPA)
5.90%, 01/01/96 1,000 1,000
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 11,900 11,900
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC Insurance &
FGIC SPA)
5.90%, 01/07/96 9,000 9,000
New York City, New York
Trust for Cultural
Resources Revenue Bonds
(Solomon R. Guggenheim
Project) Series 1990B/
(Swiss Bank LOC)
5.90%, 01/01/96 100 100
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B Subseries
B-10/(Union Bank of
Switzerland LOC)
5.00%, 01/07/96 7,500 7,500
New York City, New York
Variable Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 2,000 2,000
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1993A/ (Multiple
Credit Enhancements)
4.95%, 01/07/96 9,500 9,500
New York Local Government
Assistance Corp. Public
Improvement Revenue Bonds
Series 1994B/ (Credit
Suisse & Swiss Bank LOC)
4.95%, 01/07/96 1,000 1,000
New York Local Government
Assistance Corp. Public
Improvement Revenue
Bonds Series 1995F/
(Toronto-Dominion Bank LOC)
5.05%, 01/07/96 12,700 12,700
New York Municipal Water
Finance Authority Water &
Sewer System Revenue Bonds
Series 1994C/ (FGIC
Insurance & FGIC SPA)
5.90%, 01/01/96 5,500 5,500
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/
(AMBAC Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 3,100 3,100
New York State Energy
Research & Development
Authority Electric Facilities
Revenue Bonds (Long
Island Lighting Co.
Project) Series 1993A/
(Toronto-Dominion Bank LOC)
5.00%, 01/07/96 1,000 1,000
</TABLE>
F-10
<PAGE> 50
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
New York State Energy
Research & Development
Authority Pollution
Control Refunding Revenue
Bonds (Orange & Rockland
Utilities, Inc. Project)
Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 $10,700 $ 10,700
New York State Energy
Research & Development
Authority Pollution Control
Revenue Bonds (Central
Hudson Gas & Electric
Corp. Project) Series 1985A/
(Morgan Guaranty Trust LOC)
5.00%, 01/07/96 5,700 5,700
New York State Energy
Research & Development
Authority Pollution
Control Revenue Refunding
Bonds Series B/(Union Bank
of Switzerland LOC)
6.00%, 01/01/96 1,400 1,400
New York State Local
Government Assistance
Corp. Variable Rate
Revenue Bonds Series
1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 14,000 14,000
Triborough Bridge and
Tunnel Authority, New York
Special Obligation Bridge
Revenue Bonds Series 1994/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 11,000 11,000
Yonkers, New York Industrial
Development Authority
Revenue Bonds
Consumers Union Facility/
(AMBAC Insurance &
Credit Local de France SBPA)
4.95%, 01/07/96 1,400 1,400
-------
113,115
-------
NORTH CAROLINA--1.7%
Charlotte, North Carolina
Airport Revenue Refunding
Bonds Series 1993A/ (MBIA
Insurance & Industrial
Bank of Japan SBPA)
5.15%, 01/07/96 6,400 6,400
Haywood County, North
Carolina Industrial
Development Facilities and
Pollution Control
Financing Authority
Revenue Bonds (Solid
Waste--Champion
International Corp.)/
(Bank Austria AG LOC)
4.95%, 01/07/96 2,200 2,200
North Carolina Medical Care
Community Hospital Revenue
Bonds (Pooled Equipment
Finance Project)/(MBIA
Insurance &
Banque Paribas SBPA)
5.05%, 01/07/96 11,300 11,300
North Carolina Medical Care
Community Hospital Revenue
Bonds Adjustable
Convertible Extendable
Securities (Pooled
Financial Project)/ (MBIA
Insurance & Sakura Bank
SPA)
5.05%, 01/07/96 1,810 1,810
North Carolina Medical Care
Community Hospital Revenue
Pooled Finance
Bonds/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/07/96 5,800 5,800
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985B/
(Sumitomo Bank LOC)
5.50%, 01/07/96 2,900 2,900
Wake County, North Carolina
Industrial Facility and
Pollution Control
Financing Authority
Revenue Bonds (Carolina
Power & Light)
Series 1985C/
(Sumitomo Bank LOC)
5.50%, 01/07/96 29,400 29,400
------
59,810
------
NORTH DAKOTA--0.2%
Mercer County, North Dakota
National Rural Utility
Pollution Control Revenue
Bonds (Basin Electric
Power Cooperative Antelope
Project) Series 1984C/
(N.R.U.--C.F.C. Guaranty)
4.65%, 01/07/96 7,150 7,150
------
OHIO--1.0%
Columbus, Ohio Electric
System Revenue Bonds
Series 1984/(Dai-Ichi
Kangyo Bank LOC)
3.90%, 01/07/96 6,880 6,880
</TABLE>
F-11
<PAGE> 51
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Columbus, Ohio General
Obligation Bonds Series
1995-1/ (Westdeutsche
Landesbank LOC)
4.90%, 01/07/96 $ 6,000 $ 6,000
Dayton, Ohio Special
Facilities Revenue
Refunding Bonds (Emery Air
Freight) Series 1993F/
(ABN-AMRO Bank LOC)
5.31%, 01/07/96 8,000 8,000
Ohio Air Quality
Development Authority
Revenue Bonds (JMG
Funding, LP) Series 1994A/
(Societe Generale LOC)
5.00%, 01/07/96 12,000 12,000
Ohio Housing Finance Agency
Multi Family Housing
Revenue Bonds (Kenwood
Congregate Retirement
Community) Series
1985/(Morgan Guaranty
Trust LOC)
3.90%, 01/07/96 2,000 2,000
------
34,880
------
OKLAHOMA--0.0%
Tulsa, Oklahoma Industrial
Development Authority
Hospital Revenue Bonds
(Hillcrest Medical Center)
Series 1988/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 685 685
Tulsa, Oklahoma Industrial
Development Authority
Revenue Bonds
(Thomas & Betts Project)
Series 1991/ (Wachovia
Bank LOC)
5.25%, 01/07/96 300 300
------
985
------
OREGON--1.3%
Medford, Oregon Hospital
Facility Authority (Rogue
Valley Manor Project)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 7,700 7,700
Oregon State Economic
Development Commission
Economic and Industrial
Development Revenue
Bonds/(Wachovia Bank LOC)
5.15%, 01/07/96 4,100 4,100
Oregon State General
Obligation Notes Series
1973F/ (Mitsubishi Bank
LOC)
5.15%, 01/07/96 11,185 11,185
Oregon State General
Obligation Notes Series
1973H/ (Bank of Tokyo LOC)
5.25%, 01/07/96 18,100 18,100
Port of Portland, Oregon
Industrial Development
Revenue Bonds (Schnitzer
Steel Project)/ (Comerica
Bank LOC)
5.30%, 01/07/96 5,000 5,000
------
46,085
------
PENNSYLVANIA--1.4%
Montgomery County,
Pennsylvania Industrial
Development Authority
Revenue Bonds (Seton
Medical Supply Co. Project)/
(Banque Paribas LOC)
5.25%, 01/07/96 5,500 5,500
Pennsylvania Higher
Education Assistance
Agency Student Loan
Revenue Bonds Series
1995A/ (SLMA LOC)
5.25%, 01/07/96 17,000 17,000
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985B/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,365 4,365
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985F/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 4,100 4,100
Sayre, Pennsylvania Health
Care Facilities Authority
(VHA Capital Finance
Revenue) Series 1985J/
(AMBAC Insurance & FNB
Chicago SBPA)
5.00%, 01/07/96 9,800 9,800
Washington County,
Pennsylvania Authority
Revenue Bonds Higher
Education Pooled Equipment
Lease/ (Sanwa Bank LOC)
5.35%, 01/07/96 9,400 9,400
------
50,165
------
RHODE ISLAND--0.1%
Rhode Island State Student
Loan Authority Higher
Education Revenue Bonds
Series 1995-1/(National
Westminster Bank LOC)
5.30%, 01/07/96 2,000 2,000
------
</TABLE>
F-12
<PAGE> 52
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.4%
Greenville County, South
Carolina Industrial
Development Revenue Bonds
(Quality Thermoforming
Project)/ (South Carolina
National Bank LOC)
5.25%, 01/07/96 $1,200 $ 1,200
South Carolina Jobs
Economic Development
Authority Hospital
Facilities Revenue Bonds
(Baptist Health Care
System)/ (Credit Local de
France LOC)
5.05%, 01/07/96 6,900 6,900
South Carolina Jobs
Economic Development
Authority Industrial
Development Revenue Bonds
(Ado Corp. Project)/(South
Carolina National Bank
LOC)
5.25%, 01/07/96 800 800
Spartanburg County, South
Carolina Industrial
Development Authority
Revenue Bonds
(Bemis, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,750 4,750
------
13,650
------
SOUTH DAKOTA--0.3%
Rapid City, South Dakota
Industrial Development
Revenue Corp. (Property
Associates Project)/
(Lloyds Bank LOC)
5.15%, 01/07/96 6,025 6,025
South Dakota State Health &
Educational Facilities
Authority Revenue Bonds
(McKenna Hospital)
Series 1994/
(MBIA Insurance &
Banque Paribas SBPA)
5.20%, 01/07/96 5,000 5,000
------
11,025
------
TENNESSEE--0.2%
Metropolitan Nashville and
Davidson County, Tennessee
Health and Education
Facility Board Revenue
Bonds Series A/
(FGIC Insurance &
Barclays Bank LOC)
5.00%, 01/07/96 1,300 1,300
Metropolitan Nashville and
Davidson County, Tennessee
Industrial Development
Revenue Bonds
(Multi-Family
Housing--Western)/
(Sumitomo Bank LOC)
5.60%, 01/07/96 7,035 7,035
------
8,335
------
TEXAS--7.9%
Amarillo, Texas Health
Facilities Corp. Hospital
Revenue Bonds (High Plains
Baptist Hospital)
Series 1985/
(Banque Paribas LOC)
5.20%, 01/07/96 9,300 9,300
Bexar County, Texas Health
Facilities Development
Corp. Revenue Bonds
(Chandler Memorial Home
Project) Series 1995/
(Bank One LOC)
5.20%, 01/07/96 5,170 5,170
Capital Industrial
Development Corp., Texas
Industrial Development
Revenue Refunding Bonds
(National Service
Industries, Inc. Project)/
(Wachovia Bank LOC)
5.15%, 01/07/96 3,950 3,950
Euless, Texas Industrial
Development Authority
Revenue Bonds (Ferguson
Enterprises, Inc.)/
(Wachovia Bank LOC)
5.15%, 01/07/96 4,850 4,850
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1988A/ (AMBAC
Insurance & Citibank SBPA)
5.25%, 01/07/96 18,300 18,300
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1992A/ (SLMA LOC)
5.10%, 01/07/96 16,000 16,000
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993A/ (SLMA LOC)
5.25%, 01/07/96 48,150 48,150
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1993B-1/ (SLMA LOC)
5.25%, 01/07/96 11,000 11,000
</TABLE>
F-13
<PAGE> 53
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Greater East Texas Higher
Education Authority
Student Loan Revenue Bonds
Series 1995B/ (SLMA LOC)
5.00%, 01/07/96 $30,000 $30,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990A/
(Swiss Bank LOC)
5.10%, 01/07/96 9,000 9,000
Hays, Texas Memorial Health
Facilities Development
Corp. Hospital Revenue
Bonds AHS/Sunbelt (Central
Texas Medical Center
Project) Series 1990B/
(Swiss Bank LOC)
5.10%, 01/07/96 16,300 16,300
Lavaca-Navidad River
Authority, Texas Water
Supply System Contract
Revenue Bonds (Formosa
Plastics Corp. Project)/
(Canadian Imperial Bank of
Commerce LOC)
5.30%, 01/07/96 9,900 9,900
Lower Neches Valley
Authority, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Mobil Corp.
Neches River Treatment
Project) Series 1994
5.00%, 01/07/96 12,000 12,000
Midlothian, Texas
Industrial Development
Corp. Pollution Control
Revenue Bonds (Box-Crow
Co. Project)/(Union Bank
of Switzerland LOC)
5.80%, 01/07/96 1,400 1,400
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1992A/ (SLMA LOC)
5.20%, 01/07/96 2,300 2,300
Panhandle Plains, Texas
Higher Education
Authority, Inc. Student
Loan Revenue Bonds Series
1995A/ (SLMA LOC)
5.20%, 01/07/96 10,400 10,400
Port Authority of Corpus
Christi, Texas Nueces
County Marine Terminal
Revenue Bonds (Reynolds
Metals Co.)/ (Barclays
Bank LOC)
5.25%, 01/07/96 3,100 3,100
Robertson County, Texas
Industrial Development
Corp. Variable Rate
Revenue Bonds (Sanderson
Farms Project) Series
1995/ (Harris Trust &
Savings Bank LOC)
5.20%, 01/07/96 4,300 4,300
Texas Health Facilities
Development Corp.
Adjustable Convertible
Extendable Securities
Revenue Bonds (North Texas
Pooled Health) Series
1985B/ (Banque Paribas
LOC)
5.05%, 01/07/96 11,000 11,000
Texas Small Business
Industrial Development
Corp. Revenue Bonds
(Texas Public
Facility Capital Access)/
(Multiple Credit
Enhancements)
5.20%, 01/07/96 41,795 41,795
Texas State Revenue
Refunding Bonds (Veterans
Housing Assistance Fund)
Series 1995
5.05%, 01/07/96 13,000 13,000
Trinity River Authority,
Texas Pollution Control
Revenue Bonds (Lafarge
Corp. Project)/(Banque
Nationale de Paris LOC)
5.20%, 01/07/96 3,100 3,100
-------
284,315
-------
VERMONT--0.1%
Vermont Education and
Health Buildings Financing
Agency Revenue Bonds (VHA
New England) Series 1985G/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 4,240 4,240
-------
</TABLE>
F-14
<PAGE> 54
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VIRGINIA--0.4%
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985A/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 $ 500 $ 500
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985B/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 400 400
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985C/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 600 600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985F/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 5,600 5,600
Lynchburg, Virginia
Industrial Development
Authority Hospital
Facility Revenue Bonds
(First Mortgage VHA
Mid-Atlantic States, Inc.)
Series 1985G/ (AMBAC
Insurance & Mellon Bank
SBPA)
5.00%, 01/07/96 8,100 8,100
------
15,200
------
WASHINGTON--1.0%
Snohomish County,
Washington Public
Utilities District #1
Electric Revenue Bonds
(Generation Systems)/
(MBIA Insurance &
Industrial Bank of Japan
SBPA)
5.15%, 01/07/96 20,000 20,000
Washington State Health
Care Facilities Authority
Revenue Refunding Bonds
(Sisters of St. Joseph of
Peace) Series 1993/ (MBIA
Insurance & U.S. Bank of
Washington SBPA)
5.20%, 01/07/96 12,700 12,700
Washington State Housing
Finance Commission Multi
Family Mortgage Revenue
Bonds (Canyon Lake) Series
1993A/
(U.S. Bank of
Washington LOC)
5.40%, 01/07/96 4,565 4,565
------
37,265
------
WEST VIRGINIA--0.3%
West Virginia State
Hospital Finance Authority
Hospital Revenue Bonds
(St. Joseph's Hospital
Project) Series 1987/
(Mitsubishi Bank LOC)
5.20%, 01/07/96 2,200 2,200
West Virginia State
Hospital Finance Authority
Hospital Revenue
Bonds (VHA
Mid Atlantic States, Inc.)
Series 1985H/
(AMBAC Insurance &
FNB Chicago SBPA)
5.00%, 01/07/96 8,600 8,600
------
10,800
------
WISCONSIN--0.8%
Chilton, Wisconsin
Industrial Development
Revenue Refunding Bonds
(Kaytee Products, Inc.
Project) Series 1995/(Bank
One Milwaukee LOC)
5.35%, 01/07/96 1,865 1,865
Fairwater, Wisconsin
Industrial Development
Revenue Bonds (Dean Foods
Co. Project) Series 1990/
(Wachovia Bank LOC)
5.15%, 01/07/96 1,450 1,450
Lac Du Flambeau Band of
Lake Superior Chippewa
Indians, Wisconsin Special
Obligation Bonds (Simpson
Electric) Series 1985/
(Barclays Bank LOC)
5.25%, 01/07/96 6,300 6,300
</TABLE>
F-15
<PAGE> 55
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Milwaukee, Wisconsin
Redevelopment Authority
Industrial Development
Revenue Bonds (Field
Container Corp. LP) Series
1994/
(Northern Trust LOC)
5.40%, 01/07/96 $ 5,000 $ 5,000
Sheboygan, Wisconsin
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Wisconsin Power &
Light Co.)
5.25%, 01/07/96 1,000 1,000
Wisconsin State Health and
Education Facilities
Authority Revenue Bonds
(Sinai Samaritan) Series
1994A/(Marshall & Ilsley
Bank LOC)
5.20%, 01/07/96 13,755 13,755
---------
29,370
---------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $2,072,441) 2,072,441
---------
VARIABLE RATE TENDER
OPTION BONDS--2.5%(a)
GEORGIA--0.6%
Georgia State Public
Improvement General
Obligation Tender Option
Bonds Series 1995B
(Citi-157)/
(Citibank Tender Option)
5.25%, 01/07/96 16,000 16,000
Metropolitan Atlanta Rapid
Transit Authority, Georgia
Sales Tax Revenue
Tender Option Bonds
Series M (BT-69)/
(AMBAC Insurance & Bankers
Trust
Tender Option)
4.44%, 01/07/96 5,280 5,280
--------
21,280
--------
NEVADA--0.7%
Nevada State General
Obligation Tender Option
Bonds (Colorado River
Community) Series 1994
(Citi-143)/
(Citibank Tender Option)
5.30%, 01/07/96 25,000 25,000
--------
TEXAS--0.3%
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-138)/
(Citibank Tender Option)
5.30%, 01/07/96 7,000 7,000
Harris County, Texas Toll
Road Sub-Lien Highway
Tender Option Bonds
(Citi-139)/
(Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
12,000
------
WASHINGTON--0.9%
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-136)/
(Citibank Tender Option)
5.30%, 01/07/96 15,570 15,570
King County, Washington
Limited Tax General
Obligation Water & Sewer
Tender Option Bonds Series
1994A (Citi-137)/
(Citibank Tender Option)
5.30%, 01/07/96 10,000 10,000
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Tender Option
Bonds Series 1990C
(Citi-145)/
(FGIC Insurance, Escrowed
to Maturity with
Government Securities &
Citibank Tender Option)
5.30%, 01/07/96 5,000 5,000
------
30,570
------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $88,850) 88,850
------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--3.9%(a)(c)
CONNECTICUT--0.2%
Connecticut State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1991A (BTP-151)/
(Bankers Trust Tender
Option)
5.20%, 01/07/96 7,365 7,365
------
GEORGIA--0.4%
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-135)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 3,865 3,865
</TABLE>
F-16
<PAGE> 56
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1993B & 1993C
(BTP-140)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 $4,575 $ 4,575
Georgia State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1994B (BTP-148)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,100 7,100
------
15,540
------
ILLINOIS--0.4%
Chicago, Illinois
Metropolitan Water
Reclamation District
Greater Chicago General
Obligation Tender Option
Bond Partnership
(Cook County) (BTP-71)/
(Automated Data
Processing, Inc. Tender
Option)
4.99%, 01/07/96 9,870 9,870
Chicago, Illinois School
Finance Authority General
Obligation School Finance
Tender Option Bond
Partnership (BTP-70)/
(MBIA Insurance &
Automated Data Processing,
Inc. Tender Option)
4.66%, 01/07/96 5,365 5,365
------
15,235
------
MARYLAND--0.1%
Baltimore County, Maryland
General Obligation
Consolidated Public
Improvement Tender Option
Bond Partnership Series
1991 (BTP-132)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 3,621 3,621
------
MINNESOTA--0.1%
Minnesota State Various
Purpose Sports Health Club
Tax Tender Option
Bond Partnership
(BTP-65)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.28%, 01/07/96 4,455 4,455
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
Revenue Refunding Tender
Option Bond Partnership
(BTP-147)/(Bankers Trust
Tender Option)
5.20%, 01/07/96 5,370 5,370
------
TEXAS--1.0%
Regents of the University
of Texas Permanent
University Fund Revenue
Tender Option Bond
Partnership Series 1992A
(BTP-143)/ (Permanent
University
Fund Guaranty,
Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 10,685 10,685
Texas State General
Obligation General Purpose
Public Improvement Tender
Option Bond Partnership
Series 1993B/(BTP-116)
(Bankers Trust Tender
Option)
4.69%, 01/07/96 10,170 10,170
Texas State Public Finance
Authority General
Obligation Tender Option
Bond Partnership Series
1994 (BTP-127)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 14,980 14,980
------
35,835
------
VIRGINIA--0.4%
Chesterfield County,
Virginia General
Obligation Public
Improvement and Refunding
Tender Option Bond
Partnership Series 1991
(BTP-136)/ (Bankers Trust
Tender Option)
5.20%, 01/07/96 6,025 6,025
Fairfax County, Virginia
Public Improvement General
Obligation Tender Option
Bond Partnership Series
1991A (BTP-131)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 7,146 7,146
------
13,171
------
</TABLE>
F-17
<PAGE> 57
SchwabFunds(R) 18
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
WASHINGTON--0.7%
King County, Washington
Unlimited Tax General
Obligation Tender Option
Bond Partnership Series
1993C (BTP-56)/ (Automated
Data Processing, Inc.
Tender Option)
4.15%, 01/07/96 $6,365 $ 6,365
Washington State General
Obligation Tender Option
Bond Partnership Series
1990 (BTP-152)/ (Bankers
Trust Tender Option)
5.20%, 01/07/96 5,655 5,655
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1990C (BTP-130)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 5,740 5,740
Washington State Public
Power Supply System
Nuclear Project Number 2
Revenue Refunding Tender
Option Bond Partnership
Series 1993B (BTP-137)/
(Bankers Trust Tender
Option) 5.25%, 01/07/96 6,685 6,685
-------
24,445
-------
WISCONSIN--0.4%
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership
(BTP-62)/(Automated Data
Processing, Inc.
Tender Option &
Escrowed to Maturity with
Government Securities)
4.25%, 01/07/96 4,500 4,500
Wisconsin State Public
Improvement General
Obligation Tender Option
Bond Partnership Series
1992A (BTP-142)/
(Bankers Trust
Tender Option &
Escrowed to Maturity with
Government Securities)
5.20%, 01/07/96 9,480 9,480
-------
13,980
-------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS (Cost $139,017) 139,017
-------
CERTIFICATES OF PARTICIPATION--2.1%(b)
CALIFORNIA--2.1%
San Jose, California
Certificates of Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 72,315 75,662
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $75,662) 75,662
------
GENERAL OBLIGATIONS--4.5%(b)
ALASKA--0.3%
Anchorage, Alaska Unlimited
General Obligation Bonds
Series 1986/
(FGIC Insurance &
Escrowed to Maturity with
Government Securities)
3.72%, 06/01/96 8,600 8,924
Valdez, Alaska Unlimited
General Obligation Bonds
Series 1990/ (MBIA
Insurance)
3.70%, 01/01/97 1,000 1,028
------
9,952
------
ARKANSAS--0.1%
Arkansas State Unlimited
General Obligation Bonds
(College Savings)
3.32%, 06/01/96 1,975 1,977
------
CONNECTICUT--0.0%
Connecticut State General
Obligation Bonds Series
1992B
5.20%, 05/15/96 1,000 1,004
------
DELAWARE--0.1%
Delaware State General
Obligation
Bonds Series 1994A
3.47%, 03/01/96 2,240 2,243
Delaware State General
Obligation Bonds Series B/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 3,000 3,108
------
5,351
------
FLORIDA--0.2%
Dade County, Florida School
District General
Obligation Bonds/(MBIA
Insurance)
3.70%, 08/01/96 5,450 5,548
Florida State Board of
Education Capital Outlay
General Obligation Bonds
3.65%, 06/01/96 2,000 2,012
------
7,560
------
</TABLE>
F-18
<PAGE> 58
SchwabFunds(R) 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
GEORGIA--0.3%
Chatham County, Georgia
School District Unlimited
General Obligation Bonds
Series 1995B/ (FGIC
Insurance)
3.65%, 08/01/96 $ 1,160 $ 1,170
Clayton County, Georgia
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 10/01/96 1,335 1,370
Gwinnett County, Georgia
School District General
Obligation Bonds Series
1995A
3.78%, 02/01/96 7,035 7,043
------
9,583
------
HAWAII--0.1%
Honolulu, Hawaii City and
County Refunding and
Improvement General
Obligation Bonds Series
1993B
3.65%, 10/01/96 2,000 2,004
------
ILLINOIS--0.0%
Du Page, Illinois Water
Commission General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.70%, 03/01/96 1,000 1,026
------
KANSAS--0.7%
Wichita, Kansas General
Obligation Bonds Renewal
and Improvement Temporary
Notes Series 186
3.65%, 02/29/96 24,600 24,614
------
MASSACHUSETTS--0.3%
Massachusetts State
Dedicated Income Tax
Unlimited Tax General
Obligation Bonds Series
1990A/ (FGIC Insurance)
4.30%, 06/01/96 5,000 5,059
Massachusetts State General
Obligation Bonds Series
1986/
(Escrowed to Maturity with
Government Securities)
3.72%, 10/01/96 3,170 3,310
Massachusetts State General
Obligation Bonds Series
1990A/ (MBIA Insurance)
3.63%, 06/01/96 3,000 3,044
------
11,413
------
MINNESOTA--0.6%
Minneapolis, Minnesota
Special School District
General Obligation Bonds
3.73%, 02/01/96 5,500 5,506
Minnesota State General
Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.89%, 08/01/96 9,500 9,668
Minnesota State General
Obligation Bonds
Series 1995
3.70%, 08/01/96 5,400 5,455
Minnesota State Unlimited
General Obligation Bonds
Series 1993
3.70%, 08/01/96 1,000 1,007
------
21,636
------
NEW MEXICO--0.1%
Albuquerque, New Mexico
Municipal School District
Number 12 General
Obligation Bonds
3.60%, 08/01/96 1,700 1,705
New Mexico State Capital
Projects General
Obligation Bonds
3.75%, 08/01/96 2,000 2,000
------
3,705
------
OHIO--0.1%
Columbus, Ohio Limited Tax
General Obligation Bonds
Series 1993A
3.40%, 07/01/96 4,945 4,951
------
SOUTH CAROLINA--0.2%
South Carolina State
Capital Improvement
General Obligation Bonds
Series 1995B-1
3.70%, 08/01/96 6,400 6,474
------
TENNESSEE--0.0%
Tennessee State General
Obligation Bonds Series
1995A
4.25%, 03/01/96 1,000 1,001
------
TEXAS--0.3%
Amarillo, Texas Independent
School District Unlimited
General Obligation Bonds/
(Escrowed to Maturity with
Government Securities)
3.72%, 08/01/96 1,000 1,027
Dallas County, Texas
Hospital District
Refunding General
Obligation Bonds
4.05%, 02/15/96 1,500 1,502
</TABLE>
F-19
<PAGE> 59
SchwabFunds(R) 20
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Dallas, Texas Equipment
Acquisition Contractual
Obligation General
Obligation Bonds
3.73%, 02/15/96 $ 3,405 $ 3,407
Dallas, Texas Limited
General Obligation Bonds
Series 1995
3.75%, 02/15/96 2,750 2,757
Houston, Texas General
Obligation Bonds Series C
3.73%, 04/01/96 1,430 1,436
Tarrant County, Texas
Limited General Obligation
Bonds
3.68%, 07/15/96 1,000 1,029
------
11,158
------
VIRGINIA--0.1%
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989A/
(Escrowed to Maturity with
Government Securities)
3.50%, 06/01/96 1,000 1,028
Fairfax County, Virginia
Unlimited General
Obligation Bonds
Series 1989B/
(Escrowed to Maturity with
Government Securities)
3.75%, 11/01/96 1,320 1,359
------
2,387
------
WASHINGTON--0.8%
Washington State
General Obligation Bonds
Series 1986D/
(Escrowed to Maturity with
Government Securities)
3.85%, 09/01/96 13,200 13,554
Washington State
General Obligation Bonds
Series 1990A
3.60%, 02/01/96 2,000 2,004
Washington State
General Obligation Bonds
Series R-1992-C
3.70%, 09/01/96 1,850 1,863
Washington State
Motor Vehicles Fuel Tax
Series 1995B
3.68%, 06/01/96 1,495 1,503
Washington State
Motor Vehicles Fuel Tax
Unlimited General
Obligation Bonds
Series 1986E/
(Escrowed to Maturity with
Government Securities)
3.65%, 09/01/96 1,000 1,028
Washington State
Unlimited General
Obligation Bonds Series
R-1994-A
3.60%, 08/01/96 4,000 4,002
Washington State
Unlimited General
Obligation Bonds Series
R-1996-B
3.62%, 04/01/96 4,005 4,008
-------
27,962
-------
WISCONSIN--0.2%
Milwaukee, Wisconsin
Metropolitan Sewer
District Unlimited Tax
General Obligation Bonds
Series 1987A
3.70%, 09/01/96 1,000 1,011
Milwaukee, Wisconsin
Public Improvement
Unlimited General
Obligation Bonds Series
1995CA
3.28%, 06/15/96 1,000 1,004
Wisconsin State
General Obligation Bonds
Series 1995A
3.65%, 05/01/96 2,410 2,432
Wisconsin State
Unlimited General
Obligation Bonds Series
1992
3.70%, 05/01/96 3,000 3,012
-------
7,459
-------
TOTAL GENERAL OBLIGATIONS
(Cost $161,217) 161,217
-------
MANDATORY PUT BONDS--3.1%(b)
CALIFORNIA--0.5%
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 5,000 5,000
California Higher
Educational
Loan Authority, Inc.
Student Loan Revenue Bonds
Series 1995E-5/ (SLMA LOC)
4.25%, 06/01/96 11,700 11,700
-------
16,700
-------
FLORIDA--0.1%
Orange County, Florida
Industrial Development
Authority Revenue Bonds
(General Accident
Insurance Co.
of America Project)
4.28%, 06/01/96 3,500 3,500
-------
</TABLE>
F-20
<PAGE> 60
SchwabFunds(R) 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.6%
Chicago, Illinois
General Obligation Tender
Notes
3.65%, 05/01/96 $22,600 $22,600
------
INDIANA--0.2%
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994C
4.00%, 07/01/96 3,500 3,500
Indiana State Housing
Finance Authority Single
Family Mortgage Housing
Revenue Bonds Series 1994D
3.90%, 07/01/96 4,700 4,700
------
8,200
------
KENTUCKY--0.1%
Calvert City, Kentucky
Industrial Development
Revenue Refunding Bonds
(SKW Alloys, Inc. Lease
Rent) Series 87/
(Bayerische Vereinsbank
LOC)
4.00%, 04/01/96 2,220 2,220
------
OREGON--0.3%
Klamath Falls, Oregon
Electric Revenue Bonds
(Salt Caves Hydro
Electric) Series 1986E/
(Escrowed to Maturity with
Government Securities)
4.40%, 05/01/96 10,000 10,000
------
TEXAS--0.8%
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds
Series 1992B/ (SLMA LOC)
3.90%, 07/01/96 14,000 14,000
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1993B-2/ (SLMA LOC)
4.10%, 06/01/96 6,500 6,500
Greater East Texas
Higher Education Student
Loan Authority Student
Loan Revenue Bonds Series
1995B/ (SLMA LOC)
3.90%, 07/01/96 10,000 10,000
------
30,500
------
VIRGINIA--0.3%
Harrisonburg, Virginia
Redevelopment and Housing
Authority
Multi Family Housing
Revenue Bonds
(Rolling Brook
Village Apts.)
Series 1985A/
(Guardian Savings &
Loan Assoc. LOC)
5.10%, 02/01/96 10,000 10,000
-------
WASHINGTON--0.2%
Washington State Housing
Finance Committee
Adjustable Single Family
Mandatory Put Bonds Series
1995-1A-S
4.10%, 06/01/96 5,785 5,785
-------
TOTAL MANDATORY PUT BONDS (Cost
$109,505) 109,505
-------
OPTIONAL PUT BONDS--2.3%(b)
IDAHO--0.3%
Custer County, Idaho
Pollution Control
Revenue Bonds
(Amoco Project)
Series 1983
3.80%, 04/01/96 11,500 11,500
-------
MISSOURI--1.7%
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985A/ (Swiss Bank
LOC)
4.00%, 06/01/96 31,000 31,000
Missouri State
Environmental
Improvement and Energy
Resources Authority
Pollution Control
Revenue Bonds
(Union Electric Co.)
Series 1985B/
(Union Bank of
Switzerland LOC)
4.00%, 06/01/96 28,500 28,500
-------
59,500
-------
NEW HAMPSHIRE--0.1%
New Hampshire Higher
Education and Health
Facilities Authority
Revenue Bonds (Dartmouth
College) Series 1985A-G
4.10%, 06/01/96 3,000 3,000
-------
</TABLE>
F-21
<PAGE> 61
SchwabFunds(R) 22
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TEXAS--0.1%
Yoakum County, Texas
Industrial Development
Authority Pollution
Control Revenue Bonds
(Amoco Project)
3.75%, 05/01/96 $ 5,265 $ 5,265
------
WYOMING--0.1%
Carbon County, Wyoming
Pollution Control Revenue
Bonds (Amoco Project)
Series 1985
3.75%, 05/01/96 4,800 4,800
------
TOTAL OPTIONAL PUT BONDS (Cost
$84,065) 84,065
------
REVENUE ANTICIPATION NOTES--0.6%(b)
ILLINOIS--0.4%
Illinois State Revenue
Anticipation Notes Series
1995-April, 1996
3.70%, 04/12/96 15,000 15,033
------
OHIO--0.1%
Cleveland, Ohio City
School District Special
Obligation Revenue
Anticipation Notes/ (AMBAC
Insurance)
3.60%, 06/01/96 3,000 3,007
------
WISCONSIN--0.1%
Milwaukee, Wisconsin
Revenue Anticipation
Notes Series A
4.20%, 02/22/96 5,000 5,009
------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $23,049) 23,049
------
REVENUE BONDS--4.0%(b)
ALASKA--0.3%
Anchorage, Alaska Electric
Utilities Revenue Bonds
(Secondary Lien) Series
1986A/ (MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.70%, 06/01/96 8,770 9,083
------
ARIZONA--0.5%
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series A/
(AMBAC Insurance)
3.80%, 07/01/96 12,910 12,953
Arizona State
Transportation
Board Excise Tax Revenue
Bonds (Maricopa County
Regulatory Area) Series B/
(AMBAC Insurance)
3.80%, 07/01/96 2,470 2,478
Arizona State University
Revenue Bonds Series 1988/
(AMBAC Insurance &
Escrowed to Maturity with
Government Securities)
3.80%, 07/01/96 1,795 1,860
------
17,291
------
CALIFORNIA--0.2%
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series A/(Escrowed
to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,039
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project)/ (Escrowed to
Maturity with Government
Securities)
3.80%, 07/01/96 5,015 5,262
------
6,301
------
FLORIDA--0.1%
Florida State Municipal
Power Agency Revenue
Refunding Bonds (St. Lucie
Project)/ (Escrowed to
Maturity with Government
Securities)
3.65%, 10/01/96 1,000 1,044
Jacksonville, Florida
Electric Authority Revenue
Bonds Series 1988-3A/
(Escrowed to Maturity with
Government Securities)
3.73%, 10/01/96 2,030 2,118
------
3,162
------
HAWAII--0.1%
Hawaii State Department
of Budget and Finance
Special Purpose Mortgage
Revenue Bonds (Kapiolani
Medical Center for
Women and Children)/
(Escrowed to Maturity with
Government Securities)
3.73%, 07/01/96 3,900 4,051
------
</TABLE>
F-22
<PAGE> 62
SchwabFunds(R) 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
ILLINOIS--0.2%
Chicago, Illinois
Waterworks Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.65%, 11/01/96 $1,000 $ 1,037
Illinois State Sales
Tax Revenue Bonds
Series 1986B/
(Escrowed to Maturity with
Government Securities)
4.00%, 06/15/96 5,500 5,698
Illinois State Toll
Highway Authority
Priority Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.00%, 01/01/96 1,000 1,020
------
7,755
------
INDIANA--0.1%
Purdue University,
Indiana University Student
Fee Revenue Bonds Series
1993J
3.65%, 07/01/96 4,800 4,812
------
KENTUCKY--0.3%
Kentucky State Turnpike
Authority Economic
Development Road Revenue
Bonds Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 07/01/96 1,000 1,040
3.70%, 07/01/96 1,350 1,402
3.80%, 07/01/96 8,600 8,923
------
11,365
------
MARYLAND--0.1%
Maryland Department
of Transportation
Consolidated
Transportation Revenue
Refunding Bonds Series
1991
3.80%, 09/01/96 1,200 1,215
Washington, Maryland
Suburban Sanitation
District (Maryland Sewer
Disposal) Revenue Bonds
3.65%, 06/01/96 600 609
------
1,824
------
MINNESOTA--0.1%
Southern Minnesota
Municipal Power Agency
Power Supply System
Revenue Bonds/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.44%, 01/01/96 1,000 1,020
University of Minnesota
Refunding Revenue Bonds
Series A/
(Escrowed to Maturity with
Government Securities)
3.50%, 02/01/96 3,925 4,017
-----
5,037
-----
NEW MEXICO--0.2%
New Mexico State
Severence Tax Revenue
Bonds Series 1995B
3.80%, 07/01/96 3,110 3,136
New Mexico State
Severence Tax Revenue
Refunding Bonds Series
1992B (d)
3.50%, 07/01/96 1,000 1,008
Santa Fe, New Mexico
Single Family Mortgage
Revenue Bonds (FNMA/GNMA
Mortgage Backed Securities
Project) Series 1995B/
(FGIC Insurance)
4.00%, 11/15/96 3,000 3,000
-----
7,144
-----
NEW YORK--0.2%
Metropolitan Transportation
Authority, New York
Revenue Bonds Series
1986F/(Escrowed
to Maturity with
Government Securities)
3.70%, 07/01/96 8,445 8,799
-----
NORTH DAKOTA--0.0%
Fargo, North Dakota
Sales Tax Revenue
Refunding Bonds/ (AMBAC
Insurance)
3.85%, 07/01/96 710 714
-----
PENNSYLVANIA--0.2%
Pennsylvania State Turnpike
Commission Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.67%, 12/01/96 6,865 7,254
-----
RHODE ISLAND--0.0%
Rhode Island Depositors
Economic Protection Corp.
Special Obligation Revenue
Bonds Series A/
(MBIA Insurance &
Escrowed to Maturity with
Government Securities)
3.90%, 08/01/96 1,400 1,454
-----
</TABLE>
F-23
<PAGE> 63
SchwabFunds(R) 24
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
SOUTH CAROLINA--0.1%
South Carolina State
Public Service Authority
Expansion Revenue
Refunding Bonds/ (Escrowed
to Maturity with
Government Securities)
3.80%, 07/01/96 $ 2,695 $ 2,829
------
TEXAS--1.2%
Harris County, Texas
Hospital District Mortgage
Revenue Bonds/ (Escrowed
to Maturity with
Government Securities)
3.52%, 04/01/96 23,000 23,734
Houston, Texas
Water & Sewer System
Revenue Exchange Prior
Lien Revenue Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
3.65%, 12/01/96 300 315
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1986A/
(Escrowed to Maturity with
Government Securities)
4.25%, 02/01/96 2,150 2,190
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1985B/
(Escrowed to Maturity with
Government Securities)
3.70%, 02/01/96 10,000 10,198
San Antonio, Texas
Electric & Gas Revenue
Refunding Bonds
Series 1991A
4.25%, 02/01/96 3,000 3,004
Trinity River Authority,
Texas Regional
Wastewater System
Revenue Refunding Bonds
Series A/ (AMBAC
Insurance)
3.80%, 08/01/96 1,500 1,504
University of Texas
Constitutional
Appropriation Revenue
Bonds Series 1995(d)
3.50%, 08/15/96 1,115 1,118
------
42,063
------
VIRGINIA--0.0%
Henrico County, Virginia
Water & Sewer Revenue
Refunding Bonds
Series 1986/
(Escrowed to Maturity with
Government Securities)
3.70%, 05/01/96 1,055 1,090
------
WASHINGTON--0.0%
Seattle, Washington
Municipal Metropolitan
Seattle Sewer Revenue
Bonds Series 1988R2/
(Escrowed to Maturity with
Government Securities)
3.70%, 01/01/96 750 765
-------
WISCONSIN--0.1%
Wisconsin State
Clean Water Revenue Bonds
Series 1991-1
3.70%, 06/01/96 1,690 1,704
-------
TOTAL REVENUE BONDS (Cost $144,497)
144,497
-------
TAX ANTICIPATION NOTES--0.8%(b)
NEW YORK--0.2%
New York City, New York
Tax Anticipation Notes
Series 1995-1996A
3.60%, 02/15/96 4,500 4,505
South Huntington, New York
Unified School District
Tax Anticipation Notes
Series 1995-1996
3.64%, 06/28/96 3,850 3,861
-------
8,366
-------
OREGON--0.4%
Lane County, Oregon Tax
Anticipation Notes Series
1995-1996
3.88%, 06/28/96 3,500 3,510
Multnomah County, Oregon
School District Number 1J
Portland Tax Anticipation
Notes
3.65%, 05/30/96 10,500 10,546
-------
14,056
-------
SOUTH CAROLINA--0.2%
Charleston County, South
Carolina School District
Tax Anticipation Notes
Series 1995-1996
3.75%, 04/15/96 8,300 8,317
-------
TOTAL TAX ANTICIPATION NOTES (Cost
$30,739) 30,739
-------
TAX AND REVENUE ANTICIPATION NOTES--6.0%(b)
CALIFORNIA--3.6%
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes Series
1995A/ (MBIA Insurance)
3.75%, 07/03/96 56,500 56,774
</TABLE>
F-24
<PAGE> 64
SchwabFunds(R) 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Fullerton, California
Joint Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.80%, 11/14/96 $ 3,725 $ 3,747
Kern County, California
High School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.05%, 09/19/96 20,000 20,096
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.83%, 07/01/96 1,500 1,505
3.68%, 07/01/96 1,200 1,204
Pleasanton, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-1996
4.00%, 07/05/96 4,030 4,045
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes Series
1995-96
3.89%, 07/25/96 10,000 10,033
San Joaquin County,
California Tax and Revenue
Anticipation Notes Series
1995-1996
3.97%, 10/15/96 30,000 30,121
-------
127,525
-------
IOWA--0.7%
Iowa School Corp.
Warrant Certificates
Iowa School Cash
Anticipation Program
Series 1995A/(Capital
Guaranty Insurance)
3.85%, 06/28/96 25,000 25,106
-------
TEXAS--1.4%
Texas State Tax and Revenue
Anticipation Notes Series
1995-1996A
4.05%, 08/30/96 24,000 24,107
3.95%, 08/30/96 8,190 8,232
3.94%, 08/30/96 1,000 1,005
3.90%, 08/30/96 3,000 3,016
3.73%, 08/30/96 13,000 13,080
-------
49,440
-------
WISCONSIN--0.3%
Kenosha, Wisconsin
Tax and Revenue
Anticipation Notes
3.78%, 06/28/96 4,500 4,510
Wisconsin State Operating
Tax and Revenue
Anticipation Notes
3.50%, 06/17/96 5,000 5,021
-------
9,531
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $211,602) 211,602
-------
TAX-EXEMPT COMMERCIAL PAPER--12.4%(b)
ARIZONA--1.5%
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985B
3.80%, 02/12/96 6,450 6,450
3.85%, 02/26/96 5,000 5,000
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985C
3.85%, 02/08/96 6,250 6,250
3.50%, 02/08/96 5,500 5,500
3.80%, 02/12/96 3,100 3,100
3.75%, 02/14/96 6,450 6,450
Maricopa County, Arizona
Pollution Control
Financing Authority
Pollution Control Revenue
Bonds (Southern California
Edison Co. Palo Verde
Project) Series 1985G
3.85%, 02/26/96 4,000 4,000
Salt River, Arizona
Agricultural Improvement
Program/(Multiple Credit
Enhancements)
3.75%, 01/12/96 15,200 15,200
-------
51,950
-------
COLORADO--1.1%
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990B/ (Sumitomo
Bank LOC)
4.05%, 02/15/96 7,520 7,520
</TABLE>
F-25
<PAGE> 65
SchwabFunds(R) 26
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Denver, Colorado City and
County Airport System
Revenue Bonds (Denver
International Airport)
Series 1990C/ (Sumitomo
Bank LOC)
4.00%, 02/08/96 $15,000 $15,000
Platte River, Colorado
Power Authority
Adjustable Tender
Electric Secondary
Lien Bonds Series S-1/
(Morgan Guaranty
Trust LOC)
3.75%, 02/07/96 1,800 1,800
3.75%, 02/08/96 15,000 15,000
------
39,320
------
GEORGIA--1.5%
Burke County, Georgia
Development Authority
Pollution Control
Revenue Bonds
(Oglethorpe Power
Project) 1st Series 1989/
(Credit Suisse LOC)
3.85%, 02/08/96 4,300 4,300
3.80%, 02/08/96 2,700 2,700
3.45%, 02/08/96 1,400 1,400
3.75%, 02/15/96 7,500 7,500
3.75%, 02/26/96 2,000 2,000
3.75%, 02/27/96 11,500 11,500
3.70%, 02/27/96 22,700 22,700
------
52,100
------
KANSAS--0.4%
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987A/
(Toronto-Dominion Bank LOC)
3.75%, 02/15/96 12,150 12,150
Burlington, Kansas
Pollution Control
Revenue Refunding Bonds
(Kansas City Power &
Light) Series 1987B/
(Deutsche Bank LOC)
3.80%, 02/07/96 2,200 2,200
------
14,350
------
KENTUCKY--0.1%
Pendleton County, Kentucky
Multiple County Lease
Revenue Bonds (Kentucky
Association of Counties
Lease Program) Series
1989/ (Commonwealth Bank
of Australia LOC)
3.70%, 02/08/96 2,300 2,300
------
LOUISIANA--2.0%
Louisiana State Adjustable
Tender General Obligation
Refunding Bonds Series
1991A/(Credit Local de
France & Fuji Bank LOC)
3.85%, 02/08/96 4,275 4,275
3.80%, 02/13/96 2,500 2,500
3.75%, 02/14/96 4,745 4,745
3.80%, 02/26/96 11,000 11,000
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988B
3.65%, 02/09/96 48,900 48,900
Louisiana State Pollution
Control Revenue Refunding
Bonds (St. James
Parish/Texaco Project)
Series 1988C
3.65%, 02/09/96 1,000 1,000
------
72,420
------
MASSACHUSETTS--0.3%
Massachusetts Water
Resource Authority
Commercial Paper Series
1995/(Morgan Guaranty
Trust LOC)
3.75%, 02/22/96 9,400 9,400
------
MICHIGAN--0.9%
Michigan State Building
Authority Commercial Paper
Notes Series 1/ (Canadian
Imperial Bank of Commerce
LOC)
4.10%, 01/16/96 33,600 33,600
------
MINNESOTA--0.2%
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1988E/
(Credit Suisse SBPA)
3.70%, 02/14/96 3,100 3,100
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992A
3.75%, 02/15/96 3,000 3,000
Rochester, Minnesota
Adjustable Tender Health
Care Facility Revenue
Bonds (Mayo Foundation/
Mayo Medical Center)
Series 1992C
3.45%, 03/07/96 1,550 1,550
------
7,650
------
</TABLE>
F-26
<PAGE> 66
SchwabFunds(R) 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
NEW YORK--0.1%
New York City, New York
Municipal Water Finance
Authority Tax-Exempt
Commercial Paper/ (Credit
Suisse LOC)
3.75%, 02/08/96 $ 5,000 $ 5,000
------
NORTH CAROLINA--1.7%
North Carolina Eastern
Municipal Power Agency
Power System Revenue Bonds
Series 1988B/ (Union Bank
of Switzerland & Morgan
Guaranty Trust LOC)
3.70%, 02/07/96 20,500 20,500
3.75%, 02/26/96 5,400 5,400
North Carolina Eastern
Municipal Power Agency
Tax-Exempt Commercial
Paper/(Industrial Bank of
Japan LOC)
3.80%, 02/07/96 24,321 24,321
3.60%, 02/08/96 9,824 9,824
3.55%, 02/08/96 2,500 2,500
------
62,545
------
TEXAS--2.6%
Lower Colorado River
Authority Tax-Exempt
Commercial Paper Series
B/(Morgan Guaranty Trust
Revolving Credit Agreement
3.80%, 02/14/96 15,800 15,800
Texas Municipal Power
Agency Commercial
Paper/(Bank of America,
Canadian Imperial Bank of
Commerce & Morgan Guaranty
Trust Revolving Credit
Agreement)
3.80%, 01/11/96 49,025 49,025
Texas State Tax-Exempt
Commercial Paper Series
1995
3.35%, 08/12/96 30,000 30,000
----------
94,825
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $445,460) 445,460
----------
TOTAL INVESTMENTS--100.0%
(Cost $3,586,104) $3,586,104
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-27
<PAGE> 67
SchwabFunds(R) 28
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--52.2%(a)
ABAG Finance Authority for
Nonprofit Organizations
Certificates of
Participation
(Lucile Salter Packard
Project)/(AMBAC Insurance
& Industrial
Bank of Japan LOC)
5.00%, 01/07/96 $ 4,000 $ 4,000
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Aitchison
Family Project)
Series 1993A/
(Wells Fargo Bank LOC)
5.45%, 01/07/96 2,920 2,920
Alameda County, California
Industrial Development
Authority Industrial
Revenue Bonds (Scientific
Technology Project) Series
1994A/(Banque Nationale de
Paris LOC)
5.45%, 01/07/96 3,000 3,000
Anaheim, California
Certificates of
Participation (Anaheim
Memorial Hospital Assoc.
Project)/ (AMBAC Insurance
& Industrial Bank of
Japan SBPA)
5.30%, 01/07/96 26,820 26,820
Anaheim, California
Certificates of
Participation (Police
Facility Financing
Project)/(AMBAC Insurance
& Industrial
Bank of Japan SBPA)
5.25%, 01/07/96 1,550 1,550
Anaheim, California Housing
Authority Multi Family
Housing Revenue Bonds
(Heritage Village
Apartments Project) Series
1992A/(Multiple Credit
Enhancements)
4.70%, 01/07/96 3,385 3,385
Big Bear Lake, California
Industrial Development
Revenue Certificates of
Participation (Southwest
Gas Corp. Project) Series
A/(Union Bank of
Switzerland LOC)
5.05%, 01/07/96 12,500 12,500
California Educational
Facilities Authority
Revenue Bonds
(California Institute of
Technology) Series 1994
4.60%, 01/07/96 16,300 16,300
California Health
Facilities Financing
Authority
Revenue Bonds
(Adventist Health System--
Sutter Health)
Series 1991A/
(Toronto-Dominion Bank LOC)
4.85%, 01/07/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Childrens Hospital
Project) Series 1991/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 9,900 9,900
California Health
Facilities Financing
Authority Revenue Bonds
(Huntington Memorial
Hospital) Series 1985/
(Morgan Guaranty
Trust LOC)
4.90%, 01/07/96 9,600 9,600
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993A
4.90%, 01/07/96 8,200 8,200
California Health
Facilities Financing
Authority Revenue Bonds
(Kaiser Permanente
Project) Series 1993B
4.90%, 01/07/96 1,600 1,600
California Health
Facilities Financing
Authority Revenue Bonds
(Saint Joseph's Hospital)
Series 1985B
5.90%, 01/01/96 1,000 1,000
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1985B/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 15,120 15,120
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991A/
(MBIA Insurance &
Morgan Guaranty
Trust SBPA)
4.95%, 01/07/96 1,100 1,100
California Health
Facilities Financing
Authority Revenue Bonds
(Scripps Memorial
Hospital) Series 1991B/
(MBIA Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 13,900 13,900
</TABLE>
F-28
<PAGE> 68
SchwabFunds(R) 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Health
Facilities Financing
Authority Revenue Bonds
(St. Francis Hospital)
Series 1995F/
(MBIA Insurance &
Rabobank Nederland N.V.
SBPA)
4.85%, 01/07/96 $30,000 $30,000
California Health
Facilities Financing
Authority Revenue Bonds
Pooled Loan Program
Series 1985B/
(FGIC Insurance &
FGIC SPA)
4.95%, 01/07/96 2,000 2,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1988A/(National
Westminster Bank LOC)
5.95%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Burney Forest Products
Project) Series
1989A/(National
Westminster Bank LOC)
5.95%, 01/01/96 200 200
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Reynolds Metals Co.
Project) Series 1985/
(National Westminster Bank
LOC)
5.10%, 01/07/96 1,300 1,300
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southdown, Inc. Project)
Series B/(Societe
Generale LOC)
4.20%, 01/08/96 3,900 3,900
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986A
5.40%, 01/01/96 6,700 6,700
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986C
5.40%, 01/01/96 100 100
California Pollution
Control Financing
Authority Pollution
Control Revenue Bonds
(Southern California
Edison) Series 1986D
5.40%, 01/01/96 1,300 1,300
California Pollution
Control Financing
Authority Resource
Recovery Revenue Bonds
(Sanger Project) Series
1990A/ (Credit Suisse LOC)
5.05%, 01/07/96 9,200 9,200
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Athens Disposal Company
Project) Series 1995A/
(Wells Fargo Bank LOC)
5.20%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Burrtec Waste Industries
Project) Series 1995A/
(Union Bank LOC)
5.25%, 01/07/96 4,000 4,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990A/ (Swiss Bank
LOC)
5.05%, 01/07/96 12,900 12,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990B/ (Swiss Bank
LOC)
5.05%, 01/07/96 8,900 8,900
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Colmac Energy Project)
Series 1990C/ (Swiss Bank
LOC)
5.05%, 01/07/96 10,000 10,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Contra Costa Services)
Series 1995A/ (Bank of
America LOC)
5.15%, 01/07/96 4,500 4,500
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Shell Oil Co. Martinez
Project) Series 1994A
6.05%, 01/01/96 1,000 1,000
California Pollution
Control Financing
Authority Solid Waste
Disposal Revenue Bonds
(Taormina Industries
Project) Series
1994B/(Sanwa
Bank LOC)
5.40%, 01/07/96 11,000 11,000
</TABLE>
F-29
<PAGE> 69
SchwabFunds(R) 30
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Statewide
Community Development
Authority Apartment
Development Revenue Bonds
Series 1995-A3/ (FNMA LOC)
4.90%, 01/07/96 $10,000 $10,000
California Statewide
Community Development
Authority Hospital Revenue
Bonds Certificates of
Participation (Sutter
Health Obligation Group)/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.90%, 01/01/96 1,100 1,100
California Statewide
Community Development
Authority Revenue
Bonds Certificates of
Participation (Kaiser
Foundation Hospitals)
4.90%, 01/07/96 10,000 10,000
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (13th I
Associates Project)/
(Union Bank LOC)
5.30%, 01/07/96 5,540 5,540
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (ARM Inc. Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 675 675
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Aerostar
Properties Project)/
(Union Bank LOC)
5.40%, 01/07/96 5,095 5,095
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Agricultural Products
Inc. Project)/ (Union Bank
LOC)
5.55%, 01/07/96 1,440 1,440
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Development Industries)
Series 1994A/ (Bank of
Tokyo LOC)
5.35%, 01/07/96 1,640 1,640
California Statewide
Community Development
Corp. Industrial
Development Revenue Bonds
(Industrial Dynamics Co.
Project)/ (Union Bank LOC)
5.55%, 01/07/96 5,190 5,190
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Lorber Industries
of California Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,050 1,050
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific
Handy Cutter
Products Project)/
(Union Bank LOC)
5.55%, 01/07/96 1,210 1,210
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Pacific Scientific
Project) Series 1989/
(Bank of California LOC)
5.25%, 01/07/96 5,125 5,125
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Packaging
Innovation Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 2,440 2,440
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (The Diamond
Foods Project)
Series 1991/
(Union Bank LOC)
5.55%, 01/07/96 1,465 1,465
California Statewide
Community Development
Corp. Industrial
Development Revenue
Bonds (Z-Nix Co., Inc.
Project)/(Union Bank LOC)
5.55%, 01/07/96 920 920
California Statewide
Community Development
Corp. Revenue
Bonds (ORA
Real Estate Project)
Series 1995D/
(Union Bank LOC)
5.35%, 01/07/96 3,000 3,000
</TABLE>
F-30
<PAGE> 70
SchwabFunds(R) 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Carlsbad, California Multi
Family Housing Revenue
Refunding Bonds
Certificates of
Participation (La Costa
Apartment Project) Series
1993A/ (Bank of America
LOC)
4.80%, 01/07/96 $ 4,920 $ 4,920
Concord, California Multi
Family Housing Mortgage
Revenue Bonds (Bel Air
Apartments Project)
Series 1986A/
(Bank of America LOC)
5.00%, 01/07/96 3,000 3,000
Contra Costa, California
Multi Family Housing
Mortgage Revenue Bonds (El
Cerrito Project) Series A/
(Bank of America LOC)
5.00%, 01/07/96 980 980
Contra Costa, California
Transportation Authority
Sales Tax Revenue Bonds
Series 1993A/
(FGIC Insurance &
FGIC SPA)
4.90%, 01/07/96 30,300 30,300
Duarte, California
Redevelopment Agency
Certificates of
Participation (Johnson
Duarte Partners Project)
Series 1984B/ (Bank of
America LOC)
4.90%, 01/07/96 1,600 1,600
Duarte, California
Redevelopment Agency
Certificates of
Participation (Piken
Duarte Partners Project)
Series 1984A/ (Bank of
America LOC)
4.90%, 01/07/96 4,250 4,250
Emeryville, California
Redevelopment Agency Multi
Family Housing Revenue
Bonds (Emery Bay
Apartments II Project)
Series 1991A/
(Bank of America LOC)
4.90%, 01/07/96 6,000 6,000
Encinitas, California Multi
Family Housing Revenue
Refunding Bonds
(Torrey Pines Project)
Series A/
(Bank of America LOC)
4.80%, 01/07/96 8,100 8,100
Foothill Eastern
Transportation Corridor
Agency, California Toll
Road Revenue Bonds
Series 1995D/
(Industrial Bank of
Japan LOC)
5.00%, 01/07/96 1,000 1,000
Fremont, California Multi
Family Housing Revenue
Refunding Certificates of
Participation (Amber Court
Apartments Project)
Series 1990A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 10,380 10,380
Fresno, California Multi
Family Mortgage Revenue
Bonds (Oak Cornelia
Apartments Project) Series
1985A/(First Interstate
Bank of California LOC)
5.10%, 01/07/96 25,265 25,265
Glenn, California
Industrial Development
Authority Revenue Bonds
(Land 'O Lakes Project)/
(Sanwa Bank LOC)
5.60%, 01/07/96 1,900 1,900
Grand Terrace, California
Community Redevelopment
Agency Multi Family
Housing Revenue Bonds
(Mount Vernon Villas
Project) Series 1985A/
(Industrial Bank of
Japan LOC)
5.20%, 01/07/96 1,865 1,865
Irvine Ranch, California
Water District
Consolidated District
Numbers 102,103,105,106
Revenue Refunding Bonds/
(Commerzbank AG LOC)
5.90%, 01/01/96 4,300 4,300
Irvine Ranch, California
Water District
Consolidated District
Numbers 105,250,290
Revenue Refunding Bonds
Series 1991/(National
Westminster Bank LOC)
5.90%, 01/01/96 1,200 1,200
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-2/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 100 100
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985A-3/ (Sumitomo Bank
LOC)
5.90%, 01/01/96 1,400 1,400
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding Bonds Series
1985B-1/ (Sumitomo Bank
LOC)
6.10%, 01/01/96 100 100
</TABLE>
F-31
<PAGE> 71
SchwabFunds(R) 32
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Irvine Ranch, California
Water District
Consolidated Revenue
Refunding
Bonds Series 1993A/
(Bank of America LOC)
6.00%, 01/01/96 $1,200 $1,200
Irvine, California
Improvement Bond Act 1915
Revenue Bonds (Special
Assessment District
No. 94-15)/(Dai-Ichi
Kangyo Bank LOC)
5.90%, 01/01/96 500 500
Kern County, California
Certificates of
Participation (Kern Public
Facilities Project)
Series A/
(Sanwa Bank LOC)
4.85%, 01/07/96 200 200
Lancaster, California
Redevelopment Agency Multi
Family Revenue Bonds
(Woodcreek Garden
Apartments Project) Series
1985J/ (Bank of Tokyo LOC)
5.10%, 01/07/96 8,400 8,400
Livermore, California Multi
Family Housing Revenue
Refunding Bonds (Arbors
Apartment Project)
Series 1991A/
(Bank of Tokyo LOC)
5.30%, 01/07/96 9,255 9,255
Livermore, California Multi
Family Housing Revenue
Refunding Bonds
(Diablo Vista
Apartments Project)
Series 1990A/
(Union Bank LOC)
5.30%, 01/07/96 6,950 6,950
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985A/
(Bank of America LOC)
4.85%, 01/07/96 3,800 3,800
Los Angeles County,
California Certificates of
Participation Adjustable
Convertible Extendable
Securities (Los Angeles
County Museum of
Art Project)
Series 1985B/
(Bank of America LOC)
4.85%, 01/07/96 3,500 3,500
Los Angeles County,
California Metropolitan
Transportation Authority
General Revenue Bonds
(Union Station Project)
Series 1985A/
(FSA Insurance &
Societe Generale SBPA)
4.75%, 01/07/96 33,100 33,100
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Casden Community
Complex) Series 1991C/
(FHLB LOC)
4.80%, 01/07/96 3,200 3,200
Los Angeles County,
California Multi Family
Mortgage Revenue Refunding
Bonds (Valencia Village
Project) Series 1984C/
(Industrial Bank of Japan
LOC)
5.35%, 01/07/96 900 900
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Refunding Bonds
Series 1992A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 9,700 9,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Baldwin
Hills Public Parking
Project) Series B/
(Wells Fargo Bank LOC)
4.85%, 01/07/96 10,700 10,700
Los Angeles, California
Community Redevelopment
Agency Certificates of
Participation (Broadway
Springs Center Project)
Series 1987/
(Bank of America LOC)
4.90%, 01/07/96 10,900 10,900
Los Angeles, California
Multi Family Housing
Revenue Bonds (Poinsettia
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.35%, 01/07/96 9,600 9,600
Marin County, California
Housing Authority
Multi Family Housing
Revenue Bonds
(Crest Marin II
Apartments Project)
Series 1989A/
(Dai-Ichi Kangyo
Bank LOC)
5.45%, 01/07/96 7,200 7,200
</TABLE>
F-32
<PAGE> 72
SchwabFunds(R) 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Modesto, California
High School District and
Modesto City School
District Certificates of
Participation (Capital
Facilities Project)
Series 1991/
(Mitsubishi Bank LOC)
5.00%, 01/07/96 $3,700 $3,700
Monterey County, California
Financing Authority
Revenue Bonds (Reclamation
& Distribution Projects)/
(Dai-Ichi Kangyo
Bank LOC)
5.30%, 01/07/96 5,000 5,000
Moorpark, California Multi
Family Housing Revenue
Refunding Bonds (Le Club
Apartments Project) Series
A/(Citibank LOC)
4.80%, 01/07/96 6,000 6,000
Oakland, California
Economic Development
Revenue Refunding Bonds
(Leamington Hotel Project)
Series 1994A/ (First
Interstate Bank of
California LOC)
4.90%, 01/07/96 4,250 4,250
Oakland, California Health
Facilities Revenue Bonds
Certificates of
Participation (Children's
Hospital Project) Series
1988A/ (Banque Nationale
de Paris LOC)
4.95%, 01/07/96 3,300 3,300
Ontario, California
Redevelopment Agency Multi
Family Housing Revenue
Refunding Bonds
Series 1991A/
(FHLB LOC)
4.80%, 01/07/96 4,492 4,492
Orange County, California
Apartment Development
Revenue Refunding Bonds
(Jess L. Frost Project)
Series 1985B/
(Wells Fargo Bank LOC)
5.40%, 01/07/96 8,200 8,200
Orange County, California
Certificates of
Participation (Florence
Crittenton Services
Project) Series 1990/
(Swiss Bank LOC)
5.00%, 01/07/96 6,900 6,900
Orange County, California
Municipal Water District
Water Facilities Corp.
Certificates of
Participation/
(Barclays Bank &
National Westminster
Bank LOC)
5.20%, 01/07/96 31,225 31,225
Orange County, California
Various Sanitation
Districts Certificates of
Participation (Capital
Improvement Programs)
Series 1990-92C/
(FGIC Insurance &
FGIC SPA)
6.00%, 01/01/96 7,800 7,800
Orange County, California
Various Sanitation
Districts Certificates of
Participation Series
1990-92A/
(National Westminster
Bank LOC)
5.90%, 01/01/96 12,500 12,500
Orange County, California
Water District
Certificates of
Participation Sanitation
Districts #1,2,3/
(AMBAC Insurance &
Industrial Bank of
Japan SBPA)
5.05%, 01/07/96 11,600 11,600
Panama Buena Vista,
California Unified School
District Certificates of
Participation (1994
Capital Improvement
Financing Project)/(Bank
of California LOC)
5.45%, 01/07/96 4,000 4,000
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985A/
(Sanwa Bank LOC)
4.80%, 01/07/96 8,800 8,800
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985B/
(Sanwa Bank LOC)
5.00%, 01/07/96 100 100
Riverside County,
California Certificates of
Participation (Riverside
County Public
Facility Project)
Series 1985C/
(Sanwa Bank LOC)
5.00%, 01/07/96 5,600 5,600
</TABLE>
F-33
<PAGE> 73
SchwabFunds(R) 34
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Riverside County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Briarwood Apartment
Project) Series 1985C/
(FHLB LOC)
5.15%, 01/07/96 $ 4,500 $ 4,500
Riverside County,
California
Industrial Development
Authority Revenue Bonds
(Cryogenic Project) Series
1989B-1/ (Rabobank
Nederland N.V. LOC)
5.05%, 01/07/96 4,100 4,100
Sacramento County,
California Certificates of
Participation
(Administration
Center & Court House
Project)/(Union Bank of
Switzerland LOC)
4.75%, 01/07/96 28,200 28,200
Salinas, California
Apartment Development
Multi Family Housing
Revenue Bonds (Mariner
Villa Project)
Series 1985B/
(Bank of America LOC)
4.80%, 01/07/96 2,725 2,725
San Bernardino County,
California Certificates of
Participation (Glen Helen
Blockbuster Project)
Series 1994C/
(Mitsubishi Bank LOC)
5.50%, 01/07/96 7,255 7,255
San Bernardino County,
California Multi Family
Housing Revenue Bonds
(Western Properties
Project IV) Series 1985/
(Bank of America LOC)
4.55%, 01/07/96 1,100 1,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-1/ (Citibank LOC)
5.30%, 01/07/96 26,500 26,500
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series A-2/ (Citibank LOC)
5.30%, 01/07/96 3,750 3,750
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue Bonds
(Fillmore Center Project)
Series B-2/
(Bank of Nova Scotia LOC)
5.15%, 01/07/96 13,100 13,100
San Francisco, California
City and County
Redevelopment Agency Multi
Family Revenue
Bonds (Rincon
Center Apartments)
Series 1985B/
(Citibank LOC)
5.30%, 01/07/96 5,705 5,705
San Francisco, California
Housing Authority Multi
Family Housing Revenue
Bonds (737 Post Project)
Series 1985D/
(Banque Nationale de
Paris LOC)
4.95%, 01/07/96 16,800 16,800
San Jose/Santa Clara,
California Water Financing
Authority Sewer Revenue
Bonds Series B/
(AMBAC Insurance &
Bank of Nova Scotia LOC)
4.75%, 01/07/96 7,600 7,600
San Mateo County,
California Certificates of
Participation (Capital
Projects) Series 1985B/
(Swiss Bank LOC)
4.75%, 01/07/96 3,145 3,145
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985A/(National
Westminster Bank LOC)
4.85%, 01/07/96 7,900 7,900
Santa Clara County,
California El Camino
Hospital District Hospital
Facility Authority Revenue
Bonds (Valley Medical
Center Project) Series
1985B/(National
Westminster Bank LOC)
4.85%, 01/07/96 8,100 8,100
Santa Clara, California
Electric Revenue Bonds
Series 1985A/(National
Westminster Bank LOC)
4.90%, 01/07/96 13,300 13,300
Santa Clara, California
Electric Revenue Bonds
Series 1985B/(National
Westminster Bank LOC)
4.90%, 01/07/96 12,100 12,100
Santa Clara, California
Electric Revenue Bonds
Series 1985C/(National
Westminster Bank LOC)
4.90%, 01/07/96 8,800 8,800
</TABLE>
F-34
<PAGE> 74
SchwabFunds(R) 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Santa Cruz County,
California Housing
Authority Multi Family
Housing Revenue Bonds
(Paloma del Mar Apartments
Project) Series 1992A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 $ 7,700 $ 7,700
Simi Valley, California
Multi Family Housing
Certificates of
Participation
(Lincoln Wood
Ranch Project)/ (Sumitomo
Bank LOC)
5.30%, 01/07/96 5,600 5,600
South San Francisco,
California Multi Family
Revenue Bonds
(Magnolia Plaza Apartments
Project) Series A/
(Wells Fargo Bank LOC)
5.35%, 01/07/96 4,500 4,500
Southern California Public
Power Authority
Transmission Revenue Bonds
(Southern Transmission
Project) Series 1991/
(AMBAC Insurance &
Swiss Bank SBPA)
4.75%, 01/07/96 21,000 21,000
Vallejo, California
Commercial Development
Revenue Bonds
(Vallejo Center
Association Project)
Series 1994A/
(Bank of Tokyo LOC)
5.35%, 01/07/96 900 900
Victor, California
Elementary School District
Certificates of
Participation
(School Construction
Financing
Project)/(National
Westminster Bank LOC)
5.30%, 01/07/96 4,000 4,000
Visalia, California
Public Building Authority
Certificates of
Participation
(Convention Center
Expansion
Project) Series 1991/
(Bank of California LOC)
5.35%, 01/07/96 1,000 1,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $874,397) 874,397
-------
VARIABLE RATE TENDER
OPTION BONDS--0.2%(A)
Southern California Rapid
Transit District,
California Certificates of
Participation Short Mode
Tender Option
Bonds (BT-9)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 4,200 4,200
------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $4,200) 4,200
------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS--5.4%(a)(c)
California State
Department of
Water Resources Revenue
Bonds (Central Valley
Project) Series J3
Tender Option Bond
Partnership (BTP-141)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 5,155 5,155
California State Revenue
Anticipation Warrants
Series 1994C Tender
Option Bond Partnership
(BTP-150)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 10,000 10,000
California State Revenue
Anticipation Warrants
Series C Tender Option
Bond Partnership
(BTP-96)/(Multiple
Credit Enhancements &
Bankers Trust
Tender Option)
5.30%, 01/07/96 18,465 18,465
Los Angeles County,
California Transportation
Commission Sales Tax
Revenue Tender Option
Bond Partnership
(BTP-146)/(Bankers
Trust Tender Option &
Escrowed to Maturity with
Government Securities)
5.15%, 01/07/96 23,078 23,078
Los Angeles, California
Department of Water &
Power Electric Plant
Revenue Refunding Bonds
Series 1994 Tender Option
Bond Partnership
(BTP-68)/(Automatic
Data Processing, Inc.
Tender Option)
4.37%, 01/07/96 5,195 5,195
</TABLE>
F-35
<PAGE> 75
SchwabFunds(R) 36
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
Metropolitan Water District
of Southern California
Waterworks General
Obligation Revenue
Refunding Bonds Series
1993A1 and
1993A2 Tender Option
Bond Partnership
(BTP-115)/
(Bankers Trust
Tender Option)
5.15%, 01/07/96 $10,145 $10,145
San Diego County,
California Regional
Transportation Commission
Sales Tax Tender Option
Bonds Partnership
(BTP-135)/
(FGIC Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 2,000 2,000
Southern California Public
Power Authority Power
Project Class A
Tender Option
Bond Partnership (BTP-90)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,290 8,290
Southern California Rapid
Transit District
Certificates of
Participation (Workers
Compensation Funding
Program) Tender Option
Bond Partnership
(BTP-163)/
(MBIA Insurance &
Bankers Trust
Tender Option)
3.00%, 01/07/96 8,710 8,710
------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS
(Cost $91,038) 91,038
------
CERTIFICATES OF PARTICIPATION--2.0%(b)
Desert Sands, California
Unified School District
Certificates of
Participation (Measure O
Project) Series B/
(Escrowed to Maturity with
Government Securities)
2.60%, 03/01/96 10,000 10,257
San Jose, California
Certificates of
Participation
(Convention Center Project)/
(Escrowed to Maturity with
Government Securities)
3.73%, 09/01/96 12,500 13,080
San Mateo, California
Redevelopment Agency
Certificates of
Participation Revenue
Refunding Bonds (Bridge
and Water
Pumping Station)/
(Escrowed to Maturity with
Government Securities)
3.67%, 08/01/96 9,305 9,721
------
TOTAL CERTIFICATES OF PARTICIPATION
(Cost $33,058) 33,058
------
REVENUE ANTICIPATION WARRANTS--2.2%(b)
California State Revenue
Anticipation Warrants
Series C/(FGIC Insurance)
4.61%, 04/25/96 35,900 36,099
------
TOTAL REVENUE ANTICIPATION WARRANTS
(Cost $36,099) 36,099
------
REVENUE BONDS--0.3%(b)
Santa Clara Valley Water
District, California
Revenue Refunding Bonds/
(Escrowed to Maturity with
Government Securities)
3.55%, 06/01/96 1,000 1,009
Southern California Public
Power Authority Revenue
Bonds (Southern California
Public Power
Transmission Project)/
(Escrowed to Maturity with
Government Securities)
3.50%, 07/01/96 3,575 3,756
------
TOTAL REVENUE BONDS
(Cost $4,765) 4,765
------
SPECIAL TAX BONDS--0.1%(b)
South Poway, California
Community Facility
District No. 1 Special Tax
(Pomerado Business Park)
Series 1985A/
(Escrowed to Maturity with
Government Securities)
3.80%, 03/02/96 1,000 1,039
------
TOTAL SPECIAL TAX BONDS
(Cost $1,039) 1,039
------
</TABLE>
F-36
<PAGE> 76
SchwabFunds(R) 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
TAX AND REVENUE
ANTICIPATION
NOTES--17.3%(b)
Berkeley, California
Tax and Revenue
Anticipation Notes
Series 1995-1996
3.95%, 07/17/96 $10,500 $10,543
California School Cash
Reserve Program Authority
Pooled Tax and Revenue
Anticipation Notes
Series 1995A/
(MBIA Insurance)
3.95%, 07/03/96 2,800 2,811
3.86%, 07/03/96 25,000 25,102
3.85%, 07/03/96 225 226
3.75%, 07/03/96 40,000 40,194
Desert Sands, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 10,000 10,024
East Side Unified High
School District
Santa Clara County
California Tax and Revenue
Anticipation Notes
4.00%, 10/10/96 8,000 8,030
Elk Grove, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/31/96 10,400 10,429
Fremont, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 07/11/96 13,000 13,034
Fresno, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 06/28/96 19,900 19,947
Livermore, California
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/10/96 4,600 4,612
Los Angeles County,
California Tax and Revenue
Anticipation Notes Series
1995-96/(Multiple Credit
Enhancements)
3.87%, 07/01/96 7,260 7,281
3.82%, 07/01/96 10,000 10,031
3.80%, 07/01/96 1,000 1,003
3.70%, 07/01/96 5,000 5,018
3.68%, 07/01/96 10,000 10,037
Marin County, California
Tax and Revenue
Anticipation Notes
Series 1995-96
3.85%, 07/03/96 37,000 37,161
Mountain View, California
School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 2,000 2,005
Mountain View/Los Altos,
California Unified
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
4.00%, 07/05/96 4,200 4,210
Oxnard, California Unified
High School District
(Ventura County)
Tax and Revenue
Anticipation Notes
Series 1995-96
3.90%, 10/11/96 5,500 5,535
San Diego County,
California Tax and Revenue
Anticipation Notes
3.76%, 09/30/96 2,000 2,011
San Francisco, California
Unified School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.89%, 07/25/96 40,000 40,131
Santa Rosa, California
High School District
Tax and Revenue
Anticipation Notes
Series 1995-96
3.95%, 09/27/96 10,000 10,057
Sutter County, California
Office of Education
Tax and Revenue
Anticipation Notes
Series 1995-96
4.05%, 09/14/96 10,000 10,030
-------
TOTAL TAX AND REVENUE ANTICIPATION
NOTES
(Cost $289,462) 289,462
-------
TAX-EXEMPT COMMERCIAL PAPER--20.3%(b)
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988A/
(Swiss Bank LOC)
3.75%, 01/11/96 6,200 6,200
3.75%, 02/07/96 5,000 5,000
3.65%, 02/08/96 3,975 3,975
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988B/
(Sumitomo Bank LOC)
3.65%, 02/08/96 58,700 58,700
3.60%, 03/07/96 17,600 17,600
</TABLE>
F-37
<PAGE> 77
SchwabFunds(R) 38
- --------------------------------------------------------------------------------
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- ----------
<S> <C> <C>
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988C/
(Credit Suisse LOC)
3.70%, 01/10/96 $ 5,500 $ 5,500
3.75%, 02/07/96 1,000 1,000
3.70%, 02/07/96 6,800 6,800
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988D/
(Bank of Tokyo LOC)
3.95%, 01/10/96 4,350 4,350
3.60%, 02/08/96 3,495 3,495
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Pacific Gas & Electric)
Series 1988F/
(Banque Nationale de Paris
LOC)
4.25%, 01/09/96 10,000 10,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985A
3.65%, 02/07/96 900 900
3.65%, 02/08/96 12,000 12,000
California Pollution
Control Financing
Authority Pollution
Control
Revenue Bonds
(Southern California
Edison)
Series 1985B
3.65%, 02/07/96 800 800
3.65%, 02/08/96 14,000 14,000
California Pollution
Control Financing
Authority
Solid Waste Disposal
Revenue Bonds
(Thermal Energy
Development LP) Series
1988A/(National
Westminster Bank LOC)
3.55%, 02/08/96 35,000 35,000
East Bay Municipal Utility
District, California
(Wastewater Systems)
Tax-Exempt Commercial
Paper/(National
Westminster Bank LOC)
3.65%, 01/12/96 10,700 10,700
Long Beach, California
Harbor Revenue Commercial
Paper Notes Series
1994A/(Multiple Credit
Enhancements)
3.50%, 02/06/96 20,000 20,000
3.45%, 02/09/96 4,000 4,000
Los Angeles County,
California Department of
Water and Power Electric
Plant Short Term
Revenue Bonds
3.65%, 01/12/96 7,000 7,000
Los Angeles County,
California Transportation
Commission Second
Subordinate Sales Tax
Revenue Bonds
Series A/(Multiple
Credit Enhancements)
3.75%, 01/11/96 6,100 6,100
Los Angeles, California
Wastewater System Tax-
Exempt Commercial Paper
3.65%, 01/12/96 10,000 10,000
Metropolitan Water District
of Southern California
Tax-Exempt Commercial
Paper
3.75%, 02/21/96 10,000 10,000
Orange County, California
Local Transportation
Authority Sales Tax
Revenue Commercial
Paper Notes/
(Industrial Bank of
Japan LOC)
3.75%, 01/11/96 8,000 8,000
3.70%, 01/11/96 3,000 3,000
3.65%, 02/08/96 52,200 52,200
Sacramento, California
Municipal Utility District
Tax-Exempt Commercial
Paper Series I/
(Bank of America &
Morgan Guaranty
Trust LOC)
3.75%, 02/08/96 2,133 2,133
West and Central Basin
Financing Authority
West Basin
Municipal Water District
Tax-Exempt Commercial
Paper Notes/
(Toronto-Dominion Bank
LOC)
3.75%, 01/24/96 7,500 7,500
3.50%, 02/09/96 14,000 14,000
--------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $339,953) 339,953
-------
TOTAL INVESTMENTS--100.0%
(Cost $1,674,011) $1,674,011
=========
</TABLE>
See accompanying Notes to Schedules of Investments.
F-38
<PAGE> 78
SchwabFunds(R) 39
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--59.9%(a)
Albany, New York Industrial
Development Agency
Adjustable Revenue Bonds
(Newkirk Products, Inc.)
Series 1995A/
(Fleet Bank of
New York LOC)
5.15%, 01/04/96 $1,000 $1,000
Babylon, New York Variable
Rate General Obligation Bonds
Series B/(Bank of Nova
Scotia SBPA &
AMBAC Insurance)
4.90%, 01/07/96 2,000 2,000
Cortland County, New York
Industrial Development Agency
Revenue Bonds (General Signal
Corp. Project) Series 1983/
(Wachovia Bank LOC)
4.85%, 01/07/96 1,750 1,750
Erie County, New York Water
Authority Revenue Bonds
Series 1993B/
Industrial Bank of
Japan SBPA &
AMBAC Insurance)
5.10%, 01/07/96 1,400 1,400
Franklin County, New York
Industrial Development Agency
Revenue Bonds
(Kes Chateaugay LP
Project) Series A/
(Bank of Tokyo LOC)
5.20%, 01/07/96 3,000 3,000
Geneva, New York
Industrial Development
Agency Civic Facility
Revenue Bonds
(Colleges of The Seneca)
Series 1993A/
(Sumitomo Bank LOC)
5.10%, 01/07/96 2,500 2,500
Monroe County, New York
Industrial Development Agency
Revenue Bonds (ENBI Corp.
Lease Rent Project)
Series 1988/
(ABN-AMRO Bank LOC)
4.95%, 01/07/96 2,000 2,000
New Rochelle, New York
Industrial Development
Authority Revenue Bonds (Chas
Sadek Import Corp.)/ (Bank of
New York LOC)
5.15%, 01/07/96 5,500 5,500
New York City, New York
General Obligation
Bonds Series 1992B/
(FGIC Insurance)
5.00%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1993
Subseries A-8B/
(Sanwa Bank LOC)
5.95%, 01/01/96 385 385
New York City, New York
General Obligation
Bonds Series 1993
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/01/96 1,000 1,000
New York City, New York
General Obligation
Bonds Series 1994
Subseries B-4/(Union
Bank of Switzerland LOC)
5.00%, 01/07/96 700 700
New York City, New York
General Obligation
Bonds Series 1994B
Subseries B-4/
(MBIA Insurance &
National Westminster
Bank SBPA)
5.90%, 01/01/96 100 100
New York City, New York
General Obligation
Bonds Series 1995B
Subseries B-2/
(Bank Austria AG SBPA &
MBIA Insurance)
5.90%, 01/01/96 1,900 1,900
New York City, New York
Housing Development Corp.
Mortgage Revenue Multi Family
Housing Revenue Bonds
(Columbus Gardens Project)
Series 1993A/ (Citibank LOC)
4.75%, 01/07/96 3,500 3,500
New York City, New York
Housing Development Corp.
Variable Rate Demand
Special Obligation Revenue
Bonds (East 96th Street
Project) Series 1990A/
(Mitsubishi Bank LOC)
5.10%, 01/07/96 9,700 9,700
New York City, New York
Industrial Development Agency
Floating Rate
Revenue Bonds
(White Plains Auto)/
(Societe Generale LOC)
5.15%, 01/07/96 300 300
</TABLE>
F-39
<PAGE> 79
SchwabFunds(R) 40
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994C/
(FGIC Insurance)
5.90%, 01/01/96 $1,200 $1,200
New York City, New York
Municipal Water Finance
Authority Water & Sewer
System Revenue Bonds
Series 1994G/
(FGIC SPA &
FGIC Insurance)
5.90%, 01/01/96 2,100 2,100
New York City, New York
Municipal Water Finance
Authority Water and Sewer
System Revenue Bonds
Series 1995A/
(FGIC Insurance)
5.50%, 01/01/96 2,000 2,000
New York City, New York
Various Rate General
Obligation Bonds Series
1995B1 Subseries B-8/
(Mitsubishi Bank LOC)
5.35%, 01/07/96 700 700
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.90%, 01/07/96 7,000 7,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993A/
(Toronto-Dominion
Bank LOC)
5.00%, 01/07/96 2,000 2,000
New York State Energy Research
& Development Authority
Electric Facilities
Adjustable Rate Revenue Bonds
(Long Island
Lighting Co. Project)
Series 1993B/
(Toronto-Dominion
Bank LOC)
5.05%, 01/07/96 6,000 6,000
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds (Orange &
Rockland Utilities, Inc.
Project) Series 1994A/ (FGIC
Insurance &
Societe Generale SBPA)
4.90%, 01/07/96 9,100 9,100
New York State Energy Research
& Development Authority
Pollution Control Refunding
Revenue Bonds/ (Union Bank of
Switzerland LOC)
5.30%, 01/07/96 1,900 1,900
New York State Energy Research
& Development Authority
Pollution Control Revenue
Bonds (Central Hudson Gas &
Electric Corp. Project)
Series 1985A/
(J. P. Morgan Delaware LOC)
5.00%, 01/07/96 4,300 4,300
New York State Housing Finance
Agency Revenue Bonds (East
84th Street Project)
Series 1995A/
(Fleet Bank of
New York LOC)
5.10%, 01/07/96 5,000 5,000
New York State Housing Finance
Agency Variable Rate Housing
Revenue Bonds (Hospital
Special Surgery Staff)
Series 1985A/
(Sakura Bank LOC)
4.70%, 01/07/96 6,700 6,700
New York State Housing Finance
Agency Variable Rate Multi
Family Housing Revenue Bonds
(Normandie Court II)
Series 1987A/
(Bankers Trust Co. LOC)
4.95%, 01/07/96 2,900 2,900
New York State Housing Finance
Agency Variable
Rate Revenue Bonds
(Mount Sinai School of
Medicine) Series 1984A/
(Sanwa Bank LOC)
4.70%, 01/07/96 5,900 5,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1994B/
(Credit Suisse &
Swiss Bank LOC)
4.95%, 01/07/96 6,900 6,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995F/(Toronto-
Dominion Bank LOC)
5.05%, 01/07/96 1,900 1,900
New York State Local
Government Assistance
Corp. Revenue Bonds
Series 1995G/(National
Westminster Bank LOC)
4.90%, 01/07/96 1,100 1,100
</TABLE>
F-40
<PAGE> 80
SchwabFunds(R) 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
Niagara County, New York
Industrial Development Agency
Revenue Bonds (Allegheny
Ludlum Steel Company)
Series 1984/
(PNC Bank LOC)
5.00%, 01/07/96 $3,500 $3,500
Niagara Falls, New York Bridge
Commission Revenue Bonds
Series 1993A/
(FGIC Insurance &
Industrial Bank of
Japan SBPA)
5.10%, 01/07/96 3,400 3,400
Port Authority, New York and
New Jersey Special Obligation
Revenue Bonds Series 1993/
(Deutsche Bank LOC)
5.10%, 01/07/96 4,000 4,000
Puerto Rico--Puerto Rico
Government Development
Bank Revenue
Refunding Bonds
Series 1985/
(Credit Suisse LOC)
4.50%, 01/07/96 5,000 5,000
Schenectady, New York
Industrial Development Agency
Industrial Development
Revenue Bonds (Fortitech
Holding Corp. Project)
Series A/
(Fleet Bank of
New York LOC)
5.15%, 01/07/96 1,500 1,500
St. Lawrence County, New York
Industrial Development Agency
Environmental Improvement
Revenue
Bonds (Reynolds Metals
Project) Series 1995/
(Royal Bank of Canada LOC)
5.00%, 01/07/96 4,000 4,000
Triborough Bridge and Tunnel
Authority, New York Special
Obligation Bridge Revenue
Bonds Series 1994/
(FGIC SPA &
FGIC Insurance)
4.90%, 01/07/96 2,700 2,700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1989/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 1,500 1,500
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1991/
(Industrial Bank of
Japan LOC)
5.30%, 01/07/96 700 700
Yonkers, New York Industrial
Development Agency Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project) Series 1994/ (AMBAC
Insurance &
Credit Local de
France SBPA)
4.95%, 01/07/96 1,100 1,100
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $130,935) 130,935
-------
VARIABLE RATE TENDER
OPTION BONDS--1.9%(a)
New York City, New York
General Obligation Bonds
(Citi-1I)/(AMBAC Insurance,
Escrowed to Maturity with
Government Securities &
Citibank Tender Option)
5.29%, 01/07/96 4,100 4,100
-------
TOTAL VARIABLE RATE TENDER OPTION
BONDS (Cost $4,100) 4,100
-------
VARIABLE RATE TENDER
OPTION BOND
PARTNERSHIPS--2.5%(a)(c)
New York State Dormitory
Authority, New York
University Insured
Revenue Bonds
(BTP-26)/(Automatic
Data Processing, Inc.
Tender Option &
MBIA Insurance)
4.11%, 01/07/96 5,375 5,375
-------
TOTAL VARIABLE RATE TENDER OPTION BOND
PARTNERSHIPS
(Cost $5,375) 5,375
-------
BOND ANTICIPATION
NOTES--8.1%(b)
Broome County, New York
Bond Anticipation Notes
Series 1995-96
4.33%, 04/19/96 3,812 3,819
3.77%, 04/19/96 3,000 3,010
Dutchess County, New York Bond
Anticipation Notes Series
1995-96
3.75%, 08/02/96 2,825 2,833
Rochester, New York General
Obligation Bond Anticipation
Notes Series 1995I
3.80%, 10/31/96 5,000 5,018
Schenectady, New York General
Obligation Bond Anticipation
Notes Series 1995
4.63%, 02/16/96 3,068 3,070
-------
TOTAL BOND ANTICIPATION NOTES (Cost
$17,750) 17,750
-------
</TABLE>
F-41
<PAGE> 81
SchwabFunds(R) 42
- --------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
GENERAL
OBLIGATIONS--0.8%(b)
Buffalo, New York General
Obligation Revenue Bonds/
(MBIA Insurance)
3.50%, 12/01/96 $1,824 $ 1,832
------
TOTAL GENERAL OBLIGATIONS
(Cost $1,832) 1,832
------
REVENUE BONDS--4.9%(b)
New York State Power Authority
Revenue and General Purpose
Bonds Series 1993C
3.32%, 01/01/97 1,600 1,600
New York State Urban
Development Corp.
Correctional Facilities
Revenue Bonds/
(Escrowed to Maturity with
Government Securities)
4.80%, 01/01/96 7,000 7,140
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds
Series 1986-1/
(Escrowed to Maturity with
Government Securities)
4.07%, 01/01/96 1,000 1,020
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds Series
I/(Escrowed to Maturity
with Government Securities)
4.45%, 01/01/96 1,000 1,020
------
TOTAL REVENUE BONDS
(Cost $10,780) 10,780
------
TAX ANTICIPATION NOTES--15.3%(b)
East Hampton, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.76%, 06/28/96 5,000 5,004
Half Hollow Hills Huntington-
Babylon, New York Centralized
School District Suffolk
County Tax and Revenue
Anticipation Notes
3.70%, 06/28/96 5,800 5,815
New York City, New York
Tax Anticipation Notes Series
1995-1996A
3.80%, 02/15/96 3,000 3,003
3.70%, 02/15/96 5,000 5,005
South Huntington, New York
Unified Free School District
Tax Anticipation Notes Series
1995-1996
3.78%, 06/28/96 5,000 5,010
3.60%, 06/28/96 2,500 2,508
West Islip, New York Unified
Free School District General
Obligation Tax Anticipation
Notes Series 1995
4.00%, 06/27/96 5,000 5,018
3.40%, 06/27/96 2,000 2,013
-------
TOTAL TAX ANTICIPATION NOTES
(Cost $33,376) 33,376
-------
TAX-EXEMPT COMMERCIAL
PAPER--6.6%(b)
New York City, New York
General Obligation Bonds
Fiscal 1994 Series H-4/
(AMBAC Insurance &
Kredietbank, N.V. SBPA)
3.75%, 02/15/96 1,500 1,500
New York City, New York
Municipal Water
Finance Authority/
(Credit Suisse LOC)
3.75%, 02/08/96 7,000 7,000
New York State Dormitory
Authority Revenue Bonds
(Memorial Sloan Kettering
Project) Series 1989C/
(Chemical Bank LOC)
3.75%, 02/08/96 6,000 6,000
-------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $14,500) 14,500
-------
TOTAL INVESTMENTS--100.0%
(Cost $218,648) $218,648
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-42
<PAGE> 82
SchwabFunds(R) 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on December
31, 1995. Dates shown represent the latter of the demand date or next
interest rate change date, which is considered the maturity date for
financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
(c) Certain securities purchased by the Funds are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are issued to institutional
investors, such as the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund. Any resale by the Funds must be in an exempt transaction,
normally to a qualified institutional buyer. At December 31, 1995, the
aggregate value of private placement securities held by the Schwab
Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund were $139,017,000,
$91,038,000 and $5,375,000, respectively, which represented 3.90%,
5.40% and 2.44%, respectively, of the net assets of each Fund. All of
these private placement securities were determined by the Investment
Manager to be liquid in accordance with procedures adopted by the Board
of Trustees.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering
into the transaction. The transaction is subject to market fluctuation
and to the risk that the value may be more or less than the purchase
price when the transaction was initiated. The Fund has set aside
sufficient investment securities as collateral for securities purchased
on a delayed-delivery basis.
Abbreviations
-------------------
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FNB First National Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
N.R.U.-C.F.C. National Rural Utilities Cooperative Financing
Corporation
SBPA Standby Purchase Agreement
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
F-43
<PAGE> 83
SchwabFunds(R) 44
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost: $3,586,104,
$1,674,011 and $218,648, respectively) $3,586,104 $1,674,011 $ 218,648
Cash 166 38 39
Interest receivable 30,491 14,817 2,232
Receivable for fund shares sold 2,940 4,914 250
Receivable from adviser -- -- 4
Deferred organization costs -- -- 23
Prepaid expenses 551 162 3
---------- ---------- --------
Total assets 3,620,252 1,693,942 221,199
---------- ---------- --------
LIABILITIES
Payable for:
Dividends 15,284 6,832 899
Fund shares redeemed 670 485 120
Investments purchased 37,735 -- --
Investment advisory and administration fee 603 267 37
Transfer agency and shareholder service fees 1,157 536 68
Other 284 119 69
---------- ---------- --------
Total liabilities 55,733 8,239 1,193
---------- ---------- --------
Net assets applicable to outstanding shares $3,564,519 $1,685,703 $ 220,006
========== ========== ========
NET ASSETS CONSIST OF:
Capital paid in $3,566,367 $1,686,367 $ 220,012
Accumulated net realized loss on investments
sold (1,848) (664) (6)
---------- ---------- --------
$3,564,519 $1,685,703 $ 220,006
========== ========== ========
THE PRICING OF SHARES
3,405,684, 1,578,359 and 204,869, respectively,
outstanding Sweep Shares and
160,683, 108,008 and 15,143, respectively,
outstanding Value Advantage Shares,
$0.00001 par value (unlimited shares
authorized) 3,566,367 1,686,367 220,012
Net asset value, offering and redemption price
per each Sweep Share and Value Advantage Share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
F-44
<PAGE> 84
SchwabFunds(R) 45
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Money Money
Fund Fund Fund*
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 127,090 $55,134 $ 6,178
-------- ------- ------
Expenses:
Investment advisory and administration fee 13,694 6,445 741
Transfer agency and shareholder service fees:
Sweep Shares 14,432 6,469 708
Value Advantage Shares 103 31 9
Custodian fees 380 244 60
Registration fees 400 207 120
Professional fees 187 103 26
Shareholder reports 296 64 28
Trustees' fees 21 9 1
Amortization of deferred organization costs and
other prepaid expenses 76 50 4
Insurance and other expenses 139 75 4
-------- ------- ------
29,728 13,697 1,701
Less expenses reduced and absorbed (8,375) (4,297) (690)
-------- ------- ------
Total expenses incurred by Fund 21,353 9,400 1,011
-------- ------- ------
Net investment income 105,737 45,734 5,167
Net realized gain (loss) on
investments sold (21) 8 (6)
-------- ------- ------
Increase in net assets resulting
from operations $ 105,716 $45,742 $ 5,161
======== ======= ======
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-45
<PAGE> 85
SchwabFunds(R) 46
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- ------------
For the
period
ended
\-------------For the year ended December 31,------------\ December 31,
1995 1994 1995 1994 1995*
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 105,737 $ 65,678 $ 45,734 $ 27,608 $ 5,167
Net realized gain (loss)
on investments sold (21) (1,586) 8 (600) (6)
---------- ----------- ----------- ----------- -----------
Increase in net assets
resulting from operations 105,716 64,092 45,742 27,008 5,161
---------- ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income:
Sweep Shares (104,288) (65,678) (45,302) (27,608) (5,046)
Value Advantage Shares (1,449) -- (432) -- (121)
---------- ----------- ----------- ----------- -----------
Total dividends to
shareholders (105,737) (65,678) (45,734) (27,608) (5,167)
---------- ----------- ----------- ----------- -----------
Capital share transactions
(dollar amounts and
number of shares
are the same):
Proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares
issued in reinvestment of
dividends 100,567 57,664 43,226 24,116 4,181
Less payments for
shares redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
---------- ----------- ----------- ----------- -----------
Increase in net assets from
capital share transactions 548,589 594,220 391,812 232,441 220,012
---------- ----------- ----------- ----------- -----------
Total increase in net assets 548,568 592,634 391,820 231,841 220,006
Net Assets:
Beginning of period 3,015,951 2,423,317 1,293,883 1,062,042 --
---------- ----------- ----------- ----------- -----------
End of period $ 3,564,519 $ 3,015,951 $ 1,685,703 $ 1,293,883 $ 220,006
========== =========== =========== =========== ===========
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
F-46
<PAGE> 86
SchwabFunds(R) 47
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund
and the Schwab New York Tax-Exempt Money Fund (the "Funds") are series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management
investment company organized as a Massachusetts business trust on October 20,
1989 and registered under the Investment Company Act of 1940, as amended. The
Schwab New York Tax-Exempt Money Fund commenced operations on February 27, 1995.
The Board of Trustees of the Trust adopted a multiple class plan for the Funds
on May 9, 1995. Commencing July 7, 1995, with respect to the Schwab Tax-Exempt
Money Fund and Schwab New York Tax-Exempt Money Fund and October 3, 1995, with
respect to the Schwab California Tax-Exempt Money Fund, the Funds began offering
more than one class of shares. Pursuant to the plan, the existing shares were
redesignated as Sweep Shares ("Sweep Shares"), and a new class of shares was
added -- the Value Advantage Shares ("Value Advantage Shares"). Both classes
represent interests in the same portfolio of investments of the respective Fund
and are substantially the same in all respects except that the classes are
subject to different transfer agency and shareholder service fees (see Note 3),
investment minimums and certain other expenses.
In addition to the three Funds described above, the Trust also offers -- the
Schwab Money Market Fund, the Schwab Government Money Fund, the Schwab U.S.
Treasury Money Fund, the Schwab Value Advantage Money Fund(R), the Schwab
Institutional Advantage Money Fund(TM) and the Schwab Retirement Money Fund(R).
The assets of each series are segregated and accounted for separately.
The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of
short-term high quality municipal securities. The Schwab California Tax-Exempt
Money Fund, which is not "diversified" within the meaning of the Investment
Company Act of 1940, as amended, invests in a portfolio of debt obligations
issued by or on behalf of California and other states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities that generate interest
exempt from federal income tax and State of California personal income tax. The
Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
F-47
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SchwabFunds(R) 48
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by a Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds and their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from each Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets. Expenses attributable to both
classes of shares of a Fund are allocated daily to each class of that Fund based
on the value of settled shares outstanding of each respective class. Transfer
agency, shareholder service fees and certain other expenses which are class
specific, are calculated daily at the class level.
Interest income and realized gains (losses) -- Interest income is recorded on
the accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis. Income and realized gains (losses) are allocated daily to each class of
shares of a Fund based on the value of settled shares outstanding of each
respective class.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
Each Fund is considered a separate entity for tax purposes.
F-48
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SchwabFunds(R) 49
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- --------------------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, each Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt
Money Fund and the Schwab New York Tax-Exempt Money Fund incurred investment
advisory and administration fees of $13,694,000, $6,445,000, and $741,000,
respectively, for the period ended December 31, 1995, before the Investment
Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% and .25% of each Fund's average daily net
assets of the Sweep Shares and Value Advantage Shares, respectively. For the
period ended December 31, 1995, the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred transfer agency and shareholder service fees of $14,432,000, $6,469,000
and $708,000, respectively, for the Sweep Shares and $103,000, $31,000, and
$9,000, respectively, for the Value Advantage Shares, before Schwab reduced its
fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the period
ended December 31, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund
incurred fees of $21,000, $9,000 and $1,000, respectively, related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the ratio of operating expenses to average
net assets for each Fund. For the period ended December 31, 1995, the total of
such fees reduced and absorbed by the Investment Manager was $7,229,000,
$3,707,000 and $302,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively, and the total of such fees reduced by Schwab was $1,146,000,
$590,000 and $388,000 for the Schwab Tax-Exempt Money Fund, the Schwab
California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund,
respectively.
F-49
<PAGE> 89
SchwabFunds(R) 50
- --------------------------------------------------------------------------------
SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period ended
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab Schwab
Schwab California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
---------- ---------- ----------
<S> <C> <C> <C>
Purchases $6,419,657 $3,297,957 $527,752
Proceeds of sales and maturities $5,869,911 $2,925,680 $308,751
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
Each Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the respective Fund. Transactions in capital shares were as follows (in
thousands):
<TABLE>
<CAPTION>
Schwab Schwab New
Schwab California York
Tax-Exempt Tax-Exempt Tax-Exempt
Money Fund Money Fund Money Fund
-------------------------- -------------------------- -------------
Period ended
\----------------Year ended December 31,----------------\ December 31,
1995 1 1994 1995 2 1994 1995 3
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 9,911,852 $ 8,184,151 $ 4,257,465 $ 3,435,641 $ 671,692
Value Advantage Shares 236,471 -- 125,848 -- 21,284
----------- ----------- ----------- ----------- ---------
Total proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976
Net asset value of shares issued
in reinvestment of dividends:
Sweep Shares 99,813 57,664 43,152 24,116 4,126
Value Advantage Shares 754 -- 74 -- 55
----------- ----------- ----------- ----------- ---------
Total net asset value of
shares issued in
reinvestment of dividends 100,567 57,664 43,226 24,116 4,181
Less payments for shares redeemed:
Sweep Shares (9,623,759) (7,647,595) (4,016,813) (3,227,316) (470,949)
Value Advantage Shares (76,542) -- (17,914) -- (6,196)
----------- ----------- ----------- ----------- ---------
Total payments for shares
redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145)
----------- ----------- ----------- ----------- ---------
Total increase in net assets from
capital share transactions $ 548,589 $ 594,220 $ 391,812 $ 232,441 $ 220,012
----------- ----------- ----------- ----------- ---------
</TABLE>
1 The Value Advantage Shares commenced operations on July 7, 1995.
2 The Value Advantage Shares commenced operations on October 3, 1995.
3 The Value Advantage Shares commenced operations on July 7, 1995 and the
Sweep Shares commenced operations on February 27, 1995.
F-50
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SchwabFunds(R) 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Tax-Exempt Money Fund
---------------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ ------------------------------------------------------------------
For the
period
ended
December 31, \-----------------For the year ended December 31,----------------\
1995(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
---------- ------------------------------------------------------------------
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .02 .03 .02 .02 .03 .04
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .02 .03 .02 .02 .03 .04
Less distributions
- ------------------
Dividends from net investment
income (.02) (.03) (.02) (.02) (.03) (.04)
Distributions from realized
gain on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.03) (.02) (.02) (.03) (.04)
-------- ---------- ---------- ---------- ---------- ----------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========== ========== ========== ========== ==========
Total return (%) 1.68 3.30 2.32 1.93 2.49 4.01
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of
period (000s) $160,682 $3,403,837 $3,015,951 $2,423,317 $1,744,903 $1,359,121
Ratio of expenses to
average net assets (%) .45* .66 .65 .63 .63 .63
Ratio of net investment
income to average
net assets (%) 3.50* 3.25 2.31 1.92 2.45 3.91
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab Tax-Exempt Money Fund's
ratio of operating expenses to average net assets. Had these fees and expenses
not been reduced and absorbed, with respect to the Value Advantage Shares, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets for the period ended December 31, 1995 would have been
.95%* and 3.00%* respectively. With respect to the Sweep Shares, the ratio of
expenses to average net assets for the periods ended December 31, 1995, 1994,
1993, 1992, and 1991 would have been .91%, .91%, .93%, .94% and .95%,
respectively, and the ratio of net investment income to average net assets would
have been 3.00%, 2.05%, 1.62%, 2.14%, and 3.59%, respectively.
(1) For the period July 7, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-51
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SchwabFunds(R) 52
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SCHWAB TAX-EXEMPT MONEY FUND,
SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND
& SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab California Tax-Exempt Money Fund
-------------------------------------------------------------------------
Value
Advantage
Shares Sweep Shares
------------ --------------------------------------------------------------
For the
period
ended
December 31, \---------------For the year ended December 31,--------------\
1995 1 1995 1994 1993 1992 1991
---------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
- ----------------------
operations
----------
Net investment income .01 .03 .02 .02 .02 .04
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total from investment
operations .01 .03 .02 .02 .02 .04
Less distributions
- ------------------
Dividends from net
investment income (.01) (.03) (.02) (.02) (.02) (.04)
Distributions from realized gain
on investments -- -- -- -- -- --
-------- ---------- ---------- ---------- -------- --------
Total distributions (.01) (.03) (.02) (.02) (.02) (.04)
-------- ---------- ---------- ---------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ---------- ---------- ---------- -------- --------
Total return (%) .84 3.20 2.26 1.91 2.35 3.77
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $108,008 $1,577,695 $1,293,883 $1,062,042 $691,176 $494,214
Ratio of expenses to
average net assets (%) .45* .65 .64 .63 .63 .61
Ratio of net investment
income to average
net assets (%) 3.48* 3.15 2.25 1.89 2.31 3.70
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab California Tax-Exempt
Money Fund's ratio of operating expenses to average net assets. Had these fees
and expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.89%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets for the periods ended
December 31, 1995, 1994, 1993, 1992, and 1991 would have been .94%, .94%, .96%,
.97%, and .98%, respectively, and the ratio of net investment income to average
net assets would have been 2.86%, 1.95%, 1.56%, 1.97%, and 3.33%, respectively.
1 For the period October 3, 1995 (commencement of operations) to December 31,
1995.
* Annualized
F-52
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SchwabFunds(R) 53
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab New York Tax-Exempt Money Fund
---------------------------------------------
Value Advantage
Shares Sweep Shares
-------------------- --------------------
For the period For the period
ended ended
December 31, 1995 1 December 31, 1995 2
-------------------- --------------------
<S> <C> <C>
Net asset value at beginning of period $1.00 $1.00
Income from investment operations
- --------------------------------
Net investment income .02 .03
Net realized and unrealized gain (loss) on investments -- --
------- --------
Total from investment operations .02 .03
Less distributions
- -----------------
Dividends from net investment income (.02) (.03)
Distributions from realized gain on investments -- --
------- --------
Total distributions (.02) (.03)
------- --------
Net asset value at end of period $1.00 $1.00
======= ========
Total return (%) 1.62 2.75
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 15,143 $204,863
Ratio of expenses to average net assets (%) .45* .63*
Ratio of net investment income to average net assets (%) 3.42* 3.20*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Schwab New York Tax-Exempt Money
Fund's ratio of operating expenses to average net assets. Had these fees and
expenses not been reduced and absorbed, with respect to the Value Advantage
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.81%* and 2.06%* respectively. With respect to the Sweep
Shares, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 1.04%* and 2.79%*, respectively.
1 For the period July 7, 1995 (commencement of operations) to December 31,
1995.
2 For the period February 27, 1995 (commencement of operations) to December
31, 1995.
* Annualized
F-53
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SchwabFunds(R) 54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and
the Schwab New York Tax-Exempt Money Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schwab Tax-Exempt Money Fund,
the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt
Money Fund (three series constituting part of The Charles Schwab Family of
Funds, hereafter referred to as the "Trust") at December 31, 1995, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Francisco, California
January 31, 1996
F-54
